A Trade Law Perspective on Transit Seizures Trademark Law Institute – Amsterdam, 5 November 2016 Dr Henning Grosse Ruse - Khan Faculty of Law

A Trade Law Perspective on Transit Seizures Outline The Background: EC - Seizures of Generics in Transit and the Philips/Nokia judgments The new Law: Article 9(4) TMR (& TMD) The GATT Perspective: When are IP-based measures justified under Art.XX d) GATT? 2

Seizures of Generics in Transit 3

Seizures of Generics in Transit Starting 2008, customs in EU Mbs seized, delayed and returned shipments of generics transiting EU ports on account of suspected patent infringements in the transit country. The shipments originated in India and were destined to developing countries such as Brazil, Venezuela, Colombia, Peru or Nigeria. The drugs at issue are protected in the EU transit country, but not in the countries of origin or destination. In 19 cases, Dutch customs seized transiting generics At least 1 seizure involves generics used by UNITAID for HIV/AIDS treatment in Africa In all cases, customs in EU Mbs acted pursuant to the EU Regulation 1383/2003 on border measures (BMR)

WTO Complaints by India and Brazil In May 2010, India and Brazil initiated WTO dispute settlement procee- dings against the EU and the Netherlands by requesting consultations over the seizures of generic medicines in transit (WT/DS408) Apart from alleging inconsistency with several GATT provisions, both India and Brazil argue that the EU and Dutch measures (as such and as applied) violate the TRIPS Agreement (e.g. Artt. 1:1, 41:1, 52, 53:1&2) At stake is not the failure to meet minimum standards, but the TRIPS- plus character of the measures For the first time in WTO dispute settlement, TRIPS is used as a benchmark for constraining additional (‘TRIPS-plus’) IP protection In July 2011, India announces an interim settlement

Response under the new BMR (608/2013) Under the ‘Declaration on the TRIPS Agreement and Public Health’ adopted by the Doha WTO Ministerial Conference on 14 November 2001, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) can and should be interpreted and implemented in a manner supportive of WTO Members’ right to protect public health and, in particular, to promote access to medicines for all. Consequently, in line with the Union’s international commitments and its development cooperation policy, with regard to medicines, the passage of which across the customs territory of the Union, with or without transhipment, warehousing, breaking bulk, or changes in the mode or means of transport, is only a portion of a complete journey beginning and terminating beyond the territory of the Union, customs authorities should, when assessing a risk of infringement of intellectual property rights, take account of any substantial likelihood of diversion of such medicines onto the market of the Union. (recital 11)

Seizing Goods in Transit: Nokia Mobiles

Philips / Nokia: No Manufacturing fiction  goods merely in transit in the EU can be classified as IP infringing goods only if it is proven that they are intended to be directed to the EU market. ( no manufacturing fiction! See para.69, 70)  factors that indicate a diversion of those goods to EU consumers include: (1) the fact that the destination of the goods is not declared (although required); (2) the lack of precise or reliable information as to the identity or address of the manufacturer or consignor of the goods; (3) a lack of cooperation with the customs authorities; or (4) the discovery of documents or correspondence concerning the goods in question suggesting they are liable to remain in the EU.

Expanding substantive TM protection In order to strengthen trade mark protection and combat counterfeiting more effectively, and in line with international obligations of the Union under the framework of the World Trade Organisation (WTO), in particular Article V of the General Agreement on Tariffs and Trade (GATT) on freedom of transit and, as regards generic medicines, the ‘Declaration on the TRIPS Agreement and public health’ adopted by the Doha WTO Ministerial Conference on 14 November 2001, the proprietor of an EU trade mark should be entitled to prevent third parties from bringing goods, in the course of trade, into the Union without being released for free circulation there, where such goods come from third countries and bear without authorisation a trade mark which is identical or essentially identical with the EU trade mark registered in respect of such goods. (Recital 15) To this effect, it should be permissible for EU trade mark proprietors to prevent the entry of infringing goods and their placement in all customs situations, including transit, transhipment, warehousing, free zones, temporary storage, inward processing or temporary admission, also when such goods are not intended to be placed on the market of the Union. (16)

