To date, the European Commission has concentrated its efforts to combat counterfeiting and piracy on a system of border controls first introduced in 1988 1. This was improved substantially for the first time in 1995 2 and on 2 February 1999, the Council of Ministers adopted a Regulation3 which will bring into force on 1 July 1999 a second round of improvements. The main shortcoming of this system of border control, however, is that it only operates to prevent the importation of counterfeit and pirate goods into the Single Market and once in, goods are free to circulate subject to the enforcement of intellectual property rights within each Member State.
As a result of a wider initiative to combat organised crime4, the Commission presented in September of last year a Green Paper entitled Combatting Counterfeiting and Piracy in the Single Market. By contrast with the system of border controls, the focus of the Green Paper is to prevent the manufacture and sale of counterfeit and pirate goods within each Member State of the Single Market.
The purpose of this article is to review these measures and proposals and in particular, the proposals for improvements to the procedures for enforcing intellectual property rights ("IPRs").
Improvements to the System of Border Controls
The harmonised system of border controls was first implemented in 1988 in relation to counterfeit goods that is to say, goods bearing unauthorised trade marks. Under the original system, a trade mark owner could request the Customs Authorities in any Member State to take steps to detain, and prohibit the importation of, counterfeit goods from outside the EEA.
As a result of criticisms of its slow and/or inadequate implementation in some Member states and also the need for the EU to comply with its obligations relating to border controls contained in Part III, section 4, Articles 51 to 60 of TRIPS, the system was improved substantially in 1995.
Thus, the scope of the system was extended to cover:
- parts for counterfeit goods i.e., packaging and labelling bearing unauthorised trade marks as well as the counterfeit goods themselves;
- pirated goods that is goods infringing copyright, neighbouring rights (e.g., performers rights) or design right;
- parts used to manufacture counterfeit or pirated goods;
and also to apply:
- not merely in relation to goods released for free circulation but also goods released for export, re-export or entered for a suspensive procedure.
The shortcomings in the procedure were addressed by (1) requiring each member state to nominate the entity within its Customs Authority who was to receive and decide upon applications for action, (2) restricting the amount of information required to be provided by the right holder as a condition of securing action and finally, (3) enabling Customs Authorities to act in an ex officio capacity (i.e., on their own initiative).
In January 1998, pursuant to Article 15 of the '94 Regulation, the Commission presented a Report on the first two years' implementation of the improved system5 and made three proposals for yet further improvements to the system namely, that:
- the scope of the system should be extended to cover goods infringing product patents and supplementary protection certificates;
- the scope of the system should be extended to cover all goods whatever their customs status i.e., including goods in a free zone or warehouse and goods under customs supervision; and
- a procedure should be introduced to allow owners of Community Trade Marks ("CTMs") to make one application for customs protection the decision on which would then be applicable in all designated Member States.
All three proposals have been incorporated into an amending Regulation which was adopted on 2 February 1999 and the provisions of which are due to come into force on 1 July 1999.
Whilst the first improvement may prove to be controversial for various reasons6 and the second will be of benefit to all applicants7, it is the third which is of most interest and will be of greatest use to brand and trade mark owners.
The Single Application Procedure for CTM Owners
The procedure is only available to CTM owners. The amended Regulation provides that a CTM owner is permitted to make an application to the Customs Authority of any Member State and in addition to the usual information required to be provided by the right holder in the application, the CTM owner must specify the other Member Sates in which the Customs Authorities are to be asked to take action.
The Customs Authority in the Member State to whom the application has been made is then responsible for deciding whether to grant the application. Once the application has been granted, either the applicant or, with the applicant's consent, the Customs Authority who made the decision, can forward the decision and any other further useful information and translations to the Customs Authorities of the other specified Member States in which action has been requested.
The CTM owner still has to pay any fees and security due in each Member State in which action has been requested before the decision in that State enters into force.
The period during which action is to be taken is specified to be for one year from the date of the original decision with a right to request an extension for a further one year period.
Scope for Further Improvements
As stated in the Introduction above, the system of border controls only operates to prevent the importation of counterfeit and pirate goods into the Single Market. This fact together with the differences in the effectiveness of the national Customs Authorities within EU means that the system itself is only as effective as its weakest link. That is to say, once goods have been imported into one Member State, they cannot then be prevented (at least by the system of border controls) from being imported into other Member States. Although the Commission can obviously continue to make efforts to harmonise the scope of the system and improve the application procedures 8, it is difficult to see how to further improve the effectiveness of the system until such time as either parallel imports or counterfeit or pirate goods which have originated, or already been entered for free circulation, in the Single Market are included within the scope of the system (for which see Comments below) or progress is made in establishing a more unified EU Customs Authority.
