COMMISSION STAFF WORKING PAPER SUMMARY OF THE IMPACT ASSESSMENT  COMMISSION STAFF WORKING PAPER SUMMARY OF THE IMPACT ASSESSMENT
Date: 2011-05-24
Institutions: European Commission
Subjects: European Union Intellectual Property Office, industrial counterfeiting, innovation, intellectual property, piracy

EUROPEAN COMMISSION 

Brussels, 24.5.2011 
SEC(2011) 613 final 

COMMISSION STAFF WORKING PAPER 

SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying document to the 

Proposal for a 
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on entrusting the Office for Harmonisation in the Internal Market (Trade Marks and 
Designs) with certain tasks related to the protection of intellectual property rights, 
including the assembling of public and private sector representatives as a  
European Observatory on Counterfeiting and Piracy 

{COM(2011) 288 final} 
{SEC(2011) 612 final} 

 
 
 
 
  
 
SUMMARY OF THE IMPACT ASSESSMENT 

The  Impact  Assessment  accompanies  the  proposal  for  a  Regulation  of  the  European 
Parliament  and  of  the  Council  entrusting  the  European  Observatory  on  Counterfeiting  and 
Piracy to the Office for Harmonisation in the Internal Market (Trade Marks and Designs). 

1. 

PROBLEM DEFINITION 

The EU’s economic well-being relies on sustained creativity and innovation. Accordingly, the 
Europe  2020  Strategy1  highlights  the  need  to  strengthen  the  EU’s  research  performance,  to 
promote  innovation  throughout  the  Member  States,  ensuring  that  innovative  ideas  can  be 
turned  into  new  products  and  services  that  create  growth  and  quality  jobs.  Intellectual 
property  rights  (IPR)  are  vital  business  assets,  which  help  to  ensure  that  innovators  and 
creators get a fair return for their work and investments. 

The protection of IPR, which is guaranteed inter alia by the Charter of Fundamental Rights of 
the  European  Union  (Article  17(2)),  serves  not  only  the  interests  of  right  holders  but  also 
those  of  the  market  at  large.  Thus,  IPR  facilitate  the  entry  of  newcomers  into  markets, 
allowing  them  to  attract  venture  capital  etc.  Moreover,  IPR  protect  consumers  from  being 
misled when acquiring products. 

Over the last ten years, however, IPR infringements have increased significantly. In 2009, the 
OECD  estimated  that  international  trade  in  counterfeit  and  pirated  goods  accounted  for 
USD 250 billion in 2007, which is larger than the national GDPs of 150 economies2. Figures 
published by EU customs authorities reflect a clear increase in customs activity, with a rise in 
registered cases from 26,704 in 2005 to 43,572 in 2009, i.e. up by about 60 % in five years. 

Various  other  studies,  originating  from  industry  as  well  as  from  international  organisations, 
confirm the steady growth of trade in counterfeit and pirated goods and conclude that it: 

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significantly reduces investment in innovation and destroys jobs3; 

threatens the health and safety of European consumers4; 

creates serious problems for European SMEs5; 

results in tax loss revenues due to reductions in declared sales6; 

Communication from the Commission: Europe 2020 of 3 March 2010, COM(2010) 2020. 
OECD,  Magnitude  of  counterfeiting  and  piracy  of  tangible  products  –  November  2009  update, 
http://www.oecd.org/document/23/0,3343. 
TERA Consultants, Building a Digital Economy: March 2010   
http://www.iccwbo.org/bascap/id35360/index.html. 
European  Commission,  Taxation  and  Customs  Union  Directorate  General,  ‘Report  on  EU  Customs 
enforcement of intellectual property rights - 2009’, 
http://ec.europa.eu/taxation_customs/customs/customs_controls/counterfeit_piracy/statistics/index_en.h
tm. 
Technopolis (2007), ‘Effects of counterfeiting on EU SMEs’,   
http://ec.europa.eu/enterprise/enterprise_policy/industry/doc/Counterfeiting_Main%20Report_Final.pdf 

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– 

is attractive to organised crime7. 

In a recent study, commissioned by the International Chamber of Commerce and carried out 
in 2010, the indication was that EUR 10 billion and more than 185 000 jobs were lost due to 
piracy alone in the EU in 20088. 

