1383/2003: LEAGAL CHALLENGES FOR THE CUSTOMS

REGARDING THE COUNTERFEIT GOODS IN TRANSIT - A STUDY

WITH REFERNCE TO THE NOKIA CASE

The Overview

The trade in counterfeit goods is a big issue, especially now as the traders can ship things
from one place without being identified or having false identifications. In Europe, the
1383/2003 (Anti Counterfeit Goods Regulation)1 gives the owner of the IP, certain rights,
which can be used to detain the "counterfeit goods" and put them under the suspensive
procedure. (If the goods are found infringing the domestic Intellectual Property rights,
even when in transit, according to the Council Regulation (EEC) No 3295/942 it can be
placed in the "suspensive procedure") 3

In recent years, however the EU customs are facing problems with counterfeit goods in
transit.4The customs have no authority to confiscate a "counterfeit good" in transit
according to the Counterfeit Good Regulation. The 1383/20035 does not require
infringement evidence and degree of examination varies in different EC countries.6 In view
of this, the customs are asked to detain the goods that are not counterfeit in origin, but due
to its transnational status become counterfeits as they cross the border. A key case was
Schizopol 7
where the drug consignment was placed under suspensive procedure even
though it was manufactured under TRIPS parallel import provision, was not entering
European market, and infringed no patent in the country manufactured or the country
destined.

1
Council Regulation (EC) 1383/2003 on Counterfeit Goods Regulation (EC Border Regulation) [2003] OJ L196/7
2
Council Regulation (EC) 3295/94 on prohibit the release for free circulation, export, re-export or entry for a suspensive procedure of
counterfeit and pirated goods (EC Border Regulation) [1994] OJ L 341
3
Suspensive procedures are customs procedures that do not apply import duties or trade policy measures to non-Community goods.
For example, in accordance with Art. 114 (2) a) Custom Code, no import duties or trade policy measures are applied when placing
unprocessed goods under the outward processing procedure. Art. 84 (1) a) Custom Code also declares the transit, warehousing,
processing under customs control, and temporary use to be suspensive procedures.
4
SpicyIP, "Update on the Indo-E.U. trade dispute before the WTO"(2010)< http://spicyipindia.blogspot.com/2010/10/update-on-indo-eu-
trade-dispute-before.html>
5
Ibid n. 1
6 Jasper Helder, Severin de Wit "IP Border Detention with a Patent Topping"
[2005]<http://docs.google.com/viewer?a=v&q=cache:0qh5j0QTGfoJ:www.ipeg.com/_UPLOAD%2520BLOG/BD%2520%26%2
520TRIPS%2520EPLAW%2520Dec%252005.ppt+1383/2003&hl=en&pid=bl&srcid=ADGEEShqgGwrWgwrBNLvTXZcOETIA5
Yr41oUbPVLkFKDTee9218NfeGp09obLPG9VMM4jdMYNTJGGNjaOr6G9ysnxdn3r3g0dwPQ_smv_Q5H6s_lMjRDdX5_KUaK
FC5av3PKtSxN&sig=AHIEtbQ_YVMz3zGO0svWsJTIWOh-BY9C3Q&pli=1> Accessed on 23/02/2011.
7 India v European Union; Netherlands [2010] DS 408/01

1
This raised some very important questions as all of such cases under Dutch Authorities
relied on the decisions of the "Court of The Hague" in the Netherlands. Sisvel v Sosecal, 8
grounded in recital 8 of the 2003 IP Border Regulation. The court interpreted Recital 8,
which established the "manufacturing fiction" and tagged the goods to be manufactured
in the transit state and, hence infringing the local patents. The judgement was based on a
legal fiction called the Manufacturing Fiction under article 6(2) (b) of Regulation (EC) No
3295/94 (1).9 This fiction provided that goods even though in transit were deemed to be
infringing the local patents because they were considered to be manufactured in the place
of transit.

This dissertation will also analyse Article 2(1) (a) of Regulation 1383/2003/EC,10 which
defines the counterfeit goods and analyse if the goods could be tagged as counterfeit if it is
does not enter the European market. It will try to analyse if such fictions can be applied
now and if the goods can be deemed as counterfeits in view of the recent Nokia case
11
where ECJ in full, first time shunned such belief.

In conclusion, the focus will be on the Customs what can they do in such situations. The
relevant International Intellectual Property agreements will be analysed to look for the
provisions they provide. The impact if any of the decision in view of the Pharmaceutical
Transits and followed by recommendation to alleviate ambiguity in the law.

Introduction-

Trade in counterfeit goods is one of the biggest problems and is not all about selling the
fake goods in the market but such activities could be funding terrorist activities.12 In
November 2009, a report by the Organisation for Economic Co-operation and
Development indicated that the share of counterfeit and pirated goods in the world trade
had increased from 1.85 per cent in 2000 to 1.95 per cent in 2007. That represented an

8 Koninklijke Philips Electronics N.V. v Postech Corporation, Prico Corporation and Princo Switzerland [2004] N° C02/110H
The English Version of the decision can be accessed on
<http://www.eplawpatentblog.com/PDF_December09/Dutch%20Supreme%20Court%20Philips%20v%20Postech%20EN.pdf>
9
Ibid n. 2 art. 6 (2) b
10
Ibid n. 2 art 2 (1) (a)
11
Nokia Corporation and Her Majesty Revenue and Customs Commissioners [2009] EWHC 1903 (Ch)
12
Richard Meissner, "The trade in counterfeit goods: What is it, why is it a problem and what is its impact on Africa?"
(2010)<http://www.consultancyafrica.com/index.php?option=com_content&view=article&id=475:the-trade-in-counterfeit-goods-
what-is-it-why-is-it-a-problem-and-what-is-its-impact-on-africa&catid=82:african-industry-a-business&Itemid=266>

2
increase to US $250 billion worldwide.13 The counterfeit goods have been a major concern
for the EU as in a communication from the Commission to the Council, the European
Parliament and the European Economic and Social Committee reported over 100 million
fake articles being seized annually by European Union (hereinafter EU) customs. The
danger is quite evident by the fact that 4.4 million fake foodstuff and alcoholic beverage
seized in the EU border, of which less than 2% were luxury goods.14

However, the issue being controversial is not entirely new and its roots can be traced to
the 1978 Declaration on commercial counterfeiting, covering trademarks and trade names
were proposed during the General Agreement on Tariffs and Trade (hereinafter GATT)
discussions.15 The European Initiative to curb the free circulation of the counterfeit goods
started with the Council Regulation (EEC) No 3842/8616 of 1 December 1986, which
came into action on 1 January 198817 . This regulation for the first time gave the right
holder of a trademark the possibility to lodge an application, to the competent national
authority in that Member State (which could be the custom authorities), for suspension of
goods suspected of infringing Intellectual Property Rights.18 However, the Council
Regulation (EC) No 3295/9419 replaced the Council Regulation (EEC) No 3842/8620 was
replaced 22 December 1994. It laid down the measures to stop the release free circulation,
export, re-export, or entry for a suspensive procedure of counterfeit and pirated goods.
This new Regulation came into action on 1 July 1995.21 In 1999, Regulation 3295/9422
was amended and on 22 December 1994. The amendment providing measures for entry
into the community and the measures of export and re-export from the community goods
suspected of infringing certain Intellectual Property Rights. These measures also
broadened the scope of protection to goods that infringed the patent, this applied to

13
OECD, 'Magnitude of counterfeiting & piracy of tangible products' (November 2009)
<http://www.oecd.org/dataoecd/57/27/44088872.pdf> accessed 27 February 2011
14
COMMISSION OF THE EUROPEAN COMMUNITIES, "COMMUNICATION FROM THE COMMISSION TO THE
COUNCIL, THE EUROPEAN PARLIAMENT AND THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE - on a
Customs response to latest trends in Counterfeiting and piracy [2005]
<http://ec.europa.eu/taxation_customs/resources/documents/comm_native_com_2005_0479_3_en_acte.pdf>Accesed on
27/2/2011
15
Declaration on Commercial Counterfeiting [1978] BISD 55S/ 194.
16
Council Regulation (EEC laying down measures to prohibit the release for free circulation of counterfeit goods) 3842/86 OJ
L357/18
17
EEC Council Regulation 3842/86 on laying down measures to prohibit the release for free circulation of counterfeit goods
(adopted 1 December 1986, enter into force 1 January 1988) OJ L 357
18
EC Treaty Report 1988 (Enforcement of Intellectual Property Rights, as amended) Article 3.
19
Ibid n. 2
20
Ibid n .16
21
Council Regulation (EC) No 3295/94 of 22 December 1994 laying down measures to prohibit the release free circulation, export,

re-export or entry for a suspensive procedure of counterfeit and pirated goods [OJ L 341, 30.12.1994]. Article 1.
22
Ibid n. 2

3
whatever custom status the goods had.23 The Council Regulation (EC) No 1383/200324
came into action on July 2003. It concerned the customs action against goods suspected
of infringing certain intellectual property rights and the measures against goods found to
have infringed such intellectual property rights.

This dissertation focuses primarily on the counterfeit goods put under the customs
regulation, the role of customs, and the law regarding the counterfeit goods in transit. The
problems with goods in transit are complex as it touches matters of territoriality,
sovereignty (discussed in chapter 5), jurisdictions, and international conventions
(discussed in chapter 5). The principle of territoriality states that, the intellectual property
rights such as patents, trademarks, and copyrights should be viewed in national scope and
effect.25 However, one can apply for the protection in different jurisdictions like in case of
patents and enjoy an EU wide protection of a well-known trademark.26 Meanwhile, the
rights of territoriality are not absolute considering Community legislation regarding
trademarks, designs, and plant variety rights.27 The problem that has surfaced in view of
the above statement in recent years is due to the implementation of the Trade Mark
Directives28 into Community Trade Mark Regulation29, which harmonize the rules but do
not expand the territorial border for the rights conferred in that Member State’s legislation.
The Regulations stipulates the Community trademarks and designs. This actually extends
the territorial border to the whole Community. This lack of proper harmonization is
causing the problems like distorted competition and trouble to reach counterfeit and
pirated goods in transit. For example, under the Swedish Trademark law if the proprietor
can prove a "probable cause" for an infringement, then law can prohibit it.30 On the other
hand, the Council Regulation (EC) No 207/2009 on the Community trademark31 needs a
"threatening infringement" to issue an order prohibiting the defendant from proceeding.32
This leads to another dilemma, as was pointed out that Intellectual Property rights are not
"absolutely territorial", but on the other hand, it can be said that there is no such thing as

23Council Regulation (EC) 3295/94 on prohibit the release for free circulation, export, re-export or entry for a suspensive procedure
of counterfeit and pirated goods (EC Border Regulation) [1994] OJ L 341 Recital 3 and Article 1(2) (a).
24 Ibid n. 1
25 Bernitz/Karnell/Pehrson/Sandgren, Immaterialrätt och otillbörlig konkurrens,"Counterfeit goods in transit -A study regarding
counterfeit goods in transit and liability of intermediaries," (2010) <
http://lup.lub.lu.se/luur/download?func=downloadFile&recordOId=1713403&fileOId=1713404> Accessed on 26/02/2011.
26 Ibid n. 25 Pg 10
27 Ibid n. 25 Pg 11
28 Trade Mark Directive 1994
29 Community Trade Mark Regulation 2006
30Trademarks Act 1960:644 37 (b)
31 Ibid n. 29
32Ibid n. 29 Article 102(1)

4
an "International" Intellectual Property right, for example like an International Trademark
or Patent. Making the matters worse, it is not entirely correct to say that there is nothing
International or Systemic about the International Intellectual Property System. The World
Trade Organisation's agreement on the Trade Related Intellectual Property rights provides
the operational objectives to the International Intellectual Property and in order for the
international system to work properly; they should balance the various competing
principles.33 This balance is lacking in the recent cases in EU, which has set up a trend that
is threatening to disrupt the fabrication of such International realms. The Nokia case34
elucidates this point later when analysed with respect to the pharmaceutical transits.

On that note, the EC regulation 1383/200335 the European Border law, due to the lack of
harmonization is under constant scrutiny and has several cases that are pending under
WTO dispute settlement board36. One of such controversies includes the role of the
customs in seizure of the counterfeit goods. In this paper, the analysis is on the case of
Nokia Corporation v Her Majesty Revenue and Customs Commissioners.37 The purpose of
following this case is to have an insight on the background. The review of different case
laws related to the case, which would present a panoramic view of the problem and help
us understand the court's interpretation, which differs in different jurisdiction under
European Union.

