Criminal Enforcement Directive - A Review of the Rapporteur's Report - Too Late to Lock the Stable Door?

The European Parliament's Committee on Legal Affairs is due to discuss at Monday's meeting the Rapporteur's draft report on the proposed Criminal Enforcement Directive.

Having just reviewed the English translation of the Rapporteur's Report, I would suggest that it narrows significantly the scope of the proposed Directive, but it remains a Trojan Horse for first pillar powers.

Definition for Intellectual Property - Whither a Patent?
In particular, the Rapporteur proposes a definition for intellectual property which excludes patents. The attempt to define intellectual property proved to be very controversial in the passage of the earlier Enforcement Directive, 2004/48/EC. This discord eventually led the Commission to propose its own list of intellectual property rights, 2005/295/EC. One of the reasons patents are excluded in the current report, according to the Rapporteur, is the European Parliament's rejection of the Directive on the Patentability of Computer-Implemented Inventions (Software Directive). The Rapporteur concludes that the Parliament considered it inappropriate to legislate on patents. Accordingly, he suggests that criminalising patent infringement would be "a dangerous foray into a very complex area."

The Rapporteur's report also proposes that the Directive be limited to intellectual property rights which are harmonised at the Community level, and does not include other national "intellectual property rights."

Other Definitions
The Rapporteur's report also proposes definitions for other key phrases, including that of infringement on a commercial scale. The idea of "commercial scale" previously proved problematic during the negotiation of the Enforcement Directive. In the Enforcement Directive, the problems of definition were to some extent remedied by Recital 14. However, the definition proposed in the current Rapporteur's Report on the proposed Criminal Enforcement Directive seems considerably broader.

Does the Punishment fit the "Crime"?
The Criminal Enforcement Directive is presented on the basis of being a response to serious organised crime, the potential threat to public safety, and to the "serious threat to national economies and governments." The Rapporteur also acknowledges that "serious" intellectual property crimes can be committed outside organised crime, and therefore extends high levels of punishment to all serious crimes, rather than limiting such punitive measures to those actions committed by large criminal organisations.

On a number of occasions, the Rapporteur points out the fact that there are domestic provisions on criminal infringement in the domestic laws of many Member States, and he discusses harmonisation in this context. One intriguing point which seems to be overlooked is that the sentence of a minimum maximum of 4 years imprisonment proposed by the Criminal Enforcement Directive ignores the various sentencing rules across the Member States. In the UK, for example, the practical effect of a 4 year sentence is that the person will be eligible for release after 2 years. Therefore, it is unclear how the Commission can rely on terms like 4 years imprisonment, in the context of a harmonised approach, when it is presumed that the time served may mean quite different things for different Member States.

Competence - Win the Horse or Lose the Saddle
Finally, on the issue of competence (see the earlier post, A Trojan Horse?), the Rapporteur's report indicates that the proposal falls within the Commission's "broad interpretation" (my emphasis) of its powers under the first pillar. The Commission has relied upon Case C176/03, Commission v Council (environmental law), to use first pillar powers to impose criminal sanctions. The Commission issued a Communication on the implications of that judgment on criminal law provisions under the first pillar. After that, there was a Resolution on 14 June 2006, where the European Parliament welcomed the ECJ's judgment, although had reservations about the Commission extending it further.

The Rapporteur takes the view that applying criminal penalties to patent rights does not seem particularly appropriate in itself, and does not follow previous actions of the European Parliament. He also concludes that there is no urgent need to intervene on criminal penalties for patent infringement. What is problematic about his position is that he doesn't come to any opinion on whether the Commission's position on broad interpretation is correct. But he does believe that the scope of the proposed Directive seems to be too broad.

It's unlikely that many Member States will find much solace on the competence issue within the Report of the Legal Affairs Committee. Although, in terms of the Directive as a whole, it provides many sensible limitations. But one can still question the necessity of the Directive at all.

The Criminal Enforcement Directive - A Trojan Horse?

patentingLIVES

Last night the Patenting Lives network hosted its first in a series of workshops on current issues in patent law, policy and development.

