In 2008, the Organisation for Economic Co-operation and Development (OECD) published its report on the impact of piracy and counterfeiting in international trade. The report revealed that the value of pirated and counterfeit goods crossing international borders amounted to more than US$200 billion.¹
This figure has been updated with a more recent study conducted by London-based consulting firm Frontier Economics Ltd, which estimates that the impact of counterfeiting and piracy on the global economy will reach a staggering US$1.7 trillion by 2015.²
The effect of the global trend in the manufacture, distribution and sale of counterfeit and pirated goods is immediate. For instance, brand owners face decreases in sales and losses in revenue as consumers choose to buy the cheaper counterfeit products purporting to be genuine products. Over time this is likely to have a socioeconomic impact on innovation, growth and employment, as brand owners lose out on royalties over the long term.³
Border control
In 2010, the European Commission (EU) reported that the EU customs detained approximately 103 million counterfeit and pirated goods at the EU borders. 85% of these goods reportedly came from China.4 Over the period 2010-2011, the Australian Customs and Border Protection Service (Customs) seized 2,549 consignments of counterfeit goods in Australia. These consignments contained 606,208 items with a potential retail value of over A$29 million.5
The high proportion of counterfeit goods coming from the Asia-Pacific region rings alarm bells, particularly for businesses operating in that region.
Fighting piracy
Whilst counterfeit and pirated goods in international trade may not be realistically eradicated any time soon, brand owners can take some action to help reduce counterfeiting of their products by relying on self-help provisions contained in the Trade Marks Act 1995 (Cth) and the Copyright Act 1968 (Cth).
Under these Acts, brand owners can register their products under a customs program called the Notice of Objection Scheme, where Customs Officers are given the power to seize the counterfeit and pirated goods and to subsequently dispose of them in accordance with a court order as to the manner in which they are to be disposed.
In Chanel Ltd v Kim [2007] FCA 2076, a consignment of 100 scarves bearing the CHANEL trade mark or Chanel’s ‘crossed C’s device’ mark were seized by Customs on 19 September 2007 pursuant to section 133 of the Trade Marks Act.
In Disney Enterprises Inc v Australian Exim Co Pty Ltd [2009] FCA 719, Disney had registered a number of its trade marks and copyright works under the Notice of Objection Scheme. Armed with the Notice, Customs was able to identify the counterfeit goods and seized 54 tracksuits described as ‘Hannah Montana’ items, 108 lunch boxes and 164 t-shirts described as ‘High School Musical’ items. Disney alleged that its copyright in the artistic work appearing in the movies ‘High School Musical,’ ‘High School Musical 2,’ ‘High School Musical 3,’ and ‘Hannah Montana: The Movie’ and the television program ‘Hannah Montana’ had been infringed.
Customs also seized 53 lunch boxes, 216 tracksuits, 19 cushions and 162 t-shirts bearing marks substantially identical with or deceptively similar to Disney’s trade marks.
In both the Chanel and Disney cases the court ordered that Customs be restrained from releasing the goods from its custody. Had Chanel and Disney not registered their products under the Notice of the Objection scheme, these counterfeit and pirated items would have made their way to the consumer market, robbing Chanel and Disney of their rightful entitlement to the revenue which would have been generated from the sale of the goods.
How does the Notice of Objection Scheme work?
Registration under the Notice of Objection Scheme is simple. The registered owner or authorised user of the trade mark or copyright work lodges a Notice of Objection with Customs, listing each of their registered trade marks or copyright works. There are no fees to register and once registered, the Notice remains in force for four years.6
The Notice is a legal document which provides Customs with all the relevant information it needs to identify the counterfeit or pirated goods as goods bearing marks or signs which infringe the trade marks or copyright works registered under the scheme.
Upon seizure of the counterfeit goods, Customs notifies the registered owner (Objector) and the owner of the counterfeit goods (Designated Owner) that it will hold the seized goods for a period of 10 working days. If the Objector fails to commence legal proceedings during this period, Customs is obliged to release the seized goods to the Designated Owner.
The time period within which the Objector may bring an action for infringement of a trade mark or copyright can be extended for up to 20 working days, however, an application to extend the time needs to be made before the expiry of 10 working days.
Upon seizure of the counterfeit goods by Customs, the Designated Owner can voluntarily forfeit the goods, provided the Objector has not commenced legal proceedings during this period. Where the Designated Owner has not voluntarily forfeited the seized goods and the Objector has commenced legal proceedings within the time period, the court will make an order requiring Customs to either release the goods to the Designated Owner or forfeit the goods to the Commonwealth. Forfeited goods can be disposed of by Customs either by destruction or donation to a charity.
If you think that your company’s products are at risk from the importation of counterfeit goods, then the lodgement of a Notice of Objection is a cost-effective way to protect your brand against counterfeits.
Although there are no registration fees to lodge a Notice, registered owners are required to sign a deed of undertaking agreeing to pay costs associated with the enforcement of a court order (such as destruction of the seized goods). Notices can be re-lodged after four years or withdrawn at any time.
For more information, please contact:
Wayne Zappia | Jocelyn Nicholson |
Partner | Solicitor |
(08) 9288 6931 | (08) 9288 6856 |
wayne.zappia@lavanlegal.com.au... | jocelyn.nicholson@lavanlegal.com.au |
¹ See the Executive Summary in OECD, ‘The Economic Impact of Counterfeiting and Piracy’ (2008).
² Frontier Economics Ltd, ‘Estimating the global economic and social impacts of counterfeiting and piracy. A Report commissioned by Business Action to Stop Counterfeiting and Piracy (BASCAP)’ February 2011.
³ Gautam Mukherji and Jonathan Feder, ‘Combating Counterfeiting – a practical approach’ (2007) 20 (4) Australian Intellectual Property Law Bulletin 58.
4 European Commission, ‘Detention of counterfeit and pirated goods at EU borders in 2010’ (Press release, 14 July 2011).
5 Australian Customs and Border Protection Service, Annual Report 2010-2011, 44.
6 Trade Marks Act 1995 (Cth) s 132(4).