I. Purpose of Guide
As the EC Green Paper, Combating
Counterfeiting and Piracy in the Single Market (1998) observed
"Since the early 1980s counterfeiting and piracy have grown considerably to a
point where they have now become a widespread phenomenon with a global impact."
There are many reasons for this phenomenon. They include developments in
reprographic technologies, where digitisation has facilitated the rapid and
extensive production of copies at a minimal cost, the growth in world demand
for branded items, as well as economic and political developments, such as the
growth of international trade, the internationalisation of the economy, the
expansion of means of communication and the opportunism of organised crime
following the collapse of the political systems in central and eastern Europe
and in the former Soviet Union.
On 22nd July 2003 the
European Parliament adopted a customs-related action against goods suspected of
infringing certain intellectual property rights and the measures to be taken
against goods found to have infringed such rights
1, and on 29th April 2004 a Directive
on
the enforcement of intellectual property rights2. These provisions are modelled
primarily on the enforcement of IPR and border control provisions of Part III
of the WTO Agreement on Trade Related Aspects of Intellectual Property Rights
(TRIPS). Compliance with these provisions is obligatory for WTO members. This
border control legislation provides a range of enforcement remedies for rights
holders. The purpose of this guide is to indicate the ways in which these
remedies might be deployed. It is also intended to assist public authorities in
Member and Applicant States in their efforts to comply with their various
enforcement obligations.
II. Piracy and Counterfeiting
The principal cause of piracy and counterfeiting is the incentive
for unscrupulous traders of the considerable business profits that may be made
by free-riding on the creative efforts and investment of others by passing off
imitations of desired products at a lower cost than those which are incurred by
the producer of genuine products. Obviously this trade would not exist without
consumer demand and the public perception that piracy and counterfeiting are
innocuous infractions. The theft of intellectual property is not yet equated in
the public mind with other offences against property such as fraud, theft or
trespass. This is exacerbated by (i) a failure of the public authorities and
commercial organisations to the consuming public aware of the dangers resulting
from the use of unauthorised products and of the deleterious social welfare
effects of this trade; and (ii) the imposition of inadequately deterrent
penalties by judicial authorities.
It appears there are two channels for counterfeiting and piracy:
clandestine channels and normal commercial channels. The clandestine channels
are, by definition, organised outside the regular market (black market), i.e.
in the street, in markets, by correspondence or via the Internet. There are
also normal commercial channels, where genuine products are sold alongside
counterfeits. An area in which this bifurcated trade occurs, is the so called
"grey goods" market in which legitimate branded products are sold as parallel
imports. Since parallel products are obtained outside legitimate distribution
channels, this trade lends itself to the introduction of counterfeit products.
The EC Green Paper refers to the report of the Counterfeiting
Intelligence Bureau set up by the International Chamber of Commerce (ICC) that
estimates counterfeiting at between 5% and 7% of world trade in terms of
value
3. The immediate
impact of this global trade is the loss of sales and the consequent impact on
employment. The US copyright industry puts its losses due to piracy at between
USD 12 billion and USD 15 billion a year. According to the International
Federation of the Phonographic Industry (IFPI) sales of illegal CDs account for
14% of the relevant market at the world level. In May 2003, the UK music
industry reported that sales of pirated CDs have outstripped the sales of
genuine products. The major industries suffering from the trade in infringed
products are: the computer software industry (46%), the data processing
industry (35%), the audio-visual industry (25%), the toy industry (12%), the
perfume industry (10%), the pharmaceutical industry (6%), and the clock and
watch industry (5%).
The number of jobs lost as a result of counterfeiting is estimated
at 100,000 a year for the Community (120,000 for the United States) over the
past ten years. In addition to the loss of revenue by the State (customs
duties, VAT), there may also be infringements of labour legislation where the
counterfeit or pirated goods are made in sweatshops by undeclared workers. The
phenomenon is a serious threat to economies in general as it may destabilise
the markets, including such fragile markets as textiles and clothing.
In addition to their economic impact, counterfeiting and piracy have
a damaging effect on public health and safety products such as medicinal
products, medical equipment, toys, and spare parts for cars and aeroplanes.
Counterfeiting is also common in sectors involving products that are highly
sensitive from the point of view of public health and safety.
Counterfeiting and piracy also have damaging consequences for
consumers. They generally involve deliberately deceiving the consumer about the
quality he is entitled to expect from a product tjat bears a well-known trade
mark. When he buys counterfeit or pirated goods outside of legitimate channels,
the consumer does not, as a rule, receive any after-sales service or enjoy any
effective recourse in the event of damage or injury.
Counterfeiting and piracy also have an adverse effect on public
security when profits from this trade are appropriated by organised crime,
which uses them as a means of recycling and laundering the proceeds of other
unlawful activities (arms, drugs, etc.).
As the EC Green Paper points out, counterfeiting and piracy are
detrimental to the proper functioning of the Single Market. They give rise to
deflections of trade and distortions of competition, especially when they
exploit national disparities, producing a loss of business confidence and a
consequential under-investment in research and development in innovation and
creativity, as well as in trade promotion. This has a direct impact on the
number of jobs offered by firms.
III. EU Initiatives
With a view to establishing the Single Market, the European
Community has taken action in the intellectual property field mainly to
harmonise existing national laws
4. The Community has also taken action to create
unitary rights at the Community level, valid throughout the EC, such as the
Community trade mark
5,
the Community system of protection for plant varieties
6 and Community
designs
7. Furthermore,
work on the creation of a Community patent still continues
8.