Therefore, unless more coordinated and sustainable action is taken to combat infringements of 
IPR,  the  EU  faces  a  damaging  trend  that  will have  a  real  impact  on  its  economic  recovery, 
wealth and jobs. This trend includes a rise in products that can potentially cause serious harm 
to  consumers,  such  as  fake  medicines,  food  products,  cosmetics,  and  fake  household 
equipment. The results of a Eurobarometer survey carried out in 20099 showed that one out of 
five EU citizens had, on at least one occasion, unintentionally bought a counterfeit product. 

Successful  enforcement  of  IPR  requires  an  appropriate  legal  framework  and  measures 
ensuring  the  rules  are  effectively  applied.  Currently,  the  following  shortcomings  are 
particularly prejudicial to effective enforcement: 

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Lack  of  reliable,  objective  data,  due  to  the  absence  of  an  agreed  methodology  and 
practical  tools  to  collect  and  analyse  data  in  order  to  identify  trends  and  threats  in 
counterfeiting and piracy; 

Insufficient  coordination  and  exchange  between  responsible  authorities  in  the 
Member  States  on  best  practice,  and  real-time  exchange  of  information  between 
stakeholders on specific counterfeit products, trends and potential threats; 

Insufficient exchange on successful private sector strategies; 

Insufficient knowledge of persons involved in enforcement matters; 

Insufficient use of technologies to prevent counterfeiting; 

Insufficient awareness of consumers about the effects and dangers of counterfeiting 
and piracy; and 

Lack  of  expertise  and  structures  in  third  countries  to  combat  counterfeiting  and 
piracy. 

Without measures to address these shortcomings, the number of IPR infringements  is set to 
grow. 

At EU level, the primary initiative is the European Observatory on Counterfeiting and Piracy 
(‘the  Observatory’),  which  is  administered  by  the  Commission’s  Directorate  General  for 
Internal Market and Services (DG MARKT). The Observatory’s functions were described by 
the  Commission  in  its  2009  ‘Communication  on  enhancing  the  enforcement  of  intellectual 

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Frontier  Economics,  (May  2009),  ‘The  impact  of  counterfeiting  on  Governments  and  Consumers’: 
http://www.iccwbo.org/uploadedFiles/BASCAP/Pages/Impact%20of%20Counterfeiting%20on%20Gov
ernments%20and%20Consumers%20-%0Final%20doc.pdf. 
UNICRI, Counterfeiting: a global spread, 2008, http://counterfeiting.unicri.it/report2008.php. 
http://www.iccwbo.org/bascap/id35360/index.html. 
Available at: http://ec.europa.eu/public_opinion/. 

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property rights in the Internal Market’10 as improving data collection, exchange of public and 
private best practices and awareness-raising. 

In March 2010, a Council Resolution added a further task, namely to explore the need for EU-
level  training  programmes  for  those  involved  in  combating  counterfeiting  and  piracy11.  In 
September  2010,  a  European  Parliament  Resolution  called  on  the  Observatory  to  further 
extend  its  work12.  Finally,  a  study  commissioned  by  the  Commission’s  Directorate  General 
for Trade recommended that the Observatory should become a single point of contact within 
the European Commission and an international source of best practice13. 

Over the last two years, the Observatory’s institutional framework has been set up. However, 
due to a lack of funding, human resources, IT and meeting capacities and necessary expertise 
it does not have the appropriate infrastructure to run the required operational activities. The 
Impact Assessment therefore aims at identifying solutions for carrying out the activities that 
are needed to improve IPR enforcement at EU level. 

2. 

SUBSIDIARITY 

Many  of  the  tasks  assigned  to  the  Observatory  are  of  a  cross-border  nature,  based  on 
cooperation  and  coordination.  To  be  fully  effective,  they  require  the  engagement  and 
involvement of all 27 Member States. Therefore it would be most beneficial to develop EU-
level tools and structures, so that all Member States could benefit from the results. 

Furthermore, in relation to third countries, there has to be coordination between Commission 
services and other EU and international agencies, and therefore an EU-level initiative would 
be the appropriate way forward. 

