Strategy for the enforcement of intellectual property rights in third countries
Date: 2005-05-26
Institutions: European Commission
Subjects: TRIPS, World Trade Organisation, agreement (EU), cooperation policy, industrial counterfeiting, intellectual property, third country

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Strategy for the enforcement of intellectual property rights in third countries

(2005/C 129/03)

INTRODUCTION

Violations of intellectual property rights (IPR) continue to increase, having reached, in recent years, indus-
trial proportions. This happens despite the fact that, by now, most of the WTO members have adopted
legislation implementing minimum standards of IPR enforcement. It is, therefore, essential for the European
Union to increasingly focus on vigorous and effective implementation of the enforcement legislation.

This Strategy intends to be a contribution to the improvement of the situation in third countries. It is a
logical sequence of recent initiatives like the Enforcement Directive (1), that will harmonize enforcement
legislation within the European Union, and the revision of the Customs Regulation (2), that provides action
against counterfeit or pirated goods at the Community's border.

The purposes of the Strategy are to:

— Provide a long-term line of action for the Commission with the goal of achieving a significant reduction

of the level of IPR violations in third countries;

— Describe, prioritise and coordinate the mechanisms available to the Commission services for achieving

their goal (3);

— Inform right-holders and other entities concerned of the means and actions already available and to be

implemented, and raise their awareness for the importance of their participation.

— Enhance cooperation with right-holders and other private entities concerned, by seeking their input on
the identification of priorities and establishing public-private partnerships in fields like technical assis-
tance, information to the public, etc.

This Strategy does not intend to:

— Impose unilateral solutions to the problem — It is clear that, ultimately, any proposed solutions will
only be effective if they are prioritised and considered to be important by the recipient country. The
Commission is ready to assist in the creation of such conditions.

— Propose a one-size-fits-all approach to promoting IPR enforcement — It will be necessary to have a
flexible approach that takes into account different needs, level of development, membership or not of
the World Trade Organisation (WTO), and main problems in terms of IPR (country of production,
transit or consumption of infringing goods) of the countries in question.

(1) Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004, is available at:

http://europa.eu.int/eur-lex/pri/en/oj/dat/2004/l_195/l_19520040602en00160025.pdf

(2) Council Regulation (EC) No 1383/2003 of 22 July 2003, is available at:

http://europa.eu.int/comm/taxation_customs/customs/counterfeit_piracy/files/counterfeit_en.pdf

(3) This Strategy has no direct supplementary financial implications on the budget of the European Commission.

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— Copy other models of IPR enforcement or create alliances against certain countries — The Commission
is ready and willing to improve cooperation and to create synergies with countries sharing its concerns
and facing similar problems. It is, however, important that this strategy remains primarily focussed on
positive and constructive efforts.

PROPOSED ACTIONS TO ADDRESS THE PROBLEM

1. Identifying the priority countries

It is important to identify a limited number of countries on which the efforts of the Commission in the
framework of the present strategy should be concentrated (cf. Annex I, section 4). The human and financial
resources allocated to the enforcement of IPR (1) being limited, it is unrealistic to pretend that our action
can extend equally to all, or even most, of the countries where piracy and counterfeiting occur. Therefore,
a mechanism to assess which are the most problematic countries/regions, or those where the action of the
Community is most urgently required, will be an essential tool for the successful implementation of this
strategy.

At the end of 2002, the Commission launched a survey to assess the situation in third countries regarding
violations and enforcement of IPR (2). By identifying with more accuracy the problems, the survey provided
a diagnostic that allowed the Commission to develop the present strategy. At the same time,
it gave
substantial information to help identify those countries on which the priorities should be focused and to
which the bulk of our limited resources should be allocated.

Specific actions:

— Put in place a mechanism that will periodically conduct an exercise similar to the ‘Survey on Enforcement
of Intellectual Property Rights in Third Countries’, based on a questionnaire distributed to entities like
Commission Delegations, Embassies of Member States, right-holders and associations, Chambers of
Commerce, etc. Replies will be analysed and results made available to the public. Such results, in
conjunction with other reliable sources of information available to the Commission (3), should be the
basis for renewing the list of the priority countries for the subsequent period.

2. Multilateral/Bilateral agreements

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) (4) has a detailed chapter
dedicated to the setting of minimum standards of IPR enforcement and technical cooperation. It also
provides for a structure responsible for monitoring the implementation of the provisions of the Agreement
and for consultation between Members, i.e. the TRIPs Council. Finally, it puts in place a dispute prevention
and settlement mechanism. These characteristics make TRIPs one of the most adequate and effective instru-
ments to address problems related to IPR violations.

(1) Reference to intellectual property rights in this paper is made in its wider meaning, i.e., including copyright and

related rights, but also trademarks, patents, designs, geographical indications, undisclosed information, etc.

