Source: EURLEX
Language: en
Format: md

EN

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INT/1067

Fight against counterfeiting

OPINION

Section for the Single Market, Production and Consumption

Commission Recommendation on measures to combat counterfeiting and enhance the enforcement of intellectual property rights

[C(2024) 1739 final]

|  |  |
| --- | --- |
| Contact | [int@eesc.europa.eu](mailto:int@eesc.europa.eu) |
| Administrator | Annalisa TESSAROLO |
| Document date | 4/10/2024 |

Rapporteur: Bruno CHOIX

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| --- | --- |
| Advisor | Stéphanie LEGUAY (to the rapporteur) |
|  |  |
| Legislative procedure |  |
| Referral | European Commission, 29/7/2024 |
| Legal basis | Article 292 of the Treaty on the Functioning of the European Union |
| Commission documents | C(2024) 1739  [Summary](https://ec.europa.eu/commission/presscorner/detail/en/ip_24_1551) |
| Relevant Sustainable Development Goals (SDGs) | [SDG 8 – Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all](https://sdgs.un.org/goals) . |
|  |  |
| Commission responsible | Section for the Single Market, Production and Consumption |
| Adopted in section | 1/10/2024 |
| Outcome of vote  (for/against/abstentions) | 58/0/0 |
| Adopted at plenary | D/M/YYYY |
| Plenary session No | … |
| Outcome of vote  (for/against/abstentions) | …/…/… |

1.RECOMMENDATIONS

The European Economic and Social Committee (EESC) welcomes the European Commission’s recommendation and recommends the following:

1.1Raise awareness of intellectual property and the fight against counterfeiting among businesses. The EESC welcomes the recommendation from the European Commission. It is well aware of everything that has already been done at European level to protect consumers and SMEs against counterfeiting: publication of the EU Regulation on the protection of geographical indications for craft and industrial products and the introduction of the EU’s Digital Services Act (DSA), which has been applicable to all online platforms since February 2024. Some of the Commission’s initiatives included in the recommendation are particularly welcome, namely those aimed at increasing the capacity of SMEs to protect their intangible assets, including against online theft, in particular by raising awareness among companies on intellectual property and the fight against counterfeiting.

1.2Increase the amount of the damages and compensation granted in counterfeit cases. The EESC believes that more can still be done to support SMEs by increasing the amount of the damages and compensation granted in counterfeit cases. It should be recommended that Member States (that do not currently do so) recognise punitive damages and interest in their national legislation.

1.3Change the perception of counterfeiting. Company leaders’ perception of counterfeiting needs to be changed. To this end, communication campaigns need to be put in place. There should be more emphasis on hearing the experiences of company leaders who have successfully fought counterfeiting through industrial property rights.

1.4Create counterfeit insurance. A Europe-wide counterfeiting insurance would be worth introducing. Insurance companies say that they cannot assess the value of intellectual property assets and are therefore unable to offer a specific insurance policy that would not be too expensive. Member States should address this issue of how assets are valued in order, for example, to be able to work with insurance companies at a second stage to create specific insurance.

1.5Make it mandatory for providers of online platforms to establish a single form to flag illegal content. The EESC calls for simpler, faster and more effective procedures for reporting and withdrawing ads for counterfeit products online, possibly in the framework of discussions on the European Commission’s Memorandum of Understanding between platforms and rights holders. These ads pose a threat to consumers. We must be more effective. There is still much to be done to rid the internet of counterfeits. The EESC will monitor whether the obligations laid down in the DSA have a real impact on reducing the supply of counterfeit goods on the internet.

1.6Strengthen European cooperation when applying delisting measures for websites selling counterfeit items. The EESC will monitor the implementation of the recommendations contained in the EU Toolbox against counterfeiting, which aims to strengthen European cooperation when delisting sites selling counterfeit goods.