3. 

OBJECTIVES 

The general objective  is to enforce IPR more  effectively, in order to avoid significant harm 
being  caused  by  counterfeiting  and  piracy  to  the  European  economy  and  to  the  health  and 
safety of European citizens. 

The specific objectives are to make public authorities and private stakeholders more aware of 
counterfeiting and piracy as regards their scope, impact and trends, and effective techniques to 
combat  the  problem  and  to  improve  day-to-day  cooperation;  to  inform  consumers  of  the 
economic  impact  and  dangers  related  to  counterfeiting  and  piracy  and  to  help  them  avoid 
being misled into buying fake products; and to improve the coordination of actions directed 
towards third countries. 

The operational objectives are to ensure that the Observatory has the necessary infrastructure 
(in terms of human resources, funding, IT and meeting capacities, expertise and independence 

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COM(2009) 467. 
Council Resolution of 1 March 2010 on the enforcement of intellectual property rights in the internal 
market (OJ C 56, 6.3.2010, p. 1). 
European Parliament Resolution of 22 September 2010, 2009/2178(INI). 
ADE,  Evaluation  of  the  Intellectual  Property  Rights  Enforcement  Strategy  in  Third  Countries, 
November 2010, http://trade.ec.europa.eu/doclib/cfm/doclib_section.cfm?sec=180&langId=en. 

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from vested interests) to perform its tasks effectively, as quickly as possible and at minimum 
cost to the EU budget. 

These  objectives  dovetail  with  existing  EU  policies  and  strategies,  such  as  Europe  202014. 
They  also  fit  in  with  the  Commission’s  main  priorities  and  proposals  concerning  its  IPR 
strategy for Europe15. 

4. 

POLICY OPTIONS AND ANALYSIS OF THEIR IMPACTS 

Building  on  the  baseline  scenario  (Observatory  is  run  by  DG  MARKT  with  no  increase  in 
resources but with short-term support through an agreed Memorandum of Understanding with 
the Office for Harmonisation in the Internal Market – OHIM), three main options have been 
explored: 

Option  1:  The  Observatory  continues  to  be  administered  by  DG  MARKT,  but  with  extra 
resources: 

– 

– 

Sub-option 1a – DG MARKT’s human and budgetary resources are increased. 

Sub-option  1b  –  The  management  of  the  Observatory  is  outsourced  to  an  external 
contractor. 

Option  2:  Tasks  are  performed  by  a  private  body  or  jointly  under  a  public-private 
partnership: 

– 

– 

– 

Sub-option 2a – Industry-led initiative, financed by private sector stakeholders. 

Sub-option 2b – Industry-led initiative, financed by a Commission grant/programme. 

Sub-option 2c – Public-private partnership (PPP). 

Option 3: The Observatory is entrusted to an EU agency: 

– 

– 

Sub-option  3a  –  The  tasks  of  the  Observatory  are  entrusted  to  a  newly  created  EU 
agency. 

Sub-option 3b – The tasks of the Observatory are entrusted to an existing agency. 

Whichever  option  is  chosen,  the  Commission  will  retain  political  control  of  EU  IPR 
enforcement policies, which is considered to be one of its core tasks. 

4.1. 

Baseline scenario: The Observatory is run by DG MARKT without any increase 
in resources 

If no action is taken, the Observatory will be unable to continue delivering on its aims and the 
objectives will therefore not be reached. Given the need to maintain momentum and increase 
the Observatory’s activities in the short term, the Commission is concluding a Memorandum 
of  Understanding  (MoU)  with  the  OHIM,  the  European  trade  marks  and  designs  Office.  In 

14 
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COM(2010) 2020. 
COM(2008) 465. 

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this, the OHIM commits to providing support through certain activities already being carried 
out as ‘accessory activities’ to its core registration functions and limited to issues involving 
trade  marks  and  design  rights,  in  accordance  with  the  OHIM’s  remit.  The  MoU  is  of  a 
temporary nature and would probably not be extended beyond the end of 2011 if a decision 
was  taken  to  tackle  the  current  problems  of  the  Observatory  by  some  means  other  than 
entrusting OHIM more permanently with the tasks of the Observatory. 

