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IP Enforcement Directive 2: European Community goes criminal

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Analysis of the IP Enforcement Directive text (IPRED2) proposed by the European Commission on 2 May 2006. The Commission bulldozes through criminal law, completely mixes up infringement and organised crime and at the same time manages to exceed its legislative competence.


Overview

The original (and also quite controversial) IP Enforcement Directive (IPRED1) was approved in 2004. It introduced various new measures available to right holders in case of IP infringements. All of them were however limited to civil law.

In IPRED2, the Commission proposes to add criminal sanctions for all IP infringements. As we demonstrate below,

We will first discuss the claimed goals of the proposal, followed by six core issues with the presented text:

  1. Misdirected measures
  2. Sign of powerlessness by the Commission
  3. No harmonisation
  4. Justifications don't match the contents
  5. "Intentional" and "commercial" are meaningless
  6. No demonstration of legal basis, mingling in member state affairs

Afterwards, we present our conclusion and wrap up with links to background information.

The claimed goals of the proposal

The Commission claims that IP infringements threaten national economies and governments, threaten public safety and health, and are increasingly linked to organised crime. It also claims that the implementations of !TRIPs requirements concerning criminal sanctions differ too much among member states. Therefore, it proposes to

The proposal is unfortunately flawed from top to bottom, including in terms of the legal basis, justifications and proposed measures.

Flaws

1. Misdirected measures

Counterfeiting and large scale copyright infringement by criminal organisations are a real problem. That is why the !TRIPs agreement, which is signed by all EU member states, requires criminal sanctions for these infringements.

The Commission now wants to extend these measures to all IP infringements. It may sound like a bold step to reinforce the controversial "Intellectual property shall be protected" statement from the proposed Constitutional Treaty, but turns out to be quite misguided:

*Conclusion:* Not all IP infringements are of criminal nature, and therefore it does not make sense to criminalise each and every one of them. The proposed text weakens criminal law because under its definitions too many citizens and businesses doing nothing wrong are supposedly criminals.

2. Sign of powerlessness by the Commission

The Commission claims it will harmonise the handling of IP infringements in member states. All it does however is define a number of penalties which judges must be able to impose (which, as an aside, happen to be more severe than those for counterfeiting the Euro).

At the same time, the investigation and prosecution policy (naturally) remains under the authority of member states. And for IP, the current rule is most of the time: civil law comes first, and criminal enforcement of IP rights has a very low priority.

The reasons are:

*Conclusion:* Criminal law is generally unsuited and therefore mostly unused for IP infringements. The Commission can't change this with a directive.

3. No harmonisation

The Commission extends the !TRIPs provision of criminal sanctions for "counterfeiting and copyright piracy" to all "commercial scale and intentional" IP infringements. The problems with this are that

*Conclusion:* The Commission's "harmonisation" is based on non-harmonised terms and even non-harmonised rights. Additionally, the imposed measures do not force any particular harmonisation. A "Common Market for Crime" which can be regulated by the Commission is still a long way off.

4. Justifications don't match the contents

The Commission's justification is based on four arguments, but none of them actually makes sense when compared to the contents of the directive.

Threats to national economies and governments

Threats to governments probably refers to the ultimate argument if one wants to get something approved without annoying questions: terrorism. See below under "organised crime" for more about this, as the same arguments apply.

Threats to national economies refers to the fact that a large part of our economy is now knowledge-based, which a.o. involves the use of IP rights. As explained earlier on however, criminal law is unsuited and therefore barely used in this area. Additionally, many regular companies would become criminals under the proposed measures.

Threats to public safety and health

Regardless of whether generic medication infringes on a patent or not, it will have to be approved by the European Agency for the Evaluation of Medicinal Products (EMEA). Devices, tools, toys etc. also have to be approved by a community agency before they can be sold.

If counterfeit products are sold under someone else's registered trade name in order to evade such checks, then this action in itself is already criminally sanctionable (since counterfeiting falls under the !TRIPs provisions).

Battling organised crime

Financing means such as drugs trade, weapon and human trafficking, counterfeiting, extortion etc. are already illegal and part of criminal law.

This directive adds rights such as patents, plant variety rights, sui generis right of a database maker, etc, but these have little or nothing to do with the way these organisations finance themselves.

Implementing the "Intellectual property shall be protected" statement from the proposed Constitutional Treaty

It is unfortunate that the Commission keeps hammering this controversial statement as much as possible. Its unconditional nature makes unique in the world. For example, the US Constitution states that such rights should only be protected to the extent that they "promote science and the useful arts". It should always be kept in mind that IP rights are a means to an end, and not an end in themselves which should be protected for their own sake.

Sometimes this provision is confused with the human right to property. That provision however merely means that once recognised, a property right cannot be arbitrarily taken away (without compensation). It does not mandate that everything which people call their own should be recognised as property.

*Conclusion:* The Commission's arguments regarding organised crime and threats to public safety don't stand up to even elementary scrutiny. This endangers popular and political support for other measures aimed at ensuring public safety and combatting terrorism. One can cry wolf only so many times.

5. "Intentional" and "commercial scale" are meaningless

In criminal law, "willful" does not necessarily mean one is aware that (s)he is committing a crime. It often simply means that one is performing the action (which happens to be criminal) not accidentally, but consciously. I.e., one cannot accidentally write or sell software, this always happens consciously. Consequently, every software patent infringed by such software could easily be deemed to be intentional, regardless of knowledge about said patents by the author(s).

"Commercial scale" is sometimes interpreted as "depriving someone of potential income". So, even not-for-profit activities can be considered to be commercial scale. In other cases, infringement is always commercial. For example, patents are free for private use, and trademarks are only protected in the context of commercial conduct.

*Conclusion:* The requirements that the infringement be "intentional" and "commercial scale" are no real limitations due to their particular meaning in criminal law.

The Commission is proposing this directive based on Art 95 of the Treaty, i.e. under codecision. This means that the European Parliament can co-legislate, and that the Council can decide with a qualified majority (as opposed to unanimity) if the Commission agrees with its standpoint.

Art 95 of the Treaty can only be invoked if without harmonisation, a distortion in trade between Member States can occur. Apart from the fact that this proposal does not harmonise anything, the Commission has not even attempted to demonstrate any distortions in trade resulting from differences in criminal enforcement of IP rights. See also the remarks of Professor Hilty and Dutch Minister of Justice Donner.

Additionally, this is the first time that the Commission is trying to legislate criminal law without the member states having a veto right. Several member states are not amused by this fact, and dispute the Commission's right to do so. The Commission's message that we must hurry to implement such measures "before the next terrorist attack" is disappointingly populist in nature.

*Conclusion:* The Commission is alienating member states and the European population from the European project by attempting to interfere in matters over which it has no authority, and by trying to push everything through in the name of "the battle against terrorism".

Overall conclusion

With this proposal, the Commission is exceeding its competence both in terms of legislative power and in terms of appreciating the finesses of criminal law. It justifies its proposal with superficial, populist arguments and only seems to be interested in flexing its muscle: demonstrate to member states that it can legislate criminal law via the codecision procedure.

The Commission is playing a dangerous game here which at the same time threatens to undermine respect and support for

We therefore urge the Commission to retract this ill-conceived directive.

More information

Acknowledgements

We would like to thank Reinier Bakels for his insightful input.

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