(2) The complete results of the ‘Survey on Enforcement of Intellectual Property Rights in Third Countries’, including a detailed

report per country, for all the countries for which sufficient information was received, are available at:
http://europa.eu.int/comm/trade/issues/sectoral/intell_property/survey_en.htm

(3) A valuable source of information about the origin, the itinerary and the nature of counterfeit and pirated goods
destined to, or in transit via the Community are the annual statistics about the goods originating from third countries
seized by Customs at the Community border. The report is released by DG TAXUD. The figures for 2003 can be
found at:
http://europa.eu.int/comm/taxation_customs/customs/counterfeit_piracy/index_en.htm

(4) Agreement on Trade-Related Aspects of Intellectual Property, Annex 1C to the Agreement establishing the World

Trade Organisation (TRIPs, Marrakesh 1994).

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The numerous bilateral agreements established by the European Community contain a chapter dedicated to
IP. This chapter usually establishes that a very high standard of protection of IP (including the enforcement
thereof) must be achieved. Most agreements also include a clause allowing for technical cooperation in this
field. These clauses must be carefully monitored and effectively implemented, notably with respect to the
more ‘problematic’ countries.

The institutional structures of these multilateral and bilateral agreements (TRIPs Council, Association Coun-
cils, the World Intellectual Property Organisation — WIPO, etc.) can be used to monitor and discuss legis-
lation and enforcement problems from a very early stage. They allow for a structured political dialogue and
can act as fora to submit new initiatives or to act as ‘early warning’ for arising problems, before there is a
need to adopt stricter measures.

It is also envisaged to make the enforcement clauses in future bilateral or bi-regional agreements more
operational and to clearly define what the EU regards as the highest international standards in this area and
what kind of efforts it expects from its trading partners.

Specific actions:

— The EU will consult other trading partners regarding the possibility of launching an initiative in the
TRIPs Council highlighting the fact that the implementation of TRIPs requirements in national laws has
proven to be insufficient to combat piracy and counterfeiting, and that the TRIPs Agreement itself has
several shortcomings.

— For example, the TRIPs Council could consider in the future a number of actions to tackle the situation,
including the extension of the obligation to make available customs measures to goods in transit and
for export (1).

— Ensure a continued effort in the monitoring of the TRIPs compliance of legislation, in particular in the

‘priority’ countries.

— Revisit the approach to the IPR chapter of bilateral agreements, including the clarification and strength-
ening of the enforcement clauses. Although in designing the rules for each specific negotiation it is
important to take into account the situation and the capacity of our partners, instruments such as the
new EU Directive harmonising the enforcement of IPR within the Community, as well as the new
customs' Regulation on counterfeit and pirated goods may constitute an important source of inspiration
and a useful benchmark.

— Raise more systematically enforcement concerns at Summit meetings and in the Councils/Committees
created in the framework of these bilateral agreements. In order to allow the Commission to obtain an
effective reaction from its counterparts, it is essential that it receives credible and detailed information
from right-holders, either directly or via the EC Delegation or the embassies of the Member States in
the countries concerned.

(1) Article 51 of the TRIPs Agreement only stipulates the obligation for Members to have in place customs measures for

imported goods.

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3. Political dialogue

The Commission must make clear to its trading partners that effective protection of IP, at least at the level
set in TRIPs, is absolutely essential, and that the first step for fighting piracy and counterfeiting is an
adequate level of enforcement at the source, i.e. in the countries where these goods are produced and
exported. The Commission will also emphasize that effective enforcement is in most cases of mutual
interest, be it for health or consumer reasons, or more broadly for these countries attractiveness to foreign
investment. In its contacts, at different levels with the authorities of the countries concerned, the Commis-
sion must strongly convey the message that it is willing to assist them in raising the level of enforcement,
but also that it will not refrain from using the instruments at its disposal in cases where deficient enforce-
ment is harming its right-holders.

In addition, the Commission is increasing its cooperation with countries heavily affected by this type of
practices and that share the Community's concerns, like Japan. This will result in an increased exchange of
information and even in participation in joint initiatives in third countries. In addition, such ‘joint ventures’
should produce a rationalisation of resources between countries sharing identical concerns and pursuing
parallel initiatives.

Finally, the EC Delegations in the ‘problematic’ countries can play an important role, by establishing close
links with the local enforcement entities, with the Community right-holders operating in these countries
and with the embassies of EU Member States and other countries concerned.

Specific actions:

— The message ‘improve your enforcement’ should be repeated, as frequently and at as high a level as
possible, in the Commission's contacts with authorities of the countries in question and in all appro-
priate fora, notably the WTO and WIPO. It must be perceived as a priority concern.

