8 Criminal measures to enforce intellectual
property rights
| (26729)
11245/05
COM(05) 276
| Draft Directive on criminal measures aimed at ensuring the enforcement of intellectual property rights
Draft Council Framework Decision to strengthen the criminal law framework to combat intellectual property offences
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| Legal base | Directive - Article 95 EC; codecision; QMV
Framework Decision - Articles 31 and 34(2)(b)EU; consultation; unanimity
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| Document originated | 12 July 2005
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| Deposited in Parliament | 21 July 2005
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| Department | Home Office |
| Basis of consideration | EM of 30 August 2005
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| Previous Committee Report | None; but see (24313) HC 63-xxii (2002-03), para 6 (21 May 2003 ) and (25394) HC 42-xii (2003-04), para 15 (10 March 2004)
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| To be discussed in Council | No date set
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| Committee's assessment | Legally and politically important
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| Committee's decision | Not cleared; further information requested
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Background
8.1 A number of instruments have been proposed or adopted at Community
level relating to the substantive law on intellectual property,
including measures on patents,[18]
trade marks[19] and copyright.[20]
The European Parliament and the Council adopted a Directive (Directive
2004/48/EC) on the enforcement of intellectual property rights
in 2004.[21] This Directive
was concerned to harmonise the measures, procedures and remedies
under the law of Member States in relation to intellectual property
rights. It dealt with such matters as the parties entitled to
bring proceedings, evidence and its preservation, interim and
final remedies, including injunctions and damages. The measure
complemented the Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS) concluded under the auspices of the World
Trade Organisation and to which all Member States and the Community
(within the scope of its competence) were party.
8.2 Directive 2004/48/EC did not prescribe any criminal
measures to be taken by Member States. Instead, a recital[22]
to the Directive recalled that in addition to the civil and administrative
measures under the Directive "criminal sanctions also constitute,
in appropriate cases, a means of ensuring the enforcement of intellectual
property rights".
8.3 When the previous Committee considered the proposal,
which became Directive 2004/48/EC, it noted on 21 May 2003 that
it originally contained provisions which would have obliged the
Member States to provide for criminal sanctions and agreed with
the Government that such provisions lay outside the competence
of the Community under the EC Treaty. It noted on 10 March 2004
that the Government had secured amendments to the proposal to
remove the reference to criminal sanctions and that the Government
had indicated that many Member States had been opposed to this
reference in an instrument to be adopted under Article 95 EC.
8.4 On 13 September 2005 the Court of Justice of
the European Communities (ECJ) gave judgment in Case C -176/03
Commission and European Parliament v. Council. The case
was concerned with the power of the Community to adopt criminal
measures in relation to environmental policy under Articles 174
to 176 EC. The ECJ confirmed that "as a general rule, neither
criminal law nor the rules of criminal procedure fall within the
Community's competence" but also ruled that this finding:
"does not prevent the Community legislature,
when the application of effective, proportionate and dissuasive
criminal penalties by the competent national authorities is an
essential measure for combating serious environmental offences,
from taking measures which relate to the criminal law of the Member
States which it considers necessary in order to ensure that the
rules which it lays down on environmental protection are fully
effective".
8.5 Even though the Council was supported by Denmark,
Germany, Greece, Spain, France, Ireland, the Netherlands, Portugal,
Finland, Sweden and the United Kingdom in asserting the validity
of the Framework Decision, the ECJ nevertheless went on to annul
Council Framework Decision 2003/80/JHA on the protection of the
environment through criminal law on the grounds that it infringed
Article 47 EU[23] as
it encroached on the powers which Article 175 EC conferred on
the Community.
The proposed draft Directive
8.6 The draft Directive is proposed under Article
95 EC and would therefore be adopted by co-decision with the European
Parliament and with the Council voting by a qualified majority.
The recitals refer to the TRIPS Agreement and note that it contains
provisions on criminal matters "which are common standards
applicable at international level". The first recital goes
on to state that "the disparities between Member States are
still too great, and they do not permit effective combating of
intellectual property offences, particularly the most serious
ones". It is also stated that "this causes a loss of
confidence in the Internal Market in business circles, with a
consequent reduction in investment, in innovation and creation".
8.7 The second recital refers to the adoption of
Directive 2004/48/EC on the enforcement of intellectual property
rights but states that "a sufficiently dissuasive set of
penalties applicable throughout the Community is needed to make
the provisions laid down in this Directive complete".
8.8 By virtue of Article 1 the Directive is to apply
to intellectual property rights provided for in Community legislation
and under national law. Article 3 requires Member States to ensure
that "all intentional infringements of an intellectual property
right on a commercial scale, and attempting, aiding or abetting
and inciting such infringements" are treated as criminal
offences.
