Intellectual property: European Commission proposes new Directive to combat counterfeiting and piracy, February 2002

The European Union is set to crack down on the sale of counterfeit or pirate goods with the publication of a proposal [COM(2003) 46] by the European Commission on 30 January 2003 for a new Directive on the enforcement of intellectual property rights.

The proposal aims to deter those engaged in counterfeiting and piracy by harmonising the national laws on the means of enforcing intellectual property rights and establishing a general framework for the exchange of information between national authorities.

Commenting on the proposal Internal Market Commissioner, Frits Bolkestein, said:

"Pirates and counterfeiters are in effect stealing from rights holders the fair payment they deserve for 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".
[IP/03/144]

Background

A study, commissioned by the Business Software Alliance and prepared by Price Waterhouse, found that in 1996 the packaged software industry generated €35.6 billion in sales, €14.4 billion in tax revenues and over 334,000 total jobs in Western Europe. In the same year, Europe's average piracy rate for PC business software was 43%, compared to 27% in the United States, costing Western Europe an additional €22.1 billion in sales, 201,645 jobs and an extra €9.1 billion in tax revenues. Recent estimates by the European Union have suggested that 37% of the software used in the EU is pirated and that 36% of all CDs and cassettes sold are pirated. Annual losses in revenue through counterfeit goods are estimated to be 7.2% for perfume and toiletries, 5.8% for pharmaceuticals and 11.5% for the toy and sport sector. The problem of counterfeit and pirated goods is being made worse by the advent of the internet which provides easy access to a global market via the internet.

Aware that such a level of counterfeiting and piracy could seriously harm the EU's aims to become more competitive, the European Commission launched a wide-ranging consultation exercise in October 1998 through a Green Paper on Combating Counterfeiting and Piracy in the Single Market.

As a result of responses to the Green Paper, the European Commission presented an Action Plan [COM(2000)789] intended to combat counterfeiting and piracy in November 2000. The Action Plan proposed a number of new measures including:

• Training for supervisory authorities
• A study to define a methodology for collecting, analysing and comparing data on counterfeiting and piracy
• Proposals for harmonising the minimum thresholds for sanctions and criminal proceedings and for extending Europol's powers to combating counterfeiting and piracy
• A proposal for a Directive aimed at strengthening the means of enforcing intellectual property rights and defining a general framework for the exchange of information and administrative cooperation

Proposed Directive on Enforcement of Intellectual Property Rights

The proposed Directive on the enforcement of intellectual property rights would be the key tool in the European Commission's defence against counterfeit and pirated goods. Under the proposal, the Directive would cover infringements of all intellectual property rights (both copyright and industrial property, such as trademarks or designs) and would concentrate on infringements carried out for commercial purposes in the hope of tackling the "big offenders". The main elements of the proposal are as follows:

• All EU Member States would be required to provide for injunctions to halt the sale of counterfeit or pirated goods
• Provisional measures, such as precautionary seizures of suspected offenders' bank accounts, would be introduced
• Introduction of evidence gathering powers for judicial authorities and powers to force offenders to pay damages to rights holders as compensation for lost income
• Ban on machinery used to forge security devices, which can make consumers think goods are authentic when they are not
• Trade associations, collecting societies and right holders would have the right to initiate legal proceedings

The proposal follows the Trade Related Intellectual Property Rights approach, as concluded by the World Trade Organisation, which provides for minimum provisions on enforcement to be applied in all Member States. Currently, the rules on counterfeiting and piracy vary widely from country to country. For example, compensation to the rightholder for loss of profits is not available in Spain, The Netherlands or the United Kingdom but the right of judicial authorities to require discolsure of information does exist in the latter two countries.

The European Commission hopes that the proposed Directive, which is based on existing best practice, will create a level playing field for the enforcement of intellectual property rights in different EU countries.

Reaction to the Proposal

In a joint statement, published by the International Federation of the Phonographic Industry, but representative of several organisations including the Business Software Alliance, the Interactive Software Federation of Europe, the Federation of European Publishers and the European Grouping of Societies of Authors and Composers, the EU's creative sector criticised the European Commission's proposal. It said:

"The Commission's proposal is inadequate in view of the magnitude of the piracy problem and fails to introduce urgently needed measures to hold back the epidemic of counterfeiting. The creative sector has been extremely supportive of the Commission's initiatives on piracy, but the current proposal falls far short of providing the legal framework necessary to fight piracy in all its forms in the EU".

