Source: EURLEX
Language: en
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# 52011SC0598

**COMMISSION STAFF WORKING PAPER SUMMARY OF THE IMPACT ASSESSMENT COMMISSION STAFF WORKING PAPER SUMMARY OF THE IMPACT ASSESSMENT /\* SEC/2011/0598 final - COD 2011/0137 \*/**

  

1.
Background

A fundamental component of the EU system to
enforce intellectual property rights (IPR) is Council
Regulation (EC) No 1383/2003 of 22 July 2003, concerning customs action against
goods suspected of infringing certain intellectual property rights and the
measures to be taken against goods found to have infringed such rights[1] (hereafter, “the Regulation”).

The Regulation
implements the border enforcement measures contained within the Agreement on
Trade Related aspects of Intellectual Property Rights (TRIPS). The TRIPS
Agreement was approved by the EU Council in 1994 as
part of the multilateral negotiations of the Uruguay Round and concluded in the
framework of the World Trade Organisation. In fact, the
Regulation goes further in terms of border enforcement than the basic
requirements in TRIPS, thereby reflecting the EU’s commitment to high
protection of IPR.

Under the
Regulation, EU customs authorities are able to take
action against goods suspected of infringing certain intellectual property rights
which are under customs supervision. The mechanism envisaged is that once
suspected goods have been detained by customs, customs authorities notify the
right-holder of their action and provide him with a short period to initiate
legal proceedings (standard procedure) or, if the simplified procedure has been
implemented by the Member State where the goods have been detained, to reach an
agreement with the other concerned parties to have the goods abandoned for
destruction under customs supervision.

The EU and other developed economies
represent attractive markets for IPR infringing goods and customs have
identified a steady increase in the quantity of such goods over the last 10
years. In September 2008 the
Council invited the Commission and the Member States to review the Regulation
and to develop a new customs action plan to combat IPR infringements for the
years 2009-2012. This Action Plan[2],
prepared by the Commission and endorsed by the Council, was developed to tackle
four main challenges: dangerous counterfeit goods, organised crime,
globalisation of counterfeiting and the sale of counterfeits over the internet.
The review of the Regulation was incorporated into the plan and was carried out
by the Commission, in close collaboration with the Member States through an
expert group under the Customs 2013 Programme.

The Commission also carried out a public
consultation to give all stakeholders an opportunity to contribute to the
review. The period of the consultation was from 25 March, 2010 to 7 June 2010
and the Commission received 89 contributions. Of these, 43 were from
organisations and enterprises registered in the register of interest
representatives of the European Commission, 42 from non-registered
organizations, companies and citizens and 4 from national public authorities.

Certain instances of detentions by customs
authorities of shipments of medicines in transit through the EU, which occurred
at the end of 2008, gave rise to concerns among certain Members of the WTO,
Members of the European Parliament, NGOs and the civil society. It was claimed
that such measures could hamper legitimate trade in generic medicines, thus
contradicting the EU commitment to facilitating access to medicines in the
developing world. On 11 and 12 May 2010 India and Brazil respectively requested
consultations with the EU at the WTO in that regard. The concerns raised by
India and Brazil during the WTO consultations, as well as the incidents of
detentions have shown that the relevant EU legislation for intellectual
property enforcement by customs authorities could benefit from further
clarification to increase legal certainty.

2.
Problem definition

The above
mentioned Action Plan detailed several elements of the Regulation that should
be examined. These elements included provisions related to simplified
procedures, small consignments, destruction, costs and storage and a potential
extension of the scope of the Regulation, all of which were examined in the
course of the review. Three main issues were identified in the review, in relation
to combating IPR infringing goods.

- Problem I - Some IPRs are not enforced
by customs at the EU border. The current Regulation provides for the
enforcement of a broad range of IPR established under EU or national law,
including trademarks, copyrights, patents, plant variety rights and
geographical indications, but the list does not cover all types of IPR.
Topographies of semiconductor products for example are not covered.
Furthermore, other types of infringements are also currently excluded from the
scope of the Regulation, notably with regard to parallel trade and overruns.

- Problem II - Administrative procedures
to enforce IPR are considered to be burdensome to customs and right-holders,
especially in relation to small consignments resulting from internet sales.

- Problem III - Certain aspects of the
administrative procedures could be interpreted in a manner that leads to an
unbalanced approach towards different legitimate stakeholders. Certain
general legal principles as developed and interpreted through the jurisprudence
of the Court of Justice of the EU are not presently codified sufficiently in
the Regulation (e.g. right to be heard or liability of customs authorities).
These principles emerge from the EU’s international obligations in the framework
of the WTO, as well as the Lisbon Treaty and in particular, the Charter of
Fundamental Rights.