Initially, community initiatives on regulating enforcement against
counterfeit and pirated goods, concentrated on protecting external frontiers.
On 22nd December 1994, the Council
adopted Regulation (EC) No. 3295/94 establishing measures to prohibit the
release for free circulation, export, re-export or entry for a suspensive
procedure of counterfeit and pirated goods
9. Within the Single Market, the enforcement of
intellectual property rights has tended to be limited and to apply to specific
sectors. For example, the Directive on the harmonisation of certain aspects of
copyright and related rights in the Information Society, contains provisions on
obligations relating to technical measures and on sanctions and remedies. In
this proposal, the provisions on sanctions and remedies are couched in very
general terms.
On 15th October 1998, the
Commission presented a Green Paper
10 on the fight against counterfeiting and piracy in
the Single Market in order to launch a debate on this subject with all
interested parties. The areas of intervention suggested in the Green Paper
related in particular to action by the private sector, the effectiveness of
technical security provisions, penalties and other means of ensuring compliance
with intellectual property rights, as well as administrative co-operation
between national authorities. Following the receipt of submissions, a public
hearing in Munich on 2nd and
3rd March 1999 and a meeting of
experts from the Member States on 3rd
November 1999, the European Parliament adopted a Resolution on this subject on
4th May 2000
11. On 30th November 2000, the Commission presented a
follow-up Communication to the Green Paper in which it indicated that it would
be presenting a proposal for a Directive aimed at harmonising the legislative,
regulatory and administrative provisions of the Member States on the means of
enforcing intellectual property rights, and at ensuring that the rights
available enjoy an equivalent level of protection in the Internal
Market
12. The proposal
for a Directive on the enforcement of intellectual property rights, was
generally welcomed by interested circles and was approved by the European
Economic and Social Committee
13. A proposal for a Directive on measures and
procedures to ensure the enforcement of intellectual property rights was issued
on 30th January 2003
14. Finally, the Directive on the
enforcement of intellectual property rights was adopted on 29th April 2004. At present, the Commission has
adopted a new proposal for a Directive on criminal measures
15 aimed at ensuring the
enforcement of intellectual property rights
16 after the ECJ has established that such measures
can be adopted in a Community Law instrument .
IV. Infringing products and the free movement of goods
Article 3(1)(c) of the EC Treaty states that the activities of the
Community include an internal market characterised by the abolition, between
Member States, of obstacles to the free movement of goods and services. In
addition, Article 14(2) of the EC Treaty states that the internal market
comprises an area without internal frontiers in which the free movement of
goods and services is ensured. While the gradual harmonisation of the
substantive law on intellectual property rights has promoted the free movement
of goods between the Member States and has made the applicable rules more
transparent, the means of enforcing intellectual property rights was not
subject to any harmonisation until Directive 2004/48 came into force (April
2006). Moreover, even when the national legislation provides right holders with
effective means of enforcing their rights, it sometimes happens that the
practical implementation of those means is not ensured.
These loopholes have naturally been exploited by counterfeiters and
pirates, who have taken advantage of national differences to market their
products, thereby causing diversions of trade and market disturbances.
Harmonisation of the national provisions governing the enforcement of
intellectual property rights will ensure better movement within the Internal
Market, greater transparency in the systems of penalties and improved
application of the means made available to right holders. Furthermore, the
creation of fair and equal conditions of competition between all economic
operators in the field of intellectual property is essential in order to allow
these operators to make effective use of the fundamental freedoms set out in
the EC Treaty. The conditions for fair and equal competition are weakened or
nullified by differing national rules on enforcement of intellectual property
rights. Under certain circumstances, the results are distortions of
competition, which jeopardise the free movement of goods and services in the
Internal Market.
This situation should change after the implementation of Directive
2004/48. A full explanation of this instrument is provided in the executive
summary “Harmonization of the law on the enforcement of IPR in the
EC”.
Distortions of competition in the Internal Market may come not only
from differences in the scope and extent of intellectual property rights by
virtue of national law, but also from differences in the systems of penalties
applied to protect those rights against counterfeiters and pirates. From the
point of view of the latter, the strictness of the local system of penalties
can be taken into account in the production costs of illegal products. These
costs will depend on the penalties applied in the event of proceedings (seizure
of the illegal goods, payment of fines, need to pay workers more to offset the
risk of retaliation measures). The result is that, in the absence of
legislation to harmonise the systems of penalties for intellectual property
rights in the Internal Market, there will continue to be a situation of
differences in terms of the risks and, hence, of the costs for the operators of
counterfeit and pirated products. Since such counterfeit and pirated goods are,
by definition, substitutes in the economic sense for the lawfully marketed
goods that they imitate, the divergences in the cost base in the Internal
Market for illegal operators will also give rise to differences in the
conditions of competition for the lawful operators. It can be assumed that, in
those parts of the Internal Market where the system of penalties is relatively
ineffective, the market share for counterfeit and pirated products is likely to
be higher, and the prices of both legal and illegal goods lower, than in
countries that have stricter penalties for intellectual property rights. This
means that divergences in the systems of penalties are likely to lead to
distortions in the conditions of competition and to diversions of the natural
trade flows of legal goods that would take place if the penalties for
intellectual property rights were harmonised throughout the Internal
Market.
V. Possible Solutions
In order to effectively combat counterfeiting and piracy, horizontal
measures are envisaged in four areas: (a) monitoring by the private sector; (b)
the use of technical devices; (c) sanctions and other means of enforcing
intellectual property rights; and (d) administrative cooperation between the
competent authorities.
