Comment
Efficiency of Customs taking certain prosecution
19. From government's perspective, it is desirable that trade mark and copyright protection is undertaken efficiently. It would be efficient for Customs, in addition to the Police and the NEU, to be able to take prosecutions in respect of the offences of the Copyright Act 1994 and Trade Marks Act 2002.4 This is because, as a result of Customs' existing trade mark and copyright role, its officers often have specialist knowledge relating to offending importers, and may be in possession of counterfeit or pirated goods they have tried to import.
20. For instance in the course of Customs' existing trade mark and copyright role at the border, it may suspect there are counterfeit goods in an imported container. In this situation the container is unpacked and its contents are sorted into categories. Frequently such containers are found to have several types of counterfeit goods, relating to different rights owners' notices. Each type of good is investigated to determine whether it appears to infringe a rights owners' notice. In the process of doing this specialised knowledge is developed, including knowledge of whether a particular importer has a history of attempting to bring infringing goods into the country.
Managing Customs' existing trade mark and copyright responsibilities
21. Customs' review of its trade mark and copyright activities (referred to in paragraph 17 above) found that deterrents against importing counterfeit or pirated goods are weak. This is particularly the case because trade mark and copyright owners are often reluctant to take court action against importers. The weak level of deterrence contributes to a small number of importers repeatedly tying up significant Customs resources.
22. This situation, along with the global increase in trade in counterfeit and pirated goods, has created some operational pressure points for Customs. For example there is a backlog of about six months in its investigations of possible trade mark and copyright infringements. The backlog impacts on the availability of Customs to undertake other types of work, such as investigations relating to drugs and objectionable material. It has also precipitated a shortage of secure storage facilities for detained goods.
23. Enabling Customs to take prosecutions related to imported counterfeit and pirated goods would provide it with an additional tool to manage its existing trade mark and copyright responsibilities at the border. Potentially it would also enable Customs to play a more active role in preventing the importation of counterfeit and pirated goods.
Respective roles of Customs and the NEU in trade mark and copyright enforcement
24. If Customs were able to take prosecutions related to imported counterfeit and pirated goods, its enforcement role would be complementary to the NEU's. Unlike the NEU, Customs would not be involved in enforcing offences post border, such as the sale of counterfeit or pirated goods within New Zealand. Customs would be most likely to prosecute in situations where:
- as a result of its existing activities, it has already accumulated most of the evidence required to support a prosecution; and
- there was an element of public interest in taking the prosecution (for example where counterfeit goods pose a risk to public safety).
25. Customs would be more likely to proceed with a prosecution related to goods covered by rights owners' border notices (because it is likely to already be in possession of evidence in such cases). However there may be situations where it is efficient for Customs to take action against an importer in respect of a range of counterfeit or pirated goods, not all of which are covered by a border notice. For example within an imported container some infringing goods (such as footwear) may be covered by a border notice, while others items (such as cell phone batteries or chargers) that are not covered by a notice pose a safety threat to the public. In this sort of situation Customs may wish to include within the scope of its prosecution all the items suspected of being counterfeit or pirated. However the legislative amendments enabling Customs to prosecute importers of counterfeit and pirated goods would clarify that an importer cannot be prosecuted by both the NEU and Customs for the same offence.
26. Should Customs be given a mandate to take prosecutions related to imported counterfeit and pirated goods, the respective roles of MED and Customs (in this respect) would be clarified in a Memorandum of Understanding. The Memorandum would, for example, make it clear that Customs would not prosecute an alleged offender without being sure they were not already under investigation by the NEU. It would also ensure that NEU's and Customs' communication with stakeholders (right holders and importers) is consistent, and clear about the responsibilities of both agencies.
27. Over time the respective roles of the two agencies may be further refined, as both organisations gain experience in this area of work.
Generic Customs powers that would assist with initial investigations
28. Customs already has some generic powers under the Customs and Excise Act 1996 that could be helpful in the initial investigation of importers of counterfeit and pirated goods. For example it has the power to examine all goods being imported into the country, and to withhold delivery of items until satisfied as to their nature, value and origin. As part of the importing process certain documents have to be produced by the importer, including invoices, packing lists, shipping bills and money transfer documents. It is also possible to interview, without notice, anybody crossing the border, or who is an employee of a shipping company.
Further powers sought by Customs
29. There is, however, some uncertainty about whether certain other powers under the Customs and Excise Act 1996 would be available to Customs to support prosecutions against imported counterfeit and pirated goods.5 To put the matter of their application beyond doubt, the Trade Marks or Copyright Acts should provide Customs with those powers (detailed below), suitably modified to serve the purposes of those Acts. These powers should be the minimum necessary to do the job, and should only be available for the purpose of investigating and prosecuting criminal importing offences of the Trade Marks or Copyright Acts.