The first in the series was concerned with the proposed Directive of the European Parliament and of the Council on criminal measures aimed at ensuring the enforcement of intellectual property rights (Criminal Enforcement Directive also known as IPRED2 in view of its amendment this year). One participant described the Directive as the possible "Trojan Horse" that may be used to expand EU competence in the area of criminal justice, moving towards first pillar matters.

Background
The present proposal for IPRED2 is being considered by the European Parliament and the Council at present, as the Directive must be adopted following the co-decision procedure.

In the European Parliament it is presently before the Legal Affairs Committee. The rapporteur, Nicola Zingaretti (an Italian MEP), will present a draft report on the proposed Directive at the next meeting of the Legal Affairs Committee, 20 November 2006. If and when the Committee approves the report, there will be a vote at a plenary session of the European Parliament for its first reading.

Meanwhile, Member States are continuing to negotiate the text before the Council. The most recent Council text includes a number of amendments to the original Commission proposal. But until both the Council and the Parliament have finished the first reading the Directive cannot progress any further. At present, it looks like it might be held up before the Council, even if the Parliament is making progress.

The European Union is structured as "three pillars," - the European Communities, common foreign and security policy, and cooperation in justice and home affairs. Some Member States have indicated that they believe that the measure is not within Community competence as a first pillar instrument. Instead, they suggest that it should be a Framework Decision under the third pillar. It is anticipated that the Court of Justice's ruling in Case C-440/05 Commission v Council (ship source pollution) will give a good indication of whether or not IPRED2 can go forward as a first pillar Directive or will need to revert to being a Framework Decision.

Workshop
Around 35 participants took part in the seminar, which included presentations from Gwilym Roberts, partner at Kilburn & Strode Patent Attorneys; Phillip Johnson, DTI and legal adviser to the UK Patent Office, but speaking in his personal capacity; and Julian Heathcote Hobbins, senior legal counsel for the Federation Against Software Theft (FAST).

All speakers had reservations about the proposed Directive, some stronger than others, including predictions that it would be "completely disastrous."

Gwilym Roberts (pictured at left) very importantly identified not only the way in which it might impact upon patent practice, but also the significant commercial effect of criminalising patent infringement, "changing the game theory of decision-making at the commercial level." Rather than being able to negotiate normal commercial risk, commercial entities would now be constrained in their daily commercial decisions by the threat of criminal sanctions.

As Gwilym explained, copying a CD in large-scale copyright piracy is quite a different concern from the very complicated questions to be considered when trying to determine whether a patent has been "copied." The application of criminal sanctions to all areas of intellectual property simply cannot be justified by the same arguments. He said that the patent system is not designed to implement public health policy (such as the arguments concerned with health risks and counterfeit medicines) and should not be expected to deliver such regulation. Gwilym predicted that the Directive would effect a "significant stifling of innovation."

Julian Heathcote Hobbins (pictured at left) gave a detailed introduction to the activities of FAST and its position in the debate. Julian also identified the problem with trying to polarise the activities of users and proprietors as two mutually exclusive groups. Often in patentable technologies, proprietors are in effect potential infringers because of the very nature of innovation; therefore, as the workshop discussion largely considered, criminalising patents would interfere with the nature of innovation because it would elevate the risk of potential infringement to a level that noone would want to try to negotiate.

Phillip Johnson (pictured at right), who practised as a criminal barrister before moving into IP, gave a detailed background to the Directive. He noted the significance of applying criminal measures to all areas of intellectual property rights and outlined the potential public interest concerns with this kind of approach. In particular, the nature of criminal prosecution was discussed, including the consequences for the taxpayer. The impact of possible moves toward jury trials was also discussed, with the workshop discussion raising concerns over the possibly adverse impact on subsequent law, causing damage to the patent system in the long term.

In discussion, the impact on small and medium enterprises was considered as a potentially negative rather than positive consequence. The threat of criminal prosecution was debated as a way in which bigger interests could throw their weight around, effectively changing the landscape of the industry, with SMEs discouraged from entry into the market. Interestingly, Gwilym noted that the threat of criminal sanctions would be a public relations bonus to right-holders, giving a problematic moral high ground. He noted that, in contrast to the current bad press, a somewhat worrying outcome might be that prosecution of patent infringement is now re-presented as a "protection of the public" argument. Some participants suggested that big pharma was "playing the public health card."