(a) Monitoring by the private sector
Most monitoring is carried out privately by national, European or
international professional associations or organisations, such as
manufacturers' associations, trade mark proprietors' associations and
collecting societies. It generally consists of observing market trends,
advising and supporting the industries concerned, collaborating with the
authorities (customs, police, the courts, etc.), monitoring suspect activities
and detecting acts of counterfeiting and piracy, keeping the public informed
and, where necessary, convincing the government of the need to amend the law.
Monitoring carried out by the private sector must done in
compliance with Community competition rules.
(b) The use of technical devices
One means of combating counterfeiting and piracy available to
holders of intellectual property rights is the use of technical devices to
protect and authenticate their products or services. Technical devices may take
many forms: security holograms, optical devices, chip cards, magnetic systems,
biometric codes, special inks, microscopic labels, etc. These technical devices
facilitate the prosecution and punishment of counterfeiting and piracy. Through
them, unlawful uses of works, products or services can easily be traced back to
the source, so infringers can be found and prosecuted more effectively.
However, although technical devices act as a filter for the most obvious
counterfeit or pirated goods, they do not, as a rule, defeat the most highly
organised infringers, who succeed in reproducing the devices. Such devices must
therefore enjoy suitable legal protection to prevent them from being infringed,
manipulated or neutralised. There are international obligations in the field of
copyright and related rights
17concerning legal protection against the neutralisation of technical
measures that may be invoked by right holders in the exercise of their
intellectual property rights and which restrain the performance of acts not
authorised by the right holder or allowed by law. At the Community level, the
Commission has taken steps in the intellectual property field to ensure that
certain unlawful activities involving technical devices are prohibited in
Member States
18.
According to Art. 6 of Directive 2001/29/EC on the harmonisation of certain
aspects of copyright and related rights in the information society, Member
States shall provide adequate legal protection against the circumvention of any
effective technological measures.
(c) Sanctions and other means of enforcing intellectual property rights
The TRIPS Agreement obliges all Member countries to implement the
enforcement mechanisms contained in that Agreement. This includes both criminal
and civil remedies. All Member States have laws stating that counterfeiters and
pirates are, in principle, liable to criminal penalties, but the level and
severity of the penalties vary considerably from one Member State to another.
For certain types of rights, there is no criminal penalty. Some Member States
have, however, been tightening their criminal law with respect to
counterfeiting and piracy in recent years. In addition, right holders have a
number of legal measures and procedures at the national level, of both a
provisional and a permanent nature, which they can resort to in case of
infringement. The various measures that may be sought in primary or interim
proceedings include the cessation of the infringement while it is being
committed or the prevention of future infringements, injunctions and damages.
Applications for the cessation of infringements and the prevention of new
infringements may be lodged in all Member States. They oblige the infringer to
cease any continued interference caused by the counterfeiting. Injunctions are
the instrument most widely used in Member States to prohibit an infringer from
repeatedly infringing an intellectual property right. Failure to comply with an
injunction is punishable by specific penalties, usually a fine payable either
to the State or to the person seeking the injunction. The infringer may be
required to pay damages to the right holder to compensate for the loss or
damage caused by the infringement of the intellectual property right.
Other measures for combating counterfeiting and piracy, include
the sanction of publicity, through the publication of judgments, orders to
reveal information about the origin of the goods, the distribution channels and
the identity of any third parties involved in the production and distribution
of the goods.
Directive 2004/48/EC on enforcement of intellectual property
rights provides for minimum requirements regarding IPR execution that allows
both Community regulations and national regulations to provide for measures and
procedures that are more favourable for those holding IP rights, as long as
they are proportional, fair, and just. Member States were obliged to implement
the Directive provisions by 29th
April 2006 (see the
Briefing
Paper on this topic for further information).
(d) Administrative cooperation between the competent authorities
The TRIPS Agreement (Article 69) provides for the establishment of
contact points in the administrations of each WTO member and for the exchange
of information with a view to eliminating international trade in goods that
infringe intellectual property rights. One of the main objectives of the Action
Plan for the Single Market
19 is the need to ensure the consistent, effective
implementation of the single market legislation. In order to promote
cooperation, including the exchange of information, among Member States and
between Member States and the Commission, the enforcement Directive requires
that each Member State should designate one or more national correspondents for
any question relating to the implementation of the measures provided for by
this Directive. It shall communicate the details of the national
correspondent(s) to the other Member States and to the Commission.
VI. Enforcement and the Directorate General, Taxation and Customs Union
The Customs Union is an essential element in the creation of an
integrated single European market and of a common commercial policy. The role
of the DG Taxation and the Customs Union is to maintain and defend the Customs
Union and to ensure the uniform application of the nomenclature and origin
rules. The Directorate General takes part in international commercial
negotiations that have an effect on the common customs policy and surveys the
application of the rules of origin and preferential trading systems.
In addition to the traditional activity of collecting duties,
customs administrations are entrusted with new tasks involving the protection
of both the consumer and the legitimate trader. The development of electronic
and world trade, the current EU enlargement process and the development of
fraud and organised crime are factors forcing the customs administrations to
adopt new strategies to deal with counterfeiting and piracy.
VII. Border Controls in the EU
A Community-wide system of customs controls to prevent the import of
goods bearing counterfeit trade marks was first implemented in Council
Regulation (EEC) No 3842/86 of 1st
December 1986, which established measures to prohibit the free circulation of
counterfeit goods ("the 1986 Regulation")
20. The 1986 Regulation set out procedures whereby
trade mark owners could apply to the customs authorities of Member States to
request that they suspend the release for free circulation of goods suspected
of being counterfeit. The system of controls established by the 1986 Regulation
had a number of weaknesses
21. It was replaced by Council Regulation No 3295/94
which sought to implement the border control provisions of the TRIPS agreement.