3.
The right of the EU to act

The European Union has exclusive competence
in the area of common commercial policy, as provided for in the Treaty on the
Functioning of the European Union (TFEU). The TFEU defines common commercial
policy and the commercial aspects of intellectual
property are expressly included within this definition.

4.
Objectives

The general
objective is to ensure that customs measures and procedures concerning border
enforcement of IPR are effective and consistent with all relevant legal
obligations. The policy shall in particular pursue the following specific
objectives:

(i) improve IPR
enforcement at the border.

(ii) limit
administrative and economic burdens on customs and right-holders, especially
small and medium enterprises.

(iii) clarify
and revisit any provision which may be perceived as imbalances in
administrative procedures.

5.
Policy options

Three main options emerge as those most
realistic and feasible:

i) Policy option
A – Baseline scenario, where no action is taken.

ii) Policy
option B – Use of non-legislative instruments,
such as training, guidelines, explanatory notes, exchange of best practices,
regular contacts with the stakeholders.

iii) Policy
option C – Amendment of the Regulation, where the existing legal framework would be
modified. Different options could be available for each of the different
identified problems. Amendments to all or some of the following provisions
could be envisaged:

- with regard to problem I, concerning the
extension of the scope of customs enforcement, two sub-options could be taken
into consideration: (i) the first sub-option would be to extend the scope of
IPR infringements to cover all infringements of the types of IPR already
included in the Regulation, and (ii) the second sub-option would be to include,
in addition to the extension proposed in the first sub-option, goods infringing
IPRs not already covered by the Regulation;

- with regard to problem II, the
introduction of a mandatory system for simplified destruction of IPR-infringing
goods, subject to clarified conditions and adequate safeguards and the
introduction of a specific simplified procedure for small consignments;

- with regards to problem III, the
introduction of further clarity concerning goods that are merely transiting the
EU and not destined for, nor pose a risk of being diverted onto the EU internal
market and the introduction of further clarity in the procedures, to increase
legal certainty for all legitimate stakeholders.

Such amendments should not preclude
additional support measures.

However, it is not the intention of the
assessment to compare the likely merits of those three options, with a view to
deciding solely to maintain the baseline scenario, or to introduce
non-legislative instruments, or to make a legislative proposal. The aim is to
consider each specific problem against relevant criteria, with a view to
finding the appropriate mix of possible solutions.

6.
Assessment of impacts of options
6.1.
Introduction

There is consensus across the board that
there is a lack of credible data in this field. The main
source of information is the annual report[3] on EU
customs enforcement of IPR. However, there is little credible information on illicit
activities and the absence of data on the volume of EU
external trade in goods infringing IPR or of the situation on the internal
market renders an assessment of the possible impact of any option difficult. In
addition, it is not possible to determine to what extent customs authorities
would identify and act upon these infringing goods, as the success of the
measures does not solely depend on the decision to modify the legislation. In
these circumstances, only a quality assessment is possible.

The assessment considers the impacts of
addressing the three general problems identified in the review, which may
require amendments to the Regulation. These technical problems are not
necessarily closely inter-linked, therefore policy options for each separate problem
were drawn up and assessed with specific criteria.

6.2.
Problem I: Some IPRs are not enforced by customs
at the EU border

The level of IPR enforcement in the EU
territory would be slightly improved by extending the current scope of the
Regulation in terms of IPR infringements covered. The main focus for customs
control has been on counterfeit products; in 2009, 90%
of the articles detained by customs allegedly infringing IPR were counterfeit
products. This seems to indicate that customs authorities are mainly finding
those IPR infringements, which are more visible and easier to identify. In
principle, one would not expect that the simple amendment of the Regulation to
include within its scope, goods involving more complex IPR infringements could
lead to a radical shift in the type of customs interceptions.

Nevertheless, a relatively significant
impact from the introduction of provisions enabling customs to act on
confusingly similar trademarks and illicit parallel trade, in particular with
regards to trademarks should not be discarded, even though it is not possible
to measure the effect in advance.

There would be an impact in terms of costs
for customs authorities, international trade service providers and
right-holders. As the level of trade in these infringing goods is unknown, it
is not possible to estimate the costs, though the cost
of enforcing IPR at the border to an equivalent level in the internal market
would be lower as the right holder would need to initiate less legal
proceedings, since the shipment of infringing goods would not have been
disaggregated and delivered to retailers.