According to the organisations the proposed Directive is "unambitous" and could in fact lead to more "confusion and perpetuate a patchwork of different legal measures and procedures across the EU".

The creative sector warned that with piracy rates set to increase when the EU enlarges in 2004 to include countries with an average piracy rate of 50%, the draft Directive does not do enough to encourage accession countries to enforce intellectual property rights rigorously.

The proposal will now be subject to adoption by the European Parliament and the Council of Ministers under the "codecision" procedure.

To trace the full progress of the latest proposals through the policy-making process you can use these services.

• OEIL (Legislative Observatory) (provides a full history of the proposal with summaries of each major stage in the process)
• Pre-Lex (provides a full and concise calendar of the proposal, bibliographical references and some hyperlinks to full text sources)

The creative sector is hoping that the European Parliament will extend the scope of the draft legislation and substantially strengthen its measures following its unanimous vote on the Commission's Green Paper in May 2000 for an ambitious proposal on piracy and counterfeiting.

While the proposal may have been criticised by the creative sector, its adoption soon after a proposal [COM(2003) 20] for a Regulation to facilitate seizures by customs of counterfeit goods from outside the EU, is indicative of the European Commission's determination to seriously crack down on counterfeiting and piracy.

Further information within European Sources Online:

European Sources Online: In Focus
	Commission acts against counterfeiting and piracy, January 2003
European Sources Online: European Voice
	07.12.00:	Counterfeit measures set to top 1.6 bn euro
	08.05.02:	Bolkestein urged to push for new copyright law
	13.06.02:	Music anti piracy methods go too far, say consumer groups
	04.07.02:	Officials seize record-breaking counterfeit haul
	04.07.02:	Music pirates a serious threat, says Sony chief
	31.10.02:	Bolkestein steps up war against CD pirates
	16.01.03:	Vittorino set to leave pirates with no place to hide
	16.01.03:	Greek leader lands award for anti-piracy efforts

Further information can be seen in these external links:
(long-term access cannot be guaranteed)

EU Institutions

European Commission

	DG Internal Market
		Industrial Property: Enforcement of Intellectual Property Rights
			Proposal for measure and procedures to ensure the enforcement of intellectual property rights [COM(2003) 46]
			Report on the question of authorship of cinematographic or audiovisual works in the European Community
			A Review of the Last Ten Years and A Look at What Lies Ahead: Copyright and Related Rights in the European Union - A speech by Jörg Reinbothe
	DG Press and Communication
		Press Releases:
			30.11.00:	Counterfeiting and piracy: the Commission puts forward an ambitious action plan [IP/00/1385]
			30.01.03:	Intellectual property: Commission proposes Directive to bolster the fight against piracy and counterfeiting [IP/03/144]
		Memos:
			30.01.03:	Proposed Directive on enforcement of intellectual property rights: frequently asked questions [MEMO/03/20]
Miscellaneous Organisations
The Copyright Licensing Agency
	Homepage
	The CLA Response to the EU Copyright Directive
UNICE
	Homepage

International Federation of the Phonographic Industry
	Homepage
	Music Piracy Report 2002
	Press release:
		30.01.03:	EU Enforcement Directive falls far short of providing urgently needed tools to tackle piracy
Eurorights
	Homepage
	The EU Copyright Directive
Federation of European Publishers
	Homepage
	Activities: Copyright
	Presentation of Dr. Anton Hilscher at the IBF Conference in Cyprus: "Copyright in Europe"
Business Software Alliance Europe
	Homepage
	Policy
	Software piracy in the EU
	Response of the Business Software Alliance to the European Commission's Green Paper on Combatting Counterfeiting and Piracy in the Single Market [February 1999]
	BSA Public Policy Agenda in Europe

News Organisations

BBC News Online:
	09.04.01:	EU ministers back internet copyright
	17.06.02:	Copyright rows ring down the centuries
	26.07.02:	Massive haul of counterfeit goods
	16.08.02:	Shouting about copyright
	03.01.03:	US voices vintage music fears
	20.01.03:	EU crackdown on counterfeit goods

Helen Bower

1 February 2002