1.7Make counterfeiting a priority for the European Anti-Fraud Office (OLAF) and Europol. The EESC believes that counterfeiting must be a priority for the European Anti-Fraud Office and Europol. This topic should also be one of the priorities of the EMPACT
[1](#footnote1)
 EU Policy Cycle.

1.8Systematically include the topic of counterfeiting in bilateral and international trade. The EESC will have to check very carefully whether the issue of counterfeiting is systematically included in the trade agreements that the EU concludes with its partners. The EESC will also monitor the implementation of these agreements.

2.EXPLANATORY NOTES

Arguments in support of recommendation 1.1

2.1In the EU, counterfeiting results in more than 800 000 job losses and EUR 16 billion in lost tax revenue each year, with an increasing proportion of products constituting a threat to public health and safety. Counterfeit and pirated products are present in all sectors and product categories. Therefore, all companies, including SMEs, that use intellectual property in their business models face the risk of infringement of intellectual property rights (IPR). SMEs play an important role in most economies. The joint report of the Organisation for Economic Cooperation and Development (OECD) and the European Union Intellectual Property Office (EUIPO) entitled Risks of Illicit Trade in Counterfeits to Small and Medium-Sized Firms, published on 31 January 2023, shows that SMEs whose intellectual property has been infringed have a 34% lower chance of survival after five years. The risk is particularly high for independent SMEs that are not part of a large group and for SMEs affected by patent infringements. 40% of SMEs report that they do not monitor their markets for potential infringements of their rights. They rely solely on feedback from customers or business partners to detect counterfeits.

2.2In France, a recent business survey was conducted by the Confederation of SMEs (CPME), in cooperation with the National Institute of Intellectual Property (INPI)
[2](#footnote2)
, from the end of February to the end of April 2023, which included a section on counterfeiting. It reveals that 70% of respondents take no action to protect intangible assets and innovations. Four reasons were given: the company does not see any advantage, insufficient knowledge of IPR, the company does not feel it concerns them or the conditions for registration have not been fulfilled. SMEs seem to be completely unaware of the measures to be taken in the event that their products are copied. Better information is needed on the measures and procedures of defensive actions in the event of counterfeiting.

Arguments in support of recommendation 1.2

2.3According to the same French CPME-INPI study, fear of low compensation discourages too many companies that have been subject to counterfeiting. Only 26% of businesses that consider themselves to be victims of counterfeiting initiate legal proceedings.

2.4Defensive reactions:

44% of companies that had been subject to counterfeiting reported that they did not have any measures in place for the following reasons:

·lack of knowledge of measures to be taken: 33%

·low probability of receiving compensation: 31%

·legal proceedings too long: 24%

·court fees too high: 17%

·fear of losing a trial: 7%

·disclosure of confidential information: 1%

Arguments in support of recommendation 1.3

2.5Just as people who run businesses believe they will receive little compensation if they bring an infringement claim, they also frequently believe that their reputation will be damaged as a result of being a victim of counterfeiting. We need to change this perception. Companies seem to be worried about their image. They must be convinced that it is possible to defend themselves, that this will be effective and not harm the business. The priority is to make businesses aware of the extent of their intangible assets and to protect them in order to get the most out of them. There is a lot at stake for them if one of these assets is damaged. They need to be educated so they can be proactive and anticipate all problems.

Arguments in support of recommendation 1.4

2.6SMEs find that the procedures are too long and too expensive. If it is possible to take out insurance against theft, it should also be possible to insure against counterfeiting, which is the theft of intangible property. Counterfeiting exposes a company to various financial costs:

-loss of income (fees, turnover, etc.). In addition, it is the value of the company’s assets itself that will be depreciated, which will have an impact if that industrial property right is included in the company’s balance sheet;

-costs linked to enforcing actions, including ADR procedures, to stop counterfeiting, and to securing recognition of the company’s industrial property rights
[3](#footnote3)
 and compensation for the damage suffered. The financial costs, particularly lawyer’s fees, depend not only on the nature of the right in question but also on the territorial scope of counterfeiting, as it is sometimes necessary to have multiple proceedings in different countries. There is also sometimes technical complexity to contend with, particularly with regard to patents and the technical expertise (patent and trademark attorneys) that may be required.