The risk of hindering legitimate trade by
enforcing IPR at the border would be increased. It
might be difficult for customs authorities to assess some of the IPR infringements
that could be added, thus introducing an added risk that decisions to detain
goods might be unfounded.

The enforcement of new IPR at the border is
not expected to have a significant social and environmental impact.

6.3.
Problem II: Administrative procedures to enforce
IPR are burdensome to customs and right-holders
6.3.1.
Lack of implementation of the simplified procedure in some
Member States

Currently, the simplified procedure,
whereby goods may be abandoned for destruction, is provided for in the Regulation
on an optional basis and in consequence has not been implemented in all Member
States. Introducing mandatory rules in the Regulation providing for a
simplified procedure would harmonise the customs enforcement of IPR in the EU
and would reduce the administrative burdens of detentions relating to IPR
enforcement, for all parties concerned, in those Member States, where this has
not been implemented.

6.3.2.
Sales of IPR infringing goods on the
internet

Significant quantities of small shipments
containing suspected IPR infringing goods, are sent by post or courier and
relate to goods being ordered or sold via the internet. The application of the
standard, as well as the simplified procedure, is disproportionate in relation
to the amount and value of the infringing goods, as far as small consignments
are concerned (baseline scenario). Amending the Regulation by providing the
parties with the possibility to abandon the goods in certain cases where the
infringement appears to be clear, without the right-holders being involved,
would reduce significantly the burden for right-holders and customs. This would
increase the effectiveness of customs to stop goods sold via internet.

Some non-legislative measures could be
adopted in an attempt to tackle the increasing flow of small parcels, but new
administrative procedures could not be introduced without making legislative changes
to the procedures as described in the Regulation.

6.3.3.
Social and environmental impacts

All measures on administrative procedures
are proposed in order to lower the administrative burden for government and
business.

The introduction of a special
administrative procedure for small consignments (legislative measures option)
to fight the increasing number of goods ordered and shipped following a sale
via the internet will have an effect on consumers in the sense that these
infringing goods will not reach them. The Commission’s most recent report on EU
customs enforcement of intellectual property, concerning 2009, noted that more
and more potentially dangerous items, used by European consumers in their daily
lives, were now being detained by customs (baseline scenario and non
legislative instruments).

No environmental impacts were identified
with this problem.

6.4.
Problem III: Certain aspects of the
administrative procedures could be interpreted in a manner that leads to an
unbalanced approach towards different legitimate stakeholders

The application by EU customs authorities
of provisions on restrictive or prohibitive measures to international trade,
such as those related to the enforcement of IPR, must respect international
obligations and commitments, as well as the principles of EU law. Such
measures, insofar they belong to the area of the common commercial policy, must
be applied in a uniform way. In addition, those measures must be applied in a
balanced manner, taking into consideration, on the one hand, the need to
enforce the measures effectively and on the other hand, the facilitation as
well as respect of legitimate business. To that end and to avoid unfounded
action, the provisions must provide legal certainty.

The legislative option would provide legal
certainty on the application of the Regulation, uniformity of application
throughout the EU and would avoid the risk of unfounded detentions with regard
to the identified problems.

Non-legislative options could address some
of the identified problems by clarifying the interpretation
of the Regulation in the light of the EU's international obligations in the WTO
and in light of the relevant basic principles of EU law, as established and
interpreted by the Court of Justice of the EU. However, the risk of
misinterpretation of the Regulation would remain.

6.4.1.
Social and Environmental impacts

The clarification, via non-legislative
measures or legislative measures, on certain aspects of the administrative
procedures could have a positive impact on consumers in cases where they are
involved in the process, for example as recipients of consignments ordered via
the internet. The right to be heard and the question of customs' liability,
give consumers the possibility to object or seek compensation against any
decision by customs authorities that might adversely affect them.

The clarification of the Regulation
concerning the issue of transit of shipments across the EU territory towards
third countries, particularly with regard to medicines, could have a positive
impact on consumers in those third countries. The likelihood of delays in the
delivery of such medicines would thus be reduced.

No environmental impacts were identified
with these administrative procedures.

6.5.
Administrative burdens
6.5.1.
Administrative burdens on business

EU customs IPR enforcement is based on an
application for action having been submitted by the IP right-holder. It is for
the offended persons to initiate legal proceedings to enforce their IPR. Since
the submission of an application is not compulsory, the system and the proposed
new options do not place any extra cost and obligations on right-holders, when
compared to the current features of the Regulation, which already encourages
right-holders to lodge applications electronically when electronic data
interchange system exists.

