IP Enforcement Directive 2: European Community goes criminal
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.
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,
- criminal law is unsuited to be applied as blanket measure for all IP infringements
- the proposal would outlaw large parts of our knowledge economy
- the Commission is exceeding its legislative competence
We will first discuss the claimed goals of the proposal, followed by six core issues with the presented text:
- Misdirected measures
- Sign of powerlessness by the Commission
- No harmonisation
- Justifications don't match the contents
- "Intentional" and "commercial" are meaningless
- 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
- make all commercial scale, intentional IP infringements a criminal offence in the member states, regardless of whether they are linked to organised crime or not. The same goes for attempting, aiding or abetting and inciting such infringements;
- lay down minimal maximum penalties for such infringements;
- require that private agents of right holders are allowed to participate in international investigations related to such infringements.
The proposal is unfortunately flawed from top to bottom, including in terms of the legal basis, justifications and proposed measures.
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:
- A number of IP infringements are routine in common business practice. For example, all companies ignore software patents to some extent, simply because every single useful program you write infringes on several patents.
- The previous point results in weakening of criminal law and our justice system in general by turning so many people and businesses into supposed "common criminals".
IP infringements are almost never clear-cut. Patents go to trial and the outcome can be any combination of the fact that the patent was valid or not and that it was infringed or not. Copyright cases can be quite hard to decide (The Da Vinci Code), the same goes for trademarks (Microsoft vs MikeRoweSoft).
Law enforcement officials are usually unaware of licensing contracts among involved parties, even if such contracts are public (which they usually aren't). It is none of their business who licenses what to whom and why, so you get situations where e.g. a UK Trading Standards official cannot believe that companies can resell the freely downloadable Firefox web browser.
Criminal law by nature requires very clear boundaries. Not being able to know beforehand whether one commits a criminal offence or not is unacceptable both in terms of justice and human rights. Criminal law presupposes that one should know the law, but that is impossible in this case. See also Article 49.1 of the proposed Constitutional Treaty.
*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:
- The right holders themselves are usually more interested in compensation (civil law) than in punishment (criminal law). In fact, they usually want the infringement to continue as opposed to have it stopped (which would be the objective of criminal law), as long as they get paid for those actions.
- Governments have better things to do with tax payer money than helping out Ferrari and music publishing associations.
*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
- The terms "commercial scale" and "willful" are not harmonised.
- Some IP rights, such as the ones related to trademarks, are themselves not harmonised by the Commission's own admission.
- Since the directive does not lay down any minimum penalties or prosecution priorities, the treatment of IP infringements in different member states can still differ as much as it does today.
It is well documented that if criminals choose to operate in a particular country, this decision will be based on the chance of being caught. However, as mentioned in the previous point, the Commission cannot influence prosecution priorities.
*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.
6. No demonstration of legal basis, mingling in member state affairs
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".
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
- IP rights
- the European Union project
- the Constitutional Treaty project
- the battle against organised crime and terrorism
We therefore urge the Commission to retract this ill-conceived directive.
- Text of the directive proposal:
We would like to thank Reinier Bakels for his insightful input.