The main research will focus on getting the answer for the following questions-

Q1). If the non-community goods would be marked as "counterfeits goods" under Article
2(1) (a) of Regulation 1383/2003/EC, even if they are in transit and there is no evidence
to prove that these would be diverted back to the community. This being interpreted within
the meaning of Article 2(1) (a) of Regulation 1383/2003/EC.

Q2). If the temporarily stored goods or the transit goods come under Manufacturing
Fiction (Article 6(2) (b) of Regulation (EC) No 3295/94 (1) of 22 December 1994 {the old
Customs Regulation} which is enacted with accordance of article 7? Does the Article

33 F. Rotstein, ‘There an International Intellectual Property System? Is there an Agreement between States as to what the Objectives
of Intellectual Property Should be?’ (2010) E.I.P.R. 2011, 33(1), 1-4.
34 Ibid n 11
35 Ibid n. 1
36WTO " GENERAL OVERVIEW OF ACTIVE WTO DISPUTE SETTLEMENT CASES INVOLVING THE EU AS
COMPLAINANT OR DEFENDANT AND OF ACTIVE CASES UNDER THE TRADE BARRIERS REGULATION"
<http://trade.ec.europa.eu/doclib/docs/2007/may/tradoc_134652.pdf>Accesed on 21/02/2011
37Ibid n 11

5
constitute a uniform rule of Community law)? Alternatively, could the court of the
member state take different account?38

Q3). In view of the answers provided by the Nokia case,39 the thesis will deal with the
problem of the interpretation of the Article 2(1) (a) of Regulation 1383/2003/EC 40and
6(2) (b) 3295/9441 in conjunction with the pharmaceutical transits. The problem is the
correct interpretation of the Articles by EU courts, which has lead to the tagging of genuine
goods as counterfeits. (Generic medicines in transit)

Q4). Why the International agreements do not provide any guidelines in the interpretation
of the Counterfeit Goods Regulation 1383/2003/EC?42

Concerning the above question, the Nokia's43 decision will be analysed in view of the
Pharmaceutical transit cases and International Conventions. The common feature in the
problem is the role of the customs, and the goods not targeted for the internal market. The
analysis will also contain the choice the customs have, in view, that right holders initiate
the enforcement measures and explore the options they have to determine infringement
for the fake goods. In the end, the various agreements on the international intellectual
property will be analysed to find out what provisions are there to counteract the problem
following by the recommendations based on the analysis.
Turning to the research methodology, this dissertation is using Black Letter law approach
as a method to seek and provide a detailed, highly technical commentary upon, systematic
exposition of, and the content of legal doctrine. Primarily, Black Letter approach focuses
on statutes, case law, and academic commentaries on statutes and case law. 44 In order to
do research and achieve the aim of this dissertation, international convention, domestic
statutory, law reports, case law, law journals, books, and appropriate online resources,
thus will be analysed and critically evaluated.

38 European Union, "Official Journal of the European Union," (2010)

<http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2010:024:0029:0030:EN:PDF>
39 Ibid n. 11
40 Ibid n. 1
41 Ibid n. 2
42 Ibid n. 1
43 Ibid n 11
44 M. Salter and J. Mason, Writing Law Dissertations: An Introduction and Giude to the Conduct of Legal Research, (Perason
Education, 2007) 108

6
This thesis consists of five chapters

Chapter 1-
The literature review - It sums up the recent work of the authors regarding the goods in
transit. The Counterfeit Goods Regulation in July 2003 replacing Council Regulation (EC)
No 3295/9445 changed in 2003, so in view of the thesis has focused on recent work that
are relevant to goods transit cases and the Nokia case.46

Chapter 2-
The Nokia Case47-It consists of the detailed analysis of the Nokia case 48. This provides an
insight on the situation of the recent related cases for the counterfeit goods in transit. It
explains the contrary trends for past few years in view of pharmaceutical transits, which
will help us to analyse the controversies and find the answers to my questions asked in the
beginning of the thesis.

Chapter 3-
Possible Impacts of the Nokia's decision relating to the Pharmaceutical transit-
This chapter deals with the numerous cases regarding the transit of the Pharmaceutical
products via Europe, from a non-member country to another non-member country. It will
focus if the restrictive approach of the Nokia case49 has provided all the answers. This part
will try to analyse its possible impacts when seen in perspective of the pharmaceuticals.

Chapter 4-

Are there any solutions under European law - This part will analyse different solutions, to
resolve the situation from the customs point of view and will pin point the shortcomings
of their approach.

45 Ibid n. 2
46 Ibid n. 11
47 Ibid n. 11
48 Ibid n. 11
49 Ibid n. 11

7
Chapter 5-

Analysing International Conventions- In the thesis, it is explained how the states have
sovereignty and how they observe this by keeping the Intellectual Property Rights
"territorial" in nature. However, the transit exhibits the transnational property as it
involves jurisdiction of different countries. The international conventions in such matters
ask the countries to put minimum standards and avoid unwanted obligations on transit to
have a free-flowing trade. In view of this, the discussion will encompass the Paris
Convention, TRIPS, and GATT. The focus will remain on the Pharmaceutical transits
and the unwanted restrictions imposed on them, which are contrary to the international
conventions.

Chapter 6-
Recommendations and Conclusion - based on the analysis the recommendations are drafted.
In the end, the conclusion will provide answers based on the findings of the thesis.

Chapter 1

Introduction-
The focus in this section is on recent articles, as the due to the word limitation of the thesis
and nature of the work the older articles are somehow irrelevant. The nature of work
focuses on the Nokia case50 and the Pharmaceutical transit cases.

1. Literature Review-

Dieter Saunders51 was amongst the first academics to draw attention on the problem of
transit related to the Intellectual Property, and highlighted the problem created due to the
national differences in enforcement patterns and the necessity to have adequate
instruments of enforcement as early as 1970 and 80's. However, some notorious cases
dealing with the Dutch officials that involve drugs in transit from a Non EU member
country to another non-member country has drawn the recent attention. Enrico Bonadio

50 Nokia Corporation and Her Majesty Revenue and Customs Commissioners [2009] EWHC 1903 (Ch)
51 DIETER STAUDER, “Patent and utility model infringement proceedings in the Federal Republic of Germany, Great Britain,
France and Italy: a study rechtstatsächliche"(1989) Series on Intellectual Property Law< http://www.wipo.int/cgi-bin/koha/opac-
detail.pl?bib=19392> Accessed on 24/03/2011

8
and Carlo Maria Cantore (2010), 52 analysed one of such cases, dealing with a complaint
lodged to WTO dispute settlement, lodged by India and Brazil. It concerned the Dutch
customs authorities' seizure of consignments of generic drugs from India that were in
transit to Brazil, pursuant to Regulation 1383/2003. The analysis continues on the WTO
Agreement on Trade-Related Aspects of Intellectual Property Rights 1994 and their
compatibility with "temporary detentions" by EU officials, accused of infringing the local
patents. Analysis also focused if such measures were putting unjustified barrier to trade
and the provision of public health. Stephanie Hutchinson (2010)53 has taken another path
and analysed the factors that would enable EU Customs to seize goods in transit suspected
of infringing IP rights in the European Union? A very important point mentioned, is
whether the nature of goods can influence the decision if there is an infringement? In the
article, the author expressed the view that the recent prominence in the cases is due to the
legal and political tensions associated with this issue. The author highlighted the sharp
contrast between the current legal framework (intended to create a harmonised approach
within the EU territory) and the case law (which has provoked controversy and confusion).
This is supposed to demonstrate further clarity in the interpretation of the existing
legislation and in the drafting of the new border control regulation, currently underway.
Ana Ramalho (2011) 54 deals with the same problem dealing with the Anti-Counterfeiting
Trade Agreement (ACTA). The article points towards the "missing ingredients" as a clear
competence of the European Union. It further criticises and adds the fact, that the Union's
struggle for an expansion of its powers - especially in the area of harmonization of national
laws with a basis on internal market considerations55 - has led some doctrine to express
concerns whether the relevant provisions could give the EU blank cheque to harmonize in
a wide variety of subjects.56In the pre-Lisbon era, some authors have called the tendency
“competence creep”.57 Christopher Heath (2010) 58
puts up a rather direct approach
and discusses the issues raised by pending judgement by the European Court of Justice
and the World Trade Organisation cases concerning customs enforcement against goods
in transit. Suggests possible EU law approaches. In the analyses the frequently used

52 E. Bonadio and C.M. Cantore, ‘Case Comment Seizures of in transit generics at the EU borders: India and Brazil v the EU’
(2010) 1(4) E.J.R.R 404-408
53Stephanie Hutchinson, ‘in transition... when should in transit goods be seized for intellectual property infringement in the
European Union?’ (2010) 32 E.I.P.R 614-621
54 Ana Ramalho 'The European Union and ACTA - or making omelettes without eggs (again)' (2011) 42(1), IIC 97-101
55 See E C Treaty Report (2008) on the Functioning of the European Union (TFEU) (2008). Art. 114 and 115
56 M. DOUGAN, “The Treaty of Lisbon 2007: winning minds, not hearts”, (2008) 45 CMLR 654-655.
57 Ibid n. 56
58 C. Heath, ‘Customs Seizures, Transit and Trade - In Honour of Dieter Stauder's 70th Birthday’ (2010) 41(8) International Review
of Intellectual Property and Competition Law 881-905

9
legislations are - the Directive 89/104 on trademarks art.5 ,Regulation 1383/2003 article
1 and 2, Convention for the Protection of Industrial Property 1883 art.9, Agreement on
Trade-Related Aspects of Intellectual Property Rights 1994 (WTO) and General
Agreement on Tariffs and Trade 1994 (WTO) article V, article XX. Frederick M. Abbott
(2009) 59
again taking into consideration Regulation 1383/2003 (Anti Counterfeit
Regulation) discusses about stopping of unwanted criterions for generic drugs in transit.
The article talks about the territoriality and independence of the patents. It also Examines
whether the World Trade Organisation (WTO) Agreement on Trade-Related Aspects of
Intellectual Property Rights 1994 (TRIPs) affects the right to freedom of transit. In
examining the above fact, it also brings into Consideration whether the seizure of drugs
from countries where patents do not apply is a proportionate response to the danger of
counterfeit drugs. However, apart from this discussion the article points towards the root
of controversy to the "Fictive manufacturing under European law". Charles Gielen and
Marlous Schrijvers (2009),60 explained whether trademark owners who call on customs
officers to stop suspected counterfeit goods in transit can still rely on the concept of "fictive
manufacturing" from Regulation 3295/94, in view of Regulation 1383/2003 and Directive
89/104 on trademarks. The basis of argument is on the fact that "Manufacturing Fiction"
is used extensively in the Netherlands and Europe, citing cases. It focuses on the European
Court of Justice ruling in Montex Holdings Ltd v Diesel SpA 61(C-281/05) and the District
Court of Hague ruling in Sosecal Industria e Comercio Ltda v Societa Italiana Lo Sviluppo
Dell'Elettronica.62

David Wilson, Rachel Montagnon (2010), 63

in their article welcomes the "New
Amendments" on the Goods Infringing Intellectual Property Rights (Customs)
(Amendment) (No. 2) Regulations 2010 which introduce a simplified procedure for the
seizure and destruction of goods, which infringe trademarks, copyright, patents, or
designs. This regulation explains the circumstances in which the right owner can request
Revenue and Customs to seize goods. These procedures will no longer need the courts

59 F. M. Abbott, ‘Seizure of Generic Pharmaceuticals in Transit Based On Allegations of Patent Infringement: A Threat to International
Trade, Development and Public Welfare’ (2009) 1(1) W.I.P.O.J 43-50

60C. Gielen and M. Schrijvers, ‘Fictive Manufacturing Under European law’ (2009) 214 T.W. 43-48
61 [2006] OJ C 243 Bundesgerichtshof
62 [2008] KG ZA 08-617
63 D. Wilson and R.Montagnon, ‘Intellectual Property: HMRC issues new "simplified procedure" for the seizure and destruction of goods
infringing intellectual property rights’ (2010) 32(8) E.I.P.R 72-75

10
approval. Paul Maeyaert (2009) 64
has tried to come up with the solution to the
'manufacturing fiction'. The article poses questions regarding the clarification concerning
the 'manufacturing fiction'. The article proposes a unique solution holding the
intermediaries liable for the infringement. It also proposes to use the information from the
customs to counter parallel trade. Although, the present thesis does not explore this aspect,
it is still relevant due the cases concerning the genuine pharmaceutical goods labelled as
counterfeits under EU regulation. The thesis here will analyse whether the Nokia case 65
will help to harmonise the law as being the first ECJ case in this matter or the irregular
trend will continue in EU.

