Rights Holders not Liable for Customs Storage of Criminally Seized Counterfeits
A final Turkish judgment has held that a trademark owner cannot be charged for the storage of counterfeit goods after those goods have been seized in criminal proceedings.
Background
The case concerned 264,740 units of counterfeit Colgate toothpaste, weighing approximately 27.7 tonnes.
Following the temporary detention of the goods at customs, a criminal complaint was filed on behalf of Colgate-Palmolive Company. The Criminal Court ordered their seizure, and the destruction procedure was subsequently initiated within the criminal proceedings.
The products remained in the Customs Directorate’s warehouse from 2020 to 2023. The Customs Directorate subsequently assessed a substantial amount in storage fees against Colgate-Palmolive Company and issued a payment order for their recovery.
Case summary
After the administrative objection was rejected, separate proceedings were initiated against the storage-fee assessment and the related payment order.
The litigation initially raised questions concerning jurisdiction and whether the two actions should be heard together. After the tax and administrative courts issued decisions declining jurisdiction, the dispute was referred to the Regional Administrative Court. It ultimately confirmed that the administrative courts had jurisdiction and that the two actions could proceed separately.
The Gaziantep 3rd Administrative Court subsequently annulled the Customs Directorate’s storage-fee assessment.
The court emphasised that Colgate-Palmolive Company was neither the owner nor the importer of the counterfeit products. It was the trademark owner whose IP rights had been infringed and, consequently, the victim of the underlying offence. The costs arising from the custody of the counterfeit goods could not therefore be imposed on the party harmed by the infringement.
The court also considered such an outcome incompatible with the principle of personal criminal responsibility, as it would transfer the financial consequences of the infringer’s conduct to the victim.
The Ministry of Trade appealed, relying principally on Article 109 of the Turkish Customs Regulation. This provides that goods detained on suspicion of infringing intellectual property rights are stored under customs supervision at the rights holder’s risk and expense. The Ministry further argued that the criminal proceedings against the owner of the counterfeit goods and the administrative procedure under customs legislation were legally distinct.
The 4th Chamber of the Gaziantep Regional Administrative Court rejected those arguments. In a unanimous judgment, it upheld the first-instance decision and dismissed the Ministry’s appeal. No further appeal is available, and the judgment is final.
Implications for rights holders
Although Article 109 plays an important role in Türkiye’s border-enforcement regime, the judgment confirms that its application depends on the legal basis for the goods’ continued custody.
The critical distinction is between custody resulting from a preliminary injunction obtained by the rights holder in civil proceedings and custody resulting from a seizure order issued in criminal proceedings.
In the former case, the continued storage of the goods results from a measure sought by the rights holder to protect its rights, which may justify requiring it to bear the associated costs under Article 109. In the latter, the seized goods become offence-related property and are held within the criminal proceedings for evidentiary purposes and, ultimately, confiscation and destruction. Their storage therefore results from their status under criminal law, rather than from a civil measure obtained by the rights holder.
The judgment does not render Article 109 inapplicable to all storage costs arising in IP matters. Its conclusion is narrower: Article 109 cannot be relied upon to charge a trademark owner for the continued storage of counterfeit goods after they have been seized under a criminal court order.
Practical significance
The judgment removes a serious potential disincentive to effective border enforcement. Customs and criminal enforcement mechanisms depend heavily on trademark owners’ cooperation in identifying suspected counterfeits, filing complaints and providing evidence.
Charging those same rights holders substantial storage fees would effectively penalise them for pursuing criminal enforcement. It could also discourage enforcement in cases involving large consignments or proceedings likely to continue for several years.
The judgment provides a strong basis for challenging similar assessments, although each case will continue to depend on its particular facts and procedural history.
Legislative clarification of Article 109 would nevertheless be welcome. Its current wording does not expressly distinguish between custody resulting from a civil measure obtained by the rights holder and custody of offence-related property under a seizure order issued in criminal proceedings, leaving room for inconsistent administrative practices.
Until such clarification is introduced, the final Colgate judgment provides important judicial guidance: a trademark owner remains the victim of the offence and should not be treated as the debtor for the state’s continued custody of the infringer’s goods.