New EUTM Regulation: Implications for Goods in Transit
On March 23, 2016, the EU Regulation 2015/2424 of the European Parliament and of the Council (the EUTM Regulation) came into force amending the Community Trademark Regulation and introducing important changes to the European trademark system.
One of the major changes addresses the thorny question of goods in transit through EU member countries destined to countries outside the EU.
According to Article 9(4) of the new EUTM Regulation, EU trademark owner can prevent all third parties from bringing goods into the EU, even if the goods are only in transit, if such goods, including the packaging, come from non-EU countries and bear an identical or similar mark. However, that entitlement lapses if, during the proceedings to determine whether the EU trademark is infringed, the declarant or the holder of the goods provides evidence that the EU trademark owner is not entitled to prohibit the placing of the goods on the market of the country of final destination.
This change shifted the burden of proof introduced by the Court of Justice of the European Union (CJEU) ruling in the Philips/Nokia case, stating that the customs authorities of the EU member states may detain goods in transit and that goods in transit infringe the rights protected within the EU only if it is proven that they are intended to be put on sale in the EU. While the CJEU softened the burden of proof by stating that the indications that the goods might be diverted onto the EU market can be (1) the fact that the destination of the goods is not declared, (2) lack of reliable information regarding manufacturer or consignor, or (3) sheer lack of cooperation, the IP right holders had to prove that the goods were intended for the EU market in order to succeed in infringement cases, and the customs authorities could only stop the goods in transit if they had reasons to believe that the goods would be diverted onto the EU market.
Under the new EUTM Regulation, and in relation to the EU Customs Code, the EU customs authorities will be allowed to detain goods in transit destined for third countries, but EUTM holders will not succeed in proving infringement if the declarant or the holder of the goods proves in court that the EUTM holder does not have the right to prevent the use of the identical trademark in the country of destination. While this is a welcomed change permitting customs authorities to detain goods on the basis of suspected trademark infringement more freely and with less risk, EUTM holders will need to carefully asses whether to initiate proceedings to establish infringement of goods in transit if they are not entitled to IP protection in the destination country. Assessing this risk might be particularly difficult if documentation or information on the country of final destination cannot be obtained within the time limit to file an action.
The changes are also included in the new Directive 2015/2436 of the European Parliament and of the Council of December 16, 2015 to approximate the laws of the EU member states relating to trademarks. Article 10(4) of the new Directive contains identical provisions on goods in transit and the burden of proof in terms of the right to prevent the use of the mark in the country of final destination. However, EU governments will have until January 14, 2019 to transpose the Directive into national trademark laws, and the Directive will not be directly applicable in the meantime.
As a consequence, and until changes to national laws are introduced, national courts will have to decide whether the goods in transit bearing signs similar to national trademarks infringe those national trademark rights and whether the customs authorities may detain the goods suspected of infringing national rights if there is no evidence that these goods may be diverted onto the EU market. It remains to be seen if the trademark holder will still have to prove that the goods are intended for the EU market (following the CJEU decision in Philips/Nokia cases) or if national courts will decide that goods do not infringe national rights when the declarant or the holder of goods proves that the trademark holder may not prevent the use in the country of destination (as in EUTM Regulation).
The Community Design Regulation and other EU rights did not go through similar changes as the EUTM. It is therefore likely that customs authorities and national courts will continue to follow the Philips/Nokia principle in terms of infringement of these IP rights (either national or EU).
In conclusion, IP rights holders dealing with infringing goods in transit will need to take into account different approaches, different types of IP rights, and various national systems. The scope of protection and the burden of proof will depend on whether the rights holders are relying on the EUTM Regulation, whether national trademark laws have transposed the Directive No. 2015/2436 in terms of national trademark rights and whether the rights holders will be invoking other types of EU or national IP rights.
By: Andrej Bukovnik
For more information, please contact Andrej Bukovnik at our Slovenia Office.
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