Expanding substantive TM protection ‘Without prejudice to the rights of proprietors acquired before the filing date or the priority date of the registered trade mark, the proprietor of that registered trade mark shall also be entitled to prevent all third parties from bringing goods, in the course of trade, into the Member State where the trade mark is registered, without being released for free circulation there, where such goods, including packaging, come from third countries and bear without authorisation a trade mark which is identical with the trade mark registered in respect of such goods, or which cannot be distinguished in its essential aspects from that trade mark. The entitlement of the trade mark proprietor pursuant to the first subparagraph shall lapse if, during the proceedings to determine whether the registered trade mark has been infringed, initiated in accordance with Regulation (EU) No 608/2013, evidence is provided by the declarant or the holder of the goods that the proprietor of the registered trade mark is not entitled to prohibit the placing of the goods on the market in the country of final destination.’ (Art.9:4 of the new EU TM Reg, 2016)

Expanding substantive TM protection In order to reconcile the need to ensure the effective enforcement of trade mark rights with the necessity to avoid hampering the free flow of trade in legitimate goods, the entitlement of the proprietor of the EU trade mark should lapse where, during the subsequent proceedings initiated before the European Union trade mark court (‘EU trade mark court’) competent to take a substantive decision on whether the EU trade mark has been infringed, the declarant or the holder of the goods is able to prove that the proprietor of the EU trade mark is not entitled to prohibit the placing of the goods on the market in the country of final destination. (Recital 17) Appropriate measures should be taken with a view to ensuring the smooth transit of generic medicines. With respect to international non-proprietary names (INN) as globally recognised generic names for active substances in pharmaceutical preparations, it is vital to take due account of the existing limitations on the effect of EU trade mark rights. Consequently, the proprietor of an EU trade mark should not have the right to prevent a third party from bringing goods into the Union without being released for free circulation there, based upon similarities between the INN for the active ingredient in the medicines and the trade mark. (Recital 19)

Construing the relevant Measure Normally, a party is best placed to explain the meaning of its own law… But: In case of dispute, parties bear the burden of showing that the interpretation they advance of the nat. measure at issue is correct… (China – IPRs, para.7.28) Open Questions on the new ’Transit right’: How to define the scope of Art.9 (5) TMR? Beyond double identity cases, how to determine whether a trade mark “cannot be distinguished in its essential aspects” from an EU TM?  When is the sign “essentially identical to the trade mark registered in respect of such goods” (rec.15)? Do we still need a threat of diversion for medicines in transit (rec.11 BMR), and how to assess (essential) identity for INN-based brands? How to apply the defence that requires to show that ‘the proprietor of the registered trade mark is not entitled to prohibit the placing of the goods on the market in the country of final destination’?

Applying GATT Standards Freedom of Transit, Art.V GATT “There shall be freedom of transit through the territory of each contracting party, via the routes most convenient for international transit, for traffic in transit to or from the territory of other contracting parties” (Art.V:2) (…) “except in cases of failure to comply with applicable customs laws and regulations, such traffic coming from or going to the territory of other contracting parties shall not be subject to any unnecessary delays or restrictions” (Art.V:3) First sentence of Art. V:2 “requires extending unrestricted access via the most convenient routes for the passage of goods in international transit.” (Colombia – Ports of Entry, para.7.401)

Applying GATT Standards General Exception Clause, Art.XX GATT “Subject to the requirement that such measures are not applied in a manner which would constitute (…) a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent (…) measures necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement relating to (…) the protection of trade marks” (Art.XX d) Are transit seizures/detentions “necessary” (least trade restrictive measure) to secure compliance with TM protection in the EU? In addition, the extended EU TM protection must be a regulation/law that in itself is “not inconsistent” with GATT…