Opinion of the Economic and Social Committee on the 'Proposal for a Council Regulation (EC) amending Regulation (EC) No 3295/94 laying down measures to prohibit the release for free circulation, export, re-export or entry for a suspensive procedure of counterfeit and pirated goods'
Date: 1998-07-01
Institutions: European Economic and Social Committee
Subjects: customs regulations, free circulation, intellectual property, marketing restriction, trade mark

14.9.98

EN

Official Journal of the European Communities

C 284/3

Opinion of the Economic and Social Committee on the ‘Proposal for a Council Regulation
(EC) amending Regulation (EC) No 3295/94 laying down measures to prohibit the release for
free circulation, export, re-export or entry for a suspensive procedure of counterfeit and
pirated goods’ (1)

(98/C 284/02)

On 11 May 1998 the Council decided to consult the Economic and Social Committee, under
Article 198 of the Treaty establishing the European Community, on the above-mentioned
proposal.

The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 3 June 1998. The rapporteur
was Mr Giesecke.

At its 356th plenary session on 1 and 2 July 1998 (meeting of 1 July), the Economic and Social
Committee adopted the following opinion by 136 votes to two.

1.

Introduction

1.1.
In the industrialized countries, there is a growing
demand for quality in the manufacturing industry,
farming and the burgeoning service sector. Branded and
innovative products — which are often protected by
industrial property rights — meet this need, but at a
price. This price reflects not only better quality, but also
innovation and advertising.

1.2.
Those engaged in product piracy take advantage
of cheaper manufacturing conditions, for the most part
abroad. They have no development costs, licensing fees
or advertising outlay. They evade the costs of the
normally mandatory safety tests. Their customers are
people prepared to forgo these marks of quality for the
sake of a perceived bargain, or those to whom brand
names are all-important (even when they are forged).

1.3.
Counterfeit and pirated goods are now found in
many manufacturing fields, ranging from clothing,
leisure articles, watches, jewellery, cosmetics and phar-
maceutics to technical products such as tools and car
spares. Product piracy is on the increase in these
last-named areas, posing a clear threat to buyers who
are more than ever dependent on product safety. Not
only that, the manufacturers of genuine goods often face
unwarranted product liability claims.

The economic impact of product piracy is, of
1.4.
course, felt in the first instance by the manufacturers of
genuine products, followed by specialist retailers and
exporters. The government loses significant revenue
from various different sources. Unfortunately, the num-
ber of skilled jobs lost can only be roughly estimated,
but the German figure, to take an example, is put at
some 70 000. The same is true for the costs of legal

(1) OJ C 108, 7.4.1998, p. 63.

proceedings (lawyers’ fees, court costs, detective agen-
cies) which hit innovative small and medium-sized
businesses particularly hard. Between 5 and 8 % of
world trade is now estimated to be in counterfeit goods.

1.5.
In a continent whose competitiveness increas-
ingly depends on its innovative strength and the quality
of its products, this trend must be halted as a matter of
urgency. The draft regulation under review is a crucial
element in helping do just that.

2. The Commission proposal

2.1.
The Commission paper comprises (i) the report
on the implementation of the present regulation and (ii)
a proposal to amend this regulation.

2.2.
The Commission report looks at the experience
of Community customs authorities since 1 July 1995 in
suspending customs operations on articles presented
for import clearance which are suspected of being
counterfeit or pirated goods covered by an intellectual
property right in respect of which the right holder has
requested ‘customs protection’ under the terms of the
regulation.

2.3.
From July 1995 to June 1997, the customs
authorities in the Member States took action in a total
of 4 133 freight, postal and passenger cases.

2.4. On the basis of the experience to date, the
Commission amendment now proposes to extend the
scope of the regulation and align it on the development
of Community legislation on intellectual property rights.
The proposals include:

— extension of the scope of the regulation to cover
patented inventions, restricted to patents on prod-
ucts;

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Official Journal of the European Communities

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— extension of the customs authorities’ scope for action
to cover free zones and free warehouses, and all
suspect goods under customs supervision;

— simplifying and updating the regulation to take
account of the Community trade mark (fully oper-
ational since 1 April 1996) by making it possible
for holders of such marks to apply for ‘customs
protection’ valid in a number of Member States.

3. General comments

3.1.
The Commission appears pleased with develop-
ments in its first report on the implementation of
Regulation (EC) No 3295/94. Given the figure for
imported counterfeit goods, however, this is but the tip
of the iceberg. In the Committee’s view, there is a clear
need for improvement, given that some Member States
carry out very few operations in this field and others
none at all.

3.2. Nevertheless, now that the learning process of
the first few years is over, it would seem expedient to
extend the scope of the regulation to cover patented
inventions and all customs statuses, and to update the
regulation to take account of the Community trade
mark.

3.2.1.
The Committee feels, however, that transpo-
sition may be limited by the fact that, particularly where
the various different kinds of patents are concerned,
the customs authorities may experience difficulties in
spotting violations. One should not, therefore, overesti-
mate the impact of extending the scope of the regulation.

3.3.
In the Committee’s view, experience to date
indicates that information on this relatively new mecha-
nism needs to be considerably enhanced in both direc-
tions. The parties holding the rights (companies) should
be kept abreast of the options open to them, but they
should also help facilitate customs officers’ practical
work by improving the information they provide to the
customs authorities. A two-way flow of information of
this kind, coupled with improved training for customs
officers in this area, is the only way to ensure success in
the fight against forgery.

