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Intermediary Freight Forwarder Not Liable In Counterfeit Case – Singapore Court Rules – Part I

As an IP investigator and protection specialist, I was intrigued by a recent court decision in Singapore to not hold a freight forwarder responsible at all for (albeit) unknowingly facilitating the transport of counterfeit goods.

The court did not appear to find it necessary to make a point of advising the freight forwarder to take more of an interest in “Knowing Their Customer” in the future.

I am not an attorney and will not attempt to analyze the merits of the case.

However, there are two areas I want to raise in two consecutive posts:

  • What investigative steps could plaintiffs take to gather evidence of a freight forwarder’s prior knowledge of a container’s counterfeit content, and;
  • Consider the trend to hold transport and storage intermediaries accountable even when there’s no proof they had direct knowledge of their services being used to facilitate trademark infringement

BRIEF BACKGROUND

Two shipping containers arrived in Singapore from China en route to Indonesia. Customs uncovered counterfeit luxury goods in the containers. Freight forwarders (as per procedure) are never permitted to inspect the contents of containers. (The containers are “sealed” at the point of export and the seal is not broken until received by the consignee.) In this case, Singapore customs broke the seal and discovered the luxury counterfeits.

So, there was no opportunity for the defendant to see what was in the containers. And, the bill of lading indicated the containers had “household goods.”

Here’s a quote from an article titled, Louis Vuitton, Burberry Shut Down (Again) in Case Over $1 Million in Fakes, published in The Fashion Law on January 11, 2019,

“…the brands fell short, with the court holding that “the documents given to [Megastar-freight forwarder] merely indicated household goods and other seemingly innocuous generic merchandise. There was no evidence that luxury products were included in the cargoes.”

Moreover, the Court of Appeal stated, “There was also no evidence of any intention to import trademarked products. The facts surrounding the transactions showed that the respondent was merely providing a commercial service as freight forwarders in its ordinary course of business and nothing more.”

As a result, “imposing liability for infringement of trademarks on [Megastar] in this factual situation would be against the letter and the spirit [of Singapore’s Trade Marks Act].”

The Singapore court essentially felt that since the defendant had no knowledge of the containers’ content, it could not be held liable.

If you want a complete overview of the case, read IP attorney Martin Schweiger’s article posted on his law firm’s website on January 8, 2019 titled, “The Megastar Case – Enforcing IP Rights Against Innocent Freight Forwarders In Singapore Doe Not Work.”

INVESTIGATIVE STRATEGIES TO ESTABLISH AN INTERMEDIARY’S KNOWLEDGE

So, what would it have taken to prove a hypothetical freight forwarder knew they were about to assist in transporting counterfeit goods?

It would have taken inside information. For example, it would have taken somebody inside or close to the defendant’s business operations who had an opportunity to witness/overhear conversations or had access to documents or notes that indicated the forwarder had knowledge of the counterfeits.

Best case scenario would be for somebody on the inside of a defendant’s company (informant or undercover operative) to record (video or audio) a representative of the freight forwarder making incriminating statements that prove the forwarder’s prior knowledge.

If our IP investigative team was retained by plaintiffs under similar circumstances (before trying to identify an inside informant or attempting to place an undercover operative inside) we would have started with a background investigation of the accused freight forwarder.

We would want to know:

  • How long has the freight forwarder been in business?
  • Any registered complaints against the forwarder?
  • Outcome of those complaints?
  • Have the forwarders done business with the shippers in the past?
  • If so, how often and over what period of time?
  • If not, did they take any steps to learn who the shippers were?
  • Or are they just not interested?
  • Have the shippers been involved or suspected of prior trademark infringement activities?

Of course, there are opportunities to develop information about the shippers and the consignees’, but the above is focused on trying to determine the true extent of a hypothetical freight forwarder’s intentions and knowledge.

NEXT WEEK’S POST…

In next week’s post, we will explore how transport and storage intermediaries are being required more and more to “Know Their Customer”, especially when it cannot be established they had direct knowledge their services were being used to facilitate the transport/storage of counterfeit goods.

Disclaimer: IPPIBlog.com is offered as a service to the professional IP community. While every effort has been made to check information in this blog, we provide no guarantees or warranties, express or implied, with regard to content provided in IPPIBlog.com. We disclaim any and all liability and responsibility for the qualification or accuracy of representations made by the contributors or for any disputes that may arise. It is the responsibility of the readers to independently investigate and verify the credentials of such person and the accuracy and validity of the information provided by them. This blog is provided for general information purposes only and is not intended to provide legal or other professional advice.

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Ron Alvarez is an IP Protection and Investigations specialist at XG Consultants Group, Inc., in New York City. He is a former NYPD lieutenant where he investigated robbery, narcotics, internal affairs, and fine art theft cases. Ron is a graduate of the FBI National Academy and earned a B.A. in Government and Public Administration from John Jay College of Criminal Justice in Manhattan. He has published a number of articles on various topics for PI Magazine. Ron is licensed in New York State.

2 comments on “Intermediary Freight Forwarder Not Liable In Counterfeit Case – Singapore Court Rules – Part I

  1. Great article Ron, looking forward to part two. Another way to establish knowledge is for customs to perform spot audits of the importers or brokers records. That is what we used to do When I was a US Customs/HSI agent. Sometimes you would uncover some “smoking gun” docs that helped prove your case.

    • Ron Alvarez

      Thanks for your comment, Bruce. Very interesting to hear that importer and brokers records are available to law enforcement. Those records could be invaluable in determining the true intentions of the freight forwarders and others on the supply chain. Thanks, again for that insight!

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