In principle, whichever policy option is
chosen with regard to the problems addressed in this assessment, the features
presently associated with an administrative burden for right-holders would
remain to a certain extent. Introducing a specific simplified procedure for
small consignments containing counterfeit and pirated products, where the goods
might be destroyed without the involvement of the right-holder, would
considerably reduce this burden.

6.5.2.
Administrative burdens on customs
administrations

It is not possible to analyse the impacts
of the different options in relation to the different problems on
administrative costs. Customs authorities perform their duty at the border of
the Union and officers will control a broad variety of laws covering different
policy areas. Each law contains specific rules related to the protection of
intellectual property rights, cash controls, safety, health, and security
provisions, control on tax issues and tariff matters. It is not possible to
measure which part of each control is dedicated to a particular policy, so data
concerning administrative costs solely related to IPR enforcement is not available.

The procedures to detain goods involving
certain IPR infringements are in place in the EU since the 1st of
January 1988. The extension of the scope of the Regulation would not therefore
create a need to reorganise customs administrations.

The simplification of procedures for small
consignments is expected to reduce the procedural steps and therefore the time
spent on the treatment of each detention file. This is expected to
counter-balance the possible increase of destruction costs for customs as a result
of more efficient procedures.

7.
The preferred option

The legislative option offers the best
suitable solution to address the problems that emerged from the implementation
of the present Regulation, such as non-harmonised or burdensome procedures, or
those resulting from shortcomings, such as IP rights not covered by the
Regulation. Introducing procedural clarifications into the Regulation would
also provide the maximum legal certainty on the treatment of generic medicines
in transit, when it comes to patent law. A Commission proposal to amend the
present Regulation should preferably respond to all the problems addressed in
this Impact Assessment, to ensure a balanced outcome in terms of benefits and
constraints for all categories of affected persons.

Non-legislative measures would only
partially address the identified problems. Explanatory notes or guidelines
could help clarify the applicable procedure concerning the situation of transit
through the EU, or how to apply the general principles of law, such as the right
to be heard, in the context of the present Regulation. However, non-legislative
measures cannot address the objective of widening the scope of IPRs to be
enforced by customs.

In some instances, a combination of
legislative and non-legislative measures should be envisaged to support the
implementation of the new Regulation. However, retaining the status quo
should be excluded if the Commission is to respond adequately to the Council's
request to review the legislation, and to the concerns expressed by
stakeholders during that process.

8.
Lesson learned: the need to improve knowledge
about the scale and impacts of trade in ipr infringing goods

One of the main
constraints in assessing the impacts of any policy option in the field of IPR
enforcement is the lack of reliable data. Existing data on the trade in IPR
infringing goods is fragmented and not comparable, thus making it difficult to
estimate the overall scale and scope of the problem, the impact on the EU and
the impact of any policy measures put in place to tackle that problem.

To respond to
this data shortage, the European Observatory on Counterfeit and Piracy has
assumed, as one of its priority objectives, the aim of improving the collection
and use of information and data. The Observatory was launched in 2009 and
comprises of over 40 private stakeholder representatives, the 27 Member States
and the Commission.

The Commission
identified specific issues that require urgent action. For example, while
numerous studies have concluded that the international trade in counterfeit and
pirated goods has grown steadily over the last decade, they are often
challenged for not being comprehensive or for using incomparable figures
resulting from different methodologies. There is an urgent need to improve this
situation by developing a common methodology, for use by private and public
sector bodies, so that robust reports can be produced, which outline the true
scope and scale of the problem. Such reports would be the basis for more
evidence-based policy decisions and more focussed enforcement strategies.

As
a result a tender was launched for experts to assess the scope, scale and
impact of counterfeiting and piracy in the internal market, through a defined
methodology for collecting, analysing and comparing data. The methodology
proposed by the contractor should result in key indicators that would be
applicable throughout all Member States and sectors and which could be used in
future studies and analysis. The contractor began work in December 2010 and
will firstly identify and compile existing studies and methodologies. Secondly
on the basis of the research, the contractor will propose a preferred
methodology, which will be used to quantify the scope and scale of
counterfeiting and piracy in the internal market, in particular focusing on its
implications on various areas, like innovation, growth and competitiveness,
creativity and culture, public health and safety, employment, environment, tax
revenues, crime.

[1]               OJ L 196, 2.8.2003, p. 7–14.

[2]               Council Resolution of 16 March 2009 on the EU Customs
Action Plan to combat IPR infringements for the years 2009 to 2012 (OJ C 71,
25.3.2009, p. 1).

[3]               The reports on statistics can be found at       
http://ec.europa.eu/taxation\_customs/customs/customs\_controls/counterfeit\_piracy/statistics/index\_en.htm

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