2.7Consideration should also be given to cases where a company infringes on the intellectual property rights of third parties. There may be lengthy and costly procedures to identify the original creator or inventor or the legitimate holder of the right. A company at risk of counterfeiting may see counterfeit insurance as a means of: 1) covering litigation and ADR costs; 2) covering cessation of business if necessary.

Arguments in support of recommendation 1.5

2.8Progress needs to be made in some areas to make the tasks of rights-holders easier in practice, in particular by simplifying and harmonising the procedures for reporting and removing illegal content. These procedures differ from one platform to another and from one country to another, and business owners report that they are too time-consuming. They also have financial costs, particularly the cost of service providers. There are costs in terms of human resources, as staff within the company are involved. At least one person in the company must work full-time to develop a sufficiently effective response to the sale of counterfeit goods. For example, over the course of one year, a company that had a small team of staff to handle reports flagged over 5 800 issues on platforms and had 30 specific cases opened as a result of these reports (these mainly concern websites whose providers are on these online platforms). This flagging required more than 1 800 hours of work (carried out by three people). The cost of these tasks exceeds EUR 100 000, including salary costs and lawyers’ fees. Businesses say they have been faced with insurmountable obstacles: some platforms reject a company’s lawyers on the assumption they are flaggers, require verification of the rights of flaggers, request court decisions to take action, challenge the method of reporting, refuse to uphold trademarks when the counterfeiter distorts or blurs part of the image of the counterfeit product, etc. Many years of action do not result in the counterfeit items being removed from certain platforms, which businesses consider to be accomplices to the counterfeiters given that they receive a commission on sales. The proportion of reports rejected by platforms can be as high as 50%.

Arguments in support of recommendation 1.6

2.9More effective action should be taken when counterfeit products rapidly re-appear on shopping websites by requiring platforms to put in place an easy-to-use and responsive warning system.

2.10In France, for example, the power to delist a site was used for the first time in 2021, to delist the online sales platform Wish. It is imperative that the flagging systems that are now mandatory at EU level and the action of trusted flaggers are able to prevent the perpetual re-appearance of counterfeit offers shortly after the sanctioned sites or pages are removed. The fact that the Wish platform could be delisted in France in no way implies that other EU Member States did the same.

2.11The flagging procedure is automated to a certain extent when it comes to the recall of dangerous products, but when it comes to counterfeiting or non-compliance, in the absence of danger, delisting merely leads to sharing information at the level of the EU and OECD working groups. Each national authority can carry out its checks according to its own criteria and reach different conclusions. In this case, the product remains accessible via another European platform.

2.12A harmonised response and protection measures at EU level would be needed when national authorities determine that a platform is selling counterfeit products.

Arguments in support of recommendation 1.7

2.13Unfortunately, this issue is not at the top of the list of objectives of these cooperation bodies. The fight against counterfeiting is one component of the objective of detecting illegal trade in OLAF’s action programmes. It aims, in particular, to combat illegal trafficking through agreements with more than 80 countries. Its core mission is to protect the EU’s financial interest. However, it conducts support action beyond its financial remit such as customs coordination, which is carried out within the framework of Regulation (EC) No 515/97. Due to a lack of resources, these customs coordination actions target products that are dangerous for human health and safety and the environment.

2.14OLAF has a wide range of powers: it can conduct administrative enquiries, conclude administrative cooperation agreements with customs bodies in third countries to better understand how counterfeit products reach Europe, etc. The obstacles encountered involve missing and poor quality data, especially in the context of e-commerce. Its remit includes dealing with imports of counterfeit goods into the internal market, but it requests that its powers be extended to include intra-Europe counterfeiting. OLAF’s human resources consisted of 371 people in 2021. However, the unit responsible for operations and investigations consists of three people working on cigarettes and four or five assigned to dangerous products, giving a total of seven to eight people. OLAF as a whole lost 64 posts to the new institution of the European Prosecutor.