Conclusion- hence it provides substantial evidence that people are aware of the problem.
The role of the customs has been in question, so has been the harmonisation of the current
legal framework and interpretation of the border measures with the current legal
framework. The 'manufacturing fiction under European Law' has been scrutinised. The
proposed solution has been in regards with better harmonisation between the border
control mechanisms and case laws, and holding the intermediaries liable for the goods in
transit. Other solutions have mentioned the customs autonomy to seize goods, and looking
at the inherent nature of the goods. However, in the next section the analysis of the role of
the customs in transit continues following the Nokia case66.

64 Paul Maeyaert , 'Grey and Counterfeit Goods In Transit: Trademark Law in no-man's land' (2009)<
http://www.altius.com/en/knowledge-base/recent-publications/2009/06/08/grey-and-counterfeit-goods-in-transit-trademark-law-in-no-
man-s-land/>
65 Ibid n. 52
66 Ibid n. 52

11
Chapter 2
Introduction- this section follows the Nokia's67 case. This is certainly not the end of the
case as Nokia has appealed against the Decision to ECJ. The exact questions are unknown
but are about the "legitimacy of the Manufacturing fiction".68 The referrals made by the
Belgian, UK courts raised the stake, as in 2008, 178 million articles were detained across
Europe. No less than 42% of these goods found were in transit.69 This made the decisions
of the ECJ the most eagerly awaited in border-seizure history.

2. The Nokia Case:70

2.1 Introduction-
This is a case where the claimant ("Nokia") asked for a judicial review of

 The decision made by Her Majesty's Commissioners of Revenue and Customs

("herein HMRC") the defendant, not to detain or suspend the release of mobile
phones and accessories which Nokia considers to be fake.
 HMRC's policy - where no action is taken against the counterfeit goods if travelling
via EU from one non member state to another, and when they are not capable of
entering in free circulation in the EU.71

67 Nokia Corporation and Her Majesty Revenue and Customs Commissioners [2009] EWHC 1903 (Ch)
68 Alison Chin," Referral to ECJ for clarification of transhipment rules" (2009)< http://www.marks-
clerk.com/uk/attorneys/news/newsitem.aspx?item=299>
69European Commission Taxation and Customs Union, “Report on EU Customs Enforcement of Intellectual Property Rights;
Results at the European Border – 2008”.
<http://ec.europa.eu/taxation_customs/resources/documents/customs/customs_controls/counterfeit_piracy/statistics/2009_statist
ics_for_2008_full_report_en.pdf
70 Ibid N 52
71 HMRC, "Intellectual Property" [2010]
<http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowC
ontent&id=HMCE_CL_000244&propertyType=document#P21_1012> Accessed on 24/2/2011.

12
2.2The background-

Nokia is the largest producer of the mobile telephones in the world and incorporated under
Laws of Finland. It owns the trademark of the word "Nokia" in many countries. On 30
July 2008, HMRC inspected the goods, which were in transit from Hong Kong to
Colombia. It contained handsets, batteries, manuals, boxes and hands free kits, each of
which had Nokia as trademark. On July 2008, HMRC sent the goods to Nokia for the
inspection, which was counterfeit. On the same day, the Nokia asked the HMRC to seize
the goods under council regulation 1383/03. ("The counterfeit goods regulation")

On 6 August 2008, HMRC responded by email stating that, having received legal advice
they have difficulty in understanding how the goods were counterfeit under the
Counterfeit goods regulation unless they had evidence that the goods were diverted back
to EU market. In view of this, the Nokia had 10 days to prove to HMRC how the goods
in transit were infringing the national Intellectual Property law. Following this letter Nokia
asked for the addresses for the consigner and the consignee and other related documents
to bring a proceeding of the infringement.

Although there were, no disputes that the goods comprised in the consignment were fake.

The core issues

The issue between the parties is essentially of the correct interpretation of the definition of
"counterfeit goods" in the Counterfeit Goods Regulation. If it would, encompasses to the
goods, which were in transit and subject to special customs procedures? In addition, where
the question of them being released in the market was out of contention.

There are three sets of measures surrounding this issue (please refer Appendix 1)

 The union customs code.72

 Border Measure Regulation also known as 1383/2003.73
 The community trademark directive and the trademark directive.

72Council Regulation (EEC) 450/2008 on laying down the Community Customs Code L 145
73 Council Regulation (EC) 1383/2003 on Counterfeit Goods Regulation (EC Border Regulation) [2003] OJ L196/7

13
2.3 Analysis of the HMRC's and Nokia's position

2.3.1 HMRC's position-

i) It explained the circumstances when the goods are classified as the "counterfeits". As
defined by the Counterfeit Goods Regulation they must in fact infringe someone's
trademarks in the territory in question, in this case UK. The Counterfeit Goods Regulation
conceives of such an infringement only if a). Either infringement of a registered
Community trademark under the Community Trademark Regulation, or b). Infringement
of a registered trademark under national law. However, the use of Trademark Directive is
in order since national trademark law has been largely harmonised.

ii) One of the most important points that both the Community Trademark Regulation and
the Trademarks Directive makes clear is "in the course of trade". That is, it is available in
the market in the normal course of trade, which is highly unlikely in the case of the
consignment in issue. So HMRC opposed the issue of the putting the goods for trade.

iii) HMRC also clarifies its authority and states that the goods in the consignment are not
counterfeit according to the Counterfeit Goods Regulation. Even if they are not original
and described as counterfeit by wider common usage and on view of this, HMRC has no
legal power to seize them.

2.3.2. Nokia's position-

Nokia accuses HMRC to have adopted an unduly restrictive interpretation of the

Counterfeit Goods Regulation. It indicates that decisions of the European Court of justice
("ECJ") have clearly intended to apply to fake goods in transit and subject to customs
procedures. It also indicates that in doing so it should also adopt the "manufacturing
fiction" and assume that goods were manufactured in the Member State in question and
so have been released into free circulation in that Member State.

2.4 Relevant case law

Trademark infringement

74
2.4.1. Rioglass and Transremar

74
C 115/02 Rioglass and Transremar [2003] I-12705 E.C.R. (ECJ 6th Chamber)

14
Facts - the goods lawfully manufactured in Spain (EU Member state) and detained in
France (EU Member State) on suspicion of infringement of trademark in the course of
their transport to Poland (then a Non-Member State). The Cour de Cassation applied if
the Article 28 EC75 allowed the implementation of procedures for detention by customs
authorities in a Member State, of goods lawfully manufactured in Spain, which were
destined for a non-member country market via another Member State.

The ECJ answered by stating that [paragraph 25-28] -

"The case laws with respect to the trademarks, have established that specific subject matter,
in particular the guarantee to the owner of having the exclusive right to use that mark for
putting the product on the market for the first time and thus to protect him against
competitors wishing to take unfair advantage of the status and reputation of the trade mark
by selling products illegally bearing it." 76

The ECJ thus concluded that the protection of such goods was related to their marketing.
This somehow elucidates the issue that transporting the goods (goods in transit) lawfully
manufactured in a member state to a non-member state or states, and if it in any way does
not involve marketing is therefore not liable to infringe the specific matter of the
trademark.

Furthermore, as Advocate General Mischo noted his Opinion, he concluded that

regardless of the final destination of the goods the fact that the goods are placed
subsequently on the market in a non-member country and not in another Member State
does not alter the nature of the transit operation so does not constitute placing on the
market.

2.4.2. Case C-405/03 Class International BV v Colgate Palmolive Co 77

75
It states, "Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States."
76 See, Case Centrafarm v Winthrop [1974] 16/74 ECR 1183, paragraph 8,
Hoffmann-La Roche v Centrafarm [1978] Case 102/77 ECR 1139, paragraph 7
Loendersloot v Ballantine [1997] Case C-349/95 ECR I-6227, paragraph 22
77 [2005] ECR I-8735

15
Facts- Class International shipped into Rotterdam a container load of toothpaste bearing
the Aquafresh trademark from a source in South Africa.

The ECJ was referred on how to interpret Article 5(1) of the Trademarks Directive and
Article 9(1) and (2) (c) of the Community Trademark Regulation? (Please refer Appendix
2) Is it that a trademark's proprietor can oppose the introduction of a good under external
transit procedure or in customs warehousing of original goods bearing that mark which
had not previously been put on the market, in the Community, by that proprietor or with
his consent?

The Court in reply made it clear that non community goods under external transit
procedure does not mean they are "imported" as stated in the Trademarks Directive or the
Community Trade Mark Regulation. One of the most essential criterions is to be used in
the course of trade that is introducing in the Community for the purposes of putting them
on the market.

Article 7(1) of the Directive and Article 13(1) (please refer Appendix 3) of the regulation
were cited which conferred the limit of exhaustion of the rights conferred on the proprietor
of the trademark. It allows the proprietor to market the products outside without
exhausting their rights within. It has also provided them with the right to oppose the
importation of these goods without the consent. Cases C-414/99 Zino Davidoff and Levi
Strauss78 , paragraph 33 'Importing' within the meaning of Article 5(3)(c) (please refer
Appendix 1) of the Directive and Article 9(2)(c ) of the Regulation, entails to using the
mark in the course of trade i.e. putting the goods in the market for trade.

Even the customs procedures Article 79 of the Customs Code distinguishes between the
non-community goods placed for custom procedures like external transit or custom
warehousing and placing them under customs procedure for circulation in the market.
Release for free circulation is a requirement for putting the goods in the market. For this
reason, the mere physical induction of the goods does not constitute as importing under
Article 5(3) (c) of the directive and Article 9(2) (c) of the regulation and does not involve
as using under Article 5(1) and Article 9(1). Under these circumstances, the proprietor
cannot oppose introduction or conditional existence of a final destination already specified
by a third country. But if the goods are put on sale under the external transit or customs
warehouse procedures then under Article 5(3)(b) and Article 9 (2)(b) of the proprietor can

78 [2001] ECR I-8691

16
oppose the sale. ECJ its decision C- held that in interpreting Articles 5(1) and (3) of the
Trademark Directive79, it does create " a new criterion for the purpose of ascertaining the
existence of an infringement of trade mark law or to determine whether there is a use of
the mark liable to be prohibited".

2.4.3. In Case C-281/05 Montex Holdings v Diesel,80

Facts- Montex manufactured the clothes in Poland. They then imported back the clothes
to Ireland under the trademark of "DIESEL" via transit through Germany. The German
officials in this case implied that since the goods will find their way back the transits
infringed the trademarks.

The ECJ had to consider the issue but this time was for the "counterfeit goods" and in view
of the Counterfeit Goods Regulation (or, more accurately, its predecessor, Regulation
(EC) No 3295/94).81

The Court rejected the argument following the case laws, firstly based on a legal fiction
that goods placed under this procedure are treated as if they have not entered the
Community and so are subject neither to import duties nor other measures of commercial
policy in accordance with its decision in the earlier Case C-383/98 Polo/Lauren82 .
Secondly, based on the verdict in Rioglass and Class International83, that transit as such does
not involve any marketing of the goods in question and is therefore not liable to infringe
the specific subject matter of a trademark. The position is different, however, if the goods
are subject to the act of a third party whilst placed under the transit procedure, which
necessarily entails their being, put on the market.

The Court then interpreted Article 5 of the Trade Marks Directive as Diesel asserted and
was affected by the earlier judgment of the Court in Case C-60/02 Rolex 84, Regulation

79 EEC First Directive 89/104/EEC of the Council

80 [2006] ECR I-10881
81 Ibid 2
82 [2000] ECR I-2519
83 [2003] E.C.R. I-12705
84[ 2004] ECR I-651

17
(EC) No 3295/9485 and the fact that the goods were manufactured unlawfully in the
country of origin.

