In France, customs authorities play an important role in the fight against counterfeiting, particularly through customs detention.
In practice, trademark owners are increasingly shifting the cost, risk, and liability of combating counterfeiting of their trademarks onto customs authorities. Customs authorities often step in on behalf of economic operators when the latter do not wish to pursue legal action.
Yet, is it really the French government’s responsibility to bear the cost of protecting the economic monopoly of private interests?
It was this question, indirectly, that the Paris Court of Appeals addressed in its decision of September 13, 2016.
In this case, the customs authorities detained the goods following a request for surveillance on French territory made by the companies that operate the Gucci, Chanel, and Hermès brands.
Following the customs detention of the goods, these companies confirmed to customs that some of the detained products were counterfeit, but did not take the necessary steps to prevent their release, notably by failing to take legal action.
Once the release order was issued, customs authorities seized the products that the trademark owners had claimed were counterfeit, pursuant to the Customs Code.
The importer of the goods argued that the detention order should have been automatically lifted since Gucci, Chanel, and Hermès had not initiated any civil or criminal proceedings within the statutory time limit.
She added that the customs administration (i) would not have the authority to decide what does or does not constitute counterfeiting, (ii) that the customs authority had acted on behalf of private companies that had requested its intervention, and (iii) that it had taken over their case following their failure to take procedural action.
The Paris Court of Appeals ruled:
“Furthermore, with regard to the seizure measure, it is authorized underArticle 323, paragraph 2, of the Customs Code in the event that a customs violation is detected.”
However, it appears from the seizure report that the customs agents relied exclusively on the statements made by Chanel, Gucci, and Hermès in concluding that the goods were counterfeit and thus constituted prohibited goods within the meaning of the Customs Code.
Under these circumstances, in the absence of direct evidence that the goods were counterfeit, the customs authorities could not lawfully seize these goods on the grounds of a customs offense involving the importation of prohibited goods without declaration.
“It follows that the seizure constitutes a manifestly unlawful interference with Company B.”
The Court of Appeals ordered the customs authorities to pay the importer of the goods the sum of €5,000 as an advance payment toward the loss of profits, the amount of which will be determined by the court in a future judgment on the merits of the case.
This decision is interesting for several reasons, since:
- On the one hand, customs authorities can no longer rely solely on the trademark owner’s confirmation of infringement to justify a customs seizure under the Customs Code. The Court of Appeals holds that the authorities must make their own findings in order to determine that the goods are counterfeit.
- On the other hand, it appears that customs authorities may be held liable in place of the trademark owner when the customs seizure involves goods whose infringement is based solely on the trademark owner’s declaration. The owner of the goods may thus be entitled to compensation for the damages suffered as a result of the seizure.
Thus, due to the trademark owners’ failure to take legal action (presumably because the cost of litigation might have been considered excessive in relation to the quantities involved, or to avoid exposing their rights to potential counterclaims for invalidity or revocation due to lack of use), it was in fact the customs administration that bore the risk and cost of combating counterfeiting in place of the trademark owners.
If this type of reaction by importers against customs were to become widespread, the customs administration could withdraw from protecting trademarks, patents, and designs and models in the event of inaction by the rights holder, and no longer step in on behalf of economic operators to protect their intellectual property rights in court.
Customs authorities could also cease seizing goods under the Customs Code after the customs detention order has been lifted.
Today, it is important for trademark owners to take this upcoming change and this case law into account in their strategy for protecting their trademarks, patents, and designs in France.
BMH AVOCATS can assist you in developing strategies to actively protect your intellectual property rights in France and abroad, in collaboration with our partners.