Warranted searches
30. In December 2006 the Cabinet agreed, inter alia, that to support trade mark and copyright prosecutions the NEU will be able to apply for, be granted and execute search warrants [EDC Min (06) 22/16 and CAB Min (06) 46/6]. This power should also be provided to Customs.
31. The Cabinet paper EDC (06) 161 indicates that NEU's warrantless searches should only occur for the purposes of preventing an offender from continuing to trade in counterfeits. Given that Customs' investigations will not be focused on places where goods are being sold, NEU's power to make post-border unwarranted searches, and to seize goods during these unwarranted searches, is not relevant to Customs.
Ability to take possession of and retain documents and goods found in a lawful search or inspection, and to make visual or sound recordings
32. For the purpose of collecting evidence to support a possible prosecution Customs needs, subject to any Court order to the contrary, to be able to take possession of and retain relevant documents and imported goods found during a lawful search or examination (e.g. an examination of an imported container under Customs' control). Additionally, Customs officers should be able to take photographs or records of images and sounds in the places searched and of anything found during a lawful search or examination.
33. Subject to any Court order, seized perishable goods would be disposed by the Chief Executive of Customs, and seized non-perishable goods disposed of at the discretion of the Court.
34. Although Customs can already detain items suspected of infringing a border protection notice (referred to in paragraph 10), it would require the power to retain goods to support its trade mark and copyright prosecutions because:
- Customs may want to include some items not covered by a border notice within the scope of a prosecution (as referred to in paragraph 25); and
- Under the border notice system, if a rights owner does not take a civil court action against the importer of goods that appear to infringe their intellectual property rights, and if the goods are not voluntarily forfeited by the importer, then they are released. In this situation, in the absence of provisions to retain material to support a criminal prosecution, the goods would not be available as evidence.
Ability to require relevant information, and copy documents supplied
35. Customs has found suitable information gathering powers to be vital to the success of its investigations of other offences, such as those associated with the importation of objectionable material. For example information gathering powers are very useful when offending items are sent to a post office box but the identity of the owner of the post office box is unknown. Similarly, financial information from banks can be critical to an investigation.
36. Because of the special considerations that apply at the border, for the purpose of determining whether goods should be retained or released, Customs should be able, without seeking judicial authority, to require any person believed to have imported, or have been involved in the import (e.g. an agent), of goods to:
- appear at a reasonable time and place, specified in writing, to answer questions about goods that are still under Customs' control ; and
- supply within a reasonable time, upon notice in writing, documents and other recorded information related to those goods that are still under Customs' control.
37. The Law Commission and the Ministry of Justice consider that although an examination power is appropriate to enable speedy decisions about whether to retain or release goods that are still under Customs control, it is not appropriate that Customs should be able to require someone to be interviewed (with or without judicial authority) about suspected criminal offending related to goods that are no longer under Customs' control. In relation to the types of prosecutions envisaged in this paper, where information is provided by a suspect, it would be contrary to the privilege against self-incrimination to use it as evidence. In any case, generally where information is sought that is contrary to self-interest, the answers will often be unreliable or untruthful. It is therefore generally better for enforcement agencies to proceed on the basis of cooperation rather than coercion.
38. In relation to the types of prosecutions envisaged in this paper, the Law Commission and the Ministry of Justice consider that judicial authority should be obtained before Customs is able to require someone to supply documents and information related to goods that are no longer under its control. Other enforcement agencies generally require judicial authority before they can exercise similar powers.
39. There needs to be a provision that makes it an offence to, without reasonable excuse, refuse to be interviewed when a person is legally obliged to be, or to deliberately withhold information (including documents) when they have a legal obligation to do so. Without such a provision someone could subvert a potential prosecution with impunity. It seems reasonable that the penalty for deliberately withholding information or refusing to be interviewed is made equivalent to the penalty for deliberately providing a Customs officer with any document that is not genuine or is erroneous.6 The penalty for this is:
- imprisonment for a term not exceeding 6 months or to a fine not exceeding $10,000 for an individual; or
- a fine not exceeding $50,000 in the case of a body corporate.
Resource implications for Customs
40. Although taking occasional trade mark and copyright prosecutions may impact on Customs' ability to take other types of prosecutions, such resource allocation decisions are already made on a regular basis.
41. It is possible that taking the sorts of prosecutions described in this paper will result in a net reduction in Customs' trade mark and copyright work because it would tend to reduce subsequent offending. It may therefore help to relieve the current backlog of investigations of goods suspected of being counterfeit or pirated.
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