2.11.1 Border Measures

a) Most Frequent Products Subject to Counterfeiting in the EU

The European Commission has reported an increasing number of customs enforcement activities, with more than 36,000 seizure actions in 2006 (an increase of around 40% as compared with 2005) and with 130 million objects seized in 2006 (increasing from 75 million in 2005). While counterfeiting has traditionally been applied to luxury items, in recent years it has increasingly been applied to household consumer goods. In 2006, more than 1.6 million counterfeit cosmetics/personal care products and 1.2 million foodstuffs & beverage products were seized at the EU external border, out of a total of 130 million fake objects. Also seized were counterfeit airplane parts, electrical appliances and toys.

The European Commission is particularly worried about the booming trade in counterfeit medicines with more than 2.7 million products seized in 2006.

Cases Registered and Articles Seized by Product Type (2006)

b) EU's Action Plan to Combat Counterfeiting

In 2005, the Commission announced its Action Plan to combat counterfeiting, including the following proposed actions:

• a new business-customs working group to consider a refinement of existing anti-counterfeiting legislation;
• a new task force of Member States' customs experts, with a view to improving controls;
• the completion of an anti-counterfeiting risk management guide and a new electronic system for the real-time transmission of information (much like a hot-line which right-holders can use to transmit information to the authorities);
• the promotion of memoranda of understanding with major trade representatives such as airlines, shippers, express carriers, etc., to improve their awareness of illicit traffic;
• a recommendation to amend the WTO TRIPs Agreement so that countries apply stricter controls not only on imports but also on exports, transits and transhipment movements; and
• customs vigilance and cooperation with other trade partners, notably the Chinese mainland, the US and Japan, is also high on the EU agenda.

c) 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 (Regulation 1383/2003)

To tackle counterfeiting, the EU has adopted a procedure which allows for the suspension of the entry into its territory of counterfeit and pirated goods as well as of all goods infringing intellectual property rights. This procedure is contained in Council Regulation 1383/2003. The Regulation sets out the conditions under which customs authorities may intervene where goods are suspected of infringing intellectual property rights, and provides harmonised procedures by which right holders may apply for action to be taken.

i. Initiation of the Procedure

The procedure is lodged at the request of the owner of the intellectual property right (i.e. trademark, patent, copyright, design, etc.) which is violated because of the import of counterfeit or pirated goods. The application should include a sufficiently detailed description of the goods to enable the customs authorities to recognise them and a proof that the applicant is the holder of the right for the goods in question. The application should also include information concerning the nature of the fraud and the name and address of the contact person appointed by the right-holder. The right-holder may also request the intervention of the customs authorities of one or more Member States if he is the holder of a Community trademark, design or model, a designation of origin, or a geographical indication or designation protected by the EU.

ii. Consequences if a Violation of IPRs is Found

If there are sufficient grounds for suspecting that goods infringe intellectual property rights, the customs authorities of the EU Member States may suspend the release of the goods into the territory of the EU or detain them. A procedure is established to assess the effective violation of intellectual property rights. The law in force in the EU Member State within the territory of which the goods are placed applies when deciding whether an intellectual property right has been infringed under national law.

If a violation is finally found, the goods in question cannot be allowed to enter into the EU nor can they be removed from the EU's customs territory. In accordance with the rules of each EU Member State, the counterfeit or pirated goods can be destroyed or disposed outside commercial channels, regardless of the penalties and/or fines which could be imposed.

iii. Penalties

In cases of violation, Member States are required to apply penalties that are proportionate and dissuasive. Under certain conditions, infringing goods could be destroyed without the obligation to initiate proceedings to establish whether an intellectual property right has been infringed.

2.11.2 Internal Measures

The enforcement of intellectual property rights (Directive 2004/48)

The objectives of this Directive are to harmonise national laws on the enforcement of intellectual property rights, including all copyright, trademarks and patents, among EU Member States and to establish a general framework for the exchange of information between the competent national authorities. The Directive also aims to quell the controversy over the non-payment of royalties, by trying to ensure that licence fees are paid to right-holders on all types of goods, which would include DVD players and other electronics.
 
a) Initiation of Actions

The Directive widens the scope of persons who are entitled to attack manufacturers and importers of infringing goods: the right-holder itself may seek application of remedial measures, but so may all other persons who are authorised to use those rights, in particular other licensees and organisations eligible to defend right-holders' interests.

b) Powers of the Investigating Authorities

Judicial authorities are expressly provided with powers to obtain evidentiary information from an alleged wrong-doer: included are banking, financial or commercial documents under his control. Moreover, before the commencement of proceedings, judicial authorities can order, without even the alleged wrong-doer being heard, effective provisional measures such as the seizure of allegedly infringing goods and/or the materials or implements used in their production.

The judicial authorities are, in addition, entitled to demand and obtain information on the origin and distribution network of infringing goods, the quantities produced or made available, and other details, from the infringer and any other party, be it the seller of such goods, the manufacturer or importer. The authorities can prevent, by issuing an injunction, any imminent infringement, or demand a recurring penalty payment where such infringement continues.

Other actions against wrong-doers include permanent seizure or delivery up of goods, the blocking of bank accounts and of any other assets in the possession of the infringer.

c) Measures in Case of Violation

Corrective measures which can eventually be taken at the outcome of a case include product recalls and permanent removals from the channels of commerce, or even destruction of the infringing goods, all at the expense of the infringer. The infringer may also be ordered to pay damages to the right-holder, appropriate to the actual prejudice suffered by him as a result of the infringement, such as lost profits, or unfair profits gained by the infringer or the moral prejudice caused to the right-holder.

The Directive makes express reference to non-payment of royalties or licence fees: a judicial authority may set the damages as a lump sum on the basis of elements such as the amount of royalties or fees which would have been due if the infringer had requested authorisation to use the intellectual property right in question. This provision reflects the rising concern in recent years of imports being made into the EU of unlicensed products which can, at a stretch, be worth as little as 10% of the price of the same but appropriately licensed product.