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Following our comments on the IP Action Plan adopted by the European Commission to improve the protection of intellectual property rights (IPR) on November 25, 2020, we discuss through the following lines the proposal for action in the fight against infringements of these rights, as well as the steps that have been taken in recent months by the Commission.
The IP Action Plan focuses its attention on the fight against counterfeiting and piracy. A problem that affects all categories of IPR (patents, trademarks, designs and copyrights) and that is of particular concern due to the increase detected by the authorities in the number of illicit products introduced into the internal market as well as their recent expansion into new sectors of higher risk, such as the health and food stuffs sectors.
The problem of counterfeiting and piracy: a changing and constantly growing sector
The OECD and the EUIPO have referred to the counterfeiting and piracy sector as a “dynamic and constantly changing phenomenon”, with a capacity of adaptation that has allowed it to take advantage of technological developments (such as the implementation of e-commerce) and the needs of society at any given time.
The current fight against these illicit activities faces, among others, the following specific problems:
• Existence of new forms of infringement via the Internet that hinder the possibilities of detection and of taking effective action. The OECD and EUIPO highlight a particularly important problem: the increase of “small shipments”of illicit goods purchased by the final consumer on the Internet and introduced through state postal services and courier companies that are rarely detected by customs authorities. This was confirmed by the OLAF (European Anti-Fraud Office) at the beginning of the pandemic regarding fake COVID-19 products, when it concluded that they “enter Europe through online sales and are brought into our homes via postal or courier services” (Press Release no. 07/2020, OLAF, 20 March 2020).
• Diversification of activities or sectors targeted, by means of an emergence of new categories of illicit products –which are no longer limited to the fashion and/or luxury goods sector– and that pose greater health, safety and environmental risks, such as pharmaceuticals, toys, pesticides, food and drink, electronics and/or spare parts.
• Increase in the domestic manufacture (within the EU) based on both reduced distribution costs and reduced risk of detection as it evades customs control.
• Existence of “subjective” incentives, since for infringers it is an activity with high profits, low risk of detection and relatively minor penalties, and for consumers it is seen as an “accepted” -to some extend- offence not involving a social condemnation that acts as an effective deterrent.
Measures proposed by the Commission to fight against IPR infringements
The EU has highlighted the need to step up efforts in this area and proposes the implementation of three types of measures to address these problems: (i) regulating the responsibilities of digital services; (ii) strengthening the capacity of enforcement authorities; and (iii) boosting the effective cooperation between actors and authorities. In particular, as set out in the IP Action Plan, the Commission will:
1 “Clarify and upgrade the responsibilities of digital services, in particular online platforms, through the Digital Services Act (Q4 2020).”
This measure was already fulfilled shortly after the publication of the IP Action Plan, as on 15 December 2020 the Commission presented its “Digital Services Act Package” which, after twenty years of the e-commerce Directive 2000/31/EC, takes a further step in the regulation of digital services within the EU.
In order to create a safer and more transparent digital space and to ensure fair and accessible digital markets, two pieces of legislation are proposed: (i) the Digital Services Act (DSA) regarding the obligations to be fulfilled by digital services that connect consumers to goods, services or content and concerning, in particular, providers of intermediary services and (ii) the Digital Markets Act regarding the actions of platforms acting as gatekeepers in the digital market and the practices affecting the development of a digital single market.
The Digital Services Act, aimed at harmonising the measures applicable to these services and ensuring a balance between the parties that interact through them, is particularly relevant in the counterfeiting field, as it updates the legal mechanisms in place to deal with the problem of infringing activities. This proposal:
• Maintains the three consolidated categories of providers of intermediary services already established by the e-commerce Directive, (i) mere conduit service (ii) caching service and (iii) hosting service as well as the exemption from liability regime foreseen for each of them.
• Lays down obligations of due diligence and transparency applicable to all service providers, such as the obligation of transparency of information or the obligation to establish contact points and to designate legal representatives in the Union.
• Creates additional obligations or provisions for the category of hosting services, which are increased in the case of online platforms. Online platforms are required to implement the following measures: (i) notice and action mechanisms for the removal of illegal content, which expressly includes selling products or providing services; (ii) systems for handling complaints -provided that they do not concern micro or small enterprises- against the removal, suspension and deletion decisions taken by online platforms and provision for an out-of-court dispute settlement system; (iii) traceability system in online marketplaces to help trace traders of illegal goods or services; (iv) transparency reporting obligations regarding complaints and procedures arising from illegal activities as well as online advertising; and (v) cooperation processes between the authorities and online platforms.
The harmonisation of these policies applicable to online platforms is aimed at facilitating the identification of illegal content and promoting a uniform application of mechanisms for the cease and removal of illegal content, while seeking to safeguard users’ rights against abuse in cases of, for example, mass reporting and takedowns.
The Commission’s proposal has received positive feedback as it represents a new impulse within the EU for an effective regulation of the current digital market. However, the regulation leaves some relevant aspects of the fight against counterfeiting and piracy unaddressed. In particular, the actions and mechanisms against activities carried out through the Internet when there is not an online platform or the possibility to investigate the identity and origin of infringers. In such cases, right holders should continue to invest their efforts through the adoption of different mechanisms or complementary strategies. This has resulted in the perception -in certain sectors- that the proposed measures may be insufficient to confront the current problem of counterfeiting and piracy.
2 “Strengthen the role of OLAF in the fight against counterfeiting and piracy (2022).”
