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right holders did not affect the state of the goods, nor was there any obligation
to take right holders' comments into account, thus it was irrelevant to the
question whether the measures at issue provide for 'simple removal of the
trademark unlawfully affixed'. 109
7.206
China argued that auctions of goods confiscated by customs were subject to a
reserve price that ensures that infringers do not have the opportunity to
purchase the seized goods at an unreasonably low cost and reaffix counterfeit
marks. This argument was rejected by the Panel as it remained economically
viable for the importer or a third party to purchase the goods at auction and
reaffix the trade marks in order to infringe again.
7.207
Considering all of the foregoing issues the Panel concluded that, in regard to
counterfeit trade mark goods, China's customs measures provided that the
simple removal of the trade mark unlawfully affixed was sufficient to permit
release of the goods into the channels of commerce. 110
7.208
The final issue to be considered was what was meant by the words 'other than in
exceptional cases'. This has the reverse emphasis of Art 17(1)(b) of the Customs
Regulation, where trade mark removal is the exceptional case. The Panel
considered that the phrase must be interpreted in light of the objective of Art 46
of TRIPS, namely, 'to create an effective deterrent to infringement'. 111 Among
the cases suggested by the Panel in which the simple removal of the trade mark
prior to release of the goods into the channels of commerce would not lead to
further infringement was where an innocent importer who has been deceived
into buying a shipment of counterfeit goods has no means of recourse against
the exporter and has no means of reaffixing counterfeit trade marks to the
goods. 112 However, it acknowledged that such cases must be narrowly circum-
scribed in order to satisfy the description of 'exceptional' and that even when
narrowly circumscribed, application of the relevant provision must be rare, 'lest
the so-called exception become the rule, or at least ordinary'. 113
7.209
The Panel did not consider that 'exceptional cases' for the purposes of the fourth
sentence of Art 46 could simply be demonstrated by a low rate of cases in which
simple removal of the trade mark is treated as sufficient to permit release of
goods into the channels of commerce, or in terms of a proportion of all cases of
109
Ibid, para 7.380.
110
Ibid, at para 7.385.
111
Ibid, at para 7.391.
112
Ibid.
113
Ibid.
 
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