3.3.1.
The Committee is concerned that staffing cuts
in Member States’ customs administrations make it
more difficult for them to handle their changing tasks.
The progression from duty-collection agencies working
to government instructions to service administrations
promoting economic development becomes particularly
clear in activities undertaken on behalf of private and
public holders of protection rights.

3.5.
The Committee feels it is important, both in
trade circles and among the population at large, to drive
home the repercussions of counterfeiting on the various
different markets. People must be made more aware
that this particular form of economic crime is wrong.
The European Commission should act to strengthen
and coordinate Member States’ information campaigns.

3.5.1.
This aspect should be taken into account when
assessing non-commercial traffic, mainly tourism. After
all, tourism accounts for half of all operations in
this field, with the quantities involved, of course,
correspondingly modest.

3.5.2.
The Committee takes that view that the cri-
terion used should not focus on duty free-allowances
alone, but, above all, on what may be considered
‘normal’ in each individual case.

3.5.3.
The European Commission should alert its
delegations in the high-risk countries to the scale of
counterfeiting, in order to instigate surveillance and
alert schemes in conjunction with the authorities of
the Member States and the trade circles concerned.
Concerted action should be taken to alert the authorities
of the countries concerned to the possible adverse
consequences, inter alia in the area of commercial policy
of an over-permissive attitude.

3.6. One particular difficulty with the system is that
EU-level arrangements are necessarily limited in scope
since procedures are determined under national law.
Industry would like to see harmonization in this field so
as to ensure optimum implementation of the most
important provisions.

4. Specific comments

4.1.
The fact that intervention varies tremendously
from one Member States to another may reflect both
differences in the scale of protection rights and different
ways of handling operations. As part of consultations
on the green paper, the Commission is asked to calculate
the ratio between the number of applications for
protection and the number of violations detected in the
Member States.

4.2.
The fact that figures for violations vary between
Member States may, in the Committee’s view, be partly
due to the procedural differences after a violation
has been detected. For example, customs officials’
motivation may be considerably blunted by the less than
efficient way in which customs authorities work together
with the courts. In this regard, the Committee can but
stress the importance of a simple, transparent and speedy
procedure.

3.4.
Experience to date has also shown that the
effectiveness of the system depends on a minimum level
of physical, intelligently placed controls and a high level
of training.

4.2.1.
Although the Commission has no right of
initiative in respect of national courts, it should nonethe-
less convey to national governments the urgent need for
a lean procedure as called for in Part III of the Agreement

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on Trade-Related Aspects of Intellectual Property Rights
(TRIPS). The Committee sees a major link between
procedural practicalities and the motivation of customs
officials on the ground.

The Committee feels that those Member States which
levy fees should cut them to a level which does not deter
medium-sized and small businesses from submitting
applications for protection.

4.3.
The Committee feels that the current arrange-
ments in Greece are extremely unsatisfactory. Given
Greece’s importance as a potential gateway to the
European single market, the Committee backs Com-
mission efforts to encourage that country to find a
practicable solution.

4.4.
The regulation only covers operations relating
to trade with non-EU countries at the Community’s
external borders. Once forgeries enter the single market
undetected, they are pursued under national arrange-
if at all. The Commission should propose
ments,
harmonization remedies — as far as possible — in the
green paper discussion.

As things stand, seizure applications may be
4.5.
valid anything from between three months and two
years in the various different Member States. Since
effective follow-up may be expected to take some time,
the Committee feels a period of validity of at least one
year should be agreed across the Community.

4.6.
The Committee takes the view that the basic
idea of a Community trade mark is incompatible with a
situation such as this in which frontier seizure appli-
cations may be limited to certain EU countries. The
Community trade mark is a uniform mark, with a
uniform legal basis applicable to the Community as a
whole. Taking this concept to its logical conclusion, the
only sensible option is to have a uniform frontier seizure
application procedure effective in all EC Member States.

4.7. Where, after the operation is completed, the
forged goods are ordered to be destroyed, the sometimes
considerable costs involved should be borne by the
guilty party, generally the manufacturer of the forged
goods. If the manufacturer cannot be identified or
summoned, the importer should pay the costs, unless he
or she acted in good faith. The Committee feels it is
unreasonable to expect the party holding the protected
rights or the state to pay the costs of destruction in cases
where the manufacturer or the importer acting in bad
faith can be required to do so.

4.8.
The fees set for lodging an application to the
customs authorities and the securities to be deposited
for administrative costs and liability in the further course
of the procedure vary considerably from one Member
State to another. In the Committee’s view, the main
concern is that these fees should not act as a deterrent,
i.e. prevent small companies from using the mechanisms
in place.

4.8.1.
It should be possible for surety to take the form
of bank guarantees in all Member States, in accordance
with local practices.

It is essential that there should be direct contact
4.9.
between right holders (i.e. companies) and the customs
authorities. In particular, the customs authorities should
be kept informed of how the matter is proceeding. This
too would enhance motivation on the part of customs
officers.

4.6.1. Otherwise, the danger is that the counterfeiter,
learning that the restriction applies only to certain
countries, will naturally seek to launch the goods via
‘non-protected’ countries.

4.10.
Penalties too are fixed by national courts.
Although harmonization is unlikely to be achieved in
the near future, it should be ensured that these penalties
are highly deterrent in their effect.

Brussels, 1 July 1998.

The President

of the Economic and Social Committee

Tom JENKINS