By Rachel Armstrong
Tuesday 20th of December 2016.

Background on Special 301 Report

The Special 301 Report is a report released annually by the Office of the United States Trade Representative (the “USTR”) which sets out a review of intellectual property protection globally and identifies countries, which do not, in its view, provide adequate and effective protection of intellectual property rights (“IPR”). The 2016 Special 301 Report was issued in April 2016.

In February 2016, the International Anti-Counterfeiting Coalition (the “IACC”) submitted its comments to the USTR as part of the preparation of the 2016 Special 301 Report which include several interesting observations on both Saudi Arabia and the United Arab Emirates. We consider these observations to be of particular note, especially given that the United Arab Emirates and Saudi Arabia have both been left off the 2016 Watch Lists.

In this article, we consider the IACC’s observations, the provisions of the GCC Trade Mark Law, which address a number of the issues raised by the IACC and an overview of MENA countries that have been included in the 2016 Special 301 Report.

IACC’s observations – Saudi Arabia

Whilst the IACC makes no recommendation for or against the inclusion of Saudi Arabia on the Special 301 Watch List, the IACC has stated that it will continue to monitor Saudi Arabia throughout 2016 due to increased concerns of brand owners in regard to border control measures, non-deterrent sentencing and insufficient IPR enforcement.

Counterfeit goods are known to enter Saudi Arabia through a number of methods, including directly through its own ports and also through the Jebel Ali port in Dubai where the goods are then transported overland to Saudi Arabia. It is reported that Saudi Customs officials are reluctant to inspect and seize products and, when such seizures do take place, the actions taken are not sufficient to tackle the scale of the issue. It has also been noted that there is a lack of a centralised process in Saudi Arabia for enforcement of intellectual property offences and the co-ordination between the different agencies can be lacking.

IACC’s observations – United Arab Emirates

In comparison to Saudi Arabia, the United Arab Emirates fares worse; the IACC recommends that it is included in the Special 301 Watch List for the fourth consecutive year. This is due to its view that brand owners continue to be concerned in regard to the protection and enforcement of intellectual property rights in the United Arab Emirates. The Special 301 Report does not include the United Arab Emirates on its Watch list but there are several observations on the United Arab Emirates throughout the report, including as a transit hub for counterfeit goods.

This links to the IACC’s particular issue which appears to be with the UAE Customs authorities who are reported to be conducting less formal seizures of counterfeit goods and when such seizures are made, the Customs officials inform the shipper of the goods which regularly results in the shipper abandoning the goods. Once abandoned, it then falls on the brand owner to arrange for the destruction of the goods and to cover the associated costs.

In addition, a main concern for brand owners is the practice of re-exporting counterfeit goods to the country of origin without any communication or further information provided to the brand owner. This usually results in the brand owner losing track of the counterfeit goods as it is provided with no information on which to conduct investigation into the source and supply of the counterfeit goods.

However, it is also worth noting that the IACC states that brand owners have reported positive interactions with the Ministry of Economy and police authorities. The IACC therefore promotes the improved communication and co-ordination between the enforcement authorities to increase the sophistication of the investigative and enforcement authorities in the United Arab Emirates.

GCC Trade Mark Law – enforcement provisions

The findings reported by the IACC are generally consistent with the feedback we receive from clients who instruct us on the protection and enforcement of their IPR throughout the MENA region. However, we should stress that in our experience, the relevant enforcement authorities in the United Arab Emirates are pro-active and can be co-ordinated to work together on large scale seizures of counterfeit products. The ongoing efforts of the United Arab Emirates enforcement authorities has been demonstrated by a large number of significant seizures in 2015.

We expect to see brand owner’s confidence continuing to grow with the introduction of the GCC Trade Mark Law as it addresses a number of issues raised by the IACC and imposes harsher penalties on those prosecuted for intellectual property infringement. The most notable key enforcement provisions of the GCC Trade Mark Law are set out below.

