Opinion of the Economic and Social Committee on the 'Commission Green Paper "Combating Counterfeiting and Piracy in the Single Market"'
Date: 1999-02-24
Institutions: European Economic and Social Committee
Subjects: ESC opinion, application of EU law, customs regulations, industrial counterfeiting, intellectual property, single market

28.4.1999

EN

Official Journal of the European Communities

C 116/35

Opinion of the Economic and Social Committee on the ‘Commission Green Paper “Combating
Counterfeiting and Piracy in the Single Market”’

(1999/C 116/09)

On 16 October 1998 the Commission decided to consult the Economic and Social Committee, under
Article 198 of the Treaty establishing the European Community, on the above-mentioned green paper.

The Section for the Single Market, Production and Consumption, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 11 February 1999. The rapporteur was
Mr Malosse.

At its 361st plenary session (meeting of 24 February 1999), the Economic and Social Committee
unanimously adopted the following opinion.

1.

Introduction

2. General comments

1.1.
The Economic and Social Committee is pleased at the
European Commission’s initiative to launch a wide-ranging
debate on counterfeiting and piracy in the single market. This
matter has been the subject of the ESC’s concern on many
occasions, as in an opinion on the competitiveness of the
textile industry(1) and an opinion on the proposal for a Council
Regulation amending Regulation 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(2).

Regulation 3295/94 in fact is only concerned with
1.2.
combating counterfeit and pirated goods
from non-EU
countries. But, as the ESC pointed out in its opinion, the
regulation only covers operations relating to trade with non-EU
countries at the Community’s external borders. The ESC also
wanted the Green Paper to cover the subject of coordinating
national rules within the borders of the single market, both
for goods from non-EU countries and for goods produced
fraudulently in the EU itself.

1.3.
The ESC congratulates the Commission for taking the
initiative of launching a wide-ranging debate on this matter,
given the serious damage that such fraudulent practices cause
to the competitiveness of European industry and services. In
many sectors most of the value added to European goods and
services is the fruit of the creativity, imagination and talent of
European entrepreneurs, creators, craftsmen and workers. In
addition, such fraud is increasingly affecting activities con-
nected with the new information technologies and is thus
handicapping the development of European industry in these
high-growth sectors.

2.1.
In the field of counterfeiting and piracy it is not
desirable to separate instruments of internal policy from those
of external policy. The ESC has already made suggestions on
external controls(3). They must be recalled and reinforced, for
they may well also concern action within the EU, and
especially:

2.1.1.
Improving information and cooperation between the
monitoring services (customs, combating of fraud) and holders
of property rights.

2.1.2. Maintaining and promoting a skilled and well-trained
monitoring body.

2.1.3.

Heightening public awareness.

2.1.4.
ties.

Harmonising national rules on controls and penal-

2.1.5.
taking action against offenders.

Providing simple and streamlined procedures for

2.1.6.
least one year and throughout the whole of the EU.

Ensuring that seizure applications are valid for at

2.1.7.
Ensuring that only the guilty party, and not the
property right holder, has to pay for the costs of destroying
pirated or counterfeit goods.

Reducing the length and cost of procedures so as not
2.1.8.
to put off small firms that are wronged, and setting up new
special procedures in special courts that are well informed
about the realities and effects of counterfeiting and piracy.

(1) OJ C 214, 10.7.1998.
(2) OJ C 284, 14.9.1998.

(3) OJ C 284, 14.9.1998.

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3. Specific comments (questions in the Green Paper)

in this sector alone 100 000 jobs are lost each year in EU
industry because of counterfeit and pirated goods.

3.1. Nature and characteristics of the phenomenon:

The ESC approves of the Commission’s attempt to define
counterfeiting and piracy in the broad sense as an ‘infringe-
ment of an intellectual property right (trade mark or trade
name, industrial design or model, patent, utility model and
geographical indication) of a copyright or neighbouring right
(the rights of performing artists, the rights of producers of
sound recordings, the rights of the producers of the first
fixations of films, the rights of broadcasting organisations), or
of the “sui generis” right of the maker of a database’.

3.2.
Although the ESC understands the Commission’s con-
cern to limit the field for discussion to anything that jeopardises
property rights, the fact remains that other forms of parasitic
activity (flagrant imitations, ‘look alike’ products) mislead the
consumer. While these cannot be combated with the same
legal weapons as counterfeiting or piracy, it is necessary to
encourage the fight against such practices, which are being
used more and more systematically by counterfeiters, especially
within the EU,
to escape lawsuits. When such activities
resemble unfair trading practices or attempts to mislead
consumers, legal action must be taken against them. The ESC
therefore feels that the debate opened by the Commission
must also take account of all parasitic activities of this kind,
especially as regards information necessary for consumers and
protecting their rights.