— This commitment to include IPR enforcement in the political dialogue is illustrated by the following

initiatives:

— At the EU — Japan Summit of 2003, the Commission and Japan agreed to establish an improved
dialogue in a number of areas, including IPR. An ‘EU — Japan Joint Initiative for IPR Enforcement in
Asia’ was established, focusing on elements like (a) the close follow-up of the progress of Asian coun-
tries in the field; (b) coordinating technical assistance programmes and responsibilities; (c) enhancing
EU-Japan efforts to raise awareness in the fight against piracy and counterfeiting and to promote the
strengthening of IPR enforcement; (d) exploring the possibility to cooperate in other areas of IPR. The
initiative is implemented by an Annual Work Plan containing specific activities.

— The Commission and China agreed in the margins of the 2003 EU-China Summit to hold, at least once
a year, a ‘EU-China Dialogue on Intellectual Property’. Among other issues, the discussions should focus
on efforts to combat piracy and counterfeiting, institutional reforms, enforcement-related areas such as
central and sub-central enforcement by customs, police, administrative and judiciary bodies, public
awareness of consumers and right-holders. The first meeting took place in October 2004.

— Basic training will be provided to officials in priority Delegations so that they can offer a minimum of
information to entities with enforcement problems. The idea is to create some networking between
Commission officials in Delegations and to establish closer teamwork between Delegations and the
Headquarters. Teamwork will facilitate the compilation of information and the definition of targeted
actions for the different countries and/or for a regional approach.

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4. Incentives/Technical cooperation

Most of the countries with deficient enforcement will claim a lack of resources and the existence of more
pressing priorities than protecting IP rights. IP enforcement is a complex and multi-disciplinary activity. It
involves drafting legislation, training judges, police forces, customs officials and other experts, setting up
agencies or task-forces, public awareness raising, etc. Most of these needs can be, and to some extent
already have been, addressed by the Commission via technical cooperation programmes, but it is important
to do more and better.

Technical assistance is an activity favoured by the EU for its contribution towards poverty alleviation and
development. It is thus important to show that adequate IPR enforcement can contribute to this goal by
making a link with investment opportunities, transfer of technology and know-how, protection of tradi-
tional knowledge, improvement of health and safety standards, etc.

It will be necessary to have a flexible approach that takes into account the recipient country's different
needs,
level of development, membership or not of the World Trade Organisation (WTO), and main
problems in terms of IPR (country of production, transit or consumption of fake goods). Any cooperation
programmes will only be effective if they are prioritised and indeed felt as important in the recipient
country.

It is also relevant to share information and to ensure a minimum level of synergy between the main provi-
ders of technical assistance, such as WIPO, the World Customs Organisation (WCO), the Member States
and third countries like Japan, the US and others.

Finally, the following difficulties must be stressed:

(a) In most cases, technical cooperation is ‘demand driven’, i.e. it requires a request by the beneficiary of
the action. It is important to turn it into a ‘dialogue driven’ request, by discussing its importance and
benefits for the recipient.

(b) It is a mid to long-term solution, with few immediate results. However, the present strategy is a long
term one, and adequate enforcement is a goal that will not be achieved only by immediate actions, in
particular in the case of least-developed countries, not yet bound by TRIPs requirements.

(c) Implementing the programmes implies a complex administrative process. This is why further strength-
ening coordination between the Commission services responsible for the different aspects of IPR enfor-
cement and between the Commission and third parties is an essential component of the present
strategy.

Specific actions:

— Ensure that, at least, the countries identified as priorities are given the option to include intellectual
property in the trade-related technical assistance programmes or to obtain specific IP programmes.

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— In particular, the Commission would like to extend technical assistance to Latin America, since it is a

region where enforcement can certainly be improved and where no programme is in place.

— There are a number of programmes that cover IPR. Some, like ECAP (1) I and II, for the ASEAN coun-
tries, or even the recently concluded EU-China IPR programme are specifically destined to provide assis-
tance on IPR. Others are generally designed to cover trade related issues, but may include IPR among
their objectives — WTO II (2) and Small Project Facility (3),
technical cooperation
programmes under the framework of the Cotonou Agreement for the African, Caribbean and Pacific
(ACP) countries; or the CARDS (4) programme, for the countries of the Balkans. The Commission will
ensure that the component of IPR enforcement is adequately covered by these programmes.

for China;

— In the case of ‘production’ countries, the focus in any cooperation programmes must shift from assis-
tance in drafting legislation to a more enforcement-oriented strategy, including training programmes
for judges, police, and customs.

— It must be pointed out that this practice is already being successfully implemented in the specific field
of customs (DG TAXUD). There are a number of customs cooperation agreements that, inter alia, cover
an essential tool of IPR enforcement (customs controls of fake goods). These agreements with countries
like India and China (a new one is soon to be concluded) produce positive results in terms of training
and of passing on our experience and methods to these countries. Furthermore, they illustrate how one
can build on the existing TRIPs requirements (cf. the control of exports and goods in transit, in addition
to the control of imports). It is likely that a similar agreement may be established with Japan still in
2004.

