Counterfeiters typically make tremendous efforts to cover up their identity and the details of their actions. By doing so, they aim to both prevent trademark owners from bringing civil law claims as well as to avoid criminal prosecution through law enforcement authorities. The German Federal Court of Justice has recently ruled on the scope of criminal liability for the import of counterfeited goods infringing the EUTM Regulation (ref. no. 5 StR 554/17). Construing the relevant German criminal provisions strictly in the light of trademark functions, the Court significantly strengthened the position of trademark owners.
The accused sold counterfeit clothes in Germany that had been manufactured and bought in Turkey. These clothes featured the labels of various famous fashion brands, among them HUGO BOSS. Through his company located in Berlin, the accused operated several professional internet platforms for selling the counterfeit clothes to commercial customers. Upon order and payment by these customers, the accused had the clothes shipped from Turkey to his company in Berlin via Poland and the United Kingdom in order to avoid customs seizures. In one particular case deviating from this scheme, counterfeit HUGO BOSS branded shirts had been shipped directly from Turkey to Berlin and were seized by customs at the airport of Berlin-Tegel. Customs found that the HUGO BOSS labels were covered with stickers bearing the label MIO CALVINO.
Findings of the Court
The Court found the accused guilty of professional criminal infringement of EU trademarks, including the HUGO BOSS mark, and sentenced him to three years of imprisonment. In doing so, the Court dismissed all three counter-arguments that the accused had brought forward in his defense.
First of all, the Court held that the relevant German criminal provision (sec. 143a para. 1 no. 1 of the German Criminal Code) is constitutional and applicable although it makes reference to the outdated Community Trademark Regulation – and not the EU Trademark Regulation that replaced it in 2016. In this context, the Court underlined that the criminal provision itself includes the relevant wording of prohibiting the use of identical trademarks for identical goods without the trademark owners consent. The Court further pointed out that the examples of such infringing use in the EUTM Regulation, namely the import, must be considered when construing the criminal law provision and that both the scope of trademark protection and criminal liability need to be aligned.
Further, the Court held that covering up the HUGO BOSS labels on the counterfeit shirts did not bar the actions of the accused from amounting to criminal trademark use. It thereby dismissed prior decisions of German Appeal Courts that found to the contrary: Making reference to the parallel provision in the German Trademark Act, these Courts were of the opinion that an illegal import under a sign requires that the sign is visible in some sense. The German Federal Court of Justice, however, pointed out that in this context, trademark use has to be construed by taking into account the primary trademark function of identifying the goods and services of a company. It found that the counterfeit HUGO BOSS brands impair this primary trademark function – irrespective of whether they had been covered.
Finally, the Court made clear that – opposed to the prior findings of some German Appeal Courts – the custom seizure did not prevent an illegal import either: Under German law, a custom seizure is performed “on the import” of goods. Focusing on the rationale of the relevant statutory provisions, the Court held that – as the import is a prerequisite for the seizure and its basis – the seizure cannot prevent the import in a criminal law context.
The decision strengthens the position of trademark owners in two ways: (1) it extends the scope of criminal liability of counterfeiters by defining trademark use strictly in the light of trademark functions and (2) clarifies that border seizures and criminal liability from illegal imports do not exclude but complement one another. In line with our integrated IP enforcement approach, the decision also highlights the benefits for trademark owners of backing up civil law enforcement measures with both filing customs seizure applications and proactively initiating criminal law proceedings.
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