TRIPS-plus Customs laws add a new dimension to IPR

A signal achievement of Mr. Chidambaram that went almost unnoticed was the introduction of border measures to combat IPR infringements effectively in form of the Intellectual Property Rights (imported Goods) Enforcement Rules, 2007, notified on May 8, 2007, under section 156(1) of the Customs Act (refer www.cbec.gov.in for details). It was a landmark decision of the Government for two reasons. First, the Rules have entrusted Customs officers with comprehensive powers not only to intercept and detain infringing goods in pursuance of the Border Measures stipulated in Articles 51 to 60 of TRIPS (Trade-Related Aspects of Intellectual Property Rights) but, being read with sections 110, 111, 112 and 135 of the Customs Act (1962), also to seize, adjudicate and confiscate offending goods and to penalize and prosecute the offender. Second, while border measures under TRIPS are restricted to Copyright and Trade Marks only, the above Rules now encompass patent, design and geographical indications also. It is thus evident that Mr. Chidambaram has gone beyond the mandate of TRIPS on both counts.

It is pertinent to mention here that both Japan and China, like European Union countries and the USA, had expanded the scope of IPR enforcement at borders by covering patent and design, apart from copyright and trade marks. Besides, Japan has amended its Customs laws to impose a fine on the infringer up to 7 million yen and imprisonment up to 7 years. China has also empowered its Customs officers to confiscate infringing goods and to penalize offenders. Both the countries, like in the case of EU countries, have provided for Customs intervention in respect of both imports and exports. India, on the other hand, has restricted Customs intervention to imports only and not export as yet. Maximum penalty provided under section 112(i) of the Customs Act for an infringer of IPR is cent percent of the value (same in USA) and maximum imprisonment under section 135 (ii) is for a term of 3 years. As for European countries, it is left to each member country to decide whether the power to determine infringement of IPR at borders and to levy penalty shall be entrusted to Customs or some other authority including court (ref. Council Regulation (EC) No.1383/2003 of 22 July, 2003). Majority of EU countries have, however, assigned this power to the Customs.

Apparently though India is lagging behind Japan and China in border enforcement of IPR in that it has not covered exports as yet in its ambit, Mr. Chidambaram has stolen a march over them by integrating recordation of right holders’ notices with highly sophisticated Customs Risk Management System (RMS), perhaps the first such attempt in the world. This has led to multiple benefits for right holders apart from enabling automated detection of IPR infringement, based on right holder’s inputs. In the first place, right holders are spared the trouble of multiple recordations with Customs at all vulnerable points of entry. Second, single recordation reduces the financial and administrative burdens of the right holder in terms of security, notice fee and logistics. Third, Customs RMS through ICEGATE instantly incorporates those automated data to generate alert at all Customs stations where RMS is functional, rendering it rather impossible for suspect consignments to escape detection. Fourth, the System has enabled central monitoring and supervision.

A question may arise whether it was wise on the part of the government to entrust Customs with the power to determine infringement of IPRs, particularly Patents, designs and Geographical indications, inasmuch as such determination presupposes expertise that Customs officers generally lack. While it is possible for a trained Customs officer to determine infringement of copyright and trade marks, based on the materials provided by the right holder, the issues relating to patents, designs and geographical indications are indeed far more complex, requiring external support or consultancy before coming to any conclusion.

The contrary proposition of letting Customs merely detain suspect consignments, leaving it to the court to determine IPR infringement has certain obvious demerits. First, long-drawn court proceeding would invariably lead to accumulation of demurrage and detention charges in respect of detained cargo, which would be payable to the custodian and the owner of detained containers respectively. This extra financial burden may have to be borne by the right holder eventually. Second, confiscation of imported counterfeit and pirated goods by Customs upon determination of infringement by court would suggest redundancy and non-application of mind by the former. Third, it would lead to multiplicity of proceedings, there being two appealable orders, one by the court and the other by a Customs officer. Resultant confusion as to appellate jurisdiction would thus become unavoidable. On the balance, therefore, Mr. Chidambaram was justified in making Customs laws on IPR comprehensive enough to deal with infringing goods holistically.

It is time for the trade, both domestic and international, to draw optimum mileage out of the simplified but far-reaching Customs laws and procedure to protect their intellectual property rights.