Border Control of Goods Infringing Intellectual Property Rights
By Chie Yakura
This newsletter examines the procedures of import suspension by the Customs Office in Japan ("Customs") of goods infringing intellectual property rights of a third party. Recent legal amendments, especially in 2005 and 2006, have enhanced this border control system.
Historically, the vast majority of import suspension petitions submitted to Customs involved instances of trademark infringement by counterfeit brands and other goods. By applying for import suspension prior to the importation of the allegedly infringing goods, an intellectual property rights holder (an "IP Rights Holder") could protect its intellectual property rights before the distribution of the infringing products occurred, which is more effective than challenging infringing products once they have entered and spread throughout the Japanese market.
Since legal amendments in 2003, any holder of a patent right, utility model right, design right, or right to grow new plants has been able to submit a petition requesting that Customs suspend the importation of goods that a petitioner believes infringes its intellectual property rights. However, due to the difficulty of determining whether a good infringes a petitioner's intellectual property rights, the import suspension process was not friendly to the holders of such rights.
In response to this situation, over the past few years a number of legal amendments have been made and several systems requiring specialized and technical knowledge and expertise have been implemented to allow for the effective import suspension of goods that infringe patents and similar intellectual property rights. Two important systems that have been implemented are the Special Advisors' Opinion Request System and the Sample Inspection System.
This newsletter outlines the import suspension procedures and explains the Special Advisors' Opinion Request System and the Sample Inspection System.
II. Outline of the Import Suspension Petition and the Verification Procedures
Any good that infringes patent rights or other intellectual property rights１ is prohibited by law from being imported into Japan.
1. Filing an Import Suspension Petition and Acceptance of the Petition by Customs
An IP Rights Holder may file a petition (an "Import Suspension Petition") to commence procedures (the "Verification Procedures") to verify whether certain cargo that is to be imported into Japan and that the petitioner believes will infringe its intellectual property rights (the "Suspected Cargo") does indeed infringe its intellectual property rights.2 Such Import Suspension Petition can be filed with the head of any one of the Customs offices that have jurisdiction (based on the address of the petitioner or of its principal office or the place of entry of such Suspected Cargo into Japan) (the Customs office head with whom such Petition is filed, the "Petitioned Chief").
When filing the Import Suspension Petition, the petitioner must submit prima facie evidence3 that certain cargo infringes the petitioner's intellectual property rights. If the Petitioned Chief acknowledges that there is sufficient evidence of infringement and accepts the petition, the petition will take effect.4
The Petitioned Chief will determine whether to accept, reject, or withhold the petition within one month of the day immediately following the date on which such petition is filed.5 If the Petitioned Chief accepts the petition, the petitioner will be notified of the effective term of the petition.6 If the Suspected Cargo is actually imported into Japan any time after the acceptance of the petition and before the expiration of its effective term, then the Verification Procedures to determine whether the Suspected Cargo infringes the petitioner's intellectual property rights will commence.
2. Verification Procedures
The petitioner and the importer are notified when the Verification Procedures commence. Either party may file an opinion or evidence with the Petitioned Chief on whether the Suspected Cargo infringes the petitioner's intellectual property rights. The Petitioned Chief must verify whether the Suspected Cargo infringes the petitioner's intellectual property rights based on these opinions and evidence within one month from the day immediately following the notification to the parties.7
If the Petitioned Chief determines that the Suspected Cargo infringes the petitioner's intellectual property rights, Customs will confiscate or dispose of the Suspected Cargo, or order the importer to re-export the Suspected Cargo.
3. Petition Deposit and Customs Release Deposit
Once the Verification Procedures commence, the Suspected Cargo cannot clear customs and is suspended from importation until the Petitioned Chief makes a determination. The interests of the importer will therefore be prejudiced if the Verification Procedures are lengthy. To protect the importer's interests, the petitioner may be required to post a security deposit for any damage the importer could suffer (the "Petition Deposit").8
If a certain period has passed after the commencement of the Verification Procedures, the importer may file an application to stop the Verification Procedures. The importer must post a customs release deposit as security for any damage the petitioner could suffer as a result of the Suspected Cargo being imported into Japan (the "Customs Release").9
III. Special Advisors' Opinion Request System
1. System Overview
In the past, if intellectual property rights, especially patents, were being infringed, it was difficult to verify infringement because specialized and technical knowledge was often required to make a determination on infringement violations. To address these verification difficulties, the 2006 legal amendments introduced a system that allows for special advisors' opinions at the Import Suspension Petition and the Verification Procedures stages.
