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Brussels, 13 May 2008

Conference on Counterfeiting and Piracy: Frequently Asked Questions (FAQs)

What is the purpose of the Conference?

The High Level Conference on Counterfeiting and Piracy has been organised on the Commission's own initiative. It aims to provide a platform for Members of the European Parliament (MEPs) and major stakeholders, representing business, public administrations and civil society, to discuss the most important aspects of counterfeiting and piracy, exchange views and experiences and explore possible practical measures to enhance the fight against counterfeiting and piracy.

The Conference seeks to demonstrate that the Commission and MEPs fully support the drive for increased focus at the EU level in the fight against fake goods.

The Conference also aims to provide industry with a forum to expose the scope and the extent of the problems posed by counterfeiting and piracy, to express its readiness to actively engage counterfeiters and pirates and to collaborate with the authorities in public-private partnerships.

Counterfeiting and piracy also have a societal dimension. The Conference covers this via the participation of consumer and civil liberty organisations, either as speakers or as participants in the audience.

The Conference is not a one-off event but intends to be the starting point of a process towards a long-term strategy mobilizing both industry and public authorities to jointly combat counterfeiting and piracy.

What is the difference between counterfeiting and piracy?

The enforcement section of an agreement on intellectual property rights negotiated in the World Trade Organisation, known as the TRIPS Agreement[1], contains the following definitions:

"Counterfeit trademark goods shall mean any goods, including packaging, bearing without authorisation a trademark which is identical to the trademark validly registered in respect of such goods, or which cannot be distinguished in its essential aspects from such a trademark and which thereby infringes the rights of the owner of the trademark in question under the law of the country of importation."

This can be interpreted as being something made in imitation of something else with the intent to deceive.

"Pirated copyright goods shall mean any goods which are copies made without the consent of the right holder or person duly authorised by the right holder in the country of production and which are made directly or indirectly from an article where the making of that copy would have constituted an infringement of a copyright or a related right under the law of the country of importation".

This can be interpreted as an illegal copy of something that already exists.

What is the scope and magnitude of the problem with counterfeiting and piracy?

It is very difficult to produce exact figures, as counterfeit and pirated goods fall outside the mainstream economy. According to figures from the Organisation for Economic Co-operation and Development (OECD), international trade in counterfeit and pirated goods is estimated to have reached USD 200 billion in 2005. This amount is larger than the individual Gross Domestic Products of about 150 economies in the world, including 24 of the EU Member States.

The OECD figures do not include domestic production and consumption of counterfeited and pirated goods, nor the volume of pirated digital products being distributed via the internet. If these items were added, the total magnitude of counterfeiting and piracy worldwide could well be several hundred billion dollars more.

Over the last few years, there has been an alarming expansion in the types of products being infringed. They range from luxury items such as sportswear, watches and jewellery, to more ordinary items that have an impact on personal health and safety such as pain killers, razor blades, baby milk, children's toys and car parts. Asia emerges as the largest source for counterfeited and pirated products, with China being the largest source.

In 2006, EU customs officials intercepted more than 128 million counterfeited and pirated articles, involving 37,334 cases, a jump of 70% compared to 2005. In 2006, German customs officials alone confiscated about € 1.2 billion worth of counterfeit goods. This was five times more than in 2005.

How do counterfeiting and piracy affect the EU?

First, counterfeiting and piracy are detrimental to innovation, directly affecting job creation and economic growth. Industries protect their ideas through a variety of legal instruments such as patents, copyrights, designs, models and trademarks. Without the protection of their intellectual property rights, they are less inclined to develop new ideas and products. Risks are particularly high for industries in which the research and development costs are high compared to the production costs of the finalised product (eg pharmaceuticals). Faced with a diminishing turnover in the face of counterfeiting and piracy, industry innovation is set to slow down. This would limit development, growth and competitiveness, forcing them to simply close down or limit production.

Second, counterfeiting and piracy harm consumers. While some consumers are looking for what they believe to be bargains, knowingly buying counterfeit and pirated products, others may purchase counterfeit and pirated products believing they have purchased genuine articles. In both cases, products are often sub-standard and carry health and safety risks that range from mild to life threatening. Sectors where health and safety effects tend to occur include: car parts (brake pads, hydraulic hoses, engine and chassis parts, suspension and steering components, airbags, spark plugs, filters), electrical components (circuit breakers, fuses, switches, batteries), food and drink (tea, rice, vodka, raw spirits, baby formula), chemicals, toiletry, household products and tobacco products.

