Increasingly, counterfeits are ordered online and imported in small quantities, often under the radar of customs authorities. The Swiss legislator has recognised the need for action and intends to counteract this phenomenon by introducing a simplified procedure for the destruction of counterfeits contained in small parcels. The preliminary draft of the new federal law presented by the Swiss Federal Council is a step in the right direction, but still requires certain adjustments.

The Problem: The Increase in Capillary Imports through Online Trading (Recap)

The online trade in counterfeits is flourishing – the next counterfeit watch or the next counterfeit handbag is only a few clicks away, and this at often almost negligible unit prices and shipping costs and by the fastest means of transport. Increasingly, the counterfeits are ordered online and then imported in very small quantities (so-called capillary imports). According to the Swiss Federal Customs Administration (FCA), capillary imports from Asia to Switzerland have increased almost six-fold between 2014 and 2018 and over 90% of the goods it retains are in small consignments/parcels containing three or less items. The majority of these imports remain under the radar of the customs authorities, i.e. undetected by them, especially as they carry out their inspections on a random basis only (see OECD/EUIPO, Misuse of Small Parcels for Trade in Counterfeit Goods – Facts and Trends, Paris 2018 and our recent blog posts "Online infringements of IP rights in the EU and Switzerland" and "Defence against the Import of Counterfeits into Switzerland: What are the Pitfalls?").

This increase in capillary imports also poses major challenges for the Swiss customs authorities. The current customs procedure for the retention and destruction of suspected counterfeits is very complex and often does not meet the needs of the parties involved. The core problem is that the IP rights owners have to prepare legal proceedings before they know whether the recipient of the goods opposes the destruction (see pitfalls no. 2 and 3 mentioned in the blog post "Defence against the Import of Counterfeits into Switzerland: What are the Pitfalls?") This causes considerable administrative work, which could be largely avoided at least in those cases where the applicant/owner/proprietor (for the sake of simplicity hereinafter exclusively referred to as the importer) does not oppose the destruction of the goods. This unnecessarily ties up resources not only on the part of the FCA (which in turn are not available for inspection activities), but also in particular on the part of the IP rights owners.

The Swiss legislator has recognised this unsatisfactory legal situation and proposes corrective measures in the form of the introduction of a simplified procedure for the destruction of counterfeits contained in small parcels. On 15 January 2020, the Swiss Federal Council opened the consultation process on this bill. It will end on 30 April 2020.

The Bill

The proposal aims to introduce a simplified procedure for the destruction of small parcels suspected of infringing intellectual property rights. A similar procedure is already in place at EU level since 1 January 2014 (see the European Commission's Factsheet/Q&A "EU customs action to tackle the infringement of intellectual property rights" of 27 October 2015).

The provisions which already exist in the individual intellectual property laws on the assistance to be provided by the FCA, are to be supplemented accordingly – the new federal law should provide for standardisation in the form of a consolidating decree. In the future, it should be possible for IP rights owners to request from the FCA in their application for assistance the destruction of retained small parcels in the simplified procedure (see also the blog post "Defence against the Import of Counterfeits into Switzerland: What are the Pitfalls?"). According to the bill, the definition of a small parcel will be left to the Swiss Federal Council, i.e. should not be regulated in a formal act. Thereby, the Swiss legislator intends to ensure that the definition can be adapted more easily to reflect future developments and experiences.

The procedure is to be simplified to the extent that the FCA should inform the IP rights owner (applicant) under this simplified procedure about the retention of counterfeits only if the importer has expressly opposed the destruction of the goods in question.

If the importer does not expressly oppose the destruction or does not comment on it within ten working days of receipt of the notification, the bill provides for a destruction of the goods by the FCA without further correspondence.

According to the bill, the IP rights owner should only be informed retrospectively, in quarterly collective notifications and in a general manner – about the quantity and type of goods destroyed by the FCA under the simplified procedure. The legislator envisages that this will considerably reduce the FCA's administrative burden. Also, this should lead to a reduction of the IP rights owners' burden as they would only have to take action if it was clear that the importer opposed the destruction.

The legal status of the importers is not to be changed: They should still be able to oppose the destruction of the retained goods and ask for judicial review.

Comparison of Ordinary Procedure / Simplified Procedure

According to the planned bill, the ordinary procedure and the simplified procedure for the destruction of counterfeits can be compared as follows: