The donation of seized counterfeit goods to charity is a much-debated topic and the discussion has stepped up following the announcement of the Slovak Republic’s proposed new customs legislation, which would allow for the donation of seized counterfeit goods to charitable organisations without the consent of trademark owners.
If Slovakia’s parliament approves the draft legislation, the Administration of State Material Reserves will be permitted to offer donate seized fake goods to different social and charitable institutions including those caring for orphaned children, victims of natural disasters, healthcare networks, and social care organisations and NGOs. While the donation of seized goods is not a new idea, it is traditionally subject to the trademark owner giving their approval, and this new law will do away with that requirement – although a follow-up provision in the legislation requires that the donated counterfeits will still have to pass product safety checks and that the recipients will have to pay for the removal of the trademark, or make adequate adjustments to the design of the items. The obligation to adjust the design is subject to administrative control and non-compliance of it may be sanctioned with a fine of €1,700 and forfeiture of the goods.
Upon an initial reading of the draft legislation, and therefore only applying high-level commentary on it,Peter Stavrovsky of ČERNEJOVÁ & HRBEK suggested that the sanction is too low and, in cases of forfeiture, there is no mechanism implemented with respect of further disposition of the goods, which were not “improved”. And while the proposals do include health and safety provisions and the requirement that logos are removed, for trademark owners these are just two areas of concern when it comes to the re-distribution of faked goods.
Olivier Vrins, a partner at Altius, has previously written for WTR on this subject, arguing that, despite the positives that can be derived from donating seized counterfeit goods to charity, strict conditions should be met in order to protect rights holders and those receiving the goods. Vrins’ three non-negotiable conditions are:
- The rights holder’s consent should be obtained and the goods should be meticulously checked for potential safety or health problems (memoranda of understanding could be created to regulate these issues, in particular the issue of the liability and interests of the public authorities, excluding those of the holders of the stolen IP rights);
- All infringing signs or features should be removed from the goods; and
- The goods must be marked as charitable donations so that third parties are not tempted to re-affix counterfeit brands, logos or marks to them.
The proposed law moves towards such a regime, but only seems to meet one of the above requirements in full, so is likely to raise eyebrows. Faced with the suggestion that donation occurs without the brand owners’ consent, a number of rights holders have already taken to online forums to voice concern. Amongst the worries are that the new law could easily be misapplied and that it is not always possible to adjust the design, or remove the mark or logos in such a way that the products are not destroyed (adding that it is debatable whether anybody would be interested in wearing damaged/adjusted counterfeits anyway).
The concept of donating safe – and brand-free – goods to charity is not one that can be easily objected to and WTR has previously reported on organisations that work with brands to facilitate just such a flow of goods, a move that could have positive reputational results for participating companies. However, in these instances the brand owner is at least involved in the dialogue. Stavrovsky feels that such concerns will likely be discussed at Parliament level prior to approval of the legislation – and it is a debate brand owners will want to follow.
In a follow-up conversation with Maria Sebova of Brichta & Partners, WTR was advised that, if the proposed bill is approved, the donation of the goods under Customs supervision and control will still be subject to the right holder’s written consent, as provided by Regulation 608/2013 concerning Customs enforcement of IP rights. However “this will not apply to the donation of goods seized in the internal market under Slovak national legislation, such as in cases when the rights holder will have the Customs application on the internal market in place and Customs seize the goods suspected of IP right infringement in the Slovak internal market”. Sebova adds: “In such cases the charitable donation would be indeed possible without the right holder’s consent and Customs would not be obliged to inform the rights holder about this donation; the Ministry believes that this is fair because the rights holder should not claim any rights with respect of these goods.”
The bill is still in the legislative process, and is yet to be heard by the parliamentary committees, so she argues that there is still a chance to reach out to the legislators (especially in the legal committee) and ask them to consider changes. However, she believes that the bill is very likely to be passed.
This blog was first published in World Trademark Review on 7 November 2013