Customs U-turn could strip non-litigious brand owners of their rights

Out-Law Analysis | 28 Oct 2009 | 2:05 pm | 3 min. read

OPINION: If law is all about a balance of rights, then the people who police our borders used to have it just about right. If they came across a large, commercial consignment of fake goods they could impound them so that they didn't flood the market.

If the goods were genuine, the importer could take court action to demonstrate that. If not, they stayed off the market.

A U-turn on that policy in June has now put companies that rely on their brands and reputations in an unenviable catch 22 situation in which they must fund instant, expensive litigation or face losing all the benefits of having a successful brand and reputation.

Customs will now only impound goods for 10 working days. Companies must go to court within that time and prove that the goods are fake. If they don't, the goods hit the UK streets.

The change means that companies which have built up brands and reputations on the back of innovation, creativity and investment will feel blackmailed by a reversal of the burden of proof that says: go to court or see your brand and company damaged by cheap fakes.

Making companies pay the court costs to establish the counterfeit nature of goods they are blocking might seem reasonable until you realise the scale of the problem. Over the coming weeks a flood of containers will hit UK shores as foreign factories send consumer goods here for the Christmas retail rush.

A manufacturer cannot control how many people try to pass off fakes as their goods: the legal bill is potentially limitless. Previously the people who had to take action were importers, who were in control of whether their goods were genuine or not and had every opportunity to prove it for real goods.

Now every time one of those containers carries fake goods it is the company whose rights are being trampled on who must pay for litigation at very short notice just to ensure that nobody is ripping it off. The more that criminals target a company, the more expensive it is.

It gets worse. If a company decides it won't or can't pay for this litigation the potential price rises unacceptably high.

A company which fails to take action in relation to someone who repeatedly imports the same counterfeit goods is in danger of allowing that importer to claim the rights holder's acquiescence if they ever challenge the importing at a later date.

So not only must a brand owner pay to defend itself against every fake shipment, but if it doesn't it could lose the ability to defend itself against all future shipments.

Brand protection, trade mark and copyright laws were created, in part, to protect not just
companies but consumers. If you buy a brand of trainers because you liked the last pair then you should have the right to know that the next pair is subject to the same quality control. Fake goods strip you of that right.

So what can companies do to minimise the time, cost and trouble of dealing with counterfeit cargo? The key is being prepared. Don't wait until a consignment hits the docks before taking action. You must have a process to follow every time an incident occurs, keeping costs and time wasting to a minimum.

First, make sure you have done an up to date audit of your trade mark and copyright portfolios
so that you know what it is you need to protect.

File an Application For Action with the Customs authorities to tell them what needs protection. Remember these are only valid for a year so set up diary reminders for renewal in plenty of time.

Then create a process to manage any notifications you get from Customs about goods that might infringe the rights you have put on record with them.

Educate everybody involved in the action so that things move along quickly. Create a template claim form for England or summons for Scotland to ensure that the issue gets to court quickly. This is not only quicker but cheaper than creating forms from scratch every time.

Your legal team should be able to help to make sure that this process is water-tight to minimise the damage to you should someone decide to create fakes of your goods.

This will all help you to keep costs down, but it will be an unwelcome and unfair distraction for manufacturers, distributors and retailers at the busiest time of their year.

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