Patent Reform, Copyright Enforcement Are Key European IP Issues for 2007

By Dugie Standeford for Intellectual Property Watch.

Last year saw the apparent demise of two hotly contested European Union intellectual property policy proposals, the European Patent Litigation Agreement (EPLA) and consideration of a pan-European copyright levy on blank audiovisual media. This year could prove a bit quieter, although a European Commission plan to criminalise some IP infringements may prove no less controversial.

Patent Reform

In 2006, EU Internal Market Commissioner Charlie McCreevy backed the concept of a European Community patent and a central European patent court available to signatory member nations (the EPLA). The proposal ran into opposition from a group of countries, led by France, that prefer that any European patent system be made part of the existing framework that includes the Court of Justice. Inability to find common ground led McCreevy, in a 7 December speech to the PanEuropean IP Summit in Brussels, to admit he was not optimistic about achieving either objective.

The EPLA in its current version is widely considered dead, according to an industry source. However, there is talk that McCreevy will offer a new proposal that meshes the existing EPLA approach with the French proposal.

Later this year, the Commission will produce a communication on a range of IP rights measures, most aimed at smaller companies, McCreevy said. It will cover such issues as: Patent quality in Europe; patent litigation insurance; alternative dispute resolution schemes; general awareness actions on IPR; use of patents, including licensing; better management and financial reporting of patents; international patent enforcement.

Copyright Levies

The Commission was scheduled on 20 December to approve a recommendation reforming Europe’s copyright levy system but action was delayed. Most EU countries set fees on blank media such as CDs and DVDs to compensate artists for legal private copies consumers make, but industry – including software, digital media, consumer electronics, information and communications technology, recording media and semiconductor firms – sought to end or reduce the levies on the grounds that digital rights management (DRM) systems lessened the need for the tax.

On 14 December, European Commission President Jose Manuel Barroso delayed action on the legislation, saying it needed more thought. He was accused of bowing to pressure from the French government, which argued levies provide a significant source of income for artists.

It is unclear whether the copyright levy issue is officially dead, or will merely be bogged down in endless discussion, the industry source said.

IP Rights Enforcement Directive 2

In July 2005, the Commission proposed requiring member states to criminalize all intentional infringement of IPR on a commercial scale, including attempting, aiding, abetting or inciting such violations. Proposed penalties ranged from confiscation of counterfeit goods to jail time for offenders. The directive also called for additional penalties such as closure of establishments used for counterfeiting, and a ban on engaging in commercial activities.

At the same time, the Commission proposed that national governments beef up their criminal laws by setting minimum penalties for the offences and to work more closely together to fight IP infringements.

Following a Court of Justice ruling concerning the legality of the Commission mandating criminal sanctions, the Commission combined the proposals into a single directive, the Intellectual Property Rights Enforcement Directive 2 (IPRED2).

The directive requires approval by the European Parliament as well as the EU Council of member governments. The parliamentary rapporteur assigned to the matter, Nicola Zingaretti of the Legal Affairs (JURI) Committee, argued in his report that “there is no evidence of any urgent need to intervene by imposing criminal penalties” for patent infringement since many member states already enforce patent protection via fines and imprisonment.

IPRED2 has drawn harsh criticism from some governments as well as from consumer and digital rights organisations (IPW, European Policy, 11 July 2006).

“The possibility for the EU to impose criminal measures is still controversial,” a JURI committee spokesman said. The report is scheduled for committee approval 29 January, and may go to plenary for first reading in March, he said.

IPRED2 appears to be stalled in the Council. Last October, a Council spokesman said “divergences exist” on the proposal and “as unanimity is required, agreement cannot be reached easily.” The Finnish EU Presidency, whose term ended 1 January, was supposed to lay out compromise text with a view to reaching agreement in December. Germany now has the presidency. As of now, however, “things are not really moving,” the spokesman said, adding, “Let’s wait and see if the issue is on the agenda of the next Council meeting, in mid-February.”

The Commission proposal, the Council reaction to the proposal and other official documents are at:

http://www.europarl.europa.eu/oeil/file.jsp?id=5263692

The report and accompanying amendments are at:

http://www.europarl.europa.eu/meetdocs/2004_2009/organes/juri/juri_20061220_1500.htm

Cross-Border Management of Online Copyright Rights

A 2005 Commission recommendation on collective cross-border management of copyright and related rights for legitimate online music services is also undergoing parliamentary scrutiny. It encourages governments to facilitate the growth of Internet music services by promoting a regulatory environment that allows EU-level management of such rights as the exclusive right of reproduction.