The Commission proposes to strengthen the role of OLAF, whose cooperation with Europol and the Member States’ authorities in investigating the importation of illicit products into the internal market -such as Operation Silver Axe, concerning the import of large quantities of counterfeit pesticides, or Operation Shield on counterfeit and misused medicines and doping substances- has proven to be positive.
OLAF’s current mandate is limited to imports/exports in the internal market of illicit goods. Therefore the IP Action Plan proposes to broaden its competences and allow OLAF’s intervention and investigation capacities at an intra-community level.
This will give greater coverage to the investigations of counterfeiting products that originate in the internal market itself, the detection of which (as mentioned above) becomes more difficult due the fact that these operations are not subject to customs control mechanisms.
Given the nature, as a public body, of OLAF this measure should not be expected to be extended to all those sectors affected by counterfeiting. It will –most likely- focus on those products or sectors that pose greater health or environmental risks, leaving other products outside its scope even if they are widely counterfeited. This is corroborated by OLAF’s statement in its strategic plan for 2020-2024 according to which it will “continue to step up its efforts to discover fake and unsafe goods, unhealthy food stuffs and environmentally dangerous goods”.
The Commission’s proposal is supplemented (or reinforced) by a number of suggestions transferred and presented to the Member States. In particular, the Commission:
• “urges Member States and the Council to include IP crime among the priorities of the next EU Policy Cycle – European multidisciplinary platform against criminal threats (EMPACT), for the period 2022 – 2025”.
The Council has recently followed this proposal in its Conclusions, adopted on 26 May 2021, in which it has included Intellectual Property crime and counterfeiting of goods among the EU’s priorities for the fight against serious crime for EMPACT during 2022-2025.
• “will also support Member States’ customs authorities in improving risk management and anti-fraud actions, in particular through the establishment of an EU layer of data analytics capabilities”.
3 “Establish an EU Toolbox against counterfeiting (Q2 2022)”.
The last measure proposed by the Commission consists on the implementation of a set of tools (EU Toolbox) for the key players in the field in order to strengthen the existing cooperation mechanisms in the fight against counterfeiting and piracy.
From the statements made by the Commission regarding this proposal it is clear that it has been based on broad notion of “key players”, which is divided in three main categories: (i) right holders, (ii) intermediaries and (iii) authorities. The “intermediaries” category is particularly broad in this case, amongst which the Commission includes the following: online marketplaces, advertising industry, classified advertising websites, social networks, domain name registrars and registries, transport and logistics companies, search engines and internet access providers.
Although the specific content and functioning of this toolbox has yet to be defined, the Commission has outlined the main areas or aspects that it intends to prioritize with the implementation of the EU Toolbox:
• Clarify the roles and responsibilities of the players involved in a broad sense, as it aims to include both online and physical intermediaries and is conceived as a possible complementary mechanism to the aforementioned Digital Services Act.
• Identify ways of working together that lead to a better collaboration.
• Enable the sharing of relevant data on products and traders , i.e. facilitate the sharing of more information (and of higher quality) and improve the interoperability of databases. As part of this action, it envisages to extend EUIPO’s IP Enforcement Portal, which already allows right holders to interact with national authorities in cases concerning, for example, the issues and detection of illegal imports at customs.
• Promote the use of new technologies in this area, such as image recognition, artificial intelligence and blockchain.
Following the measures inferred from the Digital Services Act, the Commission’s proposal is leading towards a trend already in motion in the market. That is, encouraging the cooperation between right holders and intermediaries in taking action against counterfeits. As in the cases of Amazon and Salvatore Ferragamo or Valentino and, more recently, Facebook and Gucci, in which those companies have filed joint lawsuits in the United States against a number of individuals and organisations that were selling allegedly counterfeit goods through these platforms. The aim of this being the use of cooperation -in itself- an effective mechanism in the fight against IPR infringements.
Conclusion
As pointed out at the beginning of this comment on the fight against IPR infringements in the IP Action Plan, in spite of the positive reaction to the measures proposed by the Commission -and without prejudice to their specific materialisation in the months to come- there are still some doubts regarding their effectiveness against the numerous problems of the counterfeiting and piracy markets. Problems that stem mainly from the broad scope of these activities in various sectors and the diversity of means used by infringers to introduce and market illicit products.
Although the fight against counterfeiting and piracy has been going on for years, the proposed mechanisms cannot be effectively used to address certain infringing behaviour that takes place on the Internet and, in any case, do not envisage any new or more effective measures against the long existing counterfeiting in (physical) markets and customs.
Lastly, the Commission’s message on the matter is clear: the fight against IPR infringements must be the subject of greater cooperation not only on the part of the Member States –that should, however, prioritise the problem – and the authorities, but mainly on the part of private actors, both right-holders and intermediaries through whom (even indirectly or with ignorance) an important part of the illegal conduct is articulated. According to the Commission’s proposal, it is up to all of them to adopt joint measures in the fight against IPR infringements.
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1 Trends in trade counterfeit and pirated goods (OCED y EUIPO, 2019)
2“The emperical evidence suggests that these counterfeit products enter Europe through online sales and are brought into our homes via postal or Courier services” (OLAF PRESS RELAEASE 20 MARCH 2020)
3 Strategic Plan 2020-2024 of the European Anti-Fraud Office (OLAF)
4 Council conclusions settings the EU’s priorities for the fight against serious and organised crime for EMPACT 2022-2025
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