In that judgment Rolex,86 the Court pointed out in paragraph 54, that Article 1 of
Regulation No 3295/9487 is applicable when goods were transferred from one non-
member country to another, on request of the company, which holds the right when they
are temporarily detained in a member state.88

In that regard, the Court notes that Article 1 of Regulation No 3295/9489 states that -

First, the conditions under which the customs authorities were taken into action within
the meaning of Article 37 of the Customs Code, where the goods are found to be
infringing. It could then be placed under a suspensive procedure within the meaning of
Article 84(1) (a), and the re-exported subject to notification or placed in a free zone or free
warehouse under Article 166 thereof.

Second, Article 1 of Regulation No 3295/94 lays down the measures in view of the goods
mentioned above. (First)

Third, the second and third recitals of that regulation, as mentioned above exclusively
requires the placing of such goods on the market, and to the need to prohibit the release of
such goods free circulation in the Community.

Therefore, from the above interpretation Regulation No 3295/9490 does not introduce any
new criterion of determining the trademark. Moreover, similarly with regards to the
answer to the third question it is assumed to be irrelevant about the destination, place of
manufacture or the in infringement of the existing trademark rights of the proprietor in
that country.

2.5. The court's interpretation from the Case Laws-

The court derived the following principles from all these cases.

First, for the infringement of Registered Trademark, the goods should be placed on the
market. The goods in transit and subject to suspensive customs procedures do not come

85 Council Regulation (EC) 3295/94 on prohibit the release for free circulation, export, re-export or entry for a suspensive procedure
of counterfeit and pirated goods (EC Border Regulation) [1994] OJ L 341
86 Ibid n. 85
87 Ibid n. 86
88 Ibid 82, paragraphs 26 and 27
89
Ibid n.2
90 Ibid n. 2

18
under such criterion. This principle has been applied in domestic law by the Court of
Appeal in Eli Lilly v 8PM Chemists Ltd91 ; and it was recognised more recently by this court
in L'Oreal SA v eBay International AG 92.

Second, the "Montex exception"93 however considers the acts that the third party may entail
and put the goods in the market. However, the burden of proof rests solely on the
proprietor.

Third, a mere "risk" is not a good enough reason that the goods would be placed in the
market.

Fourth, the Counterfeit Goods Regulation has not introduced a new criterion for
ascertaining the infringement of a registered trademark.

2.5.1. The virtue of the position adopted by HMRC

The judgement lines the scope of the rights conferred by a registered trademark.

First, the court interprets that it has not, in any way extended the rights conferred by a
registered trademark for any purpose. On the contrary, when there is a comparison of
Article 2 of the Counterfeit Goods Regulation with Article 5 of the Trademarks Directive,
the definition of "counterfeit goods" encompasses only the rights conferred by a trademark
registration. The Counterfeit Goods Regulation provides a support for the Intellectual
Property Rights holders and protects manufacturers and the public by providing a system,
which, in specified circumstances, but it does not create entirely new rights.

Second, the Counterfeit Goods Regulation provides a system wherein if certain conditions
are satisfied the customs must take action to stop the infringement of the Intellectual
Property Rights. In such case the right holders are expected to abandon them for
destruction, however if the right holder does not abandon them for destruction then, right
holder can commence proceedings to determine if the his rights have been violated under
the National Law ( in accordance with Article 10.

91 [2008] EWCA Civ 24; FSR 12

92 [2009] EWHC Civ 1094.
93 Ibid n 63

19
Third, Montex94 establishes that the Counterfeit Goods Regulation has not introduced any
new criterion for ascertaining infringement under national law. Hence, in any proceedings
initiated by the rights holder the court must determine the question of infringement in
accordance with the principles of trademark law.

Fourth, the definition of "counterfeit goods" in Article 2.1(a) (i) based strictly on the notion
of infringement of a trademark. Hence it requires the use of a trademark which is
essentially the same as a registered trademark on goods of the same type as those the
subject of the registration and which thereby infringes the trademark holder's rights under the
Community Trade Mark Regulation or under the Trade Marks Directive.

2.5.2. The merits of the position adopted by Nokia

Nokia nevertheless contends that the Counterfeit Goods Regulation 95

does indeed give
customs authorities the power to seize fake goods which are in transit through a Member
State. Its submission has three main parts.

(i) The recitals and Article 1

Nokia refers to recitals (2) to (4), (10), and Article 1 of the Counterfeit Goods Regulation.96
It then clearly shows that the purpose of the Regulation was to prohibit counterfeit goods,
pirated goods and, more generally, goods, which infringe certain Intellectual Property
Rights from being introduced into the Community customs territory. It also covers
transhipment and enables custom authorities to take action against such goods, which are
in the process of export, re-export, or leaving the Community customs territory. As stated
exclusively in the Article 1.1(b).

The court however accepting the above submission states that it is clear that the situations
set out in Article 1 for action by customs authorities include goods in transit and the goods
subject to suspensive procedures. The same appears from the recitals. However, it is
important to note that Article 1 and the recitals only qualify, if the requirement that the
goods are counterfeit, pirated or otherwise infringe an Intellectual Property Right is
satisfied. It does not support the notion that it empowers the customs to take action against
goods, which do not infringe the Intellectual Property rights. This applies especially in

94
Ibid n 63
95
Ibid n. 1
96
Ibid n. 1

20
case of the counterfeit goods where to initiate an action it should infringe a trademark.
This makes the Article 1.1 (b) impotent. The goods in transit will become counterfeit if it
satisfies the Montex exception,97 which means that the goods will access the market. In
such case, the counterfeit goods in transit must be kept in suspensive procedures even
where the trademark law does not apply.

(ii) Polo/Lauren98 and Rolex99

Nokia finds support from two decisions of the ECJ. The first is Case C-
383/98 Polo/Lauren100 . It involved a consignment of T-shirts in transit from Indonesia to
Poland seized by Austrian customs. On appeal to the Oberster Gerichtshof expressed
uncertainty if the regulation (EC) No 3295/94 would apply. The decision considered the
situations in which the goods might come on the market in the community or at least can
have an effect on the market. The court then stated that, "It is not for the Court of Justice
to rule on the interpretation of national law, which is a matter for the national court alone.
If the national court were to find that the relevant provisions of national law do not
prohibit and, thus do not penalise the mere transit of counterfeit goods through the
Member State concerned, contrary none the less to the requirements under Articles 2 and
11 of Regulation No 3295/94, it would be proper to conclude that those articles preclude
the national provisions in question."

(iii) Manufacturing fiction

Nokia also contends the definition of "counterfeit goods" in the Counterfeit Goods
Regulation by adopting the manufacturing fiction. Citing recital (8) states that proceedings
initiated to determine whether an intellectual property right has been infringed under
national law will be conducted with reference to the criteria used to establish whether
goods produced in that Member State infringe intellectual property rights. Nokia gains
support from a decision of the Court of The Hague in Sisvel v Sosecal101, in which the
"manufacturing fiction" was apparently applied to a consignment of goods being
transhipped from China to Brazil and which were alleged to infringe a patent.

97
Ibid n 63
98
[2000] ECR I-2519
99
Ibid 57
100 Ibid 65
101
[2008] KG ZA 08-617 DISTRICT COURT IN THE HAGUE

21
However, the court ascertained otherwise and stated that recital (8) could not in any way
support the Nokia's claim. It could not find any evidence that the Community Trade Mark
Regulation and the Trade Marks Directive would actually extend the rights of the
proprietor.

The court determines the definition of "goods infringing an intellectual property right" in
Article 2 of the Counterfeit Goods Regulation to be comprehensive and limits the
provisions in the case of "pirated goods" but not otherwise. In its judgment recital (8), it
did not indicate if the law in force in the relevant Member State has to be applied in
determining whether an intellectual property right has been infringed. However, it
concluded that even if the goods were produced lawfully in a non-member state it would
be subject to seizure when it goes form one territory to another. However, for the court it
seemed unlikely that the Counterfeit Goods Regulation ever intended for such
conclusions.

The ECJ completely rejected the manufacturing fiction principle. By doing so, they tried
to keep the issue of IP infringement in transit as a “normal” IP case, and the regulation
would not confer any additional protection upon a right holder. This shows the court's
opinion that the manufacturing fiction as an "additional protection".102

2.6. The Montex exception103

The court held that it had no evidence that the goods had any real prospects "of being
diverted" back to the community. Thus, it was concluded that unless the proprietor
complains about the goods being placed in the market it does not fall within the definition
of the counterfeit goods. Hence, Nokia made it clear that the Montex Exception did not
apply.

Result - the court in its final verdict mentioned that it had no evidence to suggest that there
is any real prospect of the illicit diversion onto the market in the Community of goods,
which are in transit through the UK. It also specified that if the consignor or consignee
requests that non-Community goods in transit through the UK were entered for release
onto the Community market, then HMRC could recognise that such goods may fall within
the definition of counterfeit goods under the Counterfeit Goods Regulation. If it had a

102 G. van der Wal & F. van Schaik, “Zet het arrest Montex/Diesel de deur open voor ongebreidelde transitohandel van
nagemaakte merkgoederen? Of toch niet…” ,2009
<http://www.eplawpatentblog.com/PDF_December09/Fiction%20Geert%20Theuws.pdf> Accessed on 23/02/2011
103 Ibid n 82

22
reason to suspect that they may be counterfeit, then it suspends the release of the goods
and the right holder is contacted under Article 9 of the Regulation.

Conclusion-
In the above case, it can be seen that the Judge Kitchin J's has taken a rather restrictive
approach and this fact can be verified from the statement, which states “[T]his result is not
satisfactory. I can only hope it provokes a review of the adequacy of the measures available
to combat the international trade in fake goods by preventing their transhipment through
Member States.” However, it has clearly dismissed the "manufacturing fiction" that has
put unwanted implication on the pharmaceutical transits discussed below. However, this
approach helps the Genuine Pharmaceutical Products under transit, while is found to be
at bay in case of fakes. This point is analysed in the next chapter.

Chapter 3
Introduction- The above chapter showed the "restrictive approach" of the court but how
does it affect the Pharmaceutical industry is dealt in this current section.

3. Possible Impacts of the decision relating to the Pharmaceutical transit-

European Union amended its border control regulations in 2003 that allowed EU patent
holders to demand seizures under 1383/2003 (Counterfeit Goods Regulation).104 This
generated controversy as the seizures demanded seizures of genuinely produced goods and
marketed in a country with no patent in transit.105 This is worthy of attention because it
challenges the fundamental ideas of how the international IP works. One of such core
principle it utilizes is the principle of Independence, equated on the "acts of state
doctrine"106.The "Independence" convened at the Paris convention on the Protection of
Industrial property. 107 This principle aims to protect the national institutions and decision-
making against the outer interference of the foreign authorities. This provides the state the
autonomy to implement the patent protection, as they consider appropriate with their

104 Council Regulation (EC) 1383/2003 on Counterfeit Goods Regulation (EC Border Regulation) [2003] OJ L196/7
105WTO ‘‘Access to Medicines Back on Centre Stage at the WTO’’, (2009) 13(1) ICTSD
< http://ictsd.org/i/news/bridges/44203/ > Accessed on 27/03/2011
106 See RE Banco Nacional de Cuba v Sabbatino [1964] 376 U.S. 398
107 See Frederick M. Abbott, Thomas Cottier & Francis Gurry, International Intellectual Property in an Integrated World Economy
(2007), New York: Aspen pp.65–70.

23
framework of rules. This also protects the states from being interfered from the foreign
courts and administrative interference.

The states absolute right is controlled and modulated via "International Agreements" and
Customs "Freedom of Transit" recognised by GATT/WTO, Article V. The principle was
widely followed and there were no recorded controversies.108The Article V prohibits the
unreasonable imposition of Regulatory Requirements on the goods in transit. The Article
51, of the TRIPS allows the members to adopt procedures to prevent counterfeit trademark
and pirated copyright goods from entering national markets through detention at the
borders and notification by the custom authorities. The TRIPS also allow members to
adopt measures to prevent importation of the goods infringing other forms of IP. However,
no obligation is required to provide "anti-counterfeit or anti-piracy border procedures for
parallel traded goods.109

The problem with it is that nobody described the scope, the extension or limitation of
patent jurisdiction. This creates a gap that gives the state liberty of determining
Independence by National Legislatures and by Public International Law. Public
International Law also states that sovereign nations should exercise exclusive control over
the activities taking place within their own territory.110 This point was exploited in number
of cases that has taken place in the recent times.111 Therefore, to put it generally, the
International Laws are there which sets up a minimum standard and provides guidelines.
This helps the states to have a guideline and on the other hand follow their own set of rules
"independently" without any outside interference. The following section explains how the
states misuse this power.

