Parallel imports & counterfeit goods
- Himanshu Dasare
- Updated: Tue, 20th Dec 2016
Parallel imports and counterfeit replicas can be stopped in some cases. We tell you if there is a practical solution and what can be done. In many cases there is the risk of a heavy fine and criminal prosecution as well as damages and other remedies. We are specialists in planning a strategy for the delivery of a solution.
Our services include:
Our clients include software, technology, merchandising, fashion and retail companies. We work to prevent parallel imports and counterfeit goods from diminishing our client’s brands.
What can be done it you are infringed?
There can be a variety of options to consider. The choice of which option is best will depend upon the circumstances. We guide owners of IP rights in what action to take.
There is the choice of civil action or criminal action. We explain in outline the outcomes that can be achieved.
Under civil law, remedies include:
Damages serve to compensate the intellectual property rights owner for any loss suffered. For parallel imports, you can receive damages on account breach of a licence or importing agreement. In legal terms parallel imports are distinguished from pirated goods. A reference to a parallel import is to goods which are authentic products. The products are regarded as authentic if they have been made with the owners consent under a licence agreement. But, with a parallel import the jurisdiction clause of the licence agreement has been breached.
Applicable to both parallel imports and piracy is the possibility of claiming damages in the civil court on account of intellectual property infringement. Damages attach to losses in respect of both registered and unregistered IP rights such as trade marks, copyrights and or design rights/community marks. Damages can be awarded by UK civil courts in respect of IP rights registered in the UK or elsewhere in the world. If the IP right is not registered damages can be paid following a successful passing off claim.
An account of profits
An account of profits can be obtained for both parallel imports and counterfeit goods. The purpose of this remedy is to compensate the profit the infringer has made as a result of the infringement.
For both parallel imports and counterfeit goods, intellectual property rights owners can obtain various injunctions. This is a court order issued by the civil courts preventing the infringer from making and or selling the infringing goods.
Delivery up or destruction of goods
Orders can be obtained from the court to seize infringing goods. Alternatively, the court could order the defendant to destroy the infringing goods under oath. If the oath is breached there can be serve repercussions.
The intellectual property Enterprise Court (IPEC)
IPEC handles civil actions for counterfeit and pirate goods cases.
The IPEC can hear applications for:
- Interim injunctions – This is a temporary remedy before a hearing. Its purpose is to stop the infringer from selling counterfeits or parallel imports.
- Search orders. There is a risk that party’s involved with counterfeits and parallel imports, might conceal and hide their goods.
- Freezing injunctions- A freezing injunction is made before a claim is issued. It will prevent an infringer from disposing of or dealing with its assets.
We have the experience to prepare for a hearing at IPEC. We also attend interim injunction hearings.
Criminal prosecutions break down into:
- Public prosecutions brought by the government body – Trading Standards; or.
- Private criminal prosecution brought by the IP holder against the infringer.
IPEC does not have the authority to handle public or private criminal prosecutions. In the UK, criminal prosecutions can only be brought in the criminal courts.
Public prosecution by Trading Standards
UK Trading Standards have the power to take criminal action against counterfeiters. We do assist with drafting witness statements to encourage Trading Standards to take the case. We also provide continuing support for any prosecution. We can help to steer Trading Standards in the direction required.
Private criminal prosecution
IP owners can bring private criminal prosecution against an infringer. This has a number of advantages over prosecutions brought by Trading Standards.
- Budget cuts – There have been significant cuts to funding for public authorities, meaning that there is a limit to the number of cases they can prosecute. There is no guarantee that Trading Standards will prosecute the infringer.
- Control – In private criminal proceedings, you retain control over the proceedings.
Criminal law remedies
Remedies under private criminal prosecutions can include:
The effect of this order is that the defendant’s assets, which were acquired with the proceeds of crime are confiscated. Once this order is made, the onus falls on the infringer to prove that assets, acquired in the six years leading up to the conviction, were acquired lawfully.
Imprisonment and fines
A serious offence is punishable by up to 10 years’ imprisonment and/or an unlimited fine. Less serious cases heard before the Magistrate’s Court, are punishable by up to six months imprisonment and/or a fine not exceeding the statutory maximum which is currently £5,000. The length of the sentence and/or size of the fine will depend on the facts of the case.
Deciding what type of claim to bring
There are a variety of issues we can think through for you. We summarise some of the key issues below.
Benefits of bringing a civil action
Civil actions do not involve Trading Standards. The benefits of bringing a civil action include:
Lower burden of proof
The burden of proof is lower in civil litigation than criminal actions. The claimant in a criminal prosecution for trade mark infringement must adduce evidence beyond reasonable doubt.
Ability to Settle
If you decided to start civil proceedings, you still have an option to settle once proceedings have commenced. In a criminal case, unless a guilty plea is entered, proceedings continue until the prosecutor withdraws proceedings. Withdrawal of proceedings is not as quick and flexible as agreeing a commercial settlement agreement.