Under this system, if the Petitioned Chief considers it necessary10 when determining whether the petitioner's intellectual property rights are infringed,11 he or she may request persons who have an academic background in intellectual property rights and do not have any special interest in respect of either party to provide an opinion as special advisors on any matter necessary to make this determination.12
2. Involvement of the Parties in the Special Advisors' Opinion Request Process
The petitioner and the importer do not have any rights to request an opinion from special advisors, but either party can request that the Petitioned Chief initiate the special advisors' opinion request process. Additionally, either party is permitted to be involved in the process by:
- expressing its opinion on potential special advisors prior to the selection of the special advisors;
- expressing its opinion in the presence of the special advisors when the customs officers hear the opinion of the special advisors; and
- submitting its opinion on the opinion of the special advisors.
The introduction of the Special Advisors' Opinion Request System has enabled the Petitioned Chief to make substantive determinations on infringement violations even in specialized and technical areas such as patents, but the system has its drawbacks. The time required to request and receive a special advisors' opinion at the Import Suspension Petition stage can be extensive such that the cargo on which such opinion is sought might clear customs before the petition is accepted. Moreover, as discussed above, if a certain period has passed after the commencement of the Verification Procedures, the importer can file an application to stop the Verification Procedures. Despite these drawbacks, this system is important for IP Rights Holders because it allows the Petitioned Chief to effectively determine if importers have committed infringement violations. It is also valuable to importers because the Petitioned Chief can effectively examine the validity of the intellectual property rights such as patents.
3. Special Advisors' Opinions at the Import Suspension Petition Stage and the Verification Procedures Stage
At the Import Suspension Petition stage, the Petitioned Chief may request special advisors to provide an opinion on matters that are necessary to determine whether there is prima facie evidence of an infringement of the intellectual property rights of the petitioner (such as the validity of patents and an interpretation of the technical scope of the patents). At the Verification Procedures stage,13 special advisors may express an opinion on matters other than an interpretation of the technical scope of the intellectual property rights (such as the exhaustion of rights or issues concerning parallel imports).14
IV. Sample Inspection System
1. System Overview
Before the 2005 legal amendments, an import suspension petitioner was able to inspect the exterior of the Suspected Cargo during the Verification Procedures, but was not allowed to disassemble the Suspected Cargo to inspect and analyze it. This procedure was ineffective because the petitioner lacked sufficient data to form an opinion or provide any evidence during the Verification Procedures in cases where infringement was not obvious from looking at the exterior of the Suspected Cargo and it was difficult to determine whether the Suspected Cargo infringed intellectual property rights, especially patents, without a detailed investigation of the interior of the Suspected Cargo.
The 2005 revisions introduced the Sample Inspection System under which a petitioner, if it obtains approval from the Petitioned Chief,15 can disassemble, inspect, and analyze a sample of the Suspected Cargo.16
2. Involvement of the Parties in Sample Inspections
Either party is permitted to be involved in the sample inspection as follows.
- The petitioner may request a sample inspection by submitting a written request for the inspection to the Petitioned Chief. The importer may express an opinion on such request.
- If the petitioner's request for a sample inspection is approved, customs officers will be present at the inspection, and the importer may also be present if it applies.17
The advantage of using the Sample Inspection System is that petitioners are able to submit substantive opinions and evidence with regard to infringement on details that are not obvious. The disadvantage is that using this system increases the length of the Verification Procedures. Thus, the Verification Procedures could be stopped if the importer posts a deposit when it becomes possible to request a Customs Release. The petitioner, therefore, must carefully determine whether it is necessary to request a sample inspection and, if it does decide to carry out a sample inspection, it must do so promptly.
