Importing Basics: Intellectual Property Rights

Commercial importing is not for the uncoordinated. It is comparable to walking and chewing gum at the same time. In addition to controlling for proper classification, valuation, duty payments and record keeping, an importer must also screen its products for other compliance issues. One of those issues is Intellectual Property Rights (IPRs).

What does Customs mean by intellectual property rights?

Copyrights, trademarks, trade names and patents are all methods companies and individuals use to protect their intellectual property. IPR owners are allowed to record their trademarks and copyrights with Customs and Border Protection, which will then screen import shipments for infringements.

What is an infringement?

The regulations define intellectual property right infringement using the following terms:

Trademark & Trade Name Infringement

• Counterfeit: A counterfeit mark is defined as a “spurious (false, non-genuine) trademark, which is identical to, or substantially indistinguishable from, a federally registered U.S. trademark” (15 U.S.C. § 1127).
• Confusingly Similar: The legal standard for determining infringement where the mark is not counterfeit is “confusingly similar.” Customs will determine whether the mark is likely to cause confusion or mistake or to deceive the average consumer. (15 U.S.C. §§ 1114, 1127).
• Gray Market (Parallel Imports): Gray market goods are genuine goods manufactured in a foreign country bearing a United States trademark and imported without the consent of the United States trademark owner.

Copyright Infringement

The determination of copyright piracy is complex. The basic test is unauthorized substantial similarity of material protected as part of the copyright. In order to establish copyright infringement, proof of copying must be established through direct evidence of copying or through circumstantial evidence. Copyright infringement is most often evidenced by unauthorized use of printed or recorded media.

Patent Infringement

U.S. Customs screens for patent infringement only when enforcing an exclusion order, generally issued by the United States International Trade Commission as a result of a patent investigation.

Severe penalties!

An import deemed to be a counterfeit is subject to immediate Customs seizure and forfeiture. Under other types of infringement the importer may be allowed to export the goods in question. These types of imports, however, may also be seized and forfeited. In addition to losing the cargo, the importer can be fined up to twice the domestic value of the genuine merchandise.

These are some of the most severe civil penalties Customs may impose. An importer is well advised to screen its products for potential violations.

How do I know my imported product involves someone’s intellectual property?

Situations triggering intellectual property right concerns include:

• Product bearing a nationally recognized brand or trademark,
• Product incorporating licensed characters,
• Product bearing a look-alike brand that is similar in style to a nationally recognized brand,
• All recorded or printed media,
• Color combinations that substantially mimic a nationally trademarked brand or trademark,
• Products bearing labels such as ©, TM, ® or “Patent Pending.”

Sometimes it is difficult to determine whether or not your product is subject to IPR restrictions.

Screening your products.

Customs has simplified the process for the trade. All IPRs that have been recorded with Customs along with exclusion orders are available in a searchable database on the Customs website. The search engine, known as the Intellectual Property Rights Search (IPRS), currently contains more than 29,000 records.

Get Permission from the IPR owner!

Simply because the IPR owner has not recorded its rights with Customs does not mean it is legal to import the product. Whenever intellectual property right infringement is a possibility, an importer should request documented proof of permission to use the protected materials. A letter from the IPR owner specifying the types of products the importer is permitted to import should be sufficient evidence.

It is a best practice to include a copy of such a letter with the commercial shipping documents and ultimately within the import record retention file.

The IPR owner must be proactive.

It is the responsibility of the IPR owner to record its copyright or trademark with Customs. Recording an IPR costs $190. Detailed instructions for recording a trademark or copyright are available at the Customs website.

License Fees or Royalty Payments?

Any payments made to any party to authorize use of an intellectual property right may be considered part of the dutiable value of the imported product. For insight into this issue refer to my previous article on the subject of transaction value.

Inspect your products!

Be on your guard! One importer purchased a toy that included a mechanical music box feature. The product specification called for the music box to play a classic lullaby, a song in the public domain. Unbeknownst to the importer, the supplier substituted a different mechanism that played a copyrighted tune.

The importer has now learned to perform pre-shipment inspections of its products.