— Exchange ideas and information with other key providers of technical cooperation, like WIPO, the US,
Japan and certain EU Member States, with the aim of avoiding duplication of efforts and sharing of
best-practices.

— Improve the dialogue mechanisms with: (a) the WCO (under the coordination of DG TAXUD) to assess
the compatibility of their technical assistance with our positions and the complementarity with our
programmes; (b) WIPO and other providers of assistance (the European Patent Office, the Office of the
EU Trademarks and Designs, etc.) to share information and to better coordinate strategies.

— Technical cooperation is also an important element of the TRIPs Agreement (Article 67) and it ‘fits’
into the objectives of the Doha Development Agenda. It can be considered to take an enforcement-
oriented initiative in this framework.

(1) EC-ASEAN IPR Programme comprises a regional and a national component and covers all areas of IPR. It has a value
of EUR 5 million. An additional EUR 2 million is planned, to take account of the inclusion of Laos, Cambodia and
Vietnam. The project started in 2000 and has a duration of 5 years

(2) WTO II is the largest WTO related support programme in China, with a value of EUR 15 million over 5 years — to
which China has indicated willingness to contribute with an additional 30 %. A chapter on IPR will be proposed. The
programme should be launched before the end of 2004.

(3) Project designed to support small initiatives in China. With a total value of EUR 9,6 million, and a duration of 5

years, the initiatives are demand-driven, but the inclusion of IPR related projects will be actively encouraged.

(4) In the framework of

the Community Assistance for Reconstruction, Development and Stabilisation (CARDS)
programme for the Western Balkans, a project called ‘Industrial and Intellectual Property Rights’ was launched in July
2003. The project will have a duration of 36 months and a value of EUR 2,25 million.

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5. Dispute Settlement/Sanctions

No rule can be really effective without the threat of a sanction. Countries where IP violations are
systematic, and where no government action to address the problem is effectively taken, could be publicly
identified. As a last resort, consideration should be given to resorting to dispute settlement mechanisms
provided for in multilateral and bilateral agreements.

The existing Trade Barriers Regulation (TBR) mechanism (1) could be a starting-point. TBR is a legal instru-
ment that gives the right to Community enterprises and industries to lodge a complaint, which obliges the
Commission to investigate and evaluate whether there is evidence of violation of international trade rules
resulting in adverse trade effects. The result is that the procedure will lead to either a mutually agreed solu-
tion to the problem or recourse to dispute settlement.

The TBR has a broad scope of application, covering not only goods but also, to some extent, intellectual
property rights and services, when the violation of rules concerning these rights has an impact on trade
between the EC and a third country.

Resort to other trade related mechanisms could also be considered. For instance, the EU includes similar
instruments in an increasing number of bilateral agreements that will be triggered in cases of non-compli-
ance with the required high(est) standards of IP protection.

Deficient enforcement derives more frequently from the way the rules are (not) de facto implemented by
the competent authorities than from an absence of legislation or a blatant contradiction of legislation with
TRIPs requirements. However, when such deficiencies become systemic, they can substantiate a dispute
settlement case.

Specific actions:

— Remind right-holders of the possibility to make use of the TBR mechanism in cases of evidence of
violation of TRIPs or of the high(est) standards as agreed in bilateral agreements between the EC and
third countries. This mechanism is launched by the lodging of a complaint.

— The Commission is ready, in clearly justified cases, to make ex officio use of the WTO dispute settlement
mechanism and of the similar dispute settlement tools included in our bilateral agreements in case of
non-compliance with the mutually accepted standards of IP protection.

— Consider other mechanisms which could be used to reduce the level of IPR violations in third

countries.

6. Creation of public-private partnerships

There are numerous companies and associations which have been active in the fight against piracy/coun-
terfeiting for many years. They constitute an invaluable source of information, but also a key partner for
any awareness raising initiatives. Some of these entities are already present, and very active, in most proble-
matic countries.

(1) Council Regulation (EC) No 3286/94 of 22 December 1994 laying down Community procedures in the field of the
common commercial policy in order to ensure the exercise of the Community's rights under international trade
rules, in particular those established under the auspices of the WTO.
http://europa.eu.int/comm/trade/issues/respectrules/tbr/legis/adgreg06a.htm

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Other than the specific actions now proposed, there are within the Commission other examples of initia-
tives to create public-private partnerships that are directly or indirectly linked with IPR enforcement.

One of these projects involved the creation of Innovation Relay Centres, to support companies dealing
with transfers of technology (1). This project includes people with extensive experience in the IPR area
(licensing, transfer of IP rights, etc) and could be used to collect information about enforcement problems
in third countries. So far the network only covers the EU, but consideration is being given to extending it
to third countries. There is a pilot project with an office in Chile.

