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14.9.

98 EN Official Journal of the European Communities C 284/3

Opinion of the Economic and Social Committee on the ‘Proposal for a Council Regulation
(EC) amending Regulation (EC) No 3295/94 laying down measures to prohibit the release for
free circulation, export, re-export or entry for a suspensive procedure of counterfeit and
pirated goods’ (1)

(98/C 284/02)

On 11 May 1998 the Council decided to consult the Economic and Social Committee, under
Article 198 of the Treaty establishing the European Community, on the above-mentioned
proposal.

The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 3 June 1998. The rapporteur
was Mr Giesecke.

At its 356th plenary session on 1 and 2 July 1998 (meeting of 1 July), the Economic and Social
Committee adopted the following opinion by 136 votes to two.

1. Introduction proceedings (lawyers’ fees, court costs, detective agen-
cies) which hit innovative small and medium-sized
businesses particularly hard. Between 5 and 8 % of
1.1. In the industrialized countries, there is a growing world trade is now estimated to be in counterfeit goods.
demand for quality in the manufacturing industry,
farming and the burgeoning service sector. Branded and
innovative products — which are often protected by 1.5. In a continent whose competitiveness increas-
industrial property rights — meet this need, but at a ingly depends on its innovative strength and the quality
price. This price reflects not only better quality, but also of its products, this trend must be halted as a matter of
innovation and advertising. urgency. The draft regulation under review is a crucial
element in helping do just that.

1.2. Those engaged in product piracy take advantage
of cheaper manufacturing conditions, for the most part 2. The Commission proposal
abroad. They have no development costs, licensing fees
or advertising outlay. They evade the costs of the
normally mandatory safety tests. Their customers are 2.1. The Commission paper comprises (i) the report
people prepared to forgo these marks of quality for the on the implementation of the present regulation and (ii)
sake of a perceived bargain, or those to whom brand a proposal to amend this regulation.
names are all-important (even when they are forged).
2.2. The Commission report looks at the experience
1.3. Counterfeit and pirated goods are now found in of Community customs authorities since 1 July 1995 in
many manufacturing fields, ranging from clothing, suspending customs operations on articles presented
leisure articles, watches, jewellery, cosmetics and phar- for import clearance which are suspected of being
maceutics to technical products such as tools and car counterfeit or pirated goods covered by an intellectual
spares. Product piracy is on the increase in these property right in respect of which the right holder has
last-named areas, posing a clear threat to buyers who requested ‘customs protection’ under the terms of the
are more than ever dependent on product safety. Not regulation.
only that, the manufacturers of genuine goods often face
unwarranted product liability claims. 2.3. From July 1995 to June 1997, the customs
authorities in the Member States took action in a total
1.4. The economic impact of product piracy is, of of 4 133 freight, postal and passenger cases.
course, felt in the first instance by the manufacturers of
genuine products, followed by specialist retailers and 2.4. On the basis of the experience to date, the
exporters. The government loses significant revenue Commission amendment now proposes to extend the
from various different sources. Unfortunately, the num- scope of the regulation and align it on the development
ber of skilled jobs lost can only be roughly estimated, of Community legislation on intellectual property rights.
but the German figure, to take an example, is put at The proposals include:
some 70 000. The same is true for the costs of legal
— extension of the scope of the regulation to cover
patented inventions, restricted to patents on prod-
(1) OJ C 108, 7.4.1998, p. 63. ucts;
C 284/4 EN Official Journal of the European Communities 14.9.98

— extension of the customs authorities’ scope for action 3.5. The Committee feels it is important, both in
to cover free zones and free warehouses, and all trade circles and among the population at large, to drive
suspect goods under customs supervision; home the repercussions of counterfeiting on the various
different markets. People must be made more aware
— simplifying and updating the regulation to take that this particular form of economic crime is wrong.
account of the Community trade mark (fully oper- The European Commission should act to strengthen
ational since 1 April 1996) by making it possible and coordinate Member States’ information campaigns.
for holders of such marks to apply for ‘customs
protection’ valid in a number of Member States. 3.5.1. This aspect should be taken into account when
assessing non-commercial traffic, mainly tourism. After
all, tourism accounts for half of all operations in
3. General comments this field, with the quantities involved, of course,
correspondingly modest.

3.1. The Commission appears pleased with develop- 3.5.2. The Committee takes that view that the cri-
ments in its first report on the implementation of terion used should not focus on duty free-allowances
Regulation (EC) No 3295/94. Given the figure for alone, but, above all, on what may be considered
imported counterfeit goods, however, this is but the tip ‘normal’ in each individual case.
of the iceberg. In the Committee’s view, there is a clear
need for improvement, given that some Member States 3.5.3. The European Commission should alert its
carry out very few operations in this field and others delegations in the high-risk countries to the scale of
none at all. counterfeiting, in order to instigate surveillance and
alert schemes in conjunction with the authorities of
the Member States and the trade circles concerned.
3.2. Nevertheless, now that the learning process of Concerted action should be taken to alert the authorities
the first few years is over, it would seem expedient to of the countries concerned to the possible adverse
extend the scope of the regulation to cover patented consequences, inter alia in the area of commercial policy
inventions and all customs statuses, and to update the of an over-permissive attitude.
regulation to take account of the Community trade
mark.
3.6. One particular difficulty with the system is that
3.2.1. The Committee feels, however, that transpo- EU-level arrangements are necessarily limited in scope
sition may be limited by the fact that, particularly where since procedures are determined under national law.
the various different kinds of patents are concerned, Industry would like to see harmonization in this field so
the customs authorities may experience difficulties in as to ensure optimum implementation of the most
spotting violations. One should not, therefore, overesti- important provisions.
mate the impact of extending the scope of the regulation.