4.3.
In view of the size of the phenomenon and the very
great importance of having the most accurate data possible,
the ESC proposes that there should be some sort of EU
observation machinery, in the form of a network of national
or sectoral observation posts. Such a ‘European observatory’
could operate with the help of economic bodies on the ground.

4.4.
Counterfeit or pirated goods, which are illegal by their
very nature, are often made in underground businesses that
disregard the laws on social security, hygiene and safety at
work. It is also clear that such activities flout the tax laws and
are more and more often linked to networks of organised
crime. The ESC therefore stresses the need for a comprehensive
approach, especially in the field of monitoring and surveillance,
to put a stop to every aspect of such fraudulent activities: social
surveys, tax inspections, fighting counterfeiting, stamping out
banditry and money laundering. The monitoring and legal
services that specialise in combating these scourges should
cooperate more closely.

5. Monitoring by the private sector

Unfortunately consumers cannot always be regarded
3.3.
purely as victims. Often they help fuel
the problem by
purchasing goods which, in view of their low price, might
reasonably be assumed to be counterfeit, rather than genuine.
Consumers and consumer organizations have a very important
part to play in combating the problem.

The ESC feels that the role of professional organis-
5.1.
ations, trade unions and consumer movements, especially
at European level,
importance in assessing the
phenomenon and organising action against unlawful practices.
The ESC supports the principle of making them legally entitled
to take legal action for the purpose of defending the collective
interests on whose behalf they have a mandate to act.

is of vital

4. Scale and consequences of the phenomenon

The ESC notes the estimates provided by the Com-
4.1.
mission. They are the fruit of research undertaken by firms of
consultants. The ESC is surprised that the customs services of
the Member States and the professional associations of the
sectors concerned do not have or have not provided the
Commission with data that are easier to verify.

Regarding this matter, the ESC wonders whether the
4.2.
jobs lost each year (100 000 according to
number of
the Commission) has been assessed correctly.
Indeed the
Commission itself, in its communication on competitiveness
in the European textile and clothing industry(1), calculates that

(1) COM(97) 454 final

The ESC believes that such monitoring must also
5.2.
concern the distribution sector, which should be encouraged
— in association with manufacturers — to develop labels of
quality and codes of ethics to root out suspect products and
services. The ESC suggests that the Commission should take
initiatives in this sector in partnership with associations
representing commerce, so as to make their members aware
of the problem and given training. When mentioning this
sector, it must be made clear that both wholesale and retail
distribution are concerned, as well as both large distributors
and small traditional retailers and services for people in the
trade or private individuals.

5.3.
One way of combating counterfeit goods could be to
develop data bases on designs and models, with the support of
professional associations. Generally speaking,
the role of
the professional organisations and associations concerned in
supervising the market, alerting and cooperating with the
authorities,
informing and training legal professionals and
informing the public is essential. The example of the REACT

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network in the textile and clothing sector is to be welcomed
here. The ESC urges the Commission to launch pilot projects
to encourage such activities on a European scale.

6. The use of technical devices

The ESC thinks it would be useful to search out
6.1.
technology for identifying and ‘tracking’ fraudulent goods. The
ESC feels here that pilot schemes for transferring technology
would be welcome, preferably for high-RTD projects, for
transferring techniques already used in other areas. Such
projects should be of benefit primarily to professional associ-
ations or groupings of SMEs and craftsmen.

The ESC feels that if such measures are to combat
6.2.
counterfeiting and pirating effectively,
they must not be
allowed to have any adverse effects on the free movement of
goods within the single market.

6.3.
It is essential to train groups for monitoring and
identifying such procedures. Cooperation between producers
and the authorities is vital for setting up early warning and
monitoring networks.

7. Sanctions and other means of enforcing intellectual

property rights

7.1.
Practically all the professional organisations and trade
unions concerned feel that repression, together with preven-
tion, is the best way of combating counterfeiting and piracy
effectively. They do not criticise the laws in force so much as
their application, which is too uneven to be a real deterrent to
pirates. Of course, pirates are helped by the existence of a
single frontier-free market and the lack of a real European legal
area.