The recommendation also covers the relationship between rights-holders, collective rights managers (CRMs) and commercial users; equitable distribution and deductions; non-discrimination and representation; accountability; and dispute settlement.

In her report on the Commission proposal, JURI rapporteur Katalin Levai noted that while proper management of copyright and related rights is of critical importance in the digital age, the Commission’s recommendation goes far beyond the “soft-law instrument” Commissioner McCreevy said it is. Instead, she wrote, the recommendation has “far-reaching consequences for the copyright markets and major players in the market are already acting on the basis of it.”

While the proposal may serve as a “touchstone” for the future evolution of the broader market for authors’ rights, smaller collecting societies and rights-holders believe it has been taken as “a clear signal” for major publishers to pull their international repertoires from the network of national collecting societies and hand them to one or a few large CRMs to represent their rights across the EU, Levai wrote.

Instead of spurring competition, Levai said, the recommendation will concentrate market power in the hands of a few big players. The report is on the same legislative track as IPRED2. Information about the report is here. Links to the recommendation and other documents are here.

Online Content

The Information Society and Media Directorate-General held a public consultation last year on how to spur cross-border delivery of digital content. Among other things, it sought input on the need for EU-wide or multi-territory licensing and clearance and greater progress on making DRM systems interoperable.

The comment period closed 13 October 2006. Although the Commission expected to issue a communication on online content by year’s end, it has not yet appeared.

TV Without Frontiers

The Commission in 2005 proposed modernising the Television without Frontiers (TVWF) Directive governing cross-border television services. Included in the renamed Audiovisual Media Services Directive is a proposal to allow broadcasters of general news programs to show brief extracts of events of high public interest (news or sports) owned by other broadcasters on fair, reasonable and non-discriminatory terms. The directive does not change obligations imposed by existing copyright laws and treaties.

The legislation requires Parliament and Council approval. On 13 November 2006, members of Parliament adopted a report and several amendments at first reading. The Council arrived at a general approach last spring, and will discuss the directive informally on 12 February ahead of arriving at final agreement in May.

E-communications Framework Review

This year could see the conclusion of the Commission review of its 2002 electronic communications regulatory framework. This is not expected to have any direct implications for intellectual property.

National IP Legislation

Following a raucous debate, France last year approved legislation adopting the EU Copyright Directive into national law (IPW, European Policy, 16 May 2006).

The measure on the rights of authors and other related rights in the information society is unique in requiring owners of devices covered by proprietary DRM systems to provide access to source code essential to allow interoperability. It also creates a new regulatory authority to determine DRM disclosure requests. The new agency has yet to be established and 2007 could see interesting developments there.

Germany is now in the throes of updating its copyright law to the digital age (IPW, European Policy, 4 December 2006). Hearings in December revealed deep divisions over proposals to criminalize unauthorized private copying and a cap on copyright levies payable by makers of personal computers, CDs and other hardware.

Microsoft Antitrust Case

In 2004, the Commission ruled that Microsoft violated EU antitrust law by tying its PC operating systems to work group server operating systems and media players. The software giant was ordered to offer a version of Windows OS without Windows Media Player to computer manufacturers, turn over interface data (though not Windows source code), and pay a fine of nearly €500 million.

The Commission is now analysing the latest technical documentation submitted by Microsoft toward the end of 2006, its competition spokesman said. “We have not yet reached any conclusions on whether that documentation is sufficient to bring Microsoft into compliance with the March 2004 decision.” In addition, the European Court of First Instance is likely to rule this year on Microsoft’s appeal of the decision, the spokesman said.

Trademark Fee Review

The Commission also is eyeing a trademark fee cut. A December 2006 communication discussed long-term financing of the Office for Harmonisation in the Internal Market, a self-supporting agency responsible for granting EU-wide trademarks and design rights. The plan includes regular, automatic reviews of trademark fees to avoid huge cash reserves. Proposals for revisions to the Trade Mark Fees Regulation are expected this spring.

Dugie Standeford may be reached at info@ip-watch.ch.