The 1994 Regulation extended the scope of border controls to include exports
and goods in transit. It also expanded the definition of counterfeit goods to
include packaging materials and symbols bearing unauthorised trade marks,
whether presented alone or together with the goods themselves, and extended
coverage of the system to goods protected by copyright and design rights.
The 1994 Regulation required the European Commission to report its
implementation within two years of its entry into force. The Commission report,
published in January 1998
22 recommended that the system be extended to cover
goods protected by patents, as well as medicinal and plant products protected
by additional protection certificates. It also proposed that the range of
customs procedures falling within the scope of the system be extended.
A study carried out by the Customs Policy Division of the
Directorate General for Taxation and the Customs Union identified several areas
where the system established by the amended 1994 Regulation might be extended
or improved
23. The
Commission's subsequent legislative proposal suggested the following changes to
the system of border controls
24:
- the system of border controls should be extended to cover other forms of intellectual property, particularly plant variety rights, geographical indications and designations of origin.
- requirements for the payment of fees should be largely abolished and obligations to provide security should be replaced by declarations of liability, thereby providing right-holders with cost-free access to the system.
- a simplified procedure should be introduced to dispose of infringing goods in cases where parties interested in the goods do not object to their disposal.
- the scope for ex officio action by customs authorities should be extended.
- the extent of the so-called "non-commercial exception" should be clarified.
- measures should be introduced to improve the flow of information between right holders and customs authorities.
The proposed changes were subsequently enacted in Council Regulation
(EC) No. 1383/2003 concerning customs action against goods suspected of
infringing certain intellectual property rights and the measures to be taken
against goods found to have infringed such rights (hereafter "the 2003
Regulation"), which entered into force on 1st July 2004
25. The 2003 Regulation is
directly applicable in Member States. On 21st October 2004, the Commission issued
Regulation (EC) No. 1891/2004, which provided for the implementation of Council
Regulation (EC) No. 1383/2003 concerning customs action against goods suspected
of infringing certain intellectual property rights and the measures to be taken
against goods found to have infringed such rights
26.
The 2003 Regulation is also integrated into the Community Customs
Code (hereafter CCC)
27. In particular, the customs operations covered by
the Basic Regulation are defined directly by reference to the CCC
28. Moreover, the Customs Code
Committee established by Article 247 of the CCC plays an advisory role with
regard to the implementation of the 2003 Regulation
29. Within the Commission
responsibility for the 2003 Regulation rests with the Customs Policy Division
of the Directorate-General for Taxation and the Customs Union.
On 11th October 2005, the
European Commission presented a package of measures to strengthen protection
against counterfeiting and piracy
30 for the EU and its citizens. The measures proposed
for action in 2005 and 2006 would increase Community level protection through
improved legislation and operational controls, strengthen the customs/business
partnership and reinforce international co-operation in this area.
VIII. Council Regulation (EC) No 1383/2003
The 2003 Regulation authorises national customs authorities to
intercept infringing goods when they are discovered during the course of
specified customs operations. These operations are defined in Article 1 of the
2003 Regulation as being when goods are:
- entered for release for free circulation, export or re-export in accordance with Article 61 of the CCC;
- found during checks on goods entering or leaving the Community customs territory in accordance with Articles 37 and 183 of the CCC;
- placed under a suspensive procedure within the meaning of Article 84(1)(a) of the CCC;
- re-exported subject to notification under Article 182(2) of the CCC; or
- placed in a free zone or free warehouse within the meaning of Article 166 of the CCC.
The term 'suspensive procedure' covers a variety of customs
procedures, including external transit, customs warehousing, inward processing
in the form of a system of suspension, processing under customs control, and
temporary importation
36.
Although the 2003 Regulation is designed primarily to prevent
infringing goods from entering or leaving the Community customs territory, it
also applies to goods in external transit (i.e. goods passing through Community
customs territory on their way from one non-member state to another non-member
state). In The Polo/Lauren Company LP v. Pt Dwidua Langgeng Pratam
International Freight Forwarders, the European Court of Justice held that this
extended coverage was justified by the risk that goods entering the Community
under the external transit procedure may be fraudulently diverted onto the
single market
37.
The types of infringing goods covered by the 2003 Regulation are as
follows:
Counterfeit goods
For the purposes of the Regulation, 'Counterfeit goods' are
defined as:
... goods, including packaging, bearing without authorisation a trademark identical to the trademark validly registered in respect of the same type of goods, or which cannot be distinguished in its essential aspects from such a trademark, and which thereby infringes the trademark-holder's rights under Community law, as provided for by Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trademark or the law of the Member State in which the application for action by the customs authorities is made."38 </dd> </dl>
Article 2(1)(a) of the 2003 Regulation also provides that
trademark symbols (e.g. labels, stickers, logos), as well as packaging
materials bearing counterfeit marks are to be treated as counterfeit goods,
regardless of whether they are presented with counterfeit goods or separately
from those goods. This provision is intended to remedy a problem that arose
under the Community's earlier system of border controls whereby counterfeiters
could evade customs seizure by importing unmarked goods separately from their
labelling, packaging and other accompanying materials (e.g. instruction
manuals), then arranging for the goods to be labelled and packaged after
importation. By classifying these materials as counterfeit goods in their own
right, this provision also gives trademark owners a means of fighting the
independent international trade in labelling and packaging material for use in
the production of counterfeit goods.