7.3.
The ESC feels that the work on the preparation of
‘Rome II’ convention (on the law applicable to non-contractual
obligations) is of prime importance. In particular, the adoption
of this convention will have a significant impact on the fight
against certain acts of counterfeiting or piracy committed with
the help of the Internet. Similarly, if all the Member States
ratified the Hague Convention of 18 March 1970 on cooper-
ation between legal authorities to obtain evidence in civil and
commercial cases, this would help to combat all forms of
parasitism and unfair trading more effectively.

The Green Paper speaks of defending rights while
7.4.
forgetting that in most countries such defence is based on
protection being obtained beforehand for these rights. There
should be a large-scale information campaign explaining this
fact to firms, especially SMEs. The campaign should include
specific information on legal procedures (jurisdiction, location,
etc.).

7.5.
It is essential to see that existing texts are applied, even
let us try and get faster and simpler legal
if they differ;
procedures. Better training for judges and the setting-up of
special courts throughout the EU would prevent any backslid-
ing and inconsistency in judgments, especially in places where
a blind eye is still turned to certain forms of counterfeiting or
piracy. Mention should be made here, as an example, of
Community trade mark regulation No 49/94 of 20 December
1993, which set up ‘Community trade mark courts’ designated
by the Member States as national courts of first and second
instance with jurisdiction in the field of counterfeiting and the
validity of Community marks. One could thus imagine the
development of competent and qualified courts organised into
a Community network for handling all cases of counterfeiting
and piracy (marks, patents, designs and models, copyright and
derived rights ...).

7.2.
Effective action against counterfeiting and pirating is
obviously hampered by the vast differences which exist
between procedures for implementing complaints and penal-
ties. In this area the EU should use its new ‘Third Pillar’ powers
to undertake in-depth action aimed at establishing cheap and
simple procedures — that are recognised in all the Member
States — along the lines of those proposed by the Commission
to combat payment delays. In the medium term, in view of the
Brussels Convention being beefed up, a firm that has been
wronged should be able to apply directly in its country of
establishment for an enforcement order in another Member
State,
including Member States of transit for incriminated
goods.

The ESC is a keen supporter of a policy of systemati-
7.6.
cally publishing judgments in the press at
the violators’
expense, and of making it compulsory for violators to reveal
information. Penal measures must also be taken against
distributors who knowingly indulge in practices that encourage
counterfeiting and piracy, such as supermarkets who replace
branded goods by unlisted counterfeit goods. Where offences
are many and repeated, there should be no hesitation in closing
down shops or establishments that distribute counterfeit
products, since fines often bear no comparison with the
enormous profits that can be made. Another way of stepping
up the fight would be to involve customs departments by
making acts of counterfeiting an offence under customs
legislation, as is the case in France.

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8. Administrative cooperation between the competent

authorities

preventive measures and penalties. The media, consumer
movements, producers’, workers’ and distributors’ professional
organisations, especially those of SMEs, and the education
sector should all be involved in this.

8.1.
The ESC considers this aspect as crucial. It is surprised
that the Green Paper does not mention the vast differences in
approach and behaviour in the attitude of the different national
authorities. This particularly applies to countries that have
tolerated counterfeiting and piracy on a large scale as they did
not consider it a priority when fighting crime. In its opinion
on external control measures(1) the ESC underlined that there
were huge differences and mentioned the case of one country
that did not apply adequate punitive measures, which made it
a ‘potential gateway’. The ESC feels that such cooperation
really must be backed up by a harmonisation of rules and
large-scale training schemes and support for the
practices,
‘weak links’
in the EU set-up. Publishing the true figures
concerning procedures undertaken per country, giving exam-
ples of notorious cases of fraud and giving publicity on a
political scale to such ‘weaknesses’ are measures that seem
more likely to get things moving.

The ESC is worried here at the risk of the loss of
8.2.
motivation and cuts in the numbers of customs officials and
investigators; on the contrary, numbers should be increased
and quality and motivation improved, within a common
framework of cooperation. The ESC would congratulate the
various initiatives taken by the EU to ensure cooperation and
training for national officials responsible for implementing
legislation, especially the Karolus programme. Other pro-
grammes concern customs (Mathaeus) or combating organised
crime (Falcone). The ESC suggests that a horizontal programme
involving all the authorities concerned (customs, police, inland
revenue, welfare authorities) and magistrates
should be
launched to encourage a European-scale network for combat-
ing the underground networks organised throughout the single
market.

