Pirates, ports and pistols - the SMITH & WESSON fakes in Brazil
Denis Allan Daniel *
To combat the influx of pirated goods into Brazil is not an easy task. The Brazilian territory covers eight and a half million square kilometers and shares borders with ten countries in South America. Customs authorities are therefore faced with the natural difficulties of policing such a massive area, and for the most part, lack adequate resources for the task, with the added concern that oftentimes they are dealing with the rights of foreign citizens and countries.
Because of manpower shortages and the vast area to be covered, Brazilian customs officials employ a system of random inspections, paying special attention to merchandise coming from the big Asian exporters such as China, Taiwan and Korea, which have a history of manufacturing and exporting counterfeit goods to Brazil. This is the account of an operation, resulting in the seizure and destruction of over 100,000 plastic replicas of SMITH & WESSON pistols, as seen below, that could have been destined for the streets of Brazil or of other Latin Countries:
This seizure came about as a result of one such inspection. The customs authorities in the Brazilian port of Paranaguá, which harbours a Paraguayan free-zone, were making one such routine sampling inspection of the goods which had been transported to Brazil aboard the Izumu, a freighter inbound from the Port of Sekou, Province of Guangdong, southern China in August of last year, when they came across 367 boxes of replica plastic SMITH & WESSON pistols, with 288 pistols in each box, as illustrated:
The toy pistols, with their genuine looking appearance, to the point of coming complete with a loading mechanism and ejectable clips for bullets, would likely end up in the hands of Brazilian criminals, not the playful hands of innocent Paraguayan children. A customs Inspector at the Paranaguá port initially seized the pistols because it is illegal to import firearms or lifelike replicas of firearms into Brazil. However, the Inspector did not feel that she had strong enough grounds to detain goods in a Paraguayan free zone, relying solely on the illegality of importing the goods into Brazil.
Recalling recent Brazilian press reports on the seizure of pirated goods based on infringed trademarks, the Inspector was encouraged to consider alternative action. She suspected that the Brazilian Trademark Law might be able to give the additional support she needed to detain these goods, in a Paraguayan free-zone area, and whose destination was, ostensibly, Paraguay. The Inspector therefore decided to search the PTO’s on-line database for the name “Smith & Wesson” which disclosed the existence of the registered trademark SMITH & WESSON for firearms. The search also disclosed the name of the Brazilian attorney representing the registrant, Smith & Wesson Corp. She called the Brazilian attorney who then contacted his client in the US, which in turn authorized a meeting between the attorney and the Inspector. At the meeting the Inspector emphasized that if no written complaint was filed on an urgent basis, the merchandise would soon be on its way to Paraguay, and shortly thereafter very likely smuggled back over the border into Brazil.
A petition was rapidly prepared by the attorney and presented to the customs authorities, confirming that the pistols had been produced without Smith & Wesson Corp.’s authorization. At the same time, the Paraguayan importer of the pistols was pressuring customs to release the products. One of the strongest arguments used by the importer was that the trademark SMITH & WESSON is registered in Brazil, but not in Paraguay the final destination of the pistols. As both Brazil and Paraguay are signatories to the Paris Convention, through which Customs Authorities have the power to seize falsified goods, the attorney’s petition contained provisions of the Convention that state that: “All goods unlawfully bearing a trademark or trade name shall be seized on importation into those countries of the Union where such mark or trade name is entitled to legal protection and that seizure shall likewise be effected in the country where the unlawful affixation occurred or in the country into which the goods were imported.”
The petition also confirmed that SMITH & WESSON is a registered trademark in Brazil and is an internationally well-known mark, thus deserving special protection. Relevant provisions of the current Brazilian Trademark Law were also cited, particularly those that declare that it is a crime to reproduce a registered trademark without authorization and that goods are to be seized by customs authorities or at the request of an interested party whenever they are identified by counterfeit marks.