V. Revisions to the Border Control System
This newsletter has examined the import suspension of goods infringing intellectual property rights. In January 2007, the system of export suspension of goods infringing intellectual property rights was enhanced, in part by adding to cargo prohibited from exportation under the Customs Law goods infringing patent rights, utility model rights, design rights or trademark rights and goods infringing the Unfair Competition Prevention Law such as dead copies.
- Goods prohibited from importation include goods infringing patent rights, utility model rights, design rights, trademark rights, copyrights, copyright neighboring rights, circuit pattern rights, or plant breeder's rights, and goods infringing the Unfair Competition Prevention Law, such as dead copies (Article 69-11(1)(ix) and Article 69-11(1)(x) of the Customs Law). The Customs Law, instead of the Customs Tariff Law, now governs import suspensions since revisions to these laws in 2006.
- See Article 69-13 of the Customs Law. Even if an IP Rights Holder does not file an Import Suspension Petition, the head of the Customs office through which imported cargo passes that may relate to such Holder's intellectual property rights has certain obligations: if such Customs office head suspects that such cargo may infringe such intellectual property rights, he or she must commence the Verification Procedures (Article 69-12 of the Customs Law). A circuit pattern right holder is, however, not permitted to file an Import Suspension Petition.
- If, for instance, the petitioner believes its patent rights will be infringed, the petitioner must provide (1) materials showing that the infringing good falls within the technical scope of the patented invention, a court judgment or a decision for a provisional injunction with respect to the infringing good, or a written opinion regarding the infringing good by an attorney, and (2) samples and other materials describing the infringing good (Article 69-13-1(1)(c)iiA of the Basic Administrative Guidance of the Customs Law).
- See Article 69-13(2) of the Customs Law; see Article 69-13-1(2)(a) and Article 69-13-1(4)(a) of the Basic Administrative Guidance of the Customs Law. In practice, IP Rights Holders often consult with a Petitioned Chief before submitting a petition.
- See Article 69-13-1(2)(a) of the Basic Administrative Guidance of the Customs Law. In practice, the procedures take longer if the Special Advisors' Opinion Request System is used.
- The maximum term under the law is two years, but the term may be renewed.
- See Article 69-12-1(1)(d)(A) of the Basic Administrative Guidance of the Customs Law. In practice, the procedures take longer if the Special Advisors' Opinion Request System or the Japan Patent Office Commissioner's Opinion Request System is used. See footnotes 13 and 14 for a brief explanation of the Japan Patent Office Commissioner's Opinion Request System.
- See Article 69-15 of the Customs Law.
- See Article 69-20 of the Customs Law.
- Two specific examples are cases where the petitioner and the importer are in dispute (such as litigation) over the petitioner's intellectual property rights or where the Petitioned Chief believes a dispute is very likely (Article 69-13-1(2)(c) of the Basic Administrative Guidance of the Customs Law).
- The Petitioned Chief determines whether there is prima facie evidence of infringement at the Import Suspension Petition stage and whether the Suspected Cargo is an infringing good at the Verification Procedures stage.
- See Article 69-14 of the Customs Law.
- At the Verification Procedures stage, there is also a separate system that allows the Commissioner of the Japan Patent Office, if requested, to express his or her opinion on the interpretation of the technical scope of the intellectual property rights. See Article 69-17 of the Customs Law.
- See Article 69-19 of the Customs Law. If both the interpretation of a patent claim and the validity of the patent right are in question, the Japan Patent Office Commissioner will express an opinion on the interpretation of the patent claim, and special advisors will express an opinion on the validity of the patent rights.
- The Petitioned Chief will approve a sample inspection if (Article 69-16(2) and Article 69-16-2 of the Basic Administrative Guidance of the Customs Law):
(1) the sample inspection is needed in order to submit opinions or evidence;
(2) the interests of the importer are not likely to be unreasonably prejudiced;
(3) the Petitioned Chief determines that it is unlikely the sample will be used for an improper purpose; and
(4) the petitioner has the capacity and financial ability to properly transport, insure, inspect and otherwise handle the sample.
- See Article 69-16 of the Customs Law.
- See Article 69-16(6) of the Customs Law and Article 69-16-4 of the Basic Administrative Guidance of the Customs Law.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Prior results do not guarantee a similar outcome.