Court rules on customs confiscation of counterfeit goods

In Rolex SA v Blomqvist (Case V 29/10, November 8 2011), the Maritime and Commercial Court has upheld Rolex SA's claims that the defendant’s fake Rolex watch had been legally confiscated by Danish Customs and that it had to be surrendered to the exchequer for destruction without compensation.
The defendant had bought a fake Rolex watch for his own use from a Chinese internet store. On import, Customs confiscated the watch and suspended its release pending a decision by the court. Rolex, the owner of the ROLEX mark, brought the matter before the court, arguing that the defendant should accept that the suspension of release was legal and surrender the watch to the exchequer for destruction without compensation.
According to the information submitted, the defendant had ordered the watch at the Fashion Watch Online store on January 27 2010. The watch was described as a "Rolex GMT Master II 50th with Asian 3186 Movement". The defendant had paid $365 for the watch via credit card. A genuine Rolex GMT Master II in steel would have cost $7,500 at that time. On February 11 2010 Customs suspended release and Rolex confirmed that the watch was counterfeit.
The court found that the watch was a slavish copy of a genuine Rolex watch for which Rolex owned the copyright, and that the manufacturer had affixed trademarks that were identical to Rolex's registered trademarks without Rolex's consent. Furthermore, it was proven to the court's satisfaction that the watch was a counterfeit product. The watch had been found during customs checks on goods imported into the European Union (as regulated by Articles 91 and 1(1) of Regulation 450/2008 laying down the Community Customs Code; see also Articles 2(1)(a) and (b)).
In its ruling, the court remarked that Article 3(2) of the regulation exempts from the scope of the regulation only those goods that:
  • have no commercial character;
  • fall within the limits established for the granting of duty exemption; and
  • are contained in a traveller's personal luggage.
The exemption does not apply to goods that have not been imported by travellers as part of their personal luggage. This exemption must be interpreted strictly and cannot be extended in relation to the main rule, and aims only to avoid the disruption of customs clearance for goods contained in personal luggage. Thus, the exemption cannot, via interpretation or analogy, be extended to cover counterfeit and pirated goods that have not been imported by travellers as part of their luggage, but instead are small consignments of a non-commercial character. The exemption is supported by the history of the regulation - a previous special exemption for small consignments of a non-commercial nature (as detailed in Article 9 of EU Regulation 3842/86) was omitted from the equivalent provision in Article 10 of EU Regulation 3295/94, whose rule has been continued through Article 3(2) of Regulation 450/2008.
Regulation 450/2008 aims to prevent counterfeit and pirated goods from being brought into the market and, where such goods come from non-EU countries, to prevent their transfer for free circulation within the European Union (see also Articles 28 and 29 of the Treaty on the Functioning of the European Union and Article 129 of the EU Customs Code). Under Article 10 of Regulation 450/2008, the competent authority is responsible for deciding whether there has been a violation of IP rights. This decision must be based on the criteria that, under the rules of the relevant member state (in this case, Denmark), would be used to ascertain whether the goods violated the IP rights of goods produced within that member state.
The court found it unobjectionable that the watch had been manufactured and Rolex's registered EU trademarks and Danish device marks affixed commercially as, according to the information supplied, the watch had been offered for sale on a website where consumers could buy watches online. However, as the rights holder had not consented to the manufacture of the watch, the court ruled that there had been a violation of Rolex's copyright and trademark rights, according to the criteria used in Denmark to ascertain whether the manufacture of equivalent goods violates those rights (see also Sections 76 and 2(1) of the Act on Copyright, Sections 42 and 43 and Sections 4(1) and (3) of the Act on Trademarks, and Article 9(2) of the Community Trademark Regulation (207/2009)).
Furthermore, it was undisputed that, knowing that the watch was a copy, the defendant had bought it for private use and had not violated the provisions mentioned in the Act on Copyright and the Act on Trademarks. However, the court ruled that this was not relevant for the decision in question under the regulation, which regulates only whether the manufacture took place in violation of IP rights under the rules that apply in the member state in question.
Following completion of the procedure detailed in Article 9 of the regulation, it was established that there had been violation of an IP right. The court further noted that, under Article 16 of the regulation, it was not permissible to allow the watch to be imported into the EU customs territory, as this would allow it to pass into free circulation.
The court thus upheld Rolex's claims (see also Article 17(1)(a) of Regulation 450/2008, Section 5 of Consolidated Act 1047/2005 and Section 4 of Statutory Order 12/2006). The matter was conducted as a test case of general public importance and each party thus had to bear its own costs. The judgment was delivered by a panel of seven judges.
Mads Marstrand-Jørgensen, Norsker & Co, Copenhagen

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