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New Risks (Trade Marks and Cyber)

Jagan - December 28, 2017 - 0 comments

  1. The Singapore High Court recently ruled against the Owners of various trademarks that a Singapore freight forwarder involved in the transshipment of Containers (for movement to Indonesia), although listed in the Seaway Bills as the consignee, was not the importer of the goods and therefore not liable for the infringement of Trade Marks (Louis Vuitton MalletiervMegastar Shipping Pte Ltd (PT Alvenindo Sukses Ekspress, third party) and other suits [2017] SGHC 305). While this decision does settle the position in Singapore (unless it is challenged in the Court of Appeal), it is possible that owners of various Trade Marks may consider similar actions in other jurisdictions.
  2. Similar transhipment processes (as those conducted by the Freight Forwarder) are conducted at various ports by agents / offices of various Transport Operators (“TO” and which includes Container Operators / NVOCC’s/ Freight Forwarders). If the shipments were effected using third party vessels (slots of 3rd party vessel operators), the TO would generally be listed as the consignee in the Seaway bills issued for the carriage of containers by the vessel operators. Unless the TO were involved in packing and loading the cargo, they would be unaware of the actual cargo. As the recent case highlights, there will always be a risk for pursuit by owners of Trade Marks on the basis that the TO are listed as the consignee in the seaway bill issued or are participating in the trade of spurious goods. This article considers the possible risk management processes together with the insurance covers available to deal with such risks.
  3. We had considered some aspects of these risks in our earlier articles as listed below:
    1. Standard Trading Conditions and their importance to Transport Operators.
    2. Should Agents act as “ad hoc” Delivery Agent for others?
      While the above article was focused on the risks for Delivery Agents, they also hold true for TO’s acting as Transhipment agents for third parties.
  4. If a claim is initiated against the TO, they would first have to defend the claim and for which costs would be incurred. In the recent Singapore case, the freight forwarder would have incurred substantial sums in defending the claim (as a guess estimate, we believe that the final costs incurred by the successful forwarder would be at least a five-figure amount in Singapore Dollars). A TO with limited means may not be able to fund their defence such that a claim as this may challenge their very existence. This being the case, a TO must consider risk management measures to deal with such risks and which includes the following:
    1. Background search / Know Your Customer: A TO would be entitled to pursue Shipper’s for

      1. their failure to declare the cargo properly, or
      2. for dealing with unlawful cargo and which would include spurious goods, and/or
      3. a contractual right of indemnity if provided under their terms of engagement. Parties who participate in such spurious shipments generally cover their tracks such that following an incident, they are either difficult to track or even if trackable, may have no means to satisfy any such claims. A background search, while not a panacea, would help the TO in better understanding their underlying parties together with the risks i.e. a background search would not limit all risks but certainly would reduce/minimise the exposure.
    2. Insurance Cover: As mentioned above, there will always be a residual risk and therefore TO’s should consider an appropriate cover to deal with such risks. TO policies are generally “named perils policies”. In order to seek an indemnity under the policy, the loss must fall under one of the named perils listed in the policy and with there being no specific exclusions over-riding the positive cover (both policy and statutory exclusions). We have reviewed the various covers available to a TO  and would comment as follows:
        1. Freight Forwarder & NVOCC: The insurance cover available to Freight Forwarder & NVOCC’s are similar in nature. Our review of various wordings reveal that the risks / operative clause is very restrictive such that claims for infringement of trademarks will not fall for coverage (in order to found a claim there must be a physical loss / damage of third party property. Infringement, on the other hand, is a violation of a right and which may occur without any physical loss / damage of the cargo / property). Additionally, some policies absolutely exclude such claims (“any infringement of copyright, patent, service mark or trade name”).
        2. Professional Indemnity cover for Agents: TO’s involved primarily in agency work may be covered under a Professional Indemnity cover for their various roles. We have reviewed the cover of various insurers and understand that some of them provide positive cover for such risks (“Intellectual Property Rights: Unintentional infringement of intellectual property rights, trademark, service mark, copyright, breach of confidence, breach of privacy, passing off, patent or registered design, committed in good faith by You”).
        3. Charterers & Owners Cover: A Transport Operator may be acting as Owners or Charterers of the vessel and for which they would be covering their risks under their P&I Policy. We have reviewed some of the wordings available in the market and note that positive cover is available for such risks (“Liability to pay damages or compensation for or in relation to any loss of or damage to any property (including infringement of rights in connection with that property)…” & “Liability to pay damages or compensation for any loss of or damage to any property (including infringement of rights) …”).

      It is submitted that some TO’s (Freight Forwarder/NVOCC’s) would be without cover for such risks (claims for infringement of rights) and therefore they should consider seeking cover to avoid such exposures.

  5. Cyber risks: Technological developments not only bring ease in doing business but also are a breeding ground for new forms of disruptions. The recent widely reported cyber-attack against Maersk Line is an example of such risks. We believe that other TO’s have also been affected by such cyber-attacks but as these were not widely publicised, it has not caught the attention. Following the Maersk cyber-attack, Insurers are considering cover for cyber related risks to TO’s. The point we are trying to make is that while the industry is generally reactive, as and when necessary, they are able to develop and provide a cover when there is a need. 
  6. Conclusion:
    1. A TO must be aware of the risks involved in their business. Conducting a risk management survey of their business would identify most of the problem areas.
    2. A background search / KYC would certainly assist in reducing such risks.
    3. Any residual risk should be managed and where necessary, insured.


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