HMRC announce new customs seizure procedures for goods detained from Friday 3 July 2009

HMRC have announced new procedures for dealing with the detention and seizure of goods suspected of infringing intellectual property rights (IPRs). Under the new rules HMRC will only detain goods pending the outcome of court proceedings instituted by rights holders within a maximum period of 20 working days from notification by HMRC, and will only formally seize goods if directed to do so by the court. The changes bring the procedures for goods suspected of infringing trade marks and copyrights in line with the procedures governing goods suspected of infringing patent or design rights. The news is disappointing for rights holders who may now have to devote more time and resources to litigation.

Background

Under the previous procedures, HMRC could seize goods suspected of infringing a trade mark or copyright, and therefore liable to forfeiture, on the basis of a statement from the rights holder alone. The matter would only be referred to court if the importer appealed against the seizure.

Following a case brought before Belfast Magistrates Court, Revenue and Customs Commissioners v Penbrook Enterprises Ltd [2008] NIMag 2, the court found that the existing procedure did not comply fully with the EU Council Regulation 1383/2003 (the "Regulation"). Under the Regulation, goods are only formally seized if the rights holder obtains a successful judgment against the importer and the relevant customs office is directed by the court to seize the infringing articles. Since the Regulation is directly applicable within the UK, departure from its precise requirements is not permissible so HMRC has introduced the new procedures.

New Procedure

On 22 June 2009 HMRC announced new procedures relating to the seizure of allegedly counterfeit goods. The new procedures were detailed in letters to businesses and on HMRC’s website, pending adoption of a new Statutory Instrument to implement the precise terms of the Regulation.

In the letter, HMRC noted that they "now accept that the burden of proof should be upon the right holder who must confirm the infringing nature of the goods by taking legal proceedings" and that the procedures would change, with immediate effect, to comply fully with Article 13 of the Regulation.

Under the new procedure, when HMRC identifies goods that it suspects infringe IPRs, it will contact the rights holder and detain the goods for 10 working days. To maintain the detention beyond this initial 10-day period, the rights holder must either initiate court proceedings to determine whether IPRs have been infringed, make an application to extend the initial detention period by a further 10 working days, or reach an agreement with the importer (see below for further details). The detention period cannot exceed 20 working days in the absence of court action. In the case of perishable goods, the detention period within which court proceedings must be initiated may not exceed 3 working days, and cannot be extended. After Friday 3 July 2009, HMRC will only seize goods if directed to do so by the court following a successful judgment for the rights holder.

The new rules have also introduced a simplified procedure whereby, following detention of goods by HMRC, the rights holder may reach an agreement with the importer to abandon the goods. Any such agreement must be in writing and communicated to the case officer either by the rights holder or the importer of the goods. The simplified procedure applies to all IPRs and will therefore also apply to patent and design rights. This procedure will be formalised by way of new legislation in due course.

In addition, under the new rules, rights holders are responsible for the destruction of seized goods at their expense. Previously, HMRC arranged destruction of most goods and only certain Customs offices passed on these costs to rights holders.

Comment

The new procedure may require significantly more work and expense by rights holders to secure seizure and destruction of infringing goods. Rights holders must be prepared to take immediate action and should ensure that they have internal procedures that allow them to deal with a notification from HMRC without delay. However, the threat of civil proceedings may act as more of a deterrent to counterfeiters and importers against future infringement than mere administrative seizure.