Pirated goods
The 2003 Regulation defines 'pirated goods' as:
... goods which are or contain copies made without the consent of the holder of a copyright or related right or design right, regardless of whether it is registered in national law, or of a person authorised by the right holder in the country of production in cases where the making of those copies would constitute and infringement of that right under Council Regulation (EC) No 6/2002 of 12 December 2001 on Community designs or the law of the Member State in which the application for action by the customs authorities is made."39 </dd> </dl>
This definition of pirated goods is broader than the definition
provided in Article 51 of the TRIPs Agreement40. However, like the TRIPs Agreement, the 2003
Regulation considers goods pirated if they constitute infringing copies.
Depending on the nature of the right in question, it is then up to either
Community law or national law to determine whether a particular item represents
an infringing copy.
Patented goods
The Community's system of border controls was extended in 1999 to
include goods that infringe a patent or a supplementary protection
certificate41.
However, action by the customs authorities is confined to Member States where
the relevant patent or supplementary protection certificate is in force.
Plant varieties
The 2003 Regulation extends protection to plant varieties
protected under the national laws of Member States, as well as those protected
under the Community Regulation on plant variety rights41.
Designations of origin, geographical indications, and geographical designations
The 2003 Regulation also extends protection to goods bearing
protected designations of origin, geographical indications, and geographical
designations. These forms of intellectual property protection are particularly
important in relation to foodstuffs and beverages. In recent years national
customs authorities have intercepted large quantities of counterfeit foodstuffs
and beverages, which pose obvious risks for consumers43.
Moulds and matrices
The definition of infringing goods is extended by Article 2(3) to
include "... any mould or matrix which is specifically designed or adapted for
the manufacture of goods infringing an intellectual property right". In
practice, most of the types of equipment used to produce infringing goods -
e.g. computers, printers, labelling machines, video recorders - have perfectly
legitimate applications.
Application for Action by the Customs Authorities
Article 5 of the 2003 Regulation sets out the procedure whereby a
right holder can apply to the customs authorities of a Member State requesting
action in relation to goods that are suspected of infringing his rights. Once
an application has been submitted to the competent customs department, it must
notify the applicant in writing of its decision within 30 working days of
receipt44. If the
application is granted, the decision granting the application must be forwarded
immediately to the customs offices of the relevant Member State or
States45.
When making an application under Article 5, the right holder is
required to provide (a) proof that he holds an intellectual property right for
the goods specified in the application, (b) sufficient information to enable
the customs authorities to recognise the goods, and (c) a declaration of
liability in the event that goods are wrongly intercepted46. These elements of the
application are discussed in more detail below. If the competent customs
department decides not to process an application, because it lacks one or more
of the mandatory elements, it must give the right holder reasons for its
decision, as well as information about the appeal procedure47.
An application under Article 5 must include proof that the
applicant is the holder of the right for which protection is sought48. However, the term "right
holder" is defined broadly to include (a) the holder of any of the rights
referred to in Article 2(1), (b) any other person authorised to use one of
these rights, or (c) a representative the right-holder or authorised
user49.
Information to be provided by right holders
Article 5(5) of the 2003 Regulation requires right holders to give
sufficient information to enable the customs authorities to recognise any
infringing goods, and in particular:
- an accurate and detailed technical description of the goods;
- any specific information the right holder may have concerning the type or pattern of fraud; and
- the name and address of the contact person appointed by the right-holder.
The 2003 Regulation indicates that right holders should endeavour
to forward the following information whenever it is available:
- the value of the original goods in the relevant market;
- the location of the suspect goods or their intended destination;
- any identifying features of the consignment or packages containing the suspect goods;
- the scheduled arrival or departure date of the suspect goods;
- the means used to transport the suspect goods,
- the identities of the parties involved in the import or export of the suspect goods;
- the country or countries of production and the routes used by traffickers; and
- any technical differences between the authentic and suspect goods.
The 2003 Regulation contains a new provision whereby customs
authorities may also require right holders to provide further information that
is specific to the type of intellectual property right covered by an
application for action
51. This is intended to assist customs authorities in
dealing with applications relating to more specialised forms of intellectual
property, such as plant variety rights.
Declarations of liability
Under the 2003 Regulation right holders are no longer required to
provide security. They are, however, required to accompany their applications
with a declaration of liability. By means of such a declaration the right
holder accepts liability towards those involved in the import or export of
goods that may arise in the event that (a) action taken against the goods by
the customs authorities is subsequently discontinued as a result of an act or
omission on the part of the right holder; or (b) goods intercepted by the
customs authorities are subsequently found not to infringe an intellectual
property right52. The
declaration also covers liability for the cost of keeping goods under customs
control (e.g. the cost of storage)53.
Duration of applications
When granting an application, the customs authorities are required
to specify the period during which they will take action54. This period may not exceed
one year, but it may be renewed periodically for the duration of the relevant
intellectual property right.
IX. Special provisions for Community intellectual property rights
(a) Ex Officio
Action by the Customs Authorities
Customs authorities are also permitted to act on their own
initiative to detain or suspend the release of goods that they suspect of
infringing an intellectual property right
55. Where goods are intercepted under this provision,
the right holder must be notified of the potential infringement of his rights
and invited to make an application for action by the customs authorities under
Article 5. The customs authorities must also inform the declarant or holder of
the goods
56. The
period for which goods may be held without an application for action by the
right holder is limited to three working days. If the right holder fails to
make an application for action within the three-day period, the customs
authorities are obliged to release the goods.
