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Business News (more headlines) 01-31-2003

Intellectual Property: Commission Proposes Directive To Bolster The Fight Against Piracy And Counterfeiting

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The European Commission has presented a proposal for a Directive on the enforcement of intellectual property rights. The objectives of the proposal are to harmonise national laws on the means of enforcing intellectual property rights and to establish a general framework for the exchange of information between the responsible national authorities. The proposed Directive would ensure a level playing field for right holders in the EU, reinforce measures against offenders and thus act as a deterrent to those engaged in counterfeiting and piracy. The proposal will now go forward to the European Parliament and the EU's Council of Ministers for adoption under the so-called 'co-decision' procedure. The proposal complements the recent proposal for a Regulation to facilitate seizures by customs of counterfeit goods from outside the EU (see IP/03/75).

Internal Market Commissioner Frits Bolkestein said: "Pirates and counterfeiters are in effect stealing from right holders the fair payment they deserve for their work. If we don't stamp that out, the incentives for industrial innovation and cultural creativity will be weakened. That would threaten Europe's competitiveness and its cultural diversity and dynamism. So we have to get tough with the pirates and counterfeiters and make sure they can find no safe havens in the EU. The sooner we implement this proposal the better will be our defences against piracy. So I hope the European Parliament and the Council will work with us to get it adopted quickly."

What's in the Directive

The proposed Directive covers infringements of all intellectual property rights (both copyright and industrial property, such as trademarks or designs) which have been harmonised within the EU.

Since it is particularly important to act decisively against the 'big' offenders, the proposed Directive concentrates on infringements carried out for commercial purposes or which cause significant harm to right holders. At the same time as helping to combat illegal activities, this proposal is designed to foster legitimate trade and the development of the information society.

The proposed Directive is based on best practice already found in the legislation of the Member States which has proven to be most effective. The measures the proposed Directive would require all Member States to provide for include, inter alia, injunctions to halt the sale of counterfeit or pirate goods, provisional measures such as precautionary seizures of suspected offenders' bank accounts, evidence-gathering powers for judicial authorities and powers to force offenders to pay damages to right holders to compensate for lost income. It would also require Member States to ensure that all serious infringements of intellectual property rights (i.e. both intentional and for commercial purposes), as well as attempts at, participation in and instigation of such infringements, were treated as a criminal offence to which criminal sanctions, including imprisonment, may be applied.

The proposal follows a "TRIPs plus" (Trade Related Intellectual Property Rights) approach. The TRIPs Agreement, concluded by the World Trade Organisation, provides for minimum provisions on enforcement to be applied in all the EU Member States.

The proposed Directive would go beyond those minimum provisions with the following supplementary ones:
* banning machinery used to forge security devices which can make consumers think goods are authentic when they are not
* establishing the right for trade associations and collecting societies (as well as right holders directly) to initiate legal proceedings
* giving judicial authorities the power to force those selling pirated or counterfeit goods to disclose information on where the goods come from, on quantities produced delivered and ordered and on prices, as well as to identify people involved in production and distribution networks
* publication of judgements
* withdrawal, at the offender's expense, of infringing goods put on the market.

Damaging effect of counterfeiting and piracy

Ever-increasing harm is being done to business (lower investments, closure of SMEs), society (job losses, consumer safety, threat to creativity) and governments (loss of tax revenue) because of increasing counterfeiting and piracy.

According to an independent study(1) more than 17,000 legitimate jobs are lost annually through piracy and counterfeiting in the EU. In certain sectors, the problem is particularly serious: in the software industry, it is estimated that 37% of software being used in the EU is pirated and this represents revenue losses of 2.9 billion euros(2); the music industry shows a 7.5% average overall downturn in sales in the EU in 2001(3); pirated and counterfeit goods amount to 22% of sales of shoes and clothing(4).

The situation, especially for the cultural (music, films, videos CDs, DVDs) and software industries, has been exacerbated by the easy access to a global market via the internet. There is also evidence that counterfeiting and piracy are becoming more and more linked to organised crime and terrorist activities because of the high profits and, so far, the relatively low risks of discovery and punishment.

Why this action at EU level?

Currently, there are important differences in Member States' legislation concerning the enforcement of intellectual property rights. Pirates and counterfeiters have been taking advantage of these differences by carrying out illicit activities in those Member States where enforcement mechanisms tend to be applied less effectively. By bringing national legislation closer into line across the EU and by requiring Member States to put in place tougher sanctions and better remedies against infringements, the proposed Directive should reduce counterfeiting and piracy.

In order to get a clear idea of the situation in the EU, the European Commission launched a wide-ranging consultation exercise in October 1998 through its Green Paper on Combating Counterfeiting and Piracy in the Single Market. As a result of responses to the Green Paper, the Commission presented an ambitious Action Plan, on 30 November 2000 (see IP/00/1385), including the presentation of a proposedDirective for the enforcement of intellectual property rights.

Both the European Parliament (in its Resolution of May 2000) and the EU's European Economic and Social Committee (Opinion of May 2001) have given their backing to the Commission's approach.

The full text of the Commission's latest proposal can be found at:

http://www.europa.eu.int/comm/internal_market/en/intprop/news/index.htm

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