Third, due to its growing size combined with a high return on investment and relatively light penalties when operations are detected, piracy and counterfeiting have become an attractive investment for organised crime.

Finally, counterfeiting and piracy affect the public budgets of the Member States. Every year, millions in tax revenues are lost as a result of pirated and counterfeited goods smuggled through customs and sold on grey markets. Meanwhile, Member State governments often bear the costs associated with addressing the consequences of counterfeiting through further expenditure on consumer health and safety and on law enforcement.

What actions is the EU already taking against counterfeiting and piracy?

Within the EU, the Enforcement Directive (2004/48/EC) is the cornerstone piece of legislation in the fight against counterfeiting and piracy. It aims to harmonise the laws of the Member States on means of enforcing intellectual property rights (via sanctions and remedies). The Directive covers infringements of all intellectual property rights (trade marks, designs, patents, copyright etc.) which are for commercial purposes or which cause significant harm to rightholders.

It only covers civil measures. For example, remedies are available to rightholders, such as the destruction, recall or permanent removal from the market of pirated or counterfeited goods, as well as financial compensation, injunctions and damages. The Directive also contains the necessary safeguards and limitations to protect the interests not only of the defendant but also of potentially innocent offenders, who have unknowingly been involved in counterfeiting or piracy. (See IP/04/540)

As regards criminal sanctions, the Commission has adopted a proposal for a Directive and for a Framework Decision on intellectual property infringements. Member States were required to treat all infringements of intellectual property on a commercial scale as a criminal offence. The proposal is currently pending in the Council. (See IP/05/906 and IP/06/532)

Concerning customs cooperation, the EU customs legislation was modernised in 2004. The new regime sets out clear conditions under which the customs authorities may intervene in cases where goods are suspected of infringing intellectual property rights (See IP/03/1059).

In Relations with Third Countries, the Commission is reinforcing enforcement activity and cooperation with a number of priority countries, in particular in the EU's trade relations with China, Russia, ASEAN (Association of Southeast Asian Nations), South Korea, Mercosur (Southern Common Market), Chile and Ukraine. The Commission also works to improve enforcement in Turkey in the context of accession negotiations.

Recently, the US and Japan jointly proposed to strengthen anti-counterfeiting on an international scale through a new anti-counterfeiting trade agreement (ACTA). It identifies three key areas for agreement: international cooperation, principally between customs and enforcement agencies; enhancing the enforcement network by enhancing expertise; and the statutory framework. The Commission has received a negotiating mandate from Member States to achieve a formal agreement (see IP/07/1573).

What needs to be done further?

There are already a number of legal instruments in place, but in order to make them more effective, the European Commission is seeking stronger administrative cooperation between authorities at all levels in the fight against fake goods:

  • Improving the collection and quality of data. As stated before, data on counterfeiting and piracy is still very incomplete and fragmented. The Commission will therefore analyse how data collection at the European level can be improved.
  • Within Member States coordination between key players can be enhanced by sharing best practices. Between Member States, an efficient network of cross-border cooperation could be set up to facilitate a rapid exchange of information.
  • Greater public-private cooperation can also be a useful tool to improve enforcement, for example through a platform that would enable this cooperation, facilitating the collection and exchange of information, while monitoring the developments in the trade of counterfeits.
  • Inter-industry deals to crack down on the most evident forms of counterfeiting and piracy, including those on the internet, could prove to be a very effective and efficient way to diminish the extent of the problems. Opportunities also exist in the field of standardized tracking and tracing methods, possibly even across sectors, and user-friendly ways to authenticate original products.

Is there a link with the Community patent strategy?

Yes. The creation of a Community patent and a unified litigation system would strengthen the EU in the fight against fake goods. A unitary title providing equal protection throughout the entire territory of the EU would enhance and render more effective the fight against counterfeiting and the copying of products which are protected by patents owned by European companies. Complete geographical protection without any loopholes would help to prevent the entry of counterfeit products into the EU. An EU-wide scope of application would facilitate their effective seizure by customs authorities at all external borders of the EU and their removal from the market wherever they enter distribution channels.

[1] Agreement on the Trade-Related aspects of Intellectual Property Rights

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