There is also already in place the ‘IPR Help-Desk’ (2), a project sponsored by the Commission to support
creativity and innovation. The purpose of the Help-Desk is not to handle complaints but to provide infor-
mation to the EU industry. It may therefore give guidance to companies facing violations of their rights in
third countries.

Finally, the Commission has a long experience of involving private operators in their seminars and training
programmes covering, in particular, border enforcement of IPR.

Specific actions:

— Support

the creation of

IP networks involving companies, associations and chambers of
commerce. This practice is already being implemented in certain key countries and will be actively
supported by DG TRADE.

local

— Improve cooperation with companies and associations that are active in the fight against piracy/coun-
terfeiting, inter alia by exchanging information about future initiatives and ensuring the cross-participa-
tion of experts from the Commission and from private entities in events organised by the other party.

7. Awareness raising/Drawing on our own experience

Providing better information to the public is another very relevant dimension of the Strategy. This can be
divided into the following components:

(a) Raising the awareness of users/consumers in third countries. This must be done from two perspectives:
(a) to promote the benefits of IPR in terms of promotion of creativity, investment, transfer of tech-
nology, protection of traditions and quality; (b) to inform about the dangers of IPR violations to public
health, consumer protection, public security, etc.

(b) Raising the awareness of right-holders. Again from two different perspectives: (a) the risks incurred by
trading in certain countries where IPR enforcement is ineffective and the minimum precautions that
must be adopted, like registering the IP right in those countries (frequently, small and medium sized
companies do not even apply for the protection of their intellectual property in third countries where
they are producing or selling their goods); (b) the need to use the means available in these third coun-
tries to enforce their rights. Countries which are members of the WTO (with the exception of least-
developed countries) must have implemented minimum standards of IP protection and enforcement
since 2000. It is clear that the first steps to protect and enforce IPRs must be taken by the right-holders
themselves, and that they must use, to the maximum extent, the available mechanisms before being
entitled to legitimately complain about the effectiveness of such protection and enforcement.

(1) This project is managed by DG ENTR. For more information see:

http://europa.eu.int/comm/enterprise/innovation/networks.htm#irc

(2) http://www.ipr-helpdesk.org

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Specific actions:

— The Commission does not have the resources to pursue alone extensive awareness raising campaigns in
third countries. However, this activity could be implemented by some of the abovementioned means,
i.e. by inclusion in existing technical cooperation programmes and by public-private partnerships.

— The Commission services sponsored the drafting of a ‘Guidebook on Enforcement of Intellectual Prop-
erty Rights’. This Guidebook is mainly intended to assist public authorities of developing and least
developed countries in their efforts to put in place systems and procedures for the effective enforce-
ment of IPR. In particular, the guidebook considers the most common difficulties confronting those
countries in the enforcement of IPR and provides guidance on how to achieve effective and long-lasting
protection for such rights. The guidebook identifies useful resources which may be of assistance to
authorities and right-holders facing difficulties.

— The Guidebook will be publicly available through the Commission website.

8. Institutional cooperation

The Commission services responsible for the different aspects of IPR enforcement will step up their coordi-
nation and cooperation with a view to enhancing the role of the Commission. Without creating an addi-
tional layer of bureaucracy, it is necessary to:

(a) further improve information exchange and coordination between the services in charge of the different

aspects of IPR enforcement;

(b) simplify the identification and the access of external entities (right-holders, third country authorities,

etc.) to the service responsible for the specific issue concerning them.

Specific actions:

— Inter-service meetings will be regularly organised to follow up the initiatives being implemented in the
framework of the present strategy and to discuss the results obtained, as well as the inclusion of new
initiatives. Furthermore, increased cooperation between the services involved with technical assistance
issues will be introduced in order to promote IPR enforcement-related assistance to relevant third coun-
tries.

— In order to help third parties understand the distribution of tasks among the different Commission

services:

— A new Commission webpage will be created, presenting: (a) the existing legislation to enforce IPR; (b)
a vademecum on enforcement, including the Commission contact points for the various types of IP
rights and aspects of their enforcement, as well as links to the various web-pages of the different
services dealing with it.

— Cross-links will be inserted in the existing web-pages of each service dealing with certain aspects of IPR

or certain sectors.

— Ensure coordination with other Commission initiatives linked with IPR, such as the Innovation Relay
Centres and the IPR Help-Desk, and their effective contribution to the objective of the present Strategy
by collecting and distributing information vis-à-vis the private sector.

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ANNEX I

BACKGROUND

1. What is the problem?

The TRIPs Agreement establishes for the first time a single, comprehensive, multilateral set of rules covering all kinds of
IPR. It contains also a detailed chapter setting minimum standards of IPR enforcement to be adopted by all members of
the WTO.