These pharmaceutical products generated controversies as they were supposed to be

infringing the "local" patents on their way through the European airports112.

108 WTO‘‘Colombia—Indicative Prices and Restrictions on Ports of Entry’’, (2009) WT/DS366/R.

110 Cf. United Nations Charter, art.2. of Public International Law

<http://heinonline.org/HOL/Page?handle=hein.journals/nyuilp26&div=13&g_sent=1&collection=journals> Accessed on
26/03/2011
111 John W. Miller and Geeta Anand," India Prepares EU Trade Complaint," Wall Street Journal, (2009)
112 WTO ‘‘Access to Medicines Back on Centre Stage at the WTO’’, (2009) 13(1)

24
 DATE COMPANY DRUG DESTINATION

15.10.08: Ind-Swift Laboratories Ltd, India Clopidogrel Bilsulphate- Columbia

API
27.11.08 Cipla Ltd, through Uni World Pharma (Olanzapine 10 mg Tabs Peru
Ltd, Dubai
27.11.08 Cipla Ltd, through Uni World Pharma Rivastigmine 3 mg Tabs Peru
Ltd, Dubai
24.12.08 Dr Reddy’s Laboratories Ltd, Losartan - API Brazil
India

Table: Shows the Recent cases of the seizures of goods in transit via EU.

The most notorious113 among them is the 2008 Schiphol Airport Case,114 where seizure of
a shipment of losartan, a blood pressure medication, in transit from India to Brazil took
place. The seizures were based on the patents that were in force in the transit state (in this
case Netherlands). Losartan is patented neither in India nor in Brazil, but Merck owns the
patent rights in the Netherlands. In this case, lawyers acting on behalf of Merck demanded
that the producer, Dr Reddy’s, consent to destruction of the shipment. Merck eventually
authorised release of the goods back to India in exchange for Dr Reddy’s acknowledgment
of its Dutch patent. The Dutch officials regarded the goods in transit to have been imported
or counterfeit as they were in their territory. Another important point to mention here is,
these drugs were produced under TRIPS compliant compulsory licensing programme and
were not considered for being introduced in the common market.115

Dutch Authorities in such case have relied on decision of "Court of The Hague in the
Netherlands. Sisvel v Sosecal,116 grounded in recital 8 of the 2003 IP Border Regulation.
The court interprets Recital 8, which establishes the "manufacturing fiction". The
manufacturing fiction is a part of the legal fiction, which can be defined according to
Moglen as 117

113 Ibid n. 42 Pg 47
114 India v European Union; Netherlands [2010] DS 408/01
115 F M Abbot, "Worst Fears Realised :The Dutch Confiscation Of Medicines Bound from India to Brazil",(2009) 13(1)
116 Ibid n 64
117 Eben Moglen 'Legal Fictions and Common Law Legal Theory Some Historical Reflections'(1989), Tel-Aviv University Studies
in Law<http://emoglen.law.columbia.edu/publications/fict.html> accessed on 20/2/2011

25
"A legal fiction is a proposition about the substance or procedure of the legal system,
purporting to be a principle or rule material to the determination of cases, which rests in
whole or in part on factual premises known to be inaccurate at the time of the fiction's
invocation. Each fiction, qua fiction, may be said to have a subject matter, comprised of
the premise or premises counterfactually maintained. Fictions may have as their subject
matter the parties' status or prior transactions in the case before the court; or the existence
or relationship of third parties, places, or things not before the court; or they may assert
facts about the tribunal, or about the history of the law itself. ... In addition to its subject
matter, the fiction as fiction may be said to have the additional attribute of technique, or
the device by which the counterfactual is declared. The simplest technique is assertion: the
truth of the subject matter is announced without more or having been asserted by a party
is adopted by the court without scrutiny."

The manufacturing fiction originated from the old Customs Regulation Art.6 .2 (b)
(Appendix 2) and Recital (8)118 of the current Regulation. The Recital 8 especially outlines
the proceedings to determine, whether an intellectual property right is infringed under
national law. This intern is conducted, in reference to Article 10119 of EC regulation
1383/2003.120 "Manufacturing Fiction" states that the goods detained by customs,
irrelevant of what suspensive customs procedure the goods are put under, it shall be
considered as being manufactured in the Member State. In such situation the customs
action and national law of that state shall apply to determine if the goods infringe any
Intellectual Property Rights.121 This means that the infringement will only take place only
if its own national laws are prohibiting it.122 Once this fiction is applied, it can then be
determined whether transhipment constitutes any infringement. The manufacturing
fiction was explicitly accepted on 19 March 2004, in a case involving the Dutch customs
officials, on suspicion of infringing Philips' patent rights. 123 They detained a consignment
of CD-R discs originating from Taiwan and destined for Switzerland. Postech c.s.124
however argued that the goods could not be seized as they were merely in transit over

118 ‘Proceedings initiated to determine whether an intellectual property right has been infringed under national law will be conducted
with reference to the criteria used to establish whether goods produced in that Member State infringe intellectual property rights. This
Regulation does not affect the Member States’ provisions on the competence of the courts or judicial procedures.’
119 Article 10 of XXX stated that, ‘The law in force in the Member State within the territory of which the goods are placed in one of
the situations referred to in Article 1(1) shall apply when deciding whether an intellectual property right has been infringed under
national law.’
120 Ibid n. 106 art. 10
121 Vrins, O ‘Enforcement of Intellectual Property Rights Through Border Measures. Law and Practice in the EU’. (2010), p. 360.
122 Ibid n. 123
123 Philips v. Postech c.s. ( 2004) N° C02/110HR ( First Chamber).
124 Ibid n 97

26
Dutch territory, and transit as such does not constitute infringement under Dutch patent
law.
The Supreme Court turned down the argument and stated that it is decisive for the
infringement question whether under the assumption that the goods are manufactured in
the Netherlands and if the rights of the patent holder are violated. The lower Dutch Courts
in a series of later patent infringement cases consistently followed this reasoning and the
decision.125 18 July 2008, (Sosecal v Sisvel)126 the district court of Hague reaffirmed its
belief in the manufacturing fiction.

3.1. Applying Nokia decision to Indian Drug seizures-

Now the Nokia127 decision does not apply directly to the Drug seizures because of some
basic differences, which is the kind of Intellectual Property, infringed. Kitchin J's decision
was limited to the counterfeit (identical trademarks in use) goods rather than the patented
goods. Based on the UK Trademarks act 1994( and EC Directive, 1988), which stated that
in order to amount to an infringement the goods must be used "in course of trade" and
mere transit cannot be considered as infringement just because it has entered inside the
borders. However, in case of the UK Patents Act (based on the EPC 1973, as revised by
EPC 2000) there is no such limitation of use in trade but this does not give the UK customs
authorities right to conclude that all the goods in the "transits" can be detrained. However,
UK Patents Act (1977) specifies the need to be "imported". Now following the wordings
of the Kitchin J, it can easily be argued that an in transit entry is not really an "import".
So bearing the argument in mind it can thus be concluded that drugs in transit deemed to
be violating patent rights cannot be equated as counterfeit goods (provided it has been
properly authorised by the drug regulator). The Nokia's decision128 is celebrated as a legal

125 "Philips v Princo et al" (2005) Br /I 02/294 District Court of the Hague
< www.boek9.nl (B9 1823)> Accessed on 25/02/2011
126 Ibid n 68
127 Ibid n. 52
128 Ibid n.52

27
victory for countries like India and Latin America who have been majorly affected by the
Dutch interpretation on 1383/2003. 129

3.2. So has it worked?

The question asked in the introduction

2). Does Article 6(2) (b) of Regulation (EC) No 3295/94 (1)130 of 22 December 1994 (the
old Customs Regulation) constitute a uniform rule of Community law which must be taken into
account by the court of the Member State.

The Belgian government follows the interpretation of the previous counterfeit goods
regulation 131 (i.e. regulation 3295/94), in which the manufacturing fiction was laid down
in Article 6.2 (b). However, the article has not been maintained in the current counterfeit
goods regulation it has introduced something similar in the recital 8.132
In previous cases, the Court of Antwerp was not willing to extend the questions put before
the ECJ to include the legitimacy of the application of the manufacturing fiction.
However, in the above-mentioned Nokia case133 the UK court of Appeal has referred the
questions to ECJ.134
Now there have been clear-cut explanations on the findings of how to interpret the law
especially 1383/2003. Nevertheless, is this the end? The answer lies in the next case, which
is concerned with the transit of the Indian made pharmaceuticals from India to Libya via
Malta135(unreported case). The facts of the case were almost similar to the Nokia case136.
The goods were not patented in either of the countries, were not aimed at the domestic
markets, and were crossing an EU member country. The big question was, only two weeks

129 Spicy IP India "In Transit" Drug Seizures and TRIPS: UK Decision May Help Indian Companies"
<http://spicyipindia.blogspot.com/2009/07/in-transit-drug-seizures-and-trips-uk.html> accessed on 1/3/2011
130 Ibid 2
131 The goods were seized in November 2002. The current regulation was adopted on 22 July 2003
132 In addition, the Supreme Court decision in the Philips/Postech c.s. case related to the previous regulation The Court of The
Hague, however, consistently applied the Supreme Court’s reasoning to the current regulation.
133 Ibid n. 52
134 H. W. Theuws, "ECJ To Decide On 'Manufacturing Fiction' Under Counterfeit Goods Regulation"<
http://www.eplawpatentblog.com/PDF_December09/Fiction%20Geert%20Theuws.pdf>Acessed on 24/02/2011
135 The IPKat] 'They shall not pass: Maltese make a fake-trader cross'<http://ipkitten.blogspot.com/2011/03/they-shall-not-pass-
maltese-make-fake.html> accessed 3/01/2011.
India v Malta First Hall Civil Hall In Malta Feb24 2011
136 Ibid n. 52

28
had passed before AG's opinion on Nokia, so did the judgement provide any help in
delivering this judgement?

The defendant argued that goods were not destined for local market and did not therefore
infringe any trademark right in Malta. After all, if there is going to be an infringement,
there has to be some use in the course of commerce in that country, and it is well known
that external transit does not amount to use in the course of trade. Of course the Indian
company, the defendant raised all arguments as per Montex137 and a whole fleet of other
ECJ and UK case law (as cited and applied by Mr Justice Kitchin in Nokia).

However, the Maltese government had other ideas and stated that, "the Cross Borders
Measures legislation was a stand-alone piece of legislation, which did not require an
interpretation of trade mark infringement in order to be operative".138
This answers the main part of the question that has been highlighted that ‘Does Article
6(2)(b) of Regulation (EC) No 3295/94139 (1) of 22 December 1994 (the old Customs
Regulation) constitute a uniform rule of Community law which must be taken into account by the
court of the Member State -the answer in this case is NO. The Maltese Court has made it
quite clear that customs on the basis of the Intellectual Property Rights Cross Border Measures)
Act of 2000 (Chapter 414 of the Laws of Malta) can be seized, and this independent of
what is contemplated in the EC Regulation 1383/2003 of July 22, 2003 concerning.140

At the end of this chapter, it is worth noting how the principle of "independence" is being
misused by the different states in the EU by setting up their own minimum standards and
not following minimum international standards required for a transit, considered a
transnational affair (as it involves more than one state).

Conclusion-
This chapter shows that the restrictive approach by the Nokia certainly helps the
Pharmaceutical transit cases but does not constitute the uniform rule of the Community

137 Ibid n 82
138 Ibid n 110
139 Ibid n. 2
140TANTI - Dougall and Associates "Counterfeit Products in Transit can be seized in Malta",
<http://www.tdlegal.com/news-a-events/74-ip-news-counterfeit-products-in-transit-can-be-seized-in-malta> Accessed on
24/2/2011.

29
law. The problem with such interpretation is that although it solves the issue of parallel
trade or compulsory licensing it does not state anything, about the goods, which are
legitimately counterfeit or fake. In such cases where goods are genuinely, fake what are
the grounds on which the customs can intervene is evaluated in the next chapter.

