Shipping line 'not liable for transporting fake goods'

Freight forwarder Megastar Shipping has been found not liable in the transhipment of fake goods from China, a landmark court case has ruled.

The case, brought by luxury brands Louis Vuitton, Gucci, Burberry, Hermes and Hello Kitty manufacturer Sanrio, centred on a shipment in April 2013 that was being transported from China to the Indonesian island of Batam via Singapore.

During unloading in Singapore to be reshipped on a smaller “feeder” vessel to Batam, two containers inspected by Singapore customs officials were found to contain 436 cartons of Chinese-made fake goods and fashion accessories, which could have netted more than $1m if sold.

The companies whose brands featured on the knockoffs sued Megastar, claiming the freight forwarder was liable for infringing their trademarks. They alleged that Megastar, as the local consignee, was the importer of the fake goods, regardless of whether the firm knew or not that the containers it carried contained counterfeits.

According to the High Court ruling in Singapore, Megastar was not found to be liable because it was not deemed to be the “importer” or “exporter” of the fake goods under the Trade Marks Act, and “did not act in concert with” the third parties that organised the shipment of the fake goods.

“There is no doubt that the defendant was not the party who caused the counterfeit goods to be brought into Singapore…… It was engaged as freight forwarder by the third party for the limited purpose of arranging for transhipment, but all the preparations and instructions for the onward shipment of the counterfeit goods came from the Third Party,” Justice George Wei said, even though some of the customs permits and declarations named Megastar as the importer.

“The defendant did not act in concert with or have or shared a common design with either the shippers [exporter] or the third party [Batam importer] (or indeed anyone else) to commit acts now said to amount to infringement. It follows that the claims against the defendant are dismissed. The defendant is not the importer or liable as joint tortfeasor for the importation,” he added.

In concluding observations, Wei noted that: “The facts of this case, while relatively straightforward, have raised numerous connected issues and questions of law. These have arisen because the reality is international trade is complex.”

“The problem for intellectual property right owners and international trade in counterfeit and pirated goods is likely to be especially acute where the counterfeit or pirated goods originate from an unknown source in a third country and which “passes through” an intermediate country such as Singapore, as goods in transit or for transhipment to another country.”

The ruling noted that Megastar accepted that the goods it transported were counterfeit under the Trade Marks Act and that it had even brought third-party proceedings against the Third Party in case it was found liable or responsible.

The ruling comes on the first anniversary of a public commitment by the international shipping industry to address the transport of counterfeit goods by sea.

A year ago, in Brussels, leading global shipping firms such as Maersk Line, freight forwarders such as Kuehne and Nagel, and 10 major multinational brand manufacturers including Unilever, Chanel, Pfizer and Philip Morris International, as well as several associations including anti-counterfeiting and crime organisations, signed the ‘Declaration of Intent to Prevent the Maritime of Counterfeit Goods’.

Under the declaration, which was organised by the International Chamber of Commerce, the industry agreed “continuous proactive measures, and corporate social responsibility principles” to address the issue of counterfeits, including a commitment to “stop business co-operation with those suspected of dealing in the counterfeit trade”, a zero-tolerance policy on counterfeiting, strict supply chain controls, due diligence checks, information exchange and risk profiling.

Now a year on, three more companies have signed up – ocean carrier APL, automotive giant Honda, and French luxury leather goods company Longchamp.

“Like others in the luxury and fashion goods industry, Longchamp products are counterfeited on a large scale and vast amounts of these fakes are shipped by sea to ports around the world,” Marilyne Serafin, head of the intellectual property department for Longchamp said in a statement. “We are pleased to add our name to the Declaration to show our support for this critically important joint effort with the maritime industry. This type of voluntary collaboration among all of the parties that deal with this transport issue will be the key to stopping these illegal fake goods from getting on the world’s vessels.”

Since the initial signing, five working groups have been formed to develop best practices aimed at stopping the maritime transport of counterfeit goods.