Author: Cathryn Warburton

The sale of counterfeit goods sucks the profits out of big name brands. Lodging a New Zealand Customs Notice is an extremely effective, simple, and cost-effective way of stopping counterfeit imports before they even enter the country. This practical measure is particularly important as most counterfeit goods on sale in New Zealand are imported from overseas.

What is a Customs Notice?
A Customs Notice is the official document that is filed with the New Zealand Customs Service requesting the detention of counterfeit goods. It may be filed by the registered proprietor of a trade mark, or an authorised agent. The notice must be filed together with other documentation such as proof of a valid New Zealand trade mark registration and a form indemnifying Customs against costs. A bond of NZ$5,000 is also lodged. This is placed in an interest bearing account by Customs, and will be refunded once the notice is withdrawn. The bond is to cover Customs costs, should that be necessary. In practice Customs seldom dips into the bond money, but might from time to time send an invoice for costs of storage or disposal where a shipment is particularly large.

Can a local licensee file a Customs Notice?
It is becoming more and more common for local licensees to instruct legal advisers to file Customs Notices on behalf of the (usually overseas) trade mark proprietor. This may be done provided the registered proprietor executes an appropriate authorisation of agent form. Some local companies are even electing to pay the NZ$5,000 bond on behalf of the overseas proprietor.

Must the notice be filed by a patent attorney or solicitor?
Companies may file Customs Notices directly, without using a patent attorney, solicitor or other legal adviser. However, particularly where a company does not have an in-house legal adviser, it is recommended that the filing be done through a legal adviser. This is because there are strict time limits involved, and the goods will be released to the importer if appropriate legal action is not taken promptly.

How does it work?
What happens once the necessary documentation has been completed, the bond paid and the notice lodged? The Customs officials keep an eye out for counterfeit goods. While the officials are not able to inspect every item imported into New Zealand, they appear to have an uncanny ability to hone in on shipments containing fakes. Through their experience, and assistance from trade mark proprietors, Customs are able to form a fairly good preliminary idea of which goods are fake and which are not. Once a shipment is identified which Customs considers to be of dubious descent, it detains that shipment. Customs informs the importer, who has an option of voluntarily forfeiting the goods to the state. A surprisingly large number of importers choose this option. If the goods are forfeited immediately, that is the end of the matter (other than arranging disposal of the goods). Customs notifies the proprietor or its representative of details of the shipment. If the goods are not voluntarily forfeited, Customs issues a Notice of Determination to the trade mark proprietor or its representative.

Move quickly
Once a Notice of Determination has been issued, the registered proprietor must move quickly. It has only 10 days from the date of the notice within which to lodge court proceedings against the importer, failing which Customs must release the goods to the importer. The registered proprietor may request an extension of this period for a further 10 days, on reasonable grounds (sometimes importers will agree). What the registered proprietor elects to do next may well determine the outcome of the action.

The registered proprietor has several options.

Are the goods counterfeit? Step one is to check whether the goods are in fact counterfeit.
This can be done by:
- Attending Customs and inspecting the goods.
- Requesting digital photographs to be provided by Customs via email.
- Requesting a sample (transport costs may apply).

Thereafter the registered proprietor may simply do nothing: once the time period lapses, the goods will be released to the importer. This type of inaction is not advised. Importers soon get to know which trade mark proprietors will not act against importers of fake goods.

Immediately send a letter of demand: depending on the circumstances, the letter may cover various aspects, one of which will be the voluntary forfeiture of the goods. Another may be to supply full details of the supplier of the goods. The benefits of determining the supplier of fake goods are self-evident. Follow through with court action if necessary: this is rarely necessary. In many instances, when the importers realise that the registered proprietor is serious about protecting the mark, the goods are voluntarily forfeited. Naturally, a registered proprietor may be required to take some matters to court. However, an importer of counterfeit goods is in business to make money. It generally knows if the goods are counterfeit. It will usually be reluctant to throw good money after bad, and wish to avoid the expense of futile litigation.
Frequently importers will request permission to "re-export" the goods.

This is not recommended.
Firstly, there is no guarantee that the same shipment will not end up on the market elsewhere in New Zealand. Even if the goods end up for sale in another country, this is not appropriate as the importer will be undercutting the genuine goods wherever the fakes are sold. Quite often an importer will sign an undertaking not to import similar goods in the future. Such undertakings are usually given in response to the registered proprietor agreeing not to seek an award of damages and costs against the importer. Such an undertaking can be enforced if broken. A court award of damages and costs can be sought - this will usually only be done where the registered proprietor has evidence of importation and distribution of large quantities of the goods.

What happens to the goods?
If the goods are forfeited, the proprietor of the trade mark may elect:
- To have the goods destroyed by Customs (there is usually no charge for this, unless a shipment is particularly large).
- To have the goods donated to a specific charity. Organisations such as World Vision are usually favoured, because they can guarantee that the goods will not be circulated in New Zealand, and can allocate the goods to be used in a particular country designated by the trade mark proprietor. A country where the proprietor does not trade is often preferred.

What does it all cost?
Lodging and attending to Customs Notices is not as costly as one might think. Often trade mark proprietors give agents standing instructions to send cease and desist letters if a shipment is a particular size. Once an appropriate initial letter has been drafted and approved by the proprietor, the same standard wording (with slight modifications) can be used for future cases. Customs Notices must be renewed every five years. This is a purely administrative step and is not costly. No additional bond is required. Compared to the value of the brand to the trade mark proprietor (or its New Zealand distributor) the legal costs involved are miniscule.

Will it ever stop?
Counterfeit imports will probably continue for as long as ripping off well-known brands brings profit to the importers. It would be naive to expect all counterfeit imports to stop as soon as a Customs Notice is lodged. However, once importers realise that the proprietor of a particular brand has got tough with importers, they are likely to select a different brand to rip off. While some brands will always suffer from this type of unwanted attention, trade mark proprietors have found that lodging Customs Notices does reduce (in some cases dramatically) the number of fake goods for sale in New Zealand.

This is a general summary only and should not be taken as a substitute for specific advice.

Web site: Baldwin Shelston Waters

Email: email@bsw.com
June 2001