The Green Paper
Purpose and Scope
The Green Paper was issued by the Commission in September 1998 and written submissions responding to the 40 or so questions were requested by early March 1999.
The stated purposes of the Green Paper are:
- to assess the economic impact of the problem of counterfeiting and piracy within the Single Market;
- to evaluate the effectiveness of the available deterrents; and
- to decide whether any new measures are required at a Community level.
One of the first points to note about the Green Paper is its wide scope - counterfeiting and piracy are defined as "all products, processes or services the subject matter or result of an infringement of an intellectual property right (trade mark or trade name, industrial design or model, patent utility model and geographical indication), a copyright or neighbouring right ... or of the sui generis right of the maker of a database."
The four specific areas put forward by the Commission for the adoption of new measures are:
- monitoring by the private sector i.e., encouraging the creation of professional organisations to monitor the market and the collection and exchange of information between such professional organisations and the competent authorities responsible for combatting counterfeiting and piracy; extending the role of such professional organisations in the legal proceedings;
- technical devices i.e., encouraging the development of technical devices to authenticate genuine goods and prohibiting commercial activities relating to the unlawful use of such technical devices;
- the enforcement of intellectual property rights - discussed below;
- administrative co-operation between the competent authorities responsible for combatting counterfeiting and piracy in each Member State.
Although the adoption of new measures in all four areas are to be encouraged, improvements to the enforcement of intellectual property rights will probably provide the greatest scope for results in combatting the problem of counterfeit and pirate goods.
The Enforcement of IPRs
To date, the measures implemented by the Commission to improve the enforcement of IPRs have been aimed at harmonising the substantive law9 or introducing unitary i.e., Community-wide rights10. Other than the enforcement provisions contained within Part III of TRIPS (which in any event merely set out a broad framework for enforcement), the Commission has not as yet sought to harmonise in any concerted manner the procedures for the enforcement of intellectual property rights11.
On the subject of criminal proceedings, the Green Paper notes that there are disparities between Member States regarding the availability of such proceedings in relation to the infringement of certain IPRs and also the penalties for criminal liability where it is available.
On the subject of civil proceedings, the Green Paper notes again that there are disparities between Member States regarding the availability of provisional or protective relief as well as final relief. Thus, not all Member States have procedures designed to preserve evidence like the English Anton Piller orders or the French Saisie-Contrafacon and although generally available in all Member States, the specific rules governing the assessment of damages and delivery up vary between Member States as does the scope of final injunctive relief and sanctions for breach. The Green Paper also comments on various other sanctions available in certain but not all Member States such as the publication of Judgments and the right of information about the persons involved up and down the distribution chain of the counterfeit or pirate goods.
1. Scope of the Follow Up Proposals - As stated above, the definition of counterfeit and pirate goods for the purpose of the Green Paper is extremely wide. The stated intention for having such a wide definition is to cover not only products which are copied fraudulently (i.e., truly counterfeit or pirated goods) but also parallel imports from outside the Community and "overruns". Although it is clearly useful at this stage of the process for the Commission to gather as much information as possible about all aspects of counterfeiting and piracy, it is important that future measures continue to draw a distinction between ordinary infringement and counterfeiting and piracy. If the measures designed to improve the enforcement of IPRs against counterfeit and pirate goods are drawn too widely, there is a risk that, although designed to combat clear cut cases of counterfeiting and piracy i.e., "unlawful" competition, they will be exploited by right holders in cases of ordinary infringement in order to stifle what may at the end of the day turn out to be fair competition.
2. Parallel Imports - In its Report on the implementation of the '94 Regulation12, the Commission gave 3 reasons for excluding parallel imports from outside the Single Market from the scope of the '94 Regulation:
- parallel imports are genuine goods and not counterfeits;
- right holders have an option rather than an obligation to enforce their IPRs against parallel imports; and
- the Customs Authorities would have difficulty distinguishing unauthorised genuine goods from authorised genuine goods.
It will be interesting to see whether in the light of the ECJ decision in Silhouette13 (which establishes a Community doctrine of exhaustion) and the inclusion of patents and supplementary protection certificates (which arguably create similar problems of identification) within the scope of the amended '94 Regulation, the Commission will be persuaded to alter its postion on this issue14.