Chapter 4

Introduction- this chapter analyses the possible grounds where the customs can interfere.
However, it is not that simple, as it is not clearly indicated on what grounds the customs
should interfere. Therefore, in regards with the transits following the Nokia's141 decision
let's see if there are any legitimate option that the customs can follow to counteract the
problem of the circulation of the counterfeit goods even when the goods are not designated
for the common market. The "manufacturing fiction" although was completely ignored
in the Nokia's142 decision it is still being discussed in this chapter , as it was extensively
used by the Dutch government and seems to be perfectly good option to stop the
circulation of the counterfeit goods in transit where the Customs have no authority. In the
same context of stopping the counterfeit goods in transit, the new parameters like the
circulation of the goods, taking country of origin, and taking country of destination is
analysed in this section for establishing the infringement while in transit.

141
Ibid n. 52
142
Ibid n .52

30
4. Are there any possible solutions Under European law -

4.1. On what grounds should the customs intervene?143

The ECJ have adopted different approach from the Montex case,144 in relation to the
problem of counterfeit goods in the transition. There could be four main approaches being
adopted to deal with the problem in transits as mentioned above. The only problem with
these approaches is that none of them is very clear. They have innate problems and have
the ambiguity regarding the section 1383/2003,145 which is the root for the controversy.
The law cannot define everything, but we need to adopt a resolve to suit the people it is
trying to protect.146

4.1.1. Manufacturing fiction-

The interpretation of the EU regulation 1383/2003147 has been starkly different in the
English and the Dutch courts. The Dutch courts are interpreting the regulation to seize the
consignment, where as the English are doing it to prohibit seizures transiting though E.U.

The Dutch and Belgian courts interpret this in order to determine whether goods in transit
can be seized, in applying so, they must assume that they have been produced in the
country of transit.148 Therefore, any goods in transit are deemed infringing (and thus
subject to seizure). This then leads to the seizure of all the goods in transit that would
infringe a domestic intellectual property right (where they are subject to free circulation).
The difficulty with such an interpretation is threefold. First, such an interpretation is based
on a recital, and recitals, which only illustrate the object or purpose of a
Regulation.149 Second, this interpretation can then be used to conclude that the Customs
Regulation has created substantive intellectual property law, and can now autonomously
define “infringing goods”. Such definition is found only in statutes of Intellectual Property

143
Christopher Heath "Customs Seizures, Transit and Trade - in Honour of Dieter Saunder's 70th Birthday" (2010) , International
Review Of Intellectual Property and Competition Law <
http://login.westlaw.co.uk/maf/wluk/app/document?&src=rl&srguid=ia744cc640000012f45917bd1edaad13f&docguid=I7DE2BB5
0187B11E09002BBBBF2CBB095&hitguid=I7DE2BB50187B11E09002BBBBF2CBB095&spos=300&epos=300&td=480&crumb-
action=append&context=5&resolvein=true>
144
Ibid n. 63
145
Ibid n. 106
146
C. Heath, ‘Customs Seizures, Transit and Trade - In Honour of Dieter Stauder's 70th Birthday’ (2010) 41(8) International Review
of Intellectual Property and Competition Law 881-905

147
Ibid n. 106
148
C. Heath, ‘Customs Seizures, Transit and Trade - in honour of Dieter Stauder's 70th Birthday’ (2010) 41(8) International Review
of Intellectual Property and Competition Law 881-905
149
Gunnar Nilsson, Per Olov Hagelgren and Solweig Arrborn, (1998) ECR I-7477, ECJ
para. 54,
Palacios de la Villa v Cortefiel Servicios SA (2007) IRLR 989, paras. 42 and 44

31
Rights. In trademarks, such broad interpretation is not feasible given the definition of
infringement in Art. 5 of the Directive and the ECJ's interpretation in Class. There is
another additional difficulty using the manufacturing fiction in patents. The law in general
does not account the communalities mandate for law making, except for very specific cases
(such as biotechnology, additional protection certificate), so the opinion of the customs
does not count.150 Third, if such a rule were followed, to come to a decision then this would
also allow goods in situations such as Montex 151and Rioglass to become subject to seizure,
which the ECJ has explicitly ruled out.152
If the above appears relatively clear, one still wonders why the manufacturing fiction was
stipulated in the old Regulation in the first place. An explanation has been given by
Petersen-Padberg:
That the “fiction of manufacture” being referred to in several decisions of Dutch courts is
derived from the (obviously failed) wording of Art.6 (2) (b) and a preamble of EC/3295/94
Regulation. The problem with the regulation was that lawmakers opened up the seat for
interpretation, to construe a rule of International Private Law in Article 6 (2) (b), i. e. the
applicable law is being determined by the law of the country (where goods were placed in
customs) rather than the infringing act. This was rectified in Art.10 of Regulation
EC/1383/2003.153
The interpretation would certainly provide the base to establish when the customs should
entitle to act, rather than classifying the goods (when they are classified as the infringing
goods).Therefore, it is unlikely that the interpretation of Dutch and Belgian courts is
correct under the new Customs Regulation, if it ever was under the previous one.

4.1.2. Preventing the circulation of the counterfeit goods-

The definition of the infringing goods is very vague if we look on the customs regulation
and the recital 3 stipulates:

" In cases where counterfeit goods, pirated goods and, more generally, goods infringing an
intellectual property right originate in or come from third countries, their introduction into

150
In a general observation, one would not expect the definition of, say, theft, in a law that deals with the powers of the police.
151
Ibid n. 63
152
C. Heath, ‘Customs Seizures, Transit and Trade - in honour of Dieter Stauder's 70th Birthday’ (2010) 41(8) International Review
of Intellectual Property and Competition Law 881-905

153
ANJA PETERSEN-PADBERG , “Commentary on the Customs Regulation",(2008) Article 1 point 10

32
the Community customs territory, including their transhipment, release for free circulation
in the Community, placing under a suspensive procedure and placing in a free zone or
warehouse, should be prohibited and a procedure set up to enable the customs authorities
to enforce this prohibition as effectively as possible."

The Trademark directive requires the goods "used in trade" for the purpose of
infringement, but it does not consider the trans-shipment. Therefore, the Trademark
directive can only label goods as the counterfeit, which are in trade, but not the goods
entered for Transhipment. Article 2 of the regulation provides a better frame as it stipulates
the definition to be construed narrowly, "Goods infringing intellectual property rights are
goods, which are considered infringing under the Trademark Regulation or National
Trademark law." However, they leave a corridor of uncertainty as they add the "namely"
in Article 2.1 (a), so does it mean that there are other possible situations, which can be
classified as counterfeit. This ambiguity can be sensed in the ECJ's Rolex decision,
paragraph 58.

"It is not for the Court of Justice to rule on the interpretation of national law, which is a
matter for the national court alone. If the national court were to find that the relevant
provisions of national law do not prohibit and, thus, do not penalise the mere transit
of counterfeit goods through the Member State concerned, contrary none the less to the
requirements under Articles 2 and 11 of Regulation No 3295/94, it would be proper to
conclude that those articles preclude the national provisions in question."

In this decision, it does not specify which jurisdiction and what law the "counterfeit goods"
is based on. The problem is that the definitions are based on the subsequent location and
what is going to be done by the goods rather than looking at the inherent nature of the
goods. Counterfeit are counterfeit, not because it links the counterfeiting of the trademark
rights and its intended country of importation. E.g., The NOKIA products manufactured
in China are not counterfeit, as they do not infringe any trademark (assuming that there
were no enforceable trademark rights there) and they suddenly become counterfeit as they
cross border. Therefore, the problem is the principle of "territoriality". The idea of the
universal theory of trademark thus makes sense, first favoured by the German Imperial

33
Supreme Court154. Hence, in the absence of a jurisdiction the status of a good will change,
at least in the legal terms.

4.1.3. Taking into account the country of origin as reference-

As pointed out before in this paper, to define the counterfeit goods we need a jurisdiction.
In the case of Nokia,155 the goods produced were without the trademark owners’ consent.
So the big question is should it make a difference if goods were classified as "counterfeits"
at the time of manufacture and export? There are three main concerns regarding this rule

First, what are infringing can be debatable Under the Customs Regulation and Trademark
Directive? This can lead to the destruction of the goods that do not infringe the IP in the
place of enforcement by the IP owners. Especially, in case of the Trademark Directive
where class is very clear in this respect.

Second, the customs will have to determine if the goods were infringing in their country
of origin, and therefore apply the foreign law, which has its own complexities. (See
Appendix 3)

Third, it is not clear why European Customs should undertake the task of enforcing IP
rights on behalf of a different jurisdiction even though they do not infringe the European
Trademark directive. The solution of making the "transit of the counterfeits" an illegal act
seems appropriate in the European Union but is definitely not an answer in the current
scenario.

4.1.4. Taking the Country of destination as a reference-

The Swiss in their patent act and the German court in their recent case of - Datenträger 156
have relied heavily on taking country of destination as a reference.

The newly amended Swiss Patent Act now stipulates the following: “Sec. 8 - Acts of
Infringement…. (2) Acts of use are … import, export and transit. (3) The transit cannot be
prohibited where the patentee could not prohibit the importation into the country of
destination.”

154
Mariani , 51 RGZ 267 Decision of the Imperial Supreme Court
155
Ibid n 52
156
(2009), Inst GE 11, 65 Hamburg District Court

34
The Swiss law avoids all the problems highlighted in (c) above but, is not free from other
innate problems. For example, the "Intended destination", as mentioned above, can be
changed in the course of the transport and the European Union can be used as the
suspensive destination. This can lead to constant changing of the qualification of the
counterfeit goods. The professional infringers on the other hand can indicate a country
where the goods presumably do not infringe. Then it is not entirely sure about the burden
of proof, about on whose shoulders precisely the task should fall if there is infringement in
the country of destination. Then there is a problem with applying the lawfulness of an
import, because of the applicability of the foreign law. A simple example of such
applicability is the policy of EU for the genetically modified DNA, so does such
importation of the GM food add to the infringement. A recent case over genetically
modified soybeans decided under ECJ is a perfect case to feel the complexity of the
matter.157 In worst case scenario the defendant could argue the invalidity of the foreign
patent right or supplementary protection certificate. These issues to a certain extent also
touch upon sovereignty -for example, there are going to be concerns if a country like Brazil
the compulsory licence granted for the importation of certain patented pharmaceuticals
was ultra vires in light of domestic law or international agreements by some other country.

The Hamburg District Court, in a decision dated 30 April 2009, 158 has ruled based on
existing German law and provided an injunctive relief stating, “in view of the country of
destination the danger of an unlawful infringement of the parallel foreign patent can be
ascertained”. However, the court did not provide any remedies under the domestic patent
law for acts of transit. The patent law is specifically limited territorially hence; the scope
is restricted to the domestic infringement so there are overwhelming doubts that it would
be subsided by the general laws protecting property. In this view all the solutions provided
by the Swiss or European law seems impregnated with difficulties.

Conclusion-
In this section, it is clear that "manufacturing fiction" in any case cannot be used to
establish the infringement of IP in transits. It has particularly been severe on the

157
Monsanto Technology LLC v Cefetra BV and Others [2010] C-428/08

158
Ibid n 156

35
pharmaceutical products discussed earlier. The other option of "preventing the circulation
of the Counterfeit goods" cannot be enforced since the law against these goods does not
mention the jurisdictions. Moreover, the problem has been cited is of the definition of the
counterfeit goods. It should not depend upon the law or location but considered as an
inherent property.i.e. it should not be regarded as fake because it infringes the IP rights but
should be considered fake because they are fake and an element of deception is involved.
To determine infringement in transit if the "country of origin is used as a reference" then
the problem entails is of the foreign law and destruction of goods in the place of destination
even though it does not break any law. In case of taking "the country of destination as the
reference" it will again face the problems of the foreign law and the destination can be
changed or chosen specifically to show avoidance of the infringement.

Moving on to the next chapter the analysis will try to find out what the International Law
has to offer in this matter.

Chapter 5

Introduction- If the ECJ follows the "manufacturing fiction" doctrine, then one might have
to check, if the international law permits the seizures of goods in transit without making
it an act of infringement under the domestic law or the declaration of the transits as an
infringing act. In this section, the considerations under the international law are being
enquired to see if international law allows the seizures of goods in transit without making
it an act IP infringement under domestic law.