4.2. 

Option 1: Increase of DG MARKT’s resources 

Under option 1a, DG MARKT would continue to manage the Observatory but be provided 
with  additional  staff  and  budget.  However,  in  this  option,  where  the  Observatory  would 
remain within the Commission, OHIM would not be expected to continue its assistance in the 
long term. 

In the Impact Assessment, it is estimated that the Observatory would require an operational 
team consisting of 25 people at cruising speed. In view of the Commission’s commitment not 
to  request  any  new  posts  between  2009  and  201316,  such  a  rise  in  staff  numbers  seems 
unrealistic.  

Under option 1b, DG MARKT would act as a supervising contract manager to one or more 
external contractors and coordinate the overall functioning of the Observatory. 

However, there is a genuine risk that private stakeholders and public authorities would not be 
prepared to share sensitive data with an external contractor. Moreover, this option implies a 
considerable  impact  for  the  EU  budget.  It  is  estimated  that  between  seven  and  ten  different 
contractors,  with  specialised  skills,  would  be  required  to  carry  out  the  Observatory’s  work. 
The  contracts  would  have  to  be  managed  by  the  Commission,  leading  to  a  total  cost  of 
between EUR 4.83 million and EUR 5.97 million / year in the first two years, and between 
EUR  5.26  million  and  EUR  6.18  million  /  year  in  the  following  years,  depending  on  the 
design of the IT systems to be developed. 

4.3. 

Option  2:  The  tasks  are  performed  by  an  external  body  or  jointly  under  a 
public-private partnership 

Where  the  tasks  are  carried  out  through  an  industry-led  initiative  (option  2a),  the  same 
constraints  would  arise  as  under  option  1b.  Furthermore,  there  are  no  indications  that  the 
private  sector  would  be  able  and  willing  to  ensure  the  funding  of  such  an  initiative  in  the 
longer run. 

Under  option  2b,  the  tasks  could  be  financed  through  a  Commission  grant.  However,  the 
disadvantages  outlined  for  option  1b  would  be  largely  the  same.  Moreover,  based  on 
indicative contract costs, this method of financing would mean that the EU budget, in the first 
two years, would be burdened with lower-end costs of EUR 4.85 million / year, or EUR 5.99 
million  at  the  upper  end,  depending  on  the  design  of  the  IT  systems  to  be  developed,  and 
between EUR 5.25 million and EUR 6.17 million / year from year three. 

Option 2c (public–private partnership) avoids a number of disadvantages as the PPP contract 
would  determine  the  level  of  influence  of  each  partner  and  ensure  continuous  funding.  The 
annual costs for the EU budget, based on an equal share for the Commission and the private 

16 

SEC(2007) 530. 

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sector, are estimated at between EUR 2.41 million and EUR 2.98 million /year in the first two 
years, and between EUR 2.61 million and EUR 3.07 million / year from the third year. 

4.4. 

Option 3: The tasks of the Observatory are entrusted to an EU agency 

Under  option  3a,  a  specialised  EU  agency  would  be  set  up  to  carry  out  the  tasks  of  the 
Observatory. 

EU agencies have established administrative structures, and sustainable financial and human 
resources,  and  are  therefore  in  general  suited  to  carrying  out  tasks  such  as  those  of  the 
Observatory. However, the number of staff required for the Observatory would not justify the 
creation of a new agency, in view of the considerable overheads. Thus, the estimated cost of 
this option lies between EUR 4.33 million and EUR 5.33 million / year for the first two years, 
and between EUR 5.5 million and EUR 6.28 million / year from year three. In addition, the 
Commission undertook in 2008 not to propose any new agencies for the time being17. 

Furthermore,  it  would  take  several  years  to  get  a  new  agency  fully  up  and  running.  This 
would impact severely on the Observatory’s activities. 

Under option 3b, the Observatory would be run by an existing EU agency. This would allow 
it  to  become  quickly  operational  and  to  profit  from  existing  administrative  structures  (e.g. 
human resources, IT and finances). 

The Office for Harmonisation in the Internal Market (OHIM) is the EU agency dealing with 
trade marks and design rights and could be a suitable host for the Observatory. It has already 
established  a  basis  of  expertise  in  the  enforcement  area,  through  its  training  seminars  and 
activities, and is planning to develop further enforcement projects, such as an IT information 
system on registered trade marks and designs. 

