Border Protection Notices
Introduction
The trade in counterfeit products is a major world-wide concern. The World Trade Organization has estimated that counterfeit goods account for 5-7% of world trade. Furthermore, while the trade in counterfeit goods was traditionally dominated by trade in clothing and fashion accessories, a much broader range of goods is now being counterfeited, including electronic goods, pharmaceuticals and everyday items such as shampoo.
In New Zealand the majority of counterfeit goods are imported rather than produced locally and it appears that the amount of counterfeit goods being imported into New Zealand is increasing. Since 2001 the number of counterfeit items intercepted by the New Zealand Customs Service (“Customs”) has increased 300%. Since 1995 Customs has removed 1.18 million items from the New Zealand market and in 2005-2006 alone, Customs intercepted 260,000 items.
The trade in counterfeit goods causes damage to IP owners by diverting customers away from legitimate purchases and diluting the integrity and value of the brand. As the primary responsibility for enforcing IP rights in New Zealand rests with the IP owner, it is obviously important for IP owners to take steps to remove counterfeit goods from the market and to stop such goods reaching the market. As the majority of counterfeit goods available in New Zealand are imported, it is logical to stop these products at the point of importation rather than waiting until they are on the market. This process can be assisted by Customs which has certain powers to investigate and detain counterfeit goods. However, these powers can only be exercised if the trade mark or copyright owner has filed a border protection notice with Customs.
Procedure
The owner of a work in which copyright subsists or a registered trade mark can give notice to Customs directing that any goods which appear to infringe that copyright work or trade mark are detained. The procedure for filing these notices and the powers and the responsibilities assigned to Customs are set out in the Trade Marks Act 2002 and the Copyright Act 1994, as explained briefly below.
A notice can cover one or more trade marks and/or copyright works. When a notice is filed, the owner must also lodge a security bond of NZ$5,000 and indemnify Customs for any costs incurred in taking action regarding the notice, for example for the storage of detained goods or legal costs. This bond is deposited in an interest bearing trust account and is returned to the owner (less any costs incurred) once the notice has expired or been withdrawn. Notices are valid for five years or until the expiry of the trade mark registration or copyright (whichever is shorter) and are renewable.
After a notice has been lodged, Customs will detain any goods it discovers which appear to be infringing and conduct an investigation to determine whether the goods are infringing. Once a determination has been made, it is issued to the owner and a copy is sent to the importer. Customs can detain the goods for 10 working days after a determination has been made. If the owner initiates infringement proceedings within this period, Customs will continue to detain the goods pending the Court’s decision. If the owner does not initiate proceedings, Customs will release the goods to the importer. Also, the importer may choose to voluntarily forfeit the goods at any time.
Benefits
It is highly recommended that owners of works in which copyright subsists and/or registered trade marks in New Zealand file border protection notices with Customs.
As is stated above, the trade in counterfeit goods is a major problem and causes significant costs for IP owners. If a border protection notice is filed, Customs are able to greatly assist by discovering, investigating and detaining seemingly infringing goods.
Furthermore, as the majority of counterfeit goods in New Zealand are imported rather than produced locally, it is sensible to stop these goods before they reach the New Zealand market-place. If a notice has not been filed, Customs is powerless to stop the importation of the goods.
Filing a notice may also act as a deterrent for potential importers of Infringing goods. The list of current notices and the trade marks and/or copyright works covered thereby are published on the Customs website and potential importers can peruse this list. As Customs can only detain goods which are the subject of notices, importers of counterfeit goods are more likely to choose to import goods which are not covered by a notice.
In addition, the New Zealand Government plans to introduce amendments to the Trade Marks Act 2002 and the Copyright Act 1994 which will add to the existing benefits of filing border protection notices. The Trade Marks (International Treaties and Enforcement) Amendment Bill, which was introduced into Parliament on 8 September 2008, will amend the aforementioned Acts so as to give Customs the power to investigate and prosecute intellectual property crime. This will enable Customs to investigate and take discretionary prosecutions against importers of counterfeit goods.
These amendments will be extremely beneficial to IP owners and are likely to increase the extent to which IP rights are enforced in New Zealand, especially for IP owners who have filed border protection notices. The Trade Marks Act 2002 and the Copyright Act 1994 contain provisions setting out criminal offences. However, as IP crime is a relatively low priority for the Police, prosecutions are rarely brought under these Acts. Accordingly, IP owners generally assume the responsibility to enforce their rights by initiating infringement proceedings.
Unfortunately this is not always a particularly effective way to enforce IP rights. The decision whether to initiate infringement proceedings is generally based on financial considerations and often it will not be financially viable to initiate proceedings in individual cases. For example, it is not uncommon for importers to bring in mixed consignments with counterfeit goods bearing a number of different counterfeited brands so that it is not financially viable for a single IP owner to initiate proceedings. In addition, infringement proceedings are not always a sufficient deterrent given that the financial rewards of importing counterfeit goods may outweigh the award likely to be granted in infringement proceedings. Even if infringement proceedings are successful, this will not necessarily stop the importer importing more counterfeit goods. Finally, there is a risk of negative PR if the infringer approaches or is approached by the media alleging bullying by the IP owner.
In contrast, Customs is well placed to prosecute and deter importers. Customs will often be in possession of evidence necessary to prosecute an importer under the Trade Marks Act 2002 and the Copyright Act 1994 and under the proposed law Customs will be given powers necessary to investigate counterfeit imports. Customs also will not be constrained by the financial viability of prosecuting importers. Finally, the penalties specified in the Trade Marks Act 2002 and the Copyright Act 1994 are likely to be a greater deterrent to potential importers than is a successful award to an IP owner in infringement proceedings.
IP owners who have filed border protection notices are likely to gain the greatest benefit from Customs prosecutions as Customs is more likely to inspect and investigate goods which are the subject of a notice. Accordingly, it is these goods on which a prosecution is most likely to be based. Therefore, by simply filing a notice, owners gain the additional possible advantage of Customs prosecuting importers of counterfeit versions of their goods.
However, despite the advantages set out above, border protection notices are grossly underused. While there are over 220,000 current registered trade marks in New Zealand, there are just over 200 trade mark owners have notices currently filed with Customs. IP owners are encouraged to take advantage on this inexpensive and effective tool as a part of their overall strategy for protecting their brands.
We would be pleased to assist you with the filing of Border Protection Notices. In the first instance contact: Barbara Sulivan or Elena Szentivanyi.
Naomi Hand - February 2009.