5. Interpreting the International Treatise -

5.1. Consideration under international law

5.1.1. The Paris Convention-

In an International Agreement Paris Convention had the first provision regarding

International Trade and Intellectual Property. Article 9 of the Paris Convention for the
first time provided remedies against importation of "goods unlawfully bearing a
Trademark". This exemption finally convened as Article 9 (4) in the original 1883 draft.

36
159
This provision modelled on Section 19 of the 1857 French Trademark Act concerned
with storage and transit. Following this at the Brussels revision, it explained the transit,
export, and import.160 Therefore, it is viable to conclude from the history of the Paris
Convention that "importation" is distinguished from "transit".

5.1.2. The TRIPS Agreement

It requires the members to enforce Intellectual Property to avoid "barriers to legitimate

trade"161 stated in Article 41 and to cultivate "a multilateral framework of Principles
...dealing with international trade in counterfeit goods".162

Article 51163, of the TRIPS Agreement obligates WTO members to adopt procedures
allowing trademark and copyright owners to prevent counterfeit trademark and pirated
copyright goods from entering national markets through detention at the border and
notification by customs authorities. To that provision, it indicates no obligation to provide
anti-counterfeit or anti-piracy border procedures for parallel traded goods or ‘‘goods in
transit’’. In the case of parallel trade, it specified that members might or might not provide
border protection measures depending upon the local approach to the exhaustion
question. At the time when the TRIPS was negotiated, the practice of seizing goods in
transit based on allegations of patent infringement was unknown; so members did not
contemplate such practice as an option when drafting the relevant provision.164

Interpreting Article 51 of TRIPS:

"Members shall, in conformity with the provisions set out below, adopt procedures to
enable a right holder, who has valid grounds for suspecting that the importation of
counterfeit trademark or pirated copyright goods may take place, to lodge an application
in writing with competent authorities, administrative or judicial, for the suspension by

159 Proceedings of the conference of 1880), 2nd ed. 1902, 61.

160 Proceedings of the Brussels Council (1897), at 248.
161 Agreement on Trade-Related Aspects of Intellectual Property Rights (adopted in Uruguay round of

GATT) Uruguay Round Agreements < http://www.wto.org/english/docs_e/legal_e/27-trips_05_e.htm>

162 WTO "TRIPS PREAMBLE"<http://www.wto.org/english/tratop_e/trips_e/t_agm1_e.htm> Accessed

on 23/02/2011
163WTO,"TRIPS-Enforcement Of The Intellectual Property Rights" Article

51<http://www.wto.org/english/docs_e/legal_e/27-trips_05_e.htm>
164 Ibid N 66

37
the customs authorities of the release into free circulation of such goods. Members may
enable such an application to be made in respect of goods which involve other
infringements of intellectual property rights, provided that the requirements of this
Section are met. Members may also provide for corresponding procedures concerning
the suspension by the customs authorities of the release of infringing goods destined for
exportation from their territories."

It can be easily understood that there shall be no obligations to apply on procedures of

imports of goods put on the market in another country by or with the consent of the right
holder, or to goods in transit." This article helps in positioning the terms "imports" and
"transit". The obligatory part of the Article 51 is the enforcement of the border measures
in relation to the imports of counterfeit and pirated goods. Members "may" impose these
measures in relation to the patents and other forms of IP.
The member states "may" also impose these measures in relation to the "transit goods" but
only with a prospect of the "illegal importation". So, keeping this in mind the transit goods
may only be seized, when such goods are destined for a member state (in this case an EU
member state), where the "importation" of such goods would be illegal. However, in case
of the consignment being delivered to Brazil, then Brazil should treat such goods as
counterfeit trademark goods or pirated copyright goods.

Interpreting Article 52 of the TRIPS:

"Any right holder initiating the procedures under Article 51 shall be required to provide
adequate evidence to satisfy the competent authorities that, under the laws of the country
of importation, there is prima facie an infringement of the right holder’s intellectual
property right and to supply a sufficiently detailed description of the goods to make them
readily recognizable by the customs authorities."

This suggests that with respect to the patents and other forms of IP the option of seizure
lies with the member states, so even if the transit goods violate only a patent right and
"transiting" through Netherland it cannot be seized. The various aspects of the TRIPS
specify that member's states must ensure that enforcement of the Intellectual Property
rights should not pose a "barrier to legitimate trade".

38
The section on border measures is limited to infringements of copyrights and trademark.
However, it does make a distinction between "transit" and "importation". It clarifies no
obligation to adopt the customs procedures in transit but can be adopted e contrario and it
links the counterfeit goods to importation. It states that “counterfeit trademark goods”
shall mean any goods, including packaging, bearing without authorization a trademark.
Which is identical to the trademark validly registered in respect of such goods, or which
cannot be distinguished in its essential aspects from such a trademark, and which thereby
infringes the rights of the owner of the trademark in question under the law of the country
of importation.165

Now the provision allows the customs to base their decision on the “prima facie evidence
that an intellectual property right is infringed” in the country of importation (notably Arts.
52 and 58).
Analysing the substantive provision of the TRIPS Agreement it can be concluded that the
border measures are only for the prima facie infringing acts and the role of the customs is
limited to the fact that the infringement may occur. In addition, TRIPS Article 1 authorises
Member States to “implement in their law more extensive protection”, which may well
cover making “transit” an infringing act. Nevertheless, it was made clear that TRIPS
interpretation must be made in accordance with free legitimate trade. However, in cases
like the seizures of the lawfully made medicine it is hard to understand as what should be
understood as the principles of free trade.

5.1.3. The GATT Agreement

Since 1947, the members of the European Union have been the member of GATT now
the World Trade Organisation (WTO). The WTO/GATT article V has been recognised
as the "freedom of transit" through ports and airports. GATT article V prohibits members
from imposing the unreasonable regulatory requirements on goods in transit.166

165WIPO," Are there internationally accepted definitions of counterfeiting and piracy?"<

http://www.wipo.int/enforcement/en/faq/counterfeiting/faq01.html>
166 The Panel in the Colombia-Indicative Prices case, at para.7.387, noted ‘‘as its title indicates, Article

V of the GATT 1994 thus generally addresses matters related to ‘freedom of transit’ of goods. This
includes protection from unnecessary restrictions, such as limitations on freedom of transit, or
unreasonable charges or delays (via paras 2-4), and the extension of Most-Favoured-Nation (MFN)

39
1) The case laws require the GATT and TRIPS to be applied cumulatively. This means
that they need to comply with both the requirements of the agreement and exceptions to
certain principles.
The GATT Agreement, just as the Paris Convention, distinguishes between transit (Art.
V), and importation or exportation (Arts. VIII, X (1), XI (1), etc., and understands transit
of goods as the passage across such territory, with or without such trans-shipment,
warehousing, breaking bulk, or change in the mode of transport, is only a portion of a
complete journey beginning and terminating beyond the frontier of the contracting party
across whose territory the traffic passes. Traffic of this nature is termed in this article
“traffic in transit”.
Unlike the Paris Convention or TRIPS, GATT, in Art. V specifically stipulates a right to
free transit:
2. There shall be freedom of transit through the territory of each contracting party … for
traffic in transit to or from the territory of other contracting parties….
3. Any contracting party may require that traffic in transit through its territory be entered
at the proper customhouse, but except in cases of failure to comply with applicable
customs laws and regulations, such traffic coming from or going to the territory of other
contracting parties shall not be subject to any unnecessary delays or restrictions….
4. All charges and regulations imposed by contracting parties on traffic in transit to or from
the territories of other contracting parties shall be reasonable, having regard to the
conditions of the traffic.
Article V does not state that the goods in transit shall be regarded as if they were not calling
on the ports of the transit country at all. Rather than they are subjected to the "applicable
customs laws".
Article XX provides the exceptions for the customs enforcement regulations on patents,
trademarks, and copyrights on the conditions that are not arbitrary or disguised restriction
to International trade. (Please see Appendix 4)
Analysing the India and Brazil case, the drugs produced under compulsory license, made
them legal although not with the owner's consent. This made the drugs lawfully produced
in the country of manufacture, not infringing in the country of the import and not
infringing under the domestic law of the country of transit. In case of medicines, Doha

treatment to Members’ goods which are ‘traffic in transit’ (via paras 2 and 5) or ‘have been in transit’
(via para.6).’’

40
Declaration and Article 31bis TRIPS stops all obstruction on their transit. For all other
arguments, it can be argued that overstepping the "principle of territoriality" as such makes
the principle more onerous or that any such rule effectively counteracts the "freedom of
transit" as such (which it presumably does not). Therefore, making “transit” an act of
intellectual property infringement would lead to significant practical difficulties in its
application and in international trade, but may only lead to a contravention of GATT in
cases where there was no IP infringement in the country of origin and where there would
be no IP infringement in the country of destination.167

Conclusion-

The TRIPS Article 1 although extends the law by stating "implement in their more
extensive protection" thus may as well covering the "transit" under an infringing act but it
has to be in par with GATT which propagates free trade specially Article V.
In case of the medicines under Doha Declaration Article, 31bis states that TRIPS must
not be counteracted by the obstruction of the Transit. Taking into account the TRIPS as a
justifiable account and interpretation of the GATT in the field of intellectual property
combating of International trade must only be limited to those goods that can be termed
as the "counterfeit" not only in the colloquial terms but also in legal terms, which requires
an infringement in the country of origin. In view of the above discussion,
recommendations are made to improve the situation.

Chapter 6

167C.Heath, ‘Customs Seizures, Transit and Trade - In Honour of Dieter Stauder's 70th Birthday’
(2010) 41(8) International Review of Intellectual Property and Competition Law 881-905

41
6. Recommendations and Conclusion-

Introduction-

In the chapters above, it is established that there is a gap between the EU border measures
and International framework. There are problems with the clarity of directives and the role
of the customs in transit. It is quite difficult to cover up all measures of law without being
too descriptive and controversial.168 In this section, however the recommendations
presented are supposed to alleviate the gap and stop tagging of the genuine goods as fake
(generic medicines) and provide action against fake goods in transit.

6.1. The infringement element should be more definitive of the "counterfeit goods"-

The "counterfeit goods" need to be more definitive, this inference is based on the facts that
the "counterfeit goods" definition is only applicable to the goods found in the customs
procedures of Article 1(1) Counterfeit Goods Regulation. They only apply in the case of
goods in trade, that are shipped internationally (that is the goods subject to trade) "use in
the course of the trade ", Article 9 (1) Council Regulation 40/94/EEC (CTMR). Now
these goods may not be trade directed to the country of transit, but to somewhere else. To
avoid coverage of personal importations Article 3 (2) CGR expressly takes them out. This
shows that if a stricter trademark infringement test had applied there would have been no
need to do so. Therefore, we need to make it more definitive.
Recital (3) Counterfeit Goods Regulation states that:
“In cases where counterfeit goods, pirated goods and, more generally, goods infringing an
intellectual property right originate in or come from third countries, their introduction into
the Community customs territory, including their transhipment, release for free circulation
in the Community, placing under a suspensive procedure and placing in a free zone or
warehouse, should be prohibited and a procedure set up to enable the customs authorities
to enforce this prohibition as effectively as possible.”

168
Ibid n. 66

42
The words emphasised explicitly seem to anticipate the facts arising in the Nokia case,169
although what seems immaterial in that the goods in that case both originated in and came
from a third country (as opposed to the "or" requirement in line 3 above).170

6.2. The role and responsibility of intermediaries

There is a dire need to elucidate on the role and responsibilities of the intermediaries.171
These intermediaries may be transport companies, expeditors, handlers, logistic
companies, or warehouses. It is clear that one person does not control the transnational
export. This is in view of the fact that committing fraud is a big business, fraudsters take
every measure to disguise the origin of goods, consignments with authentic goods mixed
with counterfeit goods, and the customs status is constantly changed.172 The internet can
easily distribute these falsified goods. A seller can remain anonymous and send large
amount goods in small packages. Because of such chicanery, the law is trying to find the
intermediaries rather than the source of the counterfeit goods.173 Another most important
factor in shifting the focus is the fact that the intermediaries like the shipping corporations
have a legal office and are more convenient to target.
As mentioned above the ECJ has only ruled on the cases between the owners and the
right holders of the disputed goods. The anti piracy regulation does not mention any of
these intermediaries and more so is neutral as to whom the rights holder must revert to.
However, the Article 17 of Anti Piracy act empowers the competent authorities to take
any measure to deprive the persons concerned of any economic gains. The IP Enforcement
Directive also provides provisional measures and injunctions against an intermediary
whose service is being used by an infringer. Similar provisions are in the Benelux
countries174 Article 2.22 of the Benelux Intellectual Property Treaty. In a recent case the

169 Ibid n. 52
170Waldemar Pawla "Comments of Marques [Amicus Curie Committee] to the Minister of Economy of
the Republic of Poland on the question referred for a preliminary ruling to The Court of Justice of the
European Communities case No. C-495/09 " (2010)
<http://www.marques.org/teams/AmicTeam/Submissions/20100215.pdf> Accessed on 26/02/2011
171 Gustaf Åkesson," Counterfeit goods in transit - A study regarding counterfeit goods in transit and

liability of intermediaries"(2010)
172 EEC, 'Communication from the Commission to the Council, the European Parliament and the

European Economic and Social Committee on a Customs response to the latest trends in counterfeiting
and piracy,' (2005) COM (2005) 479 p. 6.
173
Ibid n 145
174 The Benelux is an economic union in Western Europe comprising three neighbouring

countries, Belgium, the Netherlands, and Luxembourg.