3. Counterfeit Goods Imported From Within the Single Market - It will also be interesting to see whether the Commission is prepared to consider widening the scope of the system of border controls to give the Customs Authorities the power to prevent the importation of counterfeit or pirate goods which have originated, or already been entered for free circulation, in the Single Market. At present, the '94 Regulation does not extend this far which means that, as noted above, the system is only as effective as its weakest link.
4. Enforcement by Public Bodies - Finally, one matter not mentioned as such in the Green Paper is the extent to which responsibility for combatting counterfeiting and piracy should be left to the right holder or placed in the hands of competent authorities in each Member State e.g., the Police or other enforcement bodies within central or local government. The answer to this question and, for that matter, the means of enforcement of IPRs against counterfeit and pirate goods generally, depends on the extent to which the problem is perceived to be one for the right holder (i.e., the protection of a private interest) or the consumer (i.e., the protection of a public interest). In the UK, for instance, there has been a recent tendency to place more responsibility in the hands of local government enforcement agencies. Thus, since 1994, a statutory duty has been placed on local government (through local Trading Standards Departments) to enforce the criminal provisions of the 1994 Trade Marks Act15. To date, the experience of using local Trading Standards Departments has been favourable. Despite the lack of resources available to them, action by the local Trading Standards Departments (assisted in many cases by the right holder) has in many cases provided the right holder with a cheap and effective means of seizing counterfeit goods.
First published in Trade Mark World in April 1999.
1 Council Regulation (EEC) No. 3842/86 of 1 December 1986 laying down measures to prohibit the release for free circulation of counterfeit goods.
2 Council Regulation (EC) No. 3295/94 of 22 December 1994 laying down measures to prohibit the release for free circulation, export, re-export or entry for a suspensive procedure of counterfeit and pirated goods.
3 Council Regulation (EC) No. 241/1999 of 25 January 1999 amending Regulation (EC) No. 3295/94 laying down measures to prohibit the release for free circulation, export, re-export or entry for suspensive procedure of counterfeit and pirated goods.
4 Action Plan to Combat Organised Crime adopted by the Council on 28 April 1997 OJ C 251, 15.08.97.
5 Report from the Commission dated 28 January 1998 on the implementation of Council Regulation (EC) No. 3295/94 of 22 December 1994 as regards border controls on trade in goods which may be counterfeit or pirated and Proposal for a Council Regulation (EC) amending Regulation (EC) No. 3295/94 laying down measures to prohibit the release for free circulation, export, re-export or entry for a suspensive procedure of counterfeit and pirated goods.
6 For example, Customs Authorities are known to be concerned about their ability to identify allegedly infringing products, proceedings for condemnation are not the ideal forum in which to determine issues of validity or, for that matter, infringement of a patent and it remains to be seen whether the procedure will be exploited by patentees in cases of ordinary infringement as well as in clear cut cases of counterfeiting/piracy.
7 There is currently pending before the ECJ, a reference from a German Court regarding the applicability of the '94 Regulation to goods in the course of transit between two non-member states to which has been applied a trade mark owned by a person not based in the EU - The Polo/Lauren Company -v- PT Dwidua Langgeng Pratama International Freight Forwarders, Case no. C-383/98. One of the issues to be determined in the reference is whether the '94 Regulation should apply at all other than in relation to goods entered for free circulation in the internal market.
8 Even so, the Commission seems reluctant to harmonise fully the application procedures. For instance, despite recommendations from the European Parliament, the Commission refrained from standardising the level of fees charged and the security required by the Customs Authorities of each Member State. The reason given was simply that the differences did not affect the operation of the system.
9 In the field of copyright, numerous harmonisation Directives have been adopted in the last few years. In the field of trade marks, the harmonisation Directive was adopted in 1994. In the field of utility models, the Commission has adopted a proposal for a harmonisation Directive in December 1997. Finally, in the field of designs, the Council has adopted a harmonisation Directive in September 1998.
10 The Community Trade Mark was created under EC Regulation no. 40/94. The proposal for a Regulation creating a Community Design was adopted by the Commission in December 1993. In the recent communication from the Commission entitled Follow up to the Green Paper on the Community Patent and the Patent System in Europe, the Commission has stated that it is the Commission's intention to present a draft Regulation in 1999 aimed at creating a Community Patent.
12 See fn 5 ibid.
13 Silhouette -v- Hartlauer  ETMR 539
14 In the UK, parallel imports and "overruns" imported from outside the Single Market are subject to a domestic system of border controls.
15 Section 93 of the Trade Marks Act 1994. Although a provision imposing a similar duty exists for the criminal provisions relating to copyright (Section 107A of the Copyright Designs and Patents Act 1988), it has not yet been brought into force.