These provisions, combined with the fact that both countries are also signatories of TRIPS, under the aegis of the World Trade Organization, gave the customs authorities the grounds they needed to definitively seize the pistols. The official file of the proceedings indicate the name of the importer, located in Paraguay, as being Mei Fu Trading Limited Company S.R.L., and Chenghai Huada Plastics Co. Ltd., located in China, as being the manufacturer of the pistols. Since no formal objections were filed against the seizure of the goods, the customs authorities decided they were in a position to go ahead and destroy the pistols. The destruction could have been carried out locally on the premises of the customs authorities, or in Foz do Iguaçu, a city many miles from Paranaguá, where authorities have a machine for destroying pirated CDs. Shipping the goods to Fox do Iguaçu would have cost approximately U$ 5,000.00, including the hire of containers, trucks and staff to transport and destroy the material. Because the customs authorities in the Port of Paranaguá do not have any facilities for destroying pirated or falsified goods, they rely on the goodwill of the local Department of Public Works. This goodwill consists of sending several very large tractors to roll back and forth over goods laid out on the asphalt of the patio of the customs buildings. Very soon, tractors were trundling over the 105,696 plastic replicas of SMITH & WESSON pistols. The broken plastic and metal springs that are pictured below were donated to a local children’s home, which would then sell them for scrap:
The current Brazilian Customs Regulation, which is dated 26 December 2002, includes provisions relating to counterfeit trademarks in what appears to be an attempt to adapt to TRIPS and its “Special Requirements Related to Border Measures”. Although the Regulation provides that the seizure of goods can take place at the request of the owner of the infringed trademark or ex-officio, the seized goods can only be finally apprehended and disposed of as the result of a judicial order. The need for this legal formality appears to stem from the fact that the Regulation has interpreted the words “competent authorities”, appearing in TRIPS, as being “judicial authority” and therefore the need to institute court proceedings for a court order.
Since the Regulation provides that, following the seizure of the goods the customs authorities shall notify the trademark owner, who will then have a term of ten days, renewable for another ten days, to initiate legal proceedings for the judicial approval and seizure of the goods, this will surely complicate and delay effective action by customs.
In the case of the SMITH & WESSON fake pistols, this legal formality prior to actual destruction of the pistols was not considered necessary because of the prohibition to import toy guns. Furthermore, the fact that the pistols were identified by a registered trademark in Brazil that was being used without authorization from its legal owner convinced the Inspector that there were sufficient grounds for the pistols to be seized and destroyed.
Finally, this case shows that the seizure that took place in Brazil is part of a coordinated global effort on the part of Smith & Wesson, through its attorneys, to aggressively identify and prosecute infringers.
From the moment the Inspector had the idea of contacting the trademark attorney representing Smith & Wesson Corp. in Brazil to the destruction of the pistols, action was swift and efficient. What made the situation unusual was the tripartite cooperation between the customs Inspector, trademark attorney and Public Works officials. This, and the use of both creativity and common sense, led to an expedited and legally correct outcome. Hopefully, events like this will increase cooperation between authorities and law firms, as well as between the public and private spheres, in a common effort to combat piracy and crime. The practical result of the fake SMITH & WESSON imports shows that local customs authorities are in a position to seize and destroy illicit products that infringe trademark rights. The steps that the Inspector was obliged to take in the present case do nevertheless highlight inadequacies in the Brazilian border control system which require urgent improvement to enable authorities to act in a manner that will ultimately benefit society, consumers and trademark owners alike. Customs regulations that are presently in force do not seem to be completely satisfactory so as to allow border authorities to be more proactive in stopping counterfeits from entering the country. For instance, at this time there is no prior official registration procedure that would allow trademark owners to register with the authorities. Furthermore, directives should be more detailed and specific and include a list of exactly what is required to be filed with the request for seizure at customs. This could be coupled with interaction with the on-line data-base of the Patent and Trademark Office. It would also seem necessary to amend the existing Regulation to delete the general requirement to institute court proceedings for final approval and seizure of merchandise. This would further contribute to render the system more efficient.
* Senior Partner in the firm of Daniel Advogados