Trends In International Litigation : International Business Lawyer & Attorney : Ed Joffe : Joffe & Joffe Law Firm : Miami, Florida Global Customs & Trade Issues

 
In a suit brought in Savannah, Georgia, Nike alleges that a customs broker made entry for 4,624 pairs of counterfeit Nike shoes valued by U.S. Customs at $183,157 by falsely identifying the goods as "ladies cotton woven pants". Nike further alleged that the broker identified MTC Marketing, Inc. of 11272 Leo Lane, Dallas TX 75229, as the importer of record and ultimate consignee of the counterfeit shoes, although MTC had never authorized that entry.

The complaint alleges that prior to filing the Entry documents, the broker’s sole knowledge concerning the Entry was the information it received via a phone call from an individual who identified himself as "Michael Mai", the "Vice President" of MTC. In fact, Michael Mai had no relationship of any kind with MTC. The customs power of attorney signed by Michael Mai was fraudulent and lacked both a notarization and/or corporate certificate attesting to the validity of the grant of the power of attorney. Moreover, the telephone contact number and email addresses provided by Michael Mai to D.L. Bynum were not connected to MTC.

Nike concluded that the Broker failed to use "reasonable care" in determining the nature of the goods covered by the Entry documents, and that the Broker’s actions represented acts in furtherance of the distribution and ultimate sale of the counterfeit shoes. Damages and injunctive relief were sought under the Lanham Act. The customs broker has not responded to the allegations.

Nike has filed a similar case in Newark, NJ against another customs broker who also acted as importer of record. Here too no response has been filed.
 

These actions exemplify a dangerous trend. Although customs brokers have some due diligence requirements, the law places the onus on the importer, not the broker, and the broker’s nominal fee for performing its services does not support the broader responsibilities, which Nike seeks to impose.
 

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The 8th round of negotiations on the proposed Anti-Counterfeiting Trade Agreement (ACTA) was held in Wellington, New Zealand from April 12-16,  2010, hosted by New Zealand.

Participants in the negotiations included Australia, Canada, the European Union, represented by the European Commission, the EU Presidency (Spain) and EU Member States, Japan, Korea, Mexico, Morocco, New Zealand, Singapore, Switzerland and the United States of America.

The Participants have reported that good progress was made toward narrowing existing differences, in the areas of Civil Enforcement, Border Measures, Criminal Enforcement and Special Measures for the Digital Environment. In addition the participants held constructive discussions regarding the scope of intellectual property rights covered in ACTA.

In agreeing to release publicly this draft text in the particular circumstances of this negotiation, participants reaffirmed the importance of maintaining the confidentiality of their respective positions in trade negotiations.

ACTA will not interfere with a signatory’s ability to respect its citizens’ fundamental rights and liberties, and will be consistent with the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement) and will respect the Declaration on TRIPS and Public Health.

There is no proposal to oblige ACTA participants to require border authorities to search travellers’ baggage or their personal electronic devices for infringing materials. In addition, ACTA will not address the cross-border transit of legitimate generic medicines.

While the participants recognise the importance of responding effectively to the challenge of Internet piracy, they confirmed that no participant is proposing to require governments to mandate a ‘graduated response’ or ‘three strikes’ approach to copyright infringement on the Internet.

The participants agreed that the next meeting would be hosted by Switzerland in June 2010. They also reaffirmed their commitment to continue their work with the aim of concluding ACTA as soon as possible in 2010.

The draft is available  on the trade.ec.europa.eu website.
 

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As reported by John MacKenzie, an intellectual property attorney at the UK law firm, Pinsent Masons, a British court has held that UK authorities lack authority to seize counterfeit goods passing through the UK.

A haul of 400 fake Nokia phones was seized by Her Majesty's Revenue and Customs (HMRC) as they passed through Heathrow Airport. Nokia confirmed that they were fakes and asked HMRC to impound them under the Counterfeit Goods Regulations. The phones, though, were only in transit, travelling from Hong Kong to Colombia, both outside of the EU. HMRC refused to impound the phones because trade mark infringement could only have taken place if trading had taken place, and that was only possible if the goods had been put on the market.When Nokia sued, the High Court backed HMRC.
"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, without more, satisfy this requirement," said Mr Justice Kitchin in the ruling. "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."
The High Court said that the Regulations did allow the impounding of goods if there was a risk that they would end up on the open market in the EU, but said that this was clearly not the case here.
The UK Regulations are derived from an EU regulation. Nokia has appealed the High Court ruling and the Court of Appeal has asked the EU's highest court, the Court of Justice, to decide whether or not fake goods in transit through the EU from one non-EU country to another can be seized by customs authorities.