4. Specific comments
3.3. In the Committee’s view, experience to date
indicates that information on this relatively new mecha-
nism needs to be considerably enhanced in both direc- 4.1. The fact that intervention varies tremendously
tions. The parties holding the rights (companies) should from one Member States to another may reflect both
be kept abreast of the options open to them, but they differences in the scale of protection rights and different
should also help facilitate customs officers’ practical ways of handling operations. As part of consultations
work by improving the information they provide to the on the green paper, the Commission is asked to calculate
customs authorities. A two-way flow of information of the ratio between the number of applications for
this kind, coupled with improved training for customs protection and the number of violations detected in the
officers in this area, is the only way to ensure success in Member States.
the fight against forgery.

3.3.1. The Committee is concerned that staffing cuts 4.2. The fact that figures for violations vary between
in Member States’ customs administrations make it Member States may, in the Committee’s view, be partly
more difficult for them to handle their changing tasks. due to the procedural differences after a violation
The progression from duty-collection agencies working has been detected. For example, customs officials’
to government instructions to service administrations motivation may be considerably blunted by the less than
promoting economic development becomes particularly efficient way in which customs authorities work together
clear in activities undertaken on behalf of private and with the courts. In this regard, the Committee can but
public holders of protection rights. stress the importance of a simple, transparent and speedy
procedure.

3.4. Experience to date has also shown that the 4.2.1. Although the Commission has no right of
effectiveness of the system depends on a minimum level initiative in respect of national courts, it should nonethe-
of physical, intelligently placed controls and a high level less convey to national governments the urgent need for
of training. a lean procedure as called for in Part III of the Agreement
14.9.98 EN Official Journal of the European Communities C 284/5

on Trade-Related Aspects of Intellectual Property Rights The Committee feels that those Member States which
(TRIPS). The Committee sees a major link between levy fees should cut them to a level which does not deter
procedural practicalities and the motivation of customs medium-sized and small businesses from submitting
officials on the ground. applications for protection.

4.3. The Committee feels that the current arrange- 4.7. Where, after the operation is completed, the
ments in Greece are extremely unsatisfactory. Given forged goods are ordered to be destroyed, the sometimes
Greece’s importance as a potential gateway to the considerable costs involved should be borne by the
European single market, the Committee backs Com- guilty party, generally the manufacturer of the forged
mission efforts to encourage that country to find a goods. If the manufacturer cannot be identified or
practicable solution. summoned, the importer should pay the costs, unless he
or she acted in good faith. The Committee feels it is
4.4. The regulation only covers operations relating unreasonable to expect the party holding the protected
to trade with non-EU countries at the Community’s rights or the state to pay the costs of destruction in cases
external borders. Once forgeries enter the single market where the manufacturer or the importer acting in bad
undetected, they are pursued under national arrange- faith can be required to do so.
ments, if at all. The Commission should propose
harmonization remedies — as far as possible — in the 4.8. The fees set for lodging an application to the
green paper discussion. customs authorities and the securities to be deposited
for administrative costs and liability in the further course
4.5. As things stand, seizure applications may be of the procedure vary considerably from one Member
valid anything from between three months and two State to another. In the Committee’s view, the main
years in the various different Member States. Since concern is that these fees should not act as a deterrent,
effective follow-up may be expected to take some time, i.e. prevent small companies from using the mechanisms
the Committee feels a period of validity of at least one in place.
year should be agreed across the Community.
4.8.1. It should be possible for surety to take the form
of bank guarantees in all Member States, in accordance
4.6. The Committee takes the view that the basic with local practices.
idea of a Community trade mark is incompatible with a
situation such as this in which frontier seizure appli-
cations may be limited to certain EU countries. The 4.9. It is essential that there should be direct contact
Community trade mark is a uniform mark, with a between right holders (i.e. companies) and the customs
uniform legal basis applicable to the Community as a authorities. In particular, the customs authorities should
whole. Taking this concept to its logical conclusion, the be kept informed of how the matter is proceeding. This
only sensible option is to have a uniform frontier seizure too would enhance motivation on the part of customs
application procedure effective in all EC Member States. officers.

4.6.1. Otherwise, the danger is that the counterfeiter, 4.10. Penalties too are fixed by national courts.
learning that the restriction applies only to certain Although harmonization is unlikely to be achieved in
countries, will naturally seek to launch the goods via the near future, it should be ensured that these penalties
‘non-protected’ countries. are highly deterrent in their effect.

Brussels, 1 July 1998.

The President
of the Economic and Social Committee
Tom JENKINS