However, despite the fact that, by now, most of the WTO members have adopted legislation implementing such
minimum standards (1), the levels of piracy and counterfeiting continue to increase every year. These activities have, in
recent years, assumed industrial proportions, because they offer considerable profit prospects with often a limited risk
for the perpetrators.

It has thus become clearly insufficient to limit the efforts of the EC to merely monitoring the creation of general legisla-
tive frameworks in WTO member countries. It is essential that the EC increasingly focuses on vigorous and effective
implementation of the enforcement legislation.

Within the Community and at its external borders there have been a number of important initiatives in recent years. As
long ago as 1994 the EC adopted the so-called Customs Regulation (Regulation (EC) No 3295/94), allowing border
control of imports of fake goods. Later, in 1998, the Commission issued its Green Paper on Combating Counterfeiting
and Piracy in the Single Market. As a result of responses to the Green Paper, the Commission presented an Action Plan,
on 30 November 2000. This Action Plan is materialising, namely in the form of a Directive harmonising the enforce-
ment of intellectual property rights within the Community, of a Regulation improving the mechanisms for customs
action against counterfeit or pirated goods set by the previous Customs Regulation, the extending of Europol's powers
to cover piracy and counterfeiting and a study on a methodology for the collecting, analysing and comparing of data on
counterfeiting and piracy (2). In addition, the Presidency Conclusions of the Spring European Council 2003 (3) made a
strong call for the increase in the fight against piracy and counterfeiting. As a consequence, the Commission (DG JAI)
intends to launch a legislative initiative in 2004 in the form of a proposal for a Council Framework Decision on approx-
imation of national legislation and sanctions on counterfeiting and piracy.

The situation is, however, different outside the borders of the Community. The internal instruments available to Com-
munity right-holders in the case of violations of their rights within the Community or in the case of imports of fake
goods into the EU are not usable when these violations occur in third countries and the resulting goods are either
consumed domestically or exported to other third countries. Although such violations occur outside, they directly affect
Community right-holders.

2. Why and how much does it matter? To whom?

(a) European Community

Violation of IPR, which is reflected in the presence on the market of increasing volumes of pirated and counterfeit
goods, has a very negative impact in a number of different areas. The Community, being a market that traditionally
invests heavily in IP-protected goods and services and receives considerable added-value for this effort, is particularly
affected by poor enforcement of IP, even when it takes place in third countries, and even if the pirated/counterfeit goods
or services are not destined for the Community market. These are some of the adverse effects of IP violations:

Economic and social: Deprives right-holders of the revenue from their investment in R&D, marketing, creative effort,
quality control, etc. Negatively affects market-share, sales volume, reputation, employment and ultimately the viability of
certain IP-based activities/companies. High levels of IPR violations also discourage foreign investment and transfer of
technology.

(1) Least Developed Countries have until 2006, at least, to adapt their legislation to the TRIPs requirements.
(2) Copy available upon request sent to MARKT-E4@cec.eu.int
(3) Spring European Council 2003: Presidency Conclusions:

‘37.
The European Council calls upon the Commission and Member States to improve exploitation of intellectual property rights by taking
forward measures against counterfeiting and piracy, which discourages the development of a market for digital goods and services; to protect patents
on computer implemented inventions…’

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Health and consumer protection: Pirated and counterfeit goods are usually produced by anonymous entities that pay
no heed to health, safety and quality requirements and provide no after-sales assistance, guarantees, operating instruc-
tions, etc… Illustrating this problem are growing seizures of fake medications, food (and even bottled water), car and
plane parts, electrical appliances and toys.

Public order and security: A growing concern in recent years is the increased involvement of criminal organisations
and sometimes even of terrorist groups in major international trafficking of counterfeit and pirated goods. This is
explained by the particularly lucrative nature of these activities and by the lower risk (1) compared with other lucrative
criminal activities. The scale of the problem and the sums of money involved render the situation regarding piracy as
complex to tackle as drug trafficking or money laundering. Europol, Interpol and a number of police forces in the Com-
munity have created departments dealing specifically with it.

Fiscal: Being an illegal and clandestine practice by nature, and having lower prices it frequently deprives the state from
tax revenue (VAT, revenue taxes, customs duties). This issue is particularly sensitive in countries where there are
economic sectors under strict state control, like tobacco, alcoholic drinks, fuel, etc.

(b) Third countries

Why should third countries with little tradition in the IPR field, a restricted number of right-holders, and sometimes
with a significant share of its industry and commerce benefiting from the violations, care?

The reply to this question is not entirely different from the one given for the Community (see above). The consequences
of IPR violations in terms of consumer and health protection, organised crime and loss of fiscal revenue are relatively
obvious and directly felt both in the Community and in the third countries where such violations predominantly occur.
Consequently, these countries (should) have an immediate interest in combating piracy and counterfeiting.