The ESC feels that it is time to prepare joint action to
8.2.1.
combat international traffickers: common files and data bases,
joint investigating teams, exchanges of good practices, etc.
While the services for combating counterfeiting have limited
resources, small territories and procedures that are cumber-
some, slow and technocratic, traffickers are using the Internet
to market fraudulent products ...

8.3.
Above all, there must be a real political awareness if
counterfeiting and piracy are to be countered effectively. The
ESC proposes that large-scale conferences be held in each of
the Member States to highlight the negative effects on jobs,
health and consumer safety and draw attention to the best

(1) OJ C 284, 14.9.1998.

9. Other points to be raised

9.1.
In addition to the points raised by the Green Paper,
one must deplore the delays in the EU over setting up a
full-blown European legal arsenal for protecting intellectual
property (no real EU patent, delay in bringing out an EU design
or model and harmonised utility models, insufficient time to
assess the effectiveness of the designs and models directive,
lack of EU legislation on copyright and allied rights).

indirect

the single market

The non-completion of

taxes is a known source of

9.2.
in the
fraud and
field of
misappropriation (no harmonisation of VAT rates, VAT
exemption for products going from one Member State to
another, excise duties, derived rights, etc.). It therefore consti-
tutes an obstacle to effective checks on fraud, since counterfeit
and pirated goods are often systematically channelled on to
neighbouring markets.

Public awareness campaigns drawing attention to the
9.3.
health and/or safety dangers of counterfeiting are essential.
Cases of serious injury suffered by consumers are proliferating:
counterfeit drugs with often mortal health dangers, defective
medical equipment that can cause fatal accidents, vehicle spare
parts that do not provide the protection necessary in an
impact, inflammable or allergenic textiles in children’s clothes,
the use of azo colorants, dangerous toys, etc. This subject
should be tackled more fully during the debate on the Green
Paper and machinery should be set up at EU level, with the
support of consumers’ organisations, to warn about such
cases.

10. Recommendations

All forms of counterfeiting, piracy and other para-
10.1.1.
sitic acts cause severe damage to European firms and creative
people.

10.1.2.
and may involve serious risks to their safety and health.

Such acts deceive the customer and the consumer,

10.1.3.
creativity in Europe.

They have a negative impact on employment and

Very often, illicit counterfeiting and piracy are tied
10.1.4.
up with undeclared work, tax avoidance, disregard for social
and labour law and organised crime.

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10.2.1.
In view of all this, the ESC recommends that the EU
adopt an overall approach to the phenomenon that takes
account of the external and internal political aspects and
introduces appropriate measures for preventing and stamping
out all forms of counterfeiting, piracy and other parasitic acts.

10.2.2.
Bearing in mind the importance of prevention, the
ESC notes the importance of having a single set of laws
containing uniform protection, at reasonable cost, for all forms
of intellectual property, proper information for creative people
and entrepreneurs about their rights, and campaigns to warn
consumers and appeal to their sense of civic duty.

The ESC would stress the need to launch infor-
10.2.3.
mation campaigns for the general public, coordinated at
European level and involving consumers’ organisations, trade
unions and the professional organisations concerned, includ-
ing those in the distribution sector.

10.2.4.
The ESC recommends the setting-up of a ‘European
observatory to combat counterfeiting, piracy and other para-
sitic acts’, operating in a network with all the organisations
and associations concerned;
it suggests pilot schemes to
encourage projects on a European scale aimed at alerting and
informing the public and training the authorities concerned.

10.2.5.
The ESC stresses the urgent need to strengthen legal
and police cooperation, in liaison with the organisations and

Brussels, 24 February 1999.

associations concerned. It considers that to combat organised
large-scale counterfeiting and piracy effectively, the proper
way, together with prevention, is to apply the law very strictly
with the support of effective cooperation at European level.

10.2.6.
The ESC thinks it would be wise to allow the
organisations and associations concerned to sue on behalf of
wronged firms, inventors or consumers.

10.2.7.
The ESC feels that justice must be encouraged to
apply the laws strictly, especially in the event of repeated
offences and organised crime, and that complainants should
not have to bear the cost of destroying illegally-manufactured
goods. Appropriate ways for achieving this would be to
provide specialist training for judges, set up special courts and
extend the provisions concerning the Community trade mark
to cover other areas of intellectual and industrial property.

The ESC recommends that

10.2.8.
the combating of
counterfeiting, piracy and other forms of parasitism should be
closely linked to the combating of undeclared work, tax
avoidance and organised crime. Cooperation between auth-
orities should be extended and strengthened through European
training programmes involving and mobilising all the types of
authority concerned.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI