In Nokia Corporation v Her Majesty’s Commissioners of Revenue & Customs [2009] EWHC 1903 (Ch), the Chancery Court Judge (CCJ), in an appeal for judicial review from the Queen’s Bench Division, Administrative Court, considered the decision by the Commissioner of Revenue and Customs, to no longer detain a consignment of mobile phones which Nokia claims are counterfeit.

In July 2008, Her Majesty’s Commissioners of Revenue & Customs (HMRC) stopped a consignment of goods from Hong Kong to Colombia, comprising 400 mobile phones, batteries, manuals, boxes and hand free kits, each of which bore NOKIA trade marks. HMRC sent samples to Nokia, who determined they were counterfeit. Nokia requested that the HMRC detain these goods pursuant to its powers under the Council Regulation 1383/03 (“the Counterfeit Goods Regulation”). HMRC argued that the goods were not counterfeit within the meaning of the Regulation, unless they were to be diverted into the EU market, for which there was no evidence. The only avenue open to Nokia was to pursue an infringement of Nokia’s intellectual property under national law.

The issue before the CCJ was the definition of ‘counterfeit goods’, and whether it encompasses goods which are in transit.

HMRC’s argument was that in order for goods bearing trade marks to be ‘counterfeit goods’ as defined by the Counterfeit Goods Regulation, they must infringe someone’s trade mark in the UK. It relied on Article 5 of the Council Directive 89/104 of 21 December 1988 (“the Trade Marks Directive”), according to which the owner of a trade mark may prevent another party from using the mark “in the course of the trade”. HMRC agued that such use necessitates the goods being put on the market, which had not happened in this case, nor was it going to happen. Therefore the goods were not counterfeit as defined by the Counterfeit Goods Regulation, and the HMRC did not have the power to seize them.

Nokia argued that the HMRC had adopted an unduly restrictive interpretation of the Counterfeit Goods Regulation, and that it was clearly intended to apply to fake goods in transit. It relied on Case 311378 Sisvel v Sosecal and suggested that the “manufacturing fiction” needed to be adopted, which assumes that goods were manufactured in the Member State in question, and so have been released into free circulation in that Member State. It also relied on recital (8) of the Counterfeit Goods Regulation, which states that proceedings initiated to determine whether an intellectual property right has been infringed under national law will be conducted with reference to the criteria used to establish whether goods produced in that Member State infringe intellectual property rights.

The CCJ considered the relevant case law and derived the following four principles, at 49:

First, infringement of registered trade mark requires goods to be placed on the market and that goods in transit and subject to suspensive customs procedures do not satisfy this requirement. Reliance was placed on the Court of Appeal decision in Eli Lilly v 8PM Chemists Ltd [2008] EWCA Civ 24; [2008] FSR 12.

Second, the position is different if the goods in the transit procedure are subject to the act of a third party which necessarily entails their being put on the market (Case C-281/05 Montex Holdings v Diesel [2006] ECR I-10881 (“Montex Exception”)). But the burden of establishing this rests on the trade mark proprietor.

Third, a mere risk that the goods may be diverted is not sufficient to justify a conclusion that the goods have been or will be put on the market.

Fourth, the Counterfeit Goods Regulation has not introduced a new criterion for the purposes of ascertaining the existence of an infringement of a registered trade mark or to determine whether there is a use of the mark which is liable to be prohibited.

The CCJ also found, at 54, that the Counterfeit Goods Regulation had not extended the rights of the trade mark owner,
and that it is merely a subset of the rights conferred by trade mark registration.

Nokia further relied on C-383/98 Polo/Lauren [2000] ECR I-2519, where it was held that Regulation (EC) No 3295/94, the predecessor to the Counterfeit Goods Regulation, did apply to goods passing through Community territory from a non-member country destined for another non-member country. However, the CCJ disagreed with that submission, and found that in the Polo case a more general question of application had been decided, as opposed to the more specific issue of the definition of goods in transit, in circumstances where there was no threat of them being put on the market in a Member State had not been addressed in that case.

The CCJ upheld HMRC’s decision and concluded that in order for products bearing trade marks to be counterfeit goods within the meaning of the Counterfeit Goods Regulation they must in fact infringe someone’s trade marks in the territory in question. The CCJ added that there was no evidence before it that the goods in question would be diverted into the Community, and therefore the Montex exception did not apply. The “manufacturing fiction” also did not apply, as recital (8) of the Counterfeit Goods Regulation finds no echo in the Articles of the Counterfeit Goods Regulation and would substantially extend the rights of the trade mark proprietor, and that the Sisvel case was founded on Article 6 of Regulation (EC) No 3295/94, which has not been reproduced in the Counterfeit Goods Regulation. The CCJ concluded that it did not find this result satisfactory, and hoped that ‘it provokes a review of the adequacy of the measures available to combat the international trade in fake goods by preventing their transhipment through Member States.’