When customs authorities take ex
officio action to intercept goods, they may inform the right holder
of the nature and quantity of goods intercepted. However, they may not divulge
any other information until an application for action has been
granted
57.
(b) Action by the Customs Authorities
Once an application for action has been granted, customs offices
are required to detain or suspend the release of any goods found during the
course of the customs operations specified in Article 1(1) of the 2003
Regulation that they suspect may infringe an intellectual property right
covered by the application
58. The customs office must immediately give notice
of the interception to the customs service that dealt with the
application
59. Either
the customs office or the customs service must then give notice of the
interception to the right holder, as well as the declarer or holder of the
suspect goods
60.
(c) Right of information, inspection and analysis
Following the interception of suspect goods, customs authorities
are authorised to disclose information to the right holder and the declarer or
holder of the goods about the nature and quantity of the goods
61. They must also give the
parties an opportunity to inspect the goods
62.
Customs authorities are also permitted to disclose further
information to right holders for the purpose of establishing whether their
rights have been infringed. Customs authorities are required to inform the
right holder of (a) the names and addresses of the declarer and, if known, the
consignor, consignee, and holder of any suspect goods, as well as (b) the
origin and provenance of the goods
63 However, this disclosure requirement is subject
to any "… national provisions on the protection of personal data,
commercial and industrial secrecy and professional and administrative
confidentiality".
(d) Time limits
The 2003 Regulation imposes strict time limits on the period for
which customs authorities may suspend the release of suspect goods or detain
them. This period is initially restricted to 10 working days from the receipt
of notification of interception, although it may be extended by a further 10
working days in appropriate cases
64. In the case of perishable goods, the period is
restricted to three working days and is not renewable
65.
(e) Determination of infringement
The purpose of authorising customs offices to intercept suspect
goods is to allow right holders time to ascertain for themselves whether they
believe the goods to be infringing and, if so, to secure a substantive
determination to this effect from a competent authority. Unless the customs
office dealing with the suspect goods has been informed within the time limits
outlined above that "… proceedings have been initiated to determine
whether an intellectual property right has been infringed under national law
…", then, subject to the completion of any other customs formalities, it
must release the goods
66. The proceedings must be initiated in the forum
designated by the national law of the relevant Member State as competent to
take a substantive decision regarding infringement
67.
The determination of infringement is to be made in accordance with
the law in force in the Member State where the goods were subjected to the
customs operation that led to their interception
68.
(f) Prohibition
On completion of the procedures outlined above, goods may be found
to be either infringing or non-infringing within the meaning of Article 2 of
the 2003 Regulation. Where goods are found to be infringing, they may not be
subject to any of the customs operations specified in Article 1(1)
69.
(g) Special Procedures for Patents, Supplementary, Protection Certificates, Design Rights and Plant Variety Rights
Special procedures apply where goods are suspected of infringing
design rights, patents, supplementary protection certificates, or plant variety
rights. A declarant, owner, importer, holder or consignee of goods in these
categories may apply to have the goods released, or their detention revoked,
against provision of security. The customs authorities are obliged to release
the goods as long as proceedings have been instituted to establish whether an
intellectual property right has been infringed under national law, the
authority empowered for this purpose has not imposed precautionary measures,
and all other customs formalities have been satisfied
70. The person seeking release of
the goods must, however, provide security sufficient to protect the interests
of the right holder
71.
(h) Simplified Procedure for Disposing of Infringing Goods
The 2003 Regulation enables Member States to adopt a new
simplified procedure for disposing of goods suspected of infringing
intellectual property rights. This simplified procedure allows customs
authorities, with the right holder's consent, to have suspect goods abandoned
for destruction under customs control, without previously determining whether
an intellectual property right has been infringed under national law
72. If, however, a person with an
interest in the goods (i.e. the declarer, holder, or owner of the goods)
contests the destruction, it is necessary to follow the standard procedure by
instituting proceedings to determine whether an intellectual property right has
been infringed
73.
For the simplified procedure to be carried out, the right holder
must inform the customs authorities in writing within the prescribed period
that the goods in question infringe one or more of the intellectual property
rights covered by the 2003 Regulation. The right holder must also provide the
customs authorities with a written agreement from the declarant, holder or
owner of the goods to abandon the goods for destruction. However, this
agreement is to be presumed in cases where the declarer, holder or owner of the
goods has not specifically opposed destruction within the prescribed
period
74. The
prescribed period for the simplified procedure, as for the standard procedure,
is initially restricted to 10 working days from the receipt of notification of
interception, although it may be extended by a further 10 working days in
appropriate cases
75.
In the case of perishable goods, the period is restricted to three working days
and is not renewable
76
The cost of destroying goods under the simplified procedure is to
be borne by the right holders, unless national legislation provides for this
cost to be borne by another source. If goods are destroyed under the simplified
procedure, the customs authorities must take samples and retain them for use as
evidence in any subsequent legal proceedings
77
(i) Liability of Right holders
Any civil liability on the part of a right holder toward the
declarant, owner, importer, exporter, holder or consignee of goods intercepted
under the 2003 Regulation is governed by the national law of the Member State
in which the interception took place
78.
(j) "Non-Commercial" Exclusion
TThe Community's system of border controls does not apply to goods
of a non-commercial nature found in travellers' luggage, provided they are
within the limits excluded from customs duty
79. The 2003 Regulation provides that customs
authorities may intercept infringing goods found in traveller's personal
baggage if there are material indications to suggest the goods are part of
commercial traffic
80.
