NAIP Patent Blog

By Charl Goussard, NAIP Legal Researcher

Introduction

An increasing number of Asian companies are applying for patents from the EPO. But many patent rights holders (patentees as well as exclusive licensees), while accustomed to US International Trade Commission (ITC) seizure procedure, are unaware of the powerful customs regulations that exist in the European Union. One such regulation is Border Detention.


Border Detention is often a vital part of an intelligent IP business and strategy. The sensational San-Disk case, in which Sisvel (an Italian patentee) effectively blocked all San-Disk MP3 players from being sold or even entering the EU without a Sisvel license, is one example. A recent customs raid at IFA, also prompted by Sisvel, likely caused an untold number of sales contracts for companies like Hyundai and MSI to be lost to competitors, not to mention the public embarrassment.

The Border Detention regulation stems from the European Patent Convention, and is a powerful tool designed to protect the intellectual property rights (IPR's) of European Community members. As a result, the protection it offers patent rights holders should be a major consideration for registering patents with the EPO.

Overview

In order to facilitate and promote trade between member countries, the EU functions as a Customs union. Therefore when importing into the EU, as soon as the goods are cleared by any EU Customs office, they are free to move throughout the EU regardless of national borders. Goods may also be moved between various EU member states and stored without being Customs cleared, although such goods have to be cleared at some point if they are to be traded within the EU.

However, to prevent IPR infringement, EU member states are encouraged to promote cooperation between their respective customs authorities. Hence the introduction of the EPC Border Detention practice, governed by Regulation 1383/2003 EC, which provides for the detention of goods not yet cleared by Customs - the so-called transit regimes. Patent rights holders should thus apply for a Border Detention order against goods which may possibly infringe on their patents, before goods are cleared. This application may be logged at the customs office where the goods are first to enter the EU, where they are stored, or where they are eventually inspected. The patent rights holder need only prove that he/she has the right to the registered patent in the country where the allegedly infringed goods will enter the EU, be in transit, or be cleared. Compared to obtaining a seizure of imported goods from the ITC in the USA, it is much easier to get a border detention order against an alleged infringer within the EU (see fig. 1).

Fig. 1 Differences in Procedure between US ITC Seizure & EC Border Detention

US ITC Seizure	EC Border Detention
Legal proceedings before the ITC resulting in a judgment before EXCLUSION ORDER	Administrative procedure to obtain Border Detention order - thereafter litigation and judgment
Administrative Judge decides on infringement and validity of patent	No administrative decision as to the infringement or validity of the patent
Applicant needs to prove that domestic industry will be harmed by infringing goods	No requirement to prove harm to domestic industry
Appeal possible - Court of Appeals Federal Circuit	No appeal - administrative procedure
Only foreign produced products may be excluded	Detention order available to prohibit both import or export of infringing goods

Ultimately, Border Detention is a particularly powerful tool in the European Union (EU). It is advisable for the patentee to seek patent protection in countries where the infringing products are likely to enter the EU or in the countries where those products will be cleared.

Procedure

1. APPLICATION PHASE

Firstly, in order to successfully apply for a detention of infringing products, the patent rights holder will have to supply the relevant Customs authority with the following facts:

• characteristics of the infringing products,

• origin of infringing products,

• expected time and port of arrival in the EU,

• possible distribution routes within the EU, and

• proof of ownership or an exclusive license of the infringed patent.

No technical infringement details are required in the request to the Customs authorities ( i.e. The patent rights holder does not have to prove infringement).
Regulation 1383/2003 makes provision for ex-officio inspection and detention of goods by the Customs officials, but due to the technical complexity of patent cases, it is improbable that Customs officials will search for alleged patent infringements without patent rights holder’s instructions.

2. CUSTOMS REVIEW: BORDER DETENTION ORDERED

Next, the Customs authority will consider the documentation, and usually grant the patent rights holder’s request within a few weeks and issue a detention order for the goods.

3. GOODS DETAINED BY CUSTOMS

The next step involves detaining the goods: Once the suspect goods have been located at the Customs office, the detention order will be attached. The Customs officials will then inform the patent rights holder of such detention. Patent rights holders are allowed to inspect the goods and to take samples for technical investigation. In addition, Customs officials will supply patent rights holders with the name and address of the consignee of the goods.

4. APPLICANT FILES SUIT

From the start of the detention, the patent rights holder will have 10 working days to file suit against the infringer. The national law of the country where the goods are detained will also apply for the infringement litigation. If an infringement suit is not filed within the given time, the detention order will be lifted and the goods will be cleared.

The detention order will be valid until the outcome of the patent litigation. The detained goods will then be disposed of as ordered by the national court.

Goods may however be released by Customs upon payment of security by the owner of the goods. Nevertheless, parties more than often reach settlements before courts adjudicate the matters.

Border Detention Procedure

Step 1.	Step 2.	Step 3.	Step 4.
Application	Customs Review	Detention	Litigation
• Applicant supplies Customs with info on products	• Customs receive info from applicant	• Goods located & order attached	• Applicant files suit at National level
• Proves ownership of patent	• Border Detention ordered within two weeks	• Customs informs applicant / consignee	• File suit in country or countries who granted BD orders
		• Applicant may inspect & retain samples of detained goods
		• 10 DAY period
ADMINISTRATIVE PROCEDURE		JUDICIAL PROCEDURE
Preparation phase: goods not attached		Goods attached: infringement must be proved
		*Goods may be released by customs upon payment of a security by the proprietor of the goods

Practical Advice: Apply for patents in the Netherlands

For patent rights holders, a valuable venue for border detention orders is the Netherlands. Both Rotterdam harbor and Schiphol airport are major ports for the EU. Furthermore, the Dutch Customs officials are well experienced and highly effective in granting border detentions.

To add to this, the Netherlands have a sophisticated patent court in The Hague. Due to the procedural rules and the court’s renowned productivity, a ruling on patent infringement in the court of first instance may be handed down within only 12 months.

Holders of Dutch patent rights are thus guaranteed of an experienced team of Customs officials, swift and efficient border detentions against infringers, and a relatively quick infringement litigation process.


Conclusion

Border Detention in EU countries is a cost effective and a powerful tool available to patent rights holders. Along with market intelligence of issues such as competitors’ distribution channels, it can be very effective in keeping them at bay by obstructing infringing products from entering or leaving the EU. Therefore IP strategists should work closely with all members of management to fully utilize Border Detention for their company's benefit.


Relevant Links:
EPC Regulation 1383/2003 (pdf)

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