Benefits of bringing a private criminal action include:
Criminal proceedings can be considerably quicker than civil proceedings. A criminal trial may be heard within 6 months of the summons being issued. Civil cases can take up to 12 months or more, if the case goes to trial.
If a private criminal prosecution has been properly brought, the claimant can recover his costs. This is regardless of whether he has won or lost the case. This is in stark contrast to civil actions, where the claimant needs to be awarded costs.
Significant deterrent effect
Criminal penalties are more severe. The threat of imprisonment and significant fines can act as a deterrent to stop infringers from committing the act.
Benefits of Trading Standards bringing the case:
Trading standards bear the cost of the proceedings therefore it is cheaper. However, if the defendant is found guilty of counterfeiting or parallel importing, it will give rise to a criminal record. The defendant may also face imprisonment or a fine.
Settlement is usually the best outcome
For parallel imports and counterfeit goods, our clients want a swift solution to get the products out of the market. We have found that a settlement agreement with damages and an undertaking not to repeat the infringing act is often the best remedy.
Settlement agreements have a number of benefits for both parties, such as:
Cost – Court actions are slow and expensive. If a settlement is agreed before proceedings have been issued, it can save costs associated with litigation.
Confidentiality- Settlement agreements are kept confidential. This will limit the bad publicity associated with litigation.
If breached, it is simpler to enforce- if a settlement agreement has been breached it can be enforced as a breach of contract. This is a lot easier than proving IP infringement.
Use of warning letters
Before commencing legal proceedings relating to any form of IP infringement a warning letter should be sent. The letter sets out the IP infringement allegations. A good letter will always set out what you want the infringer to do, or not do, as is often the case.
Caution before sending a warning letter
The warning letter requires care. The alleged infringer has the right to assert that a warning letter is a groundless threat of infringement. If this happens they can bring a counterclaim against you.
Review of evidence and case
We review the evidence. We give an honest assessment of whether there is a claim and how to approach the warning letter. We do have, and work with, a network of private investigators in the UK and abroad.
Defences to allegations of infringement
We explore defences. Part of the exercise includes assessment of the weight of evidence available to either side.
We deal with:
- Review of the intellectual property right the infringement relates to. The review is to find out if the IP right does not in fact exist because of initial registration defaults.
- Review of the merits of the allegation and determine if a defence is available. Possible defences include:
- The person bringing the claim (i.e. the claimant) cannot establish first use – This can be used if the IP right in question is a registered patent, trade mark or design rights. This means that the product is not novel and therefore the IP right should not have been registered.
- Valid licence – If the defendant has a valid licence agreement, which allows them to sell the goods, then they are not infringing IP rights. Questions of interpretation often arise which we provide guidance on
Exhaustion of IP rights
In devising the defence strategy it pays to consider if the IP rights are exhausted. The rules on exhaustion refer to the extent to which IP rights holders can control the distribution of their goods. The EU’s overriding policy is the free movement of goods.
There are three principles that remove the IP rights holder’s opportunity for monopolisation:
- National exhaustion: This is where an intellectual property rights owner cannot object to the resale of goods that he, or another with consent, put on a national market.
- EEA exhaustion: an intellectual property rights owner cannot use national laws to prevent the resale of goods that he, or another with consent, put in the EEA.
- International exhaustion: an intellectual property rights owner cannot use national law to prevent the resale of goods that he, or another with consent, put on the market anywhere in the world.
Track record of recent solutions found to combat parallel imports & counterfeit goods
We have dealt with a wide range of cases over the years. Our approach is practical being fully aware of the difficulties. However, we do deliver results. We assist in:
- Preventing the sale of pirated goods– Our client is a handbag designer. Pirated handbags displaying his trade mark were sold. On two counts, we successfully brought proceedings in the IPEC and obtained substantial damages for loss of profits and damage to goodwill.
- Enforcing EU Patent– Enforced EU patents for a car airbag designer and manufacturer. Our client marked its products for EU distribution, and suspected infringement. We worked in conjunction with HMRC to stop parallel importing of goods. We successfully obtained a cease and destruction order.
- Preventing parallel imports– Prevented parallel imports for a sportswear wholesaler. We monitored the imports, as part of a retainer, and liaised with appropriate authorities to protect our client’s brand.
- Defending allegations of parallel importing & piracy –Defended a rucksack wholesaler accused of parallel importing. We argued EEA exhaustion and obtained our client’s costs. Our client had operations throughout the EU. We negotiated amicable settlement for cessation of trade at a premium. The claimant believed our client’s trade mark resembled their mark. We also prevented our client’s financial position from being effected, and publication of their name in the press.
- Goods in circulation were counterfeit, and in breach of intellectual property rights;
- Goods were sold in states with no consent.
- Seize and destruction order for a child’s toy manufacturer – We located the source of the pirated goods circulating within the UK, and obtained the court order.
- Protected sports shoe manufacturer’s EU rights portfolio– Our client feared piracy and counterfeiting. We re-registered the portfolio, drafted applications and supporting documentation, to maximise our client’s protection.
Our expertise monitors, prevents and enforces breaches of your intellectual property. Why not email or call me to arrange an informal discussion.....