This approach is in sharp contract with the practice of the US courts and the US Customs and Border Protection both of which consistently  have upheld the seizing of counterfeit goods even if only being transshipped through the US.
 

Surely the EU will correct this regulatory misstep. Until then Heathrow Airport will continue to be a funnel for the trafficking of counterfeit goods worldwide.
 

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Worldwide counterfeiting continues in epidemic proportions in the Pharmaceutical industry. A recent article about counterfeit antimalaria medication highlights the problem.

Malaria, a deadly infectious disease, is usually curable if treated early with appropriate drugs.  Artesunate, developed by Chinese scientists in the 1970s, is a leading antimalaria drug. An article by Andrew Marshall in the October 2009 Smithsonian Magazine discusses fake artesunate pills which  first appeared in Southeast Asia in the late 1990s and which have resulted in thousands of deaths annually. 

In May of 2005, public health experts with INTERPOL attacked this problem through the study of spores and pollen grains in the drugs, palynology. They determined that nearly all of the counterfeits  were manufactured in the same region of southern China. With this information, China's Ministry of Public Security were able to arrest two buyers and a seller for their roles in trafficking 240,000 blister packs of fake artesunate into Myanmar. The manufacturers of the counterfeit artesunate were never found.

In 2006, the World Health Organization (WHO) creating a global coalition of stakeholders called IMPACT (International Medical Products Anti-Counterfeiting Taskforce), to seek global solutions and increase awareness to the dangers of counterfeit medical products.

For 2007 WHO reported 1513 cases of counterfeit medicine. Many countries in Africa and parts of Asia and Latin America have areas where more than 30% of the medicines on sale can be counterfeit. The Chair IMPACT is Dr Carissa Etienne, Assistant Director-General, Health Systems and Services, WHO.

Over the last 12 months IMPACT has conducted several successful initiatives. Between September 29 and October 5, 2008 in East Africa, Operation Mamba, inspected 191 locations in Tanzania, including pharmacies, warehouses and illicit markets, resulted in the seizure of some 100 types of products. Police closed four pharmacies and 18 drug shops. In Uganda, a total of 38 shops and pharmacies were investigated. Unregistered medicines were confiscated and suspected counterfeit medicines were taken away for analysis.

On May 29 2009, IMPACT announced that in April and May, 2009, Egyptian police, customs and private sector investigators joined forces in Port Said, Cairo and the Suez Canal to seize 10 containers each holding hundreds of thousands of counterfeit medicines bound for the Middle East. Three of the containers were seized by Egyptian customs in the Suez Canal, and 3,300 bottles of counterfeit pharmaceuticals at Cairo airport.

Likewise, in Nigeria the National Agency for Food and Drug Administration and Control (NAFDAC),  foiled an attempt to import a consignment of fake and adulterated antimalarial drugs Maloxine and Amalar tablets. Laboratory tests showed that the fake antimalarials which were produced in China but labelled "Made in India," contained only sulfadioxine and no pyrimethamine.

The U.S. Food and Drug Administration (FDA) formed a Counterfeit Drug Task Force in July 2003 and has a number of ongoing intiatives to combat this problem. On July 13, 2009,the FDA issued a draft guidance on the use of inks, pigments, flavors, and other physical-chemical identifiers (PCIDs) by manufacturers to make drug products more difficult to duplicate by counterfeiters, and to make it easier to identify the genuine version of the drug. A PCID is a substance or combination of substances possessing a unique physical or chemical property used to identify and authenticate a drug product or dosage. In addition to inks, pigments, and flavors, specific chemicals may be used as molecular tags in a PCID. In some cases, the PCID may be easily detected by wholesalers or pharmacists to determine if they have authentic products. In other cases, special analytical instruments may be necessary to identify whether the PCID is present. For more information contact Christopher Kelly.

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