Comment
Impact of No Enforcement Action
27. The absence of prosecutions under the criminal offence provisions of the Trade Marks and Copyright Acts may be a factor leading to the increase in volume of counterfeits being sold in New Zealand.
28. The impact of counterfeiting goes beyond being merely a problem for rights holders, as greater volumes of counterfeits being offered for sale can lead to an entrenchment in society of the acceptance and consumption of counterfeits, which is likely to result in health and safety risks, a disregard for the law and have a wider negative economic impact.
29. Increasing international concern and attention is being focused on preventing the growth in trade in counterfeits within different international fora, such as the Group of Eight, WTO, APEC, World Customs Organisation and World Intellectual Property Organization. Particular attention is being paid to the ineffectiveness of enforcement efforts in some countries, such as China. This in turn is translating into political pressure for countries to take action. For example, it appears that the US is considering initiating a WTO dispute settlement with China over its ineffective enforcement. As these tensions assume a greater profile, it is in our best interests to seek tailored solutions to combating the sale and consumption of counterfeits in New Zealand before the international community seeks to impose its solutions upon us.
Improving Enforcement of Criminal Offences
30. The NEU is a business unit of the Ministry of Economic Development. It investigates and, where appropriate, prosecutes offences under a number of Acts5 on behalf of the Official Assignee, the Registrar of Companies and the Registrar of Motor Vehicle Traders. The NEU also prepares banned director reports on behalf of the Registrar of Companies.
31. The NEU appears to be the most appropriate unit to enforce the criminal offences in the Trade Marks and Copyright Acts. These Acts are the primary responsibility of the Ministry of Economic Development and the NEU is a unit established within this department. The NEU has a wide range of experience investigating and prosecuting various forms of regulatory crime. Furthermore, the NEU also has established links with other government agencies with existing roles enforcing legislation against the manufacture, importation and sale of counterfeits.
32. The nature and extent of enforcement activity undertaken by the NEU will ultimately depend on funding for that activity. However, I would expect the NEU to take a strategic approach to any enforcement of the criminal offences under the Trade Marks and Copyright Acts. Rather than attempting to enforce all possible offences, I would prefer the NEU to target its efforts on high-level and high-profile offending. In doing so the NEU could co-ordinate and cooperate with the activities of other government agencies (such as Police, Customs, Commerce Commission and DIA) and right holders.
33. The role to be undertaken by the NEU would therefore complement the existing efforts of other government agencies to combat the sale of counterfeits, rather than negate the need for them to continue to have a role.
34. Furthermore, criminal enforcement by the NEU would also not be a substitute for civil enforcement by right holders. Since right holders would be the primary beneficiaries of any criminal enforcement activity by the NEU, a key consideration for determining whether the NEU acted on a complaint from a right holder could be the extent to which a right holder has previously taken, or is willing to take, civil enforcement.
Investigative Powers
35. In order to carry out investigations and bring prosecutions for criminal offending under both the Trade Marks Copyright Acts, I recommend that both the Trade Marks and Copyright Acts be amended to provide the NEU with suitable investigative and prosecutorial powers to enforce the criminal offences in both Acts. These powers should include the ability to apply for, be granted and execute search warrants; and the ability to require other relevant agencies, such as New Zealand Customs and New Zealand Police, to provide information to assist in identifying persons involved in the commission of a criminal offence.
36. There are, however, a range of circumstances where applying for and executing a search warrant would be impractical, because of the transient and itinerant nature of offenders and the nature of some counterfeits that can pose a public health and safety risk. These offenders usually trade "out of the back of a vehicle" and at locations within public areas. For example, it is common for offenders to set up a temporary stand or stall inside, outside or near a major event venue; tourist attraction; transport hub; market or fair; or on the footpath within the central business district of a town or city.
37. In order to address this type of offending, I propose that the NEU be given some limited powers to undertake search and seizure of counterfeits without a search warrant for the purposes of preventing the offender from continuing to trade in counterfeits and in order to bring a criminal prosecution against the offender. In this respect, I propose that entry to a place (other than a private residence) where goods are being offered for sale or publicly displayed without a search warrant would be possible but limited to when the:
- occupier of the place consents to entry;
- place is in a public area and the entry is made when it is open to the public; or
- place is a place of business and the entry is made when it is open for carrying on business and the enforcement officer enters only the parts of the place that are open to the public.
38. The enforcement officer would have the power to seize property, including documents, without a search warrant where the enforcement officer has reasonable grounds to believe it breaches, or is being used, or is evidence of a breach either the Trade Marks Act or the Copyright Act. Seized property would be held by the NEU for use as evidence in a criminal prosecution. Property that is seized and not used as evidence would be returned to the person from whom it was taken.
39. Before the enforcement officer exercised these limited powers, he or she would be required to show an appropriate identity card or warrant of appointment to any person who may be interested in, or affected by, the exercise of those powers and take all steps that are practical in the circumstances to ensure that as little damage as possible is caused. During the exercising of these limited powers, the enforcement officer would not be authorised to search any person or enter any place, except as described above in paragraph 38.
40. The Trade Marks and Copyright Acts would also need to identify a statutory officer who would hold these powers and then delegate them to the NEU. I propose therefore that the enforcement powers would be conferred on the Chief Executive of the Ministry of Economic Development, or his delegates.
41. Very similar non-search warranted powers are proposed for enforcement officers under the draft Major Events Management Bill. It is envisaged that this legislation would provide a useful model for amendments to the Trade Marks and Copyright Acts. Furthermore, it appears highly likely that the NEU will responsible for enforcement under the Major Events Management Bill. Because traders in counterfeits are attracted to major events, it is appropriate that the investigative and prosecutorial power for the NEU under the Trade Marks and Copyright Acts should be consistent with those under the Major Events Management Bill.
New Zealand Customs Service
42. Customs administers the border protection measures provided in the Trade Marks and Copyright Acts. While Customs is required to detain suspected infringing goods in respect of all border protection notices lodged by right holders, it is considered outside Customs' power to prosecute importers. The onus of legal action falls on the right holder.
43. Customs is faced with increasing volumes of infringing goods each year and, as noted above, has detained over 260,000 items in 2005/2006. This places a significant workload on Customs and without a greater deterrent from prosecution this trend is expected to continue. It is expected that a specific enforcement agency with a strategic overview would have a significant impact on the long term trend of increasing volumes of infringing goods being imported into New Zealand.
44. Customs is considering options to assist with the enforcement of the Trade Marks and Copyright Acts at the border, including a review of the existing border protection measures and an expansion to the existing powers available to it under the border protection measures. Customs and Ministry of Economic Development will work closely together in developing any further initiatives, as the agencies believe complementary efforts are necessary to effectively address the problem of counterfeits being imported into New Zealand over the short term.
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