Change To EU Enforcement Directive Could Criminalise Parallel Imports

By Monika Ermert for Intellectual Property Watch
The European Parliament has voted against criminalising parallel imports of goods in the proposed European Union directive on criminal measures aimed at ensuring the enforcement of intellectual property rights (IPRED2). Yet these re-imports of products marketed by rights holders in other countries may be criminalised if Parliament does not change a “cleaned-up” draft text of the directive that has quietly emerged, sources say.

The directive is a follow-up to the IP Enforcement Directive (2004/48/EC, IPRED1) passed by the EU in 2004 and will add criminal sanctions against piracy and counterfeiting of a commercial scale. Both IPRED1 and IPRED2 brought about fierce debates about how far protection of intellectual property should go in Europe.

Two contradictory amendments are the cause of the trouble. In Amendment 15 tabled at the first reading, parallel imports are removed from sanctions. “Criminal sanctions shall not be applied in cases of parallel importation of original goods which have been marketed with the agreement of the right holder in a country outside the European Union,” it states.

On the other hand, the last part of Amendment 38 states that the directive should not apply to any infringement of an intellectual property right related to “parallel importation of original goods from a third country which have been allowed by the right holder.”

A reading of the amendments might be that while 15 would not criminalise parallel importation for original goods, 38 would make it criminal if the right holder had not said yes to it. And now 15 appears to have gone missing, and the legislation on a fast-track to passage.

Both amendments were carried in a vote in April (IPW, European Policy, 26 April 2007) despite the fact that they are mutually exclusive.

“There a huge difference between both amendments,” said an assistant of Hans-Peter Mayer. Mayer has been JURI shadow rapporteur for the EPP/ED, the Conservative Party group in the Parliament, to help to find compromises between Parliament and Commission. “The lawyer-linguists had to adapt both amendments,” she said. The lawyer-linguists check and revise legislative acts of the Union before publication.

Lead rapporteur Nicola Zingaretti was consulted and himself also consulted the shadow rapporteur and the secretariat of the Parliament, the assistant said. The changes, according to her, were routine and from the standpoint of content “logical.”

Now, in the consolidated text available on the EU website the exclusion of parallel imports from criminal sanctions has been eliminated. The text that is the basis for discussions between EU Parliament, Council and Commission according to the co-decision procedures in Article 1 that describes “objective and scope” excludes from criminalisation only parallel importation allowed by right holders. And it confirms in Article 3 on “offences” that: “criminal sanctions shall not be applied in cases of parallel importation of original goods from a third country which have been allowed by the right holder.”

Alarm Over Missing Amendment

Amendment 15 is missing in the consolidated text, and ?the text does not represent the plenary vote,” concluded activists from two non-governmental organisations, the Foundation for a Free Information Infrastructure (FFII) and the Electronic Frontier Foundation (EFF). The activists were alarmed about ever-tighter restrictions for consumers, and users contacted the respective rapporteurs and EU services. The three parliamentary committees involved in the preparation of the text for the first reading (Legal Committee [JURI], Committee on Civil Liberties, Justice and Home Affairs [LIBE] and the Committee on Industry, Research and Energy [ITRE]) all agreed on the exclusion of parallel imports from penalties.

Yet according to Erik Josefsson of the EFF in Europe, nothing has happened to solve the problem. Josefsson said he was afraid that the changes would just be carried through the so-called trilog procedure without further consultation of the plenary of the parliament where a considerable number of members (MEPs) were not happy with the language in the draft text adopted during the first reading to begin with. The trilog allows a fast track procedure without second reading in the Parliament – it was used to speed up the predecessor IPRED1 four years ago.

FFII has posted an analysis of the errors it found in the draft legislation.

Parliament was always interested in a second reading, said an assistant of Rainer Wieland, rapporteur for IPRED in the LIBE Committee. A second reading would give MEPs the possibility to address the original inconsistency. But according to his information there might be no second reading, the assistant said. Zingaretti, who according to the shadow rapporteur’s office was fine with the changes, could not be reached for a comment.

The criminalisation of the parallel imports now appearing in the document constitutes a turnaround, said Professor Annette Kur, Research Fellow at the Max Planck Institute for Intellectual Property, Competition and Tax Law. The institute had filed a statement on IPRED2 earlier in the process recommending not to criminalise parallel importation.

“In my opinion this is a change of considerable weight,” said Kur. Parallel imports of products marketed by EU companies outside the union for lower prices were a much seen phenomenon. While civil right sanctions are in place, criminal law sanctions would be wrong, according to Kur.

“People who engage in parallel imports are not criminals,” said Kur, adding that in the end, what these people would sell were originals and not counterfeited or pirated goods. Kur said there is a long, ongoing debate about whether parallel importing was a violation of trademark law at all. The EU Trademark Directive demanded a change of an well-established German law principle that “originals always were originals,” she said. Even the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) did not go so far as to ask for sanctions for parallel imports. The mere mention of intellectual property today results in knee-jerk reactions for tighter regulation, warned Kur, who asked for more caution.

How the Parliament will react to the change of IPRED has still to be seen. According to EU Reporter magazine, a complaint has filed by one MEP. Yet neither the offices of the shadow rapporteur or the LIBE rapporteur could confirm at press time. Federico de Girolamo, spokesperson of the Parliament, said he had no news about a complaint. Most MEPs and officials of the EU services are away from Brussels during summer. Nothing will happen at the moment, said one observer, especially as the member states in the European Council did not have their first reading. How the national governments will react remains to be seen.

Monika Ermert may be reached at info@ip-watch.ch.