(K) Penalties
The 2003 Regulation requires Member States to introduce penalties
to apply in cases where the Regulation has been violated. According to Article
18 these penalties must be "effective, proportionate and dissuasive".
X. Best Practices for Enforcement of Intellectual Property Rights
A survey conducted by the WIPO in 2002 indicated that the main
barriers to eliminating counterfeiting and piracy were not found in the
substantive law, but rather in the remedies and penalties available (or not
available) to stop and deter counterfeiting and piracy
1. The ineffectiveness of
enforcement systems was attributed, in many cases, to a lack of human
resources, funding and practical experience in IP enforcement of relevant
officials, including the judiciary; insufficient knowledge on the part of right
holders and the general public, concerning their rights and remedies; and
systemic problems resulting from insufficient national and international
coordination, including a lack of transparency.
The following were identified as being among the best practices for
the implementation of the enforcement provisions of the TRIPS Agreement. As
explained in the specific
Briefing
Paper, most of these practices have been incorporated into
Community Law by Directive 2004/48:
(a) National Cooperation and Coordination
The fight against counterfeiting and piracy would have much
greater chances for success if it were a coordinated one, involving all the
relevant stakeholders, and dealing with all the various intellectual property
rights. A number of Member States have established coordinating or taskforce
units involving the relevant ministries and agencies, such as the industrial
property offices, customs, police and justice. Also involved are members of
such bodies as associations of right holders, copyright societies, medicine
control agencies and trading standard authorities, as well as leading
manufacturing, retail and consumer organizations. These units sometimes have
smaller specialized committee that deal, with more specialized intellectual
property issues such as the drafting of new legislation and the development of
frameworks for cooperation on enforcement action against intellectual property
crimes.
The aims of this cooperation included the coordination of
enforcement activities; the development of greater expertise, particularly
among customs officers at all points of import and export; the improvement in
general liaison procedures with all national agencies involved in enforcement;
the enhancement of contacts with right holders and their representative
organizations; the establishment of benchmarks with specialised
anti-counterfeiting units in other Customs administrations; and the
participation in public awareness campaigns. The exchange of officials is
believed to have produced good results, allowing them to benchmark their
performance and structure against specialist units that operate in other Member
States. Right holders have been encouraged to contribute to the training of
customs staff in the identification of counterfeit and pirated goods, and in
intelligence reporting from their own sources to assist officers in identifying
consignments of counterfeit or pirated goods.
(b) International Cooperation
In some Member States, cooperation with international
intergovernmental organizations has resulted in the creation of bilateral
cooperation and support programs in the field of enforcement. It has been
suggested that industrialized Member States be requested to create an
international computer network covering the ownership of merchandise that
passes through customs. It was observed that the same intellectual property
rights registered in a number of countries could be affected by the same types
of infringements. Information networks could consequently be useful for the
exchange of information on infringement cases.
(c) Public Awareness and Cooperation
Ultimately, the fight against counterfeiting and piracy has to
involve the public, since it is the public’s purchasing power that makes
these practices profitable. National anti-counterfeiting and anti-piracy
campaigns could be used to indicate the link between intellectual property,
crime and job losses, the debilitating effects of organized crime, and the
dangers to health and safety of infringing goods.
(d) Right Holder Cooperation
As intellectual property rights are ultimately private rights,
right holders have the largest immediate financial stake in ensuring the
protection of those rights. For this reason, rights holders have been
particularly willing to assist enforcement efforts by providing information to
assist in the identification of infringing products and in co-operating in
awareness and training programmes.
(e) Judicial Enforcement
(i) Provisional measures
The effective participation of right holders in enforcement
actions against counterfeiters and pirates is necessary. An effective way to
facilitate this participation is by ordering prompt provisional measures to
preserve evidence and prevent infringements. In some jurisdictions, the right
holders apply ex parte for an order to
enter the premises of the alleged infringer in order to attach and preserve
evidence. This can be done on short notice, but right holders have to
substantiate their claims and may have to provide security. The applications
for ex parte orders should be acted upon
and executed within a short time period, and security requirements should not
unreasonably deter recourse to these procedures. Similarly, the appropriate
authorities should have the right to order the seizure of suspected infringing
goods and other relevant evidence as soon as there is reason to suspect that
rights are being or are about to be infringed. The ability to seize or preserve
should cover not only the infringing articles themselves, but also the
equipment and other materials used in the infringing operation, including the
means of production and distribution
In some jurisdictions, the freezing of the defendant's bank
account(s) and other assets may be ordered in order to ensure that funds to
satisfy compensation awards and judgments pending the court's consideration of
the merits of the case. In the USA, such orders, executed by the police
authorities, under anti-racketeering legislation, allow the enforcement
authorities to confiscate assets of organised criminals, such as real property,
vehicles and boats, to be used in subsequent enforcement activities.
(ii) Damages
IIn cases involving infringements of intellectual property
rights, it is important that courts be empowered to award damages that both
compensate the right holders and deter potential infringers from engaging in
illegal activities. National laws therefore should contain rules on the
calculation of damages that allow courts to award such damages in order to
create a deterrent and adequately compensate right holders. In common law
countries, right holders are entitled to an "account of profits", i.e. the
right to receive all profits from the infringement. Exemplary damages may be
used as a deterrent in cases of flagrant counterfeiting and piracy.
(iii) Ancillary orders
In a number of countries, the courts can order the destruction
of infringing goods and/or implements used in the manufacturing thereof,
particularly if the defendant has acted in bad faith. Judicial procedures may
also be adopted whereby offending goods that have been placed on the market are
recalled at the infringer's expense, as long as they were not sold to
consumers. In some countries, infringers may be required to undertake
corrective advertising.