Regarding the first point however (economic and social consequences), some will say that by enforcing the protection of
IP rights held by Community companies, third countries will not obtain any direct benefit. It would appear, on the
contrary, that they are using their resources to protect the investment of foreign entities (an argument frequently raised
by certain countries). To counter this reasoning, the EC must get across the message that effective enforcement of IP
rights (even if these belong to third parties) is an essential tool to attract foreign investment and the transfer of tech-
nology and know-how, as well as to protect local right-holders in developing and least-developed countries who are
already suffering the misappropriation of their intellectual property (2). It is a matter of good governance and interna-
tional credibility, not to mention the need to comply with WTO and other international and bilateral commitments. In
the mid-to-long term, it will also encourage domestic authors, inventors and investors and contribute to the develop-
ment of these countries.

Under-estimating the value of intellectual property rights contributes to ineffective enforcement. To enhance this aspect
of the intellectual property rights system, it would be useful for some (fast) developing countries to assess the value of
the industries based primarily on intellectual property rights (3). This could lead to an appreciation of the value of intel-
lectual property rights in terms of a country's economic environment, as well as in respect to economic, social and
cultural growth and development.

There are, however, recent examples of countries where the emergence of a competitive and increasingly sophisticated
economy is making evident the need to efficiently protect IP against domestic and external violations.

(1) In many countries other very lucrative criminal activities like drug trafficking carry considerable risks (even the death penalty) and are

combated with considerable resources, while the trafficking of fake goods is seen as a relatively harmless practice.

(2) Cf. the cases of counterfeits of certain brands of rice wine in China or of a well-known local fish sauce brand in Vietnam.
(3) The Commission services published a study in 2003 entitled The economic importance of copyright

(http://www.europa.eu.int/comm/internal_market/en/intprop/index.htm).
Some countries, such as the USA and Finland produce such documents, namely for the copyright industries (‘Copyright industries in the
US Economy — Stephen E. Siwek & Gale Mosteller, prepared for the International Intellectual Property Alliance and The Economic
Importance of Copyright Industries in Finland, the Finnish Copyright Society’).

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In some of the most ‘problematic’ countries the authorities appear to be fully aware of the importance of IPR for the
development of the country and domestic right-holders demand enforcement of IPR as rigorously as foreign right-
holders. The problem is that the piracy/counterfeiting industry is an important element of their economy. It is therefore
clear that there is a broader picture which cannot be tackled merely under the IP angle. Only a comprehensive policy
involving authorities at national, regional and local level can provide a solution.

3. Which IP rights are violated and which sectors are most affected?

Most of them. One frequent misconception is that piracy and counterfeiting mainly affect some luxury, sports and
clothing brands, music and software CDs/DVDs, and little else. The reality is that virtually every IP is being violated on a
considerable scale and that the variety of fake products ranges from cereal boxes to plants and seeds, from aeroplane
spare parts to sunglasses, from cigarettes to medications, from AA batteries to entire petrol stations. Big software produ-
cers are as likely to be harmed as small makers of a certain type of tea. The annual statistics published by the Commis-
sion's customs services regarding the number and the nature of seized pirated and counterfeit goods originating from
third countries provide detailed and reliable information about the dimension and the growth of the problem (1).

The Commission considers that the vast majority of the problems affecting holders of the different types of intellectual
property rights are common and consequently, are most effectively addressed by an integrated strategy. The strategy
now proposed aims at improving enforcement against violations of all kinds of IP (copyright, trademarks, geographical
indications, patents, designs, etc.).

4. How to define the ‘priority’ countries?

There are several different criteria to define the most problematic countries in terms of enforcement of IPR (2). These can
be split into: (a) source countries; (b) transit countries, and (c) target countries. For each of these groups of countries,
the type of measures most adequate to address the situation will differ.

(a) Source countries

These are the countries where production of pirated and counterfeit goods, both for domestic consumption and for
export, reaches worrying dimensions. In cases of digital piracy via the internet, the origin of the IPR violation can be
particularly difficult to detect.

In these countries it is particularly important to improve the effectiveness and the coordination of the police, the courts,
the customs and the administration in general. It is also essential to ensure that the legal framework provides for deter-
rent sanctions.

(b) Transit countries

For the full picture, one should, however, not focus exclusively on countries violating IPR due to the massive production
of counterfeited products occurring in their territories, but also on those often acting as a hub. This category includes
countries appearing as major places of origin of fake goods seized in the Community, the problem occurring mainly
because of the flow of fake products in transit and not because of domestic production of such goods. The large volume
of goods originating in these countries is nevertheless indicative of deficient enforcement, at least at the level of border
controls. Organised crime networks will take advantage of such weaknesses to establish different traffic routes, hiding
the real origin of the goods.

