Out-Law / Your Daily Need-To-Know

Out-Law Analysis 3 min. read

ACTA year-long impounding of suspected fakes could hurt businesses

OPINION: Outrage over the contents of the till-now secret Anti-Counterfeiting Trade Agreement (ACTA) has focused on the potential harm to consumers. But now that a draft has been published we can see that it could do serious harm to businesses too.

Importers face a wait of up to a year for goods they are bringing into the UK if they are suspected of being fakes. There is no detail on who will pay for this year-long storage, nor on what impact a year-long wait could have on the saleability of products in fast-moving consumer markets.

There has been an international outcry over the way ACTA has come into being over the last two and a half years. It has been negotiated in secret by governments who should, say opponents, have been consulting those who elected them. Citizens' and consumers' rights are at risk from the secretive plan, they say.

But what nobody has examined so far are the implications for companies. And with the first official publication of a draft of the Agreement this week, companies – and importers especially – may not have liked what they saw.

Currently, rights holders have to take court action within 20 days if they want to detain goods they think are fakes at the border. Under ACTA this could stretch to a year. This gives rights holders the advantage of more time to bring a case, but could be ruinous for importers.

"Each Party shall provide procedures by which right holders may request the competent authorities to suspend the release of goods suspected of infringing intellectual property rights," says ACTA. "These applications for suspension shall remain applicable for a period of not less than [one year][or sixty days] from the date of application."

The European Union is part of negotiations and potentially a 'Party' in the terms of ACTA. The square brackets mean that the ACTA negotiators have not yet decide whether suspensions can last a year or more or 60 days or more.

Even at 60 days this is a major change to UK policy. Instead of having a week and a half in which to take court action (a period actually extendable to 20 days on application), rights holders will have the right to have goods held for two months without going near a court.

Extend that period to a year and you have a measure that could seriously damage the interests of legitimate importers.

If a company imports genuine goods and a rights holder mistakenly identifies them as bogus or acts dishonestly to claim that they are fakes, then this treaty gives the rights holder the ability to hold the importer to ransom.

Whether it is toys you are importing or shoes, cosmetics or clothes, the chances are that your business is time-sensitive, and that a delay of a year will seriously affect the desirability of your stock.

Not only that, but a year delay ties up vital capital as goods that you have paid for sit depreciating on the docks, unavailable for sale. This could seriously damage the financial health of a distributor.

Rights holders do have to go some way to proving that the goods are fakes, but that requirement is less onerous than the one in place today.

"The competent authorities shall require a right holder … to provide adequate evidence to satisfy themselves that, under the laws of the Party providing the procedures, there is prima facie an infringement of the right holder's intellectual property right and to supply sufficient information that may reasonably be expected to be within the right holder’s knowledge to make the suspected infringing goods reasonably recognizable by the competent authorities," says ACTA.

There is no guidance about what 'adequate evidence' means. There is no requirement to involve a court to oversee the evidence. There is just the ability to stall an importer's business for a year.

This becomes more worrying when you consider that distributors and rights holders are often in fierce dispute. More than once, rights holders have objected to distribution practices.

These might be 'grey importing', where legal, legitimate goods bought in one territory are sold in another at a knock-down price. Or they might be disputes over retail agreements, where a rights holder wants only certain retailers to sell their products.

So it is not hard to imagine a situation in which rights holders will want to stop goods being imported.

There is another element to ACTA which could make life even harder for importers. It would allow customs officials to act "upon their own initiative" if they see goods they suspect of being counterfeit.

Currently in the UK customs officials can only act to protect rights that they have been informed of by brand owners. ACTA would give them the power to stop anything they thought looked fake. It is silent on if and when importers would have to be told and whether court action would be needed before their destruction.

By Gillian Smullen, a dispute resolution specialist with Pinsent Masons, the law firm behind OUT-LAW.COM.

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