Synergies between the tasks of the Observatory and those already  carried out by  the OHIM 
would significantly limit the number of additional staff required. Therefore, the total cost of 
this  option  is  estimated  at  between  EUR  3.3  million  and  EUR  4.3  million  /  year  during  the 
initial two years and between EUR 4.74 million and EUR 5.52 million from year three. 

Finally, these amounts could be financed from the revenue that OHIM generates through its 
fees. Thus, the EU budget would not need to cover these costs and would even be freed from 
the costs of the activities that currently are carried out within the Observatory. These savings, 
for the EU budget, amount to about EUR 40,000. 

17 

COM(2008) 135. 

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5. 

COMPARISON OF OPTIONS 

Table 1: Comparison of options 

Assessment 

Effectiveness (achievement of 
objectives) 

Efficiency 

Overall 
assessment 

Time 
needed  

Overall costs 

Implication 
for 
budget 

EU 

Options 

Sustain
able 
funding 

Stable 
structure 

Human 
resources 

IT  
capacity 

0 

0 

0 

0 

Option 0 
(baseline 
scenario) 

Option 1b 

+ 

+ 

+ 

+ 

Indepen-
dence 
from 
vested 
interests 

0 

0 

0 

- 

0 

+ 

- 

+ 

+ 

++ 

0 

0 

between 
EUR 4.83 
million 
and EUR 
6.18 
million / 
year 

between 
EUR 4.85 
million 
and EUR 
6.17 
million / 
year 

between 
EUR 2.41 
million 
and EUR 
3.07 
million / 
year 

between 
EUR 4.33 
million 
and EUR 
6.28 
million / 
year 

- EUR 
0.04 
million / 
year 

between 
EUR 4.83 
million and 
EUR 6.18 
million / 
year 

between 
EUR 4.89 
million and 
EUR 6.21 
million / 
year 

between 
EUR 4.89 
million and 
EUR 6.21 
million / 
year 

between 
EUR 4.37 
million and 
EUR 6.32 
million / 
year 

between 
EUR 3.3 
million and 
EUR 5.52 
million / 
year 

Option 2b 

+ 

- 

+ 

+ 

- 

-- 

Option 2c 

+ 

+ 

+ 

+ 

0 

-- 

Option 3a 

++ 

++ 

++ 

+ 

++ 

-- 

++ 

++ 

++ 

++ 

++ 

- 

Option 3b 
(as regards 
OHIM) 

Magnitude  of  effectiveness  and  efficiency:  ++  strongly  positive,  +  positive,  0  neutral,  -  negative,  -- 
strongly negative, N/A not applicable. 

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As  explained,  option  1a  (more  staff  in  DG  MARKT)  is  not  feasible  under  the  given 
circumstances. Options 1b (outsourcing on a commercial basis), 2a and 2b (tasks performed 
by  industry-led  initiative)  are  feasible,  but  are  not  suitable  solutions  since  in  particular  the 
collection  of  sensitive  information  would  pose  considerable  problems.  These  disadvantages 
could  be  partially  avoided  in  option  2c  (PPP),  which  however  would  impose  on  the  EU 
budget annual costs of between EUR 2.41 million and EUR 3.07 million. 

Option  3a  (a  new  EU  agency)  offers  solutions  to  allow  the  objectives  to  be  delivered. 
However, this option would bring substantial costs for the EU budget and a significant time 
delay. 

Option 3b (entrusting the tasks to an existing EU agency, preferably OHIM) would allow the 
Observatory  to  have  access  to  expertise,  resources  and  financing  and  to  become  quickly 
operational. In budgetary terms it would offer a cost-efficient solution and allow costs to be 
covered by financial resources outside of the EU budget. 

Based on this comparison, option 3b is the preferred option. 

6. 

MONITORING AND EVALUATION 

Five years after the entry into force of the Regulation entrusting OHIM with the tasks related 
to the Observatory, the Commission would publish a report assessing whether the objectives 
pursued had been reached and whether new or different measures might be needed. 

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