(1) http://europa.eu.int/comm/taxation_customs/customs/counterfeit_piracy/index_en.htm
(2) ‘Priority countries’ can be identified on the basis of the following criteria:

— Information received from Community right-holders and other sources (Delegations, etc.) regarding IPR violations.
— Data regarding customs seizures of fake goods at the Community's borders.
— Relevance of the countries in terms of actual or potential volume of trade with the Community. The inclusion of a country in one
or more of the categories reflects the level of relevance of the situation in that particular country from the Community perspective.
Countries with reduced importance in terms of trade were not considered a priority.

In any event, the situation in this area is constantly changing, therefore it will require continuous monitoring and updating.

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Improving the availability of border measures and the effectiveness of customs authorities in particular regarding the
transit of goods should help to substantially reduce the volume of traffic.

(c) Target countries

It is also important to consider, in any strategy to reduce the violations of IPR, the countries identified as the main final
destinations of exports of fake goods or serving primarily as a market for such products.

Substantial volumes of sales of fake goods occur in almost all countries. The difficulty of defining countries that are
main markets for pirated goods is that it is a very widespread problem, albeit for a variety of (sometimes contradictory)
reasons: because they are too poor to buy IP-protected protects, because such practice is accepted or at least not
condemned, because they produce them in large quantities, because there is sometimes no way to distinguish between
real and fake, or because fakes are cheaper. This is why it is necessary to concentrate resources on the main markets of
the legitimate Community right-holders most affected by IPR violations.

Dealing with the consumption of pirated and counterfeit goods requires an effort in terms of building up public aware-
ness about the negative impact and the risks of such practice. It also requires more effective customs controls of
imported goods and a more effective reaction by the police and courts against those networks and individuals involved
in large scale trading in such goods.

5. What is the situation in the Community?

Generally speaking, the Community and its Member States are acknowledged for protecting and enforcing IPR to very
high standards, as the acquis, and in particular the recent efforts described in point 1 above, can demonstrate. Also in
practical terms, reports like the one published annually by DG TAXUD (1) give a clear idea of the results achieved by the
authorities of each Member State in terms of seizures of fake goods at the borders.

However, within the Community the level of enforcement is different among Member States. Some Member States still
need to do more towards improving the current situation and cutting down remaining production and sale of pirated or
counterfeit goods. The new Directive harmonising the enforcement of intellectual property rights within the Community
will help to improve the situation.

6. Who are the key actors of IPR enforcement in the Commission?

Different Directorates-General (DGs) of the Commission are competent as regards the distinct aspects of IPR enforce-
ment. In simple terms:

— DG Trade handles the external dimension (multilateral and bilateral) of the issue, i.e. enforcement in third countries.

It also represents the European Community at the WTO and notably at the TRIPs Council.

— DG Internal Market (MARKT) is responsible for EU intellectual and industrial property policy and legislation and
represents and leads negotiations on behalf of the European Community in various committees in WIPO. DG
MARKT was the author of the above mentioned Enforcement Directive.

— DG Agriculture (AGRI) is responsible for internal and external EU policy and for EU legislation concerning geogra-

phical indications in agriculture and leads negotiations in these matters

— DG Taxation and Customs Union (TAXUD) regulates the enforcement of IPR at the Community's external borders.

DG TAXUD drafted the above mentioned Customs Regulation.

(1) http://europa.eu.int/comm/taxation_customs/customs/counterfeit_piracy/index_en.htm

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— DG Justice and Home Affairs (JAI) has shared regulatory responsibilities when IPR enforcement is linked with law
enforcement both within and outside the Community. Specific ‘field’ operations in the same area will be handled by
the European Anti-Fraud Office (OLAF).

— DG Development (DEV) and DG External Relations (RELEX) coordinate, both centrally and via the EU Delegations in
third countries, Community assistance to developing countries and least-developed countries, including in the area of
Trade, while the Europe Aid Cooperation Office (AIDCO) manages any technical assistance programmes.

— Finally, DG Enterprise (ENTR), as manager of the IPR Help Desk (1), and with its close contacts with the industry (i.e.

with a very important number of IP right-holders), is a key partner.

This is a very crucial point for the efficacy of the present Strategy. DG TRADE and other DGs with external responsibil-
ities have an important and well defined role in terms of improving the enforcement of IPR in third countries. However,
the most ‘operational’ responsibilities of the fight against piracy and counterfeiting lie with Member States or with other
DGs. The most visible and/or immediate results in this fight will always be achieved by the customs authorities, the
police, national courts, the harmonisation of laws and procedures and the creation of information exchange mechanisms
at Community level. In these (mainly domestic) areas DG TRADE can only provide a limited contribution. The situation
is, however, different with regard to enforcement in third countries. In this case, DG TRADE and the Commission
services with external responsibilities in these matters, with the cooperation of the EC Delegations in third countries, can
certainly play a key role in achieving the implementation of the tasks proposed in the present Strategy.

(1) http://www.ipr-helpdesk.org/index.htm