(iv) Evidentiary rules
In some States, the rules of civil procedure have been amended
to include a rebuttable presumption that allows judicial authorities to presume
that a person who has infringed an intellectual property right had reasonable
grounds to know he was infringing such right. The presumption can be rebutted
if the defendant is able to provide concrete proof to the contrary.
Additionally, proceedings are facilitated by the presumption of ownership of an
industrial property right, evidenced by the relevant registration certificate.
In copyright matters, the person or legal entity whose name was indicated as
the author, producer, performer or publisher of the work, in the usual manner
is, in the absence of proof to the contrary, presumed to be the lawful right
holder of the work. A person claiming to have a copyright licence bears the
burden of producing a true copy of the license agreement.
(f) Criminal Procedures
A number of countries have introduced criminal sanctions for
piracy and counterfeiting. Article 61 of the TRIPS Agreement requires criminal
procedures and penalties for cases of wilful trademark counterfeiting or
copyright piracy on a commercial scale. A number of countries provide for both
civil remedies and criminal penalties in relation to piracy and counterfeiting,
as well as for the seizure, forfeiture and destruction of the infringing goods
and of any materials and implements that have been used primarily to commit the
offence.
(g) Right to Information
A "right to information" has been identified as a valuable
instrument in the fight against counterfeiting and piracy. It would enable
right holders to identify the key persons involved in infringing activities,
particularly when the infringing activity involves a number of countries.
Providing the right holder with information about infringing goods, as well as
about persons involved in the infringements, enables the right holder to
identify the chain of distribution.
(h) Deterrence of Publicity
In some countries, in order to protect the public and raise the
awareness of the value of intellectual property rights, judicial authorities,
have the power to order the official publication of court decisions,
particularly those with a deterrent effect.
(i) Specialized Courts
Some developing countries, such as Thailand and China, have
established specialised courts to hear IPR-related cases as a means of
improving their capacities for national enforcement, though such measures are
not formally required under TRIPS. A more attractive approach for developing
countries is probably to establish (or strengthen) a commercial court, which
may hear IPR-related cases and provide improved access to justice for the
business sector as a whole. In any event, in most developing countries, a
considerable programme of training for the judiciary and other enforcement
agencies in IP matters will be required The "private" nature of IP rights
suggests the importance of the resolution of disputes between parties either
out of court or under civil law. Indeed, as state enforcement of IPRs is a
resource-intensive activity, there is a strong case for developing countries to
adopt IPR legislation that emphasises enforcement through a civil rather than a
criminal justice system. This would reduce the enforcement burden on the
government in the case of counterfeiting on a large scale, although the state
enforcement agencies would still be required to intervene. That said, we note
that developing countries have come under pressure from industry which
advocates enforcement regimes based on state initiatives for the prosecution of
infringements. Such pressures should be resisted, and right owners assume the
initiative and costs of enforcing their private rights.
(j) Accelerated Procedures
The WIPO survey of proposed best practices
82 urged that, in order to
relieve the courts and their congestion, accelerated cost reducing procedures
could be considered. For example, after the customs authorities have seized the
goods, the applicant or the person who is entitled should have the possibility
to file a written objection within a short time limit. If no objection is
filed, the goods would be destroyed or removed from the market in a different
way. If an objection is raised, the seized goods would be handed over to the
right holder if the applicant cannot prove that he has brought an action with
the competent court within a time limit of 10 or 20 days, for example. It was
also suggested that alternatively, intellectual property cases could be dealt
with in interim, informal procedures, which could be held on very short notice
and following which the infringement might be stopped immediately. This
abbreviated procedure could be followed by proceedings on the merits. The right
holder could make a reasonable case for having an urgent interest and he should
do so within reasonable time after the discovery of the infringements,
otherwise, he should start proceedings on the merits.
(k) Mediation and Arbitration
A means of reducing the expense and bureaucratic delays in the
enforcement process in a number of developed countries has been to introduce
alternative dispute resolution procedures, such as mediation and arbitration.
These procedures encourage the exchange of information in order to facilitate
the settlement of disputes at an early stage.
(l) Regulation of Optical Media
Manufacturing
A particular problem, particularly in Asia, has been the
manufacture of pirated optical discs. The Macao SAR Government has taken a
series of measures to deal with optical disc piracy. It requires controls on
the import and export of optical disc production equipment, stampers and media
products, as well as raw material for optical discs. Shops selling optical
discs must be registered (stating business hours) before business operation,
and a penalty shall be levied for any operation beyond registered business
hours. With this regulation in place law enforcement authorities are able to
control the irregular operation of shops. Source documents (e.g. an invoice)
must be available for tracing the activities of selling, storing and shipping
in/out of optical disc products, otherwise, a penalty shall be levied. Fines
and imprisonment are imposed in relation to selling, storing, and in/out
shipping of pirate disc production.
(m) Contact Points and Information Providers
For effective ex officio and
normal actions, the security forces and customs authorities must have access to
information concerning the right holders. In order to achieve this, contact
points have been established in a number of WIPO Member Sates as the national
intellectual property offices, which, under the right circumstances, can
provide useful and fast information on right holders and rights. In some Member
States, the intellectual property office plays a pivotal role in drafting clear
instructions for enforcement officials on how to proceed in these cases and how
to do studies and compile useful reports to assist in this aim. The
intellectual property office has been called upon to give binding or
non-binding reports, and other relevant information, to assist the
courts.
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