2.15The EESC regrets the fact that so few resources are available to OLAF that are dedicated to counterfeiting, which includes many flows and trafficking. It would be useful to reinforce the team dedicated to counterfeiting so it could be more effective in its current tasks, even more so if its remit is extended to cover intra-EU counterfeit flows.

Arguments in support of recommendation 1.8

2.16The European Commission’s recent Report on Intellectual Property Rights in Third Countries, published in May 2023
[4](#footnote4)
 establishes a list of priority countries on which the EU should focus its efforts to improve the effective protection of intellectual property rights. China and Hong Kong are at the root of the main flows of counterfeit products imported into the EU and are at the forefront of European concerns
[5](#footnote5)
. India and Türkiye, where the enforcement of intellectual property rights is problematic, are also significant production and transit countries for counterfeit goods. Other countries in Asia, Africa and South America are also among the main transit countries of counterfeit goods.

2.17The protection of intellectual property rights must be mentioned in all bilateral agreements signed by the Member States and the European Union.

2.18In addition, some third countries’ efforts to combat counterfeiting should be taken into account, for example through development aid. The EESC points out that European companies have an obligation to respect human rights by refraining from working with partners that are guilty of using forced labour involving certain sections of society.

3.PROPOSED AMENDMENTS TO THE LEGISLATIVE PROPOSAL OF THE EUROPEAN COMMISSION

Amendment 1

linked to recommendation 1.2

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| --- | --- |
| Text proposed by the European Commission  Point 42 | EESC amendment |
| Ensuring the granting of appropriate damages  42) Member States are encouraged to ensure that, in the context of proceedings on IP enforcement, the rightsholders can receive damages appropriate to compensate for the actual prejudice caused, using a method of calculating damages that addresses all aspects of the suffered prejudice, including:  (a) damages covering the moral damage suffered by the rightsholder;  (b) damages covering costs that are linked to researching and identifying possible acts of infringement;  (c) damages covering payment of interest on the sums due. | Ensuring the granting of appropriate damages  42) Member States are encouraged to ensure that, in the context of proceedings on IP enforcement, the rightsholders can receive damages appropriate to compensate for the actual prejudice caused, using a method of calculating damages that addresses all aspects of the suffered prejudice, including:  (a) damages covering the moral damage suffered by the rightsholder;  (b) damages covering costs that are linked to researching and identifying possible acts of infringement;  (c) damages covering payment of interest on the sums due.    In order to achieve this, the Member States are encouraged to give consideration to the issue of the valuation of intellectual property assets. |

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| --- |
| Reason |
| Low levels of compensation discourages too many companies that have been victims of counterfeiting from taking action. |

Brussels, 1 October 2024

The president of the Section for the Single Market, Production and Consumption

Sandra PARTHIE

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:   [(1)](#footnoteref1)
       European Multidisciplinary Platform Against Criminal Threats — 
    <https://home-affairs.ec.europa.eu/policies/law-enforcement-cooperation/empact-fighting-crime-together_en>
    .
:   [(2)](#footnoteref2)
       
    <https://www.cpme.fr/publications/enquetes>
    .
:   [(3)](#footnoteref3)
       More specifically, the purpose of industrial property is to protect and enhance the value of inventions, innovations and creations. Intellectual property comprises industrial, literary and artistic property.
:   [(4)](#footnoteref4)
       
    <https://policy.trade.ec.europa.eu/news/commission-releases-its-report-intellectual-property-rights-third-countries-2023-05-17_en>
    .
:   [(5)](#footnoteref5)
     
       To understand where counterfeits and their costs come from for Member States, see also: 
      
    <https://www.oecd.org/en/publications/2021/06/global-trade-in-fakes_f64665b3.html>
    .

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