The Organisation for Economic Co-operation and Development (OECD) and the European Union Intellectual Property Office (EUIPO) issued jointly their updated study “Trends in Trade in Counterfeit and Pirated Goods” on March 18. The 2019 study updates a similar study issued in 2016. Neither study examines the trade in counterfeit and pirated goods where the infringing goods are made and consumed in the same country or pirated digital products distributed via the internet.  Therefore, as an example, any counterfeit or pirated goods made in China and bought by Chinese consumers fall outside the scope of this study.

The new study compares data from 2013, reported in 2016, and 2016, reported on March 18, 2019.  The study’s conclusion is that the value of global trade in counterfeit and pirated goods has increased and may be as high as $509 billion dollars (3.3% of global trade) as compared to $461 billion dollars (2.5% of global trade) in the earlier study.

The trends identified in the study included the increased volume of small parcels sent through the international mail system and greater use of express couriers to reach consumers. The study also noted the expanding product lines affected by counterfeit and pirated goods. Complicating enforcement efforts even more is the role of free trade zones (FTZs) in countries where infringing goods may transit before reaching their final destination. The FTZs located in transit countries may be used to repackage and relabel infringing goods and not subject to much or any enforcement because the goods are not intended to be consumed in the transit country.

Regarding some of the enforcement deficiencies and challenges identified in the study, intellectual property rights (IPR) owners should be aware that the U.S. has been negotiating free trade agreements (FTA) that obligate trading partners to heighten their enforcement efforts. For example, the U.S.-Korea FTA border measures provisions require authorities to have ex officio authority to take enforcement action to stop the import and export of counterfeit and pirated goods. Moreover, the FTA requires that customs officials have the same powers to stop infringing goods moving in-transit or into or out of FTZs. The willful importation or exportation of counterfeit and pirated goods must also be subject to possible criminal enforcement actions.

The U.S.-Panama and U.S.-Peru Trade Promotion Agreements are identical regarding obligations to give their enforcement authorities ex officio powers to take action to stop suspected counterfeit and pirated goods that are being imported, exported or moving in-transit. Neither agreement, however, addresses FTZs. The U.S.-Mexico-Canada Agreement, which is not yet in force, has strong IPR border measures that upon entering into force would require all parties to provide authorities with ex officio powers to stop imports, exports, goods moving in-transit and goods entering or exiting an FTZ or bonded warehouse.

While the U.S., through various FTAs, is negotiating stronger provisions to address some of these issues, the European Union (EU) has strengthened border measures provisions that apply to its member states. The 2013 EU Regulation allows for enforcement against infringing goods being imported, exported or entering an FTZ. The EU’s Trademark Regulation was amended more recently to permit enforcement against counterfeit goods transiting the EU. Additionally, the EU’s Regulation sets out specific procedures that apply to small consignments sent through the postal system or via express couriers.

Overall, the global trade in counterfeit and pirated goods is daunting. Without exception, governments around the world should reconsider whether their relevant border enforcement agencies have sufficient legal authority to take enforcement actions against the trade in counterfeit and pirated products. Governments should unilaterally enact legislation to give ex officio authority to their relevant border agencies, without pressure from trading partners.

In addition, governments should consider eliminating the “non-commercial” exception that exists currently in most border enforcement regimes. To combat counterfeit and pirated goods, enforcement should be extended to prevent the export, transit and entry into/exit out of FTZs and bonded warehouses. To demonstrate the priority of IPR enforcement, governments need to implement a sustained program of training.

Finally, IPR owners must engage national customs administrations by offering to train customs and other relevant government border enforcement authorities. Any effort to prevent the growing trade in counterfeit and pirated goods cannot succeed without the commitment of IPR owners to be active partners. Having invested in acquiring the intellectual property rights, IPR owners should also make an investment in protecting their IPR assets.

This post was written by Timothy Trainer, a co-author of Customs Enforcement of Intellectual Property Rights, published by Thomson Reuters.

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