Customs

There are three main provisions particularly worth highlighting in the GCC Trade Mark Law in relation to the customs procedure:

  1. Article 38 (4) provides for the Customs officials to take pro-active action to suspend the clearance of suspected counterfeit or infringing goods, without the need for the brand owner to have previously submitted an application. Following seizure, the officials are required to notify the importer and the owner of the trade mark. An interesting development is that the Customs officials are also required, if requested by the brand owner, to provide the names and addresses of the sender, importer of the suspect goods as well as the name of the entity that dispatched the goods and the quantities. This additional information may well assist brand owners with its investigations into supply routes of the suspect goods.
  1. In accordance with Article 38 (6), following notification of a seizure by Customs, the brand owner can file an action with the Court (within 10 days of receipt of the seizure notification) and if the Court issues a judgment that the goods are either counterfeit or infringing in a way that that creates consumer confusion, the Court will issue a judgment for either (1) the destruction of the goods at the importer’s expense; or (2) if the destruction may cause damage to public health or the environment, for the goods to be removed from commercial channels.
  2. In any event, Article 38 (6)(2) specifically prohibits the re-exportation of the suspect goods which, as set out above, is one of the key concerns for brand owners, especially in the United Arab Emirates.

Penalties

Depending on the seriousness and type of offence committed, Article 42 sets the penalties that will apply for contravention of the provision of the GCC Trade Mark Law.

The harshest penalties will apply to those found guilty of (i) falsifying a registered trade mark; (i) imitating it in such a way that the mark misleads the pubic; (iii) using the false or imitated mark with malicious intent; or (iv) use with malicious intent in the provisions of its services a trade mark owned by another party. In such cases, the following penalties will apply:

  • imprisonment of between one month and three years; and
  • a fine of between 5,000 Saudi Riyals (c. USD 1,335) and 1,000,000 Saudi Riyals (c. USD 266,675).

Less severe penalties will apply to those found guilty of offences such as, knowingly selling and offering for sale goods bearing a false or imitated trade mark and for those who possess any materials or tools for the purposes of using them to create a false or imitated trade mark. In such cases, the penalties will be:

  • imprisonment of between one month and one year; and
  • a fine of between 1,000 Saudi Riyals (c. USD 266) and 100,000 Saudi Riyals (c. USD 26,670).

MENA countries on the Special 301 Report Watch List 2016

The Special 301 Report sets out two lists, the Priority Watch List and the Watch List.

Priority Watch List

In 2016, both Algeria and Kuwait are listed on the Priority Watch List. In regard to Algeria, it is commended on acceding to the Madrid Protocol in 2015 and its efforts to promote awareness of the importance of IPR in Algeria. However, there remains concern particularly in the area of IPR enforcement including the enforcement of existing anti-piracy statues, combatting the use of unlicensed software, and the provision of judicial remedies for patent infringement. The main concern with Kuwait appears to be its failure to introduce a copyright law consistent with international standards and that it is not effectively enforcing copyright and trade mark rights. On the trade mark side, we expect to see improvements in Kuwait following its implementation of the GCC Trade Mark Law in 2016.

Watch List

Pakistan is an example of a country that has been moved from the Priority Watch List in 2015 to the Watch List in 2016. This is in recognition of its efforts to implement key provision of the Intellectual Property Organisation of Pakistan Act of 2012. In addition, Pakistan is committed to a transparent process for amending IPR legislation and revisions on its copyright, trade mark and patent laws were expected at the end of 2016. Despite its efforts, Pakistan remains on the Watch List due to the rates of counterfeiting and piracy in Pakistan remaining high.

Due to a concern with a failure to combat usage of pirated and counterfeit goods, Egypt remains on the 2016 Watch List. Egypt is recognised as having taken steps to improve the enforcement of IPR but this remains an issue.

Despite remaining on the Watch List, the position taken on Lebanon is encouraging, and includes recognition of Lebanon’s administrative and enforcement capacity for IPR protection. Further progress is required on IPR legislative reforms and amendments to the copyright and patent laws to bring these into line with international standards.

Concluding remarks

It is clear from the IACC recommendations and the observations made in the 2016 Special 301 report that further work is required to grow the confidence of brand owners as to the effectiveness of the enforcement authorities in many countries throughout the MENA region. However, the GCC Trade Mark Law is a clear step forward in terms of the protection and enforcement of IPR across the GCC and should specifically improve the issues highlighted in Kuwait, the United Arab Emirates and Saudi Arabia. Although it will take some time for the law to be implemented across the region and for its provisions to be tested, this is a positive step forward by the GCC countries and should give both brand owners, the IACC and the USTR confidence that its concerns are being addressed.