43
commercial court of Brussels held the custodian of the illegitimately imported authentic
shoes in Addidas v Universal Express NV, was found liable under the Belgian Tort Law
even though his actions did not amount to any infringement as such.
Therefore, the intermediaries would attempt to recover losses from the importer of the
goods and will have no concerns with the trademark holder. Now the liability of the
intermediary passes the test of further scrutiny it may be a useful tool in combating the
counterfeiting and parallel imports.175

6.3. Use of customs information to counter counterfeit trade-

It is quite common in case of transits to provide legal status of the goods with respect to
the destination e.g., Art 88 of the Belgian Code of International Private Law. In countries
like Italy, the authorities do prevent the transits of the illicit goods. Now in cases of the
"break route" the opportunity could be used to detain such goods unless the destination
and one solid proof is given that it would not infringe the IPR in the country of destination.

In the case of the Beecham Group v. Andacon (C-132/07), the Beecham group under the
provision of Article 12 of the Anti-piracy Regulation (Appendix 5) sought after the
information obtained to use in the proceedings to stop parallel imports. The matter was
referred to ECJ, as Article 12 states that the information obtained by the right holder from
the customs under Anti-piracy Regulation, should only be used for ascertaining whether
the goods in question infringe an IP right in the sense of the regulation. However, in the
latter paragraph of that article it notifies that the other use of the information only insofar
as it is “not permitted by national legislation”.

Advocate -General Ruiz- Jarabo Colomer was convinced that National law allowed any
permitted use. However, ECJ is unlikely to rule on these questions as dispute took place
out of court.176

Paul Maeyaert," Grey and Counterfeit Goods in Transit: Trademark Law in No-man’s Land" [2009]
175

<http://www.worldservicesgroup.com/publications.asp?action=article&artid=2958>
176
European Communities Trademark Association, " ECTA’s response to the Consultation Paper on the Review of EU Legislation on
Customs Enforcement of IPRs." [2010]
< http://www.ecta.org/IMG/pdf/May_2010_ECTA_response_re_reveiw_customs_legislation.pdf>

44
6.4. Harmonize National trademark laws further177

The harmonisation of the counterfeit goods regulation can achieve harmonisation of the
National Trademark. For example, Finland has included the right to prohibit the
counterfeit goods in transit and hence broadening the scope of its national trademark law.
Goods may, at any time be put under customs transit procedure ‘irrespective of their
nature or quantity, or their country of origin, consignment or destination’ as provided by
the Article 58 of the Community Customs Code. However, this ‘...shall not preclude the
imposition of prohibitions or restrictions justified on grounds of... the protection of
industrial and commercial property.’ In here, if the goods in transit are being capable of
being the counterfeit goods in circumstances cannot be said for sure if it is not going to be
released in the internal market. This specifies the need for greater harmonization.

6.5. To remove the patent rights, form the scope of the customs regulation-

This would make matter simpler for the customs as in practise the patentee would have
no right to tell the customs how to recognise goods that infringes its patent. Moreover, the
inclusion of such right does not resolve the issue. If such inclusion actually improved
proper enforcement of patent rights beyond existing litigation procedures, it would have
been useful. It rather results in combating arbitrary and damaging detentions, which
primarily provides a strategic advantage in subsequent litigation and which could not be
commenced directly.

The patent right could also be excluded from the scope of the Regulation where the goods
are in transit and have no evidence that they can be diverted to the EU market. 178

6.6. Improvements in Anti Counterfeit Trade Agreement Negotiation (ACTA)-179

It is a plurilateral agreement concerned with establishing International standards of the IP
enforcement. The negotiations started in June 2008 and it is a voluntary legal framework
outside WTO, WIPO or the UN. In November of 2009 the summary of the key

177
Gustaf Åkesson " Counterfeit goods in transit - A study regarding counterfeit goods in transit and liability of intermediaries
(2010)< http://lup.lub.lu.se/luur/download?func=downloadFile&recordOId=1713403&fileOId=1713404>
178
Christopher Stothers, Arnold & Porter " Nokia and in-transit border controls" Fordham Intellectual Property Law Institute 18th
Annual Conference on Intellectual Property Law & Policy
<http://fordhamipconference.com/wp-content/uploads/2010/08/stothers.pdf> accessed on 3/4/2011
179
Ibid N 55 pg 1

45
negotiations were published, ACTA aim to build on existing International Rules of the
Intellectual Property Laws. ACTA were supposed to strengthen issues that were weak and
needed attention in the international arena.180 One of such area is the "role of customs in
transit". Based on the ACTA draft published on April 2010, section 2 deals with the Border
Measures leaves on the members to apply the Agreement on goods in transit and states,
"that do not infringe an intellectual property right held within the territory of the Party".
This is as ambiguous and onerous as the EC Border Measures.

The ACTA was supposed to clarify the role of the customs for the goods in transit and
their role when the targeted goods were for the non-community market (with no proof of
diversion towards the internal market). This fault was spotted by the International
Chamber of Commerce and International Trademark assignment and in their letter
suggested, “that customs authorities are expressly given the authority to seize goods in
transit that are suspected of being counterfeit and pirated whatever their final destination.”
This could work however, the consideration should include the "nature of goods", and
they need to define the jurisdiction in order to determine "counterfeit". The focus should
be on the clarity of interpretation of the regulation.

There are particular concerns in case of generics in transit with this act. In a recent measure
Karel De Gucht, trade chief at the EU regarding generics in correspondence to Indian
Commerce and Industry minister said that the "transports in transit will no longer be checked,
except for counterfeiting".181 However, these kinds of measures should be included in ACTA
so that such controversies are in check.

Now the seizure of the goods in case of the medicines, which are in transit being
considered as the infringing under ACTA, is difficult to justify under both Article V 3
(which allows for compliance with administrative rules, or issues of general concern), and
Article XX. (Because such seizure would not be necessary in order to prevent
infringement, and therefore be arbitrary). 182

180
Swiss federation of Intellectual Property, "transparency paper" [2009]
<https://www.ige.ch/fileadmin/user_upload/Juristische_Infos/e/transparency_paper.pdf>
181
The Big Red Biotech Blog " EU - India Settle WTO Drug Trade Dispute" (2010< http://www.in-
pharmatechnologist.com/Industry-Drivers/EU-India-resolve-generic-drug-seizures-dispute-reports?utm_source=RSS_text_news>
182
Only giving customs the authority to supervise goods in transit would not be of much help anyway, if the IP right owner then was
not given any rights for seizure and/or destruction. But in the absence of any infringement, how could the IP right owner assert such
claims?

46
Conclusion -

The current Border Measures Regulations183 were supposed to provide clarity, alleviate
controversy and confusion, the facts analysed indicate otherwise. The current trend seems
to be against Generics. Kitchin J's recognised his restrictive approach and issued a
statement that “[T]his result is not satisfactory. I can only hope it provokes a review of the
adequacy of the measures available to combat the international trade in fake goods by
preventing their transhipment through Member States.”
It is unlikely that the Kitchin J's restrictive approach or for that matter the "manufacturing
fiction" will be used, but there needs to be a balance to hit the right note.

Findings from the Dissertation-

1). In response to the first question according to the Nokia184 case the goods cannot be
marked as "counterfeit" unless they are put in market or according to UK law are
"imported". The customs have no power to seize them unless this criterion is fulfilled; as
otherwise, they do not infringe any Intellectual Property law (in view of the territoriality
concept). However, this does not hold true for the other member states. The manufacturing
fiction is followed in the countries like Netherlands to counteract the problem of the fakes,
as going by the book does not prevent the circulation of the counterfeits. In such cases, the
counterfeit goods are seized even if there is no evidence to suggest that they would be put
in the market. An efficient Border enforcement for outright trademark fakes and
counterfeits can restore the glory of the system.

2. The UK court of justice, in its Nokia decision185 totally ignored the manufacturing
fiction proving that it does not constitute the uniform rule of the community law. The
Dutch court has had a keen interest in the fiction. Nevertheless, to decide the validity of
the issue, states are waiting for the European Court of Justice to deliver its verdict that
could help in forming a uniform community law. The concept of the national
"sovereignty" is due for compromise if law is based on such fictional acts. For example,
under such fictional acts a doctor performing abortion in UK can be prosecuted in India
for an illegal act. Most of the time such seizures are purely for the convenience of the

183
Ibid n.106
184
Ibid n .52
185
Ibid n .52

47
patent holders that have chosen that transit country just to have a long-term "extension of
jurisdiction". Since the law is not harmonised i.e. it does not expand the territorial border
while expanding the Trademark directive into the community trademark this loophole
needs to be covered. There have been cases where different accounts of law has taken place
for similar cases, e.g. as Maltese government pointed out that it considered the Border
regulation as a standalone piece of legislation and hence took a different stand on the
matter abhorring the Intellectual Property.

3). the interpretation of the Article 2 (1) (a) has problems because of the term "goods
infringing" with reference to the Intellectual Property Rights. The key element of the
infringing goods is the "counterfeit goods". The "counterfeit goods" element consists of
two elements Identity element goods including packing etc (See Appendix 1) and the
Infringement element. (See Appendix 1)
The Nokia186 decision reveals that identity element is determinative and infringement element
is merely illustrative. Therefore, for a better interpretation the infringement element
"thereby" should be preceded by "implicitly" or read as "by inference".( See Appendix 1)
As we have seen that applying a restrictive approach in case of the Nokia 187 does not
counter the counterfeit goods problem, on the other hand solves it whilst applying on the
Generic pharmaceutical transits. According to the interpretation of Kitchen J, they cannot
seize even the fake goods travelling through EU under EU laws. Therefore, traders who
can conceal the identity are free to transport the goods. The same problem is with the
"manufacturing fiction" as on one hand solves the problem of counterfeit goods messes up
the things for Generic Pharmaceuticals.

4).As illustrated before according to the TRIPS the counterfeit transit goods can be seized
only if they are destined for a member state and are based on the prima facie infringing acts
and the role of the customs is limited to the fact that the infringement may occur. GATT
article V Doha Declaration Article 31, propagates the fact of "right to freedom of transits".
The two pacts are supposed to be applied cumulatively; it does not however help in
alleviating the controversy. The international guidelines are there to protect the
International Law and on the other hand maintain independence and sovereignty of the
state. However, the states are not allowed to jeopardise the freedom as is done in case of

186
Ibid n.52
187
Ibid n.52

48
the generic medicine transit. The international agreements do not provide any guidelines,
as they never anticipated the problem of goods in transit. This is why it is necessary to
implement ACTA properly, which are designed specifically to counteract counterfeit
problem.
At the end, would like to conclude by pointing out that a sensible interpretation of
customs regulation is needed to answer the ECJ referrals and WTO cases currently
pending. The Counterfeit Goods Regulation in itself is inadequate and needs to be better
equipped to counteract the problem of the "counterfeit goods". It should be simple enough
to use based on the prima facie evidence and custom officials should not need Masters in
Intellectual Property to decide on the matter. "Manufacturing fiction" although stops the
circulation of fake goods but is found to be incompetent in case of the Generic
pharmaceutical transits. Therefore a need to have a better definition of the "Counterfeit
Goods", better system of holding the intermediaries liable, better harmonization of the
case laws and regulations is in demand but it is still not a surety that having these
amendments will cover all the loose ends.

49