Future Workshops
More workshops are planned, including discussions on the forthcoming report of the Gowers Review, a workshop on biopharmaceuticals and biosimilars, and more. If you'd like further details, email me, Johanna Gibson, to be on the mailing list, or check this blog and Patenting Lives for more.

DG Trade and IPR Enforcement

Yesterday, the European Commission published a survey of EU businesses and intellectual property enforcement. The results identify several countries "in the fight against counterfeiting," including China as a main priority, and Russia, the Ukraine, Chile and Turkey as secondary priorities.

Intellectual property enforcement is central to EU policy, and "goes to the heart of the EU's ability to compete in the global economy" with Europe's key competitive advantage coming from the so-called creative economy.

This week, the Commissioner for External Trade, Peter Mandelson, launched the Global Europe external competitiveness strategy, which identified the fight against counterfeiting as critical. In the Commission Staff Working Document, produced by the Directorate-General for Trade (DG Trade), trade policy was tied to better recognition and enforcement of intellectual property rights. In particular, international patent harmonisation is identified in the document as a possible mechanism by which to minimise redundancies and delays in the grant of patents.

International patent harmonisation is part of ongoing discussions in WIPO, considered in particular earlier this week at the 33rd General Assembly. At the General Assembly, Members agreed to submit proposals on the work programme of the Standing Committee on the Law of Patents (SCP) by December, with informal consultations towards a work plan to be held next year. The results of the consultations are to be considered in the 2007 General Assembly at which time a work plan for 2008 and 2009 will be established. WIPO will also be staging a number of informal colloquia on patent issues, including two planned for 11 October (Research Exemption) and 29 November (Standards and Patents) this year.

Importantly, the Commission working document states that work towards international patent harmonisation should keep in mind the potential relationship between intellectual property rights, public health, and sustainable development. Indeed, openness and market access are not necessarily the key to economic development according to the Secretary-General of the UN Conference on Trade and Development (UNCTAD), Supachai Panitchpakdi. The Secretary-General explained at a recent Geneva meeting, "UNCTAD, development, and the way forward," that without technical assistance and the development of regional capacity, least developed and developing countries will not benefit from globalization. In an UNCTAD press release, he states, "In fact, some have argued that trade liberalization has in some cases resulted in de-industrialization and even greater poverty."

The EU announcement of its recent survey maintains that although the EU does not exclude the possibility of WTO action against intellectual property infringement, it is also "looking to focus technical assistance and cooperation in the joint fight against piracy."

UK Patent Office Publishes National IP Enforcement Report

The United Kingdom Patent Office has just released its National Intellectual Property (IP) Enforcement Report 2005.

The report is the second since Lord Sainsbury of Turville, Parliamentary Under Secretary of State for Science and Innovation, launched the National IP Crime Strategy (Strategy) in 2004 and plans for a National IP Crime Group (IPCG). The Strategy is described as bringing together industry, government, and enforcers, "widely seen as the way forward" and "already bearing fruit." Plans for further education of the general public is also advocated in the report, "to convince the public that counterfeiting and piracy is not a victimless crime."

The report includes an introduction to TellPatTM, the national IP crime intelligence database. Lord Sainsbury describes TellPatTM as "a crucial strand in our Strategy," with numerous entries concerning IP crime "and the criminals involved." The information, however, comes from not only enforcement agencies, but also industry. The press release accompanying the launch states that more than 500 000 intelligence reports have been received by the Patent Office in the last 9 months.

Members of the IPCG, trading standards officers, and police officers, will all undertake training in the database over the next 12 months as it is introduced into the UK.

Notably, the report continues to concentrate upon initiatives that are motivated by the relationship between industry, government, and enforcement agencies. In this way, such initiatives do not necessarily engage with the public other than through education in "IP crime." By continuing to concentrate on traditional models of property in IP, it might well be that the Strategy utilises a dynamic that threatens to continue the alienation of individual users from the "crime" arguments. On the other hand, genuine "industries" in counterfeiting probably won't attend the classes.