8.9 Article 4 obliges Member States to provide for
sentences of imprisonment, with fines and confiscation of the
infringing goods also applying to natural and legal persons. In
addition, Member States are also to provide for the destruction
of infringing copies, for closure of the establishment used to
commit the offence, a "permanent or temporary ban on engaging
in commercial activities", "placing under judicial supervision",
winding up, a "ban on access to public assistance or subsidies"
and publication of judicial decisions.
The draft Framework Decision
8.10 The draft Framework Decision is proposed as
a supplement to the draft Directive. The fifth recital to the
Framework Decision asserts that for this purpose the "level
of sentencing … must be harmonised", whilst the sixth
recital asserts that Member States must ensure that holders of
intellectual property rights, or their representatives, are allowed
to assist the investigations carried out by joint investigation
teams.
8.11 Article 2(1) requires Member States to provide
for a sentence of at least four years' imprisonment where an intellectual
property offence is committed "under the aegis of a criminal
organisation" or where such offences "carry a health
of safety risk". Although Article 4 of the Directive already
requires provision for sentences of imprisonment, Article 2(2)
of the Framework Decision requires Member States to provide for
"effective, proportionate and dissuasive penalties"
for the offences referred to under Article 3 of the Directive.
It also requires that these penalties are to include "criminal
and non-criminal fines" to a maximum of €100,000 for
cases other than the most serious cases, and €300,000 for
the offences referred to in Article 2(1).
8.12 Article 3 requires Member States to provide
for complete or partial confiscation in accordance with Article
3 of Framework Decision 2005/212/JHA on Confiscation of Crime-Related
Proceeds, Instrumentalities and Property[24]
at least where the offences are committed "under the aegis
of" a criminal organisation or where "they carry a health
or safety risk".
8.13 Article 4 provides that Member States must ensure
that holders of intellectual property rights, or their representatives,
and experts, are allowed to assist the investigations carried
out by joint investigation teams.
8.14 Article 5 requires Member States to establish
rules of jurisdiction to cover cases in which an offence referred
to in Article 3 of the Directive is committed wholly or partially
within the national territory. Where such an offence falls within
the jurisdiction of more than one Member State, the Member States
concerned are required to cooperate in order to decide which will
undertake the prosecution "with the aim, if possible, of
centralising proceedings in a single Member State". For this
purpose, "sequential account" is to be taken of the
following connecting factors, namely, the place of commission
of the offence, the nationality or residence of the offender,
place of registration of a legal person, residence of the victim
and place in which the offender is found.
The Government's view
8.15 In her Explanatory Memorandum of 30 August 2005
the Parliamentary Under-Secretary of State at the Home Office
(Ms Fiona Mactaggart) explains that the approach taken by the
Commission in proposing the measures reflects the opinion of the
Advocate General in Case C 176/03 Commission v. Council,
a case in which the UK intervened in support of the Council's
case that there was no competence under the EC Treaty to require
Member States to impose criminal sanctions. The Minister adds
that the approach taken will need to be considered carefully once
the ECJ has given its judgment.
8.16 The Minister points out that the law of the
United Kingdom already provides for criminal penalties for wilful
trademark counterfeiting or copyright piracy on a commercial scale,
rather than for all intellectual property offences, so that the
measures go beyond what the Government sees as necessary to deal
with intellectual property crime.
8.17 In relation to the proposed Directive, the Minister
considers that its scope will need careful consideration, and
that the reference to the term "commercial scale" needs
further clarification. The Minister adds that prosecuting authorities
are concerned that "there could be confusion from an operational
perspective if there is not sufficient clarity". In relation
to the penalties under Article 4, the Minister explains that,
apart from its concerns over Community competence, the UK as Presidency
will be seeking to ensure that the provisions on penalties, particularly
under Article 4(2) are not so detailed as to impinge on the subsidiarity
principle and that some textual amendment may be needed.
8.18 In relation to the draft Framework Decision,
the Minister explains that the Government will raise during the
negotiations the question of whether there is power under Article
34 EU to include the provisions of Article 4 and 6 in the Framework
Decision, as they do not appear to be concerned with co-operation
between the competent authorities of the Member States. The Government
will also resist the provisions of Article 4 on joint investigation
teams, because of its concerns that provisions of this kind should
be in over-arching instruments dealing with crimes in general,
such as the 2000 EU Convention on Mutual Legal Assistance in Criminal
Matters rather than in crime-specific instruments. The Minister
adds that there are practical concerns over the utility of having
holders of intellectual property rights participating in joint
investigation teams.
8.19 The Minister also expresses concern over the
mandatory nature of the rules on conflicts of jurisdiction under
Article 5, and considers that it would be preferable for this
provision to be re-drafted in permissive terms. The Minister adds
that modification may also be needed in relation to Article 6
(which provides that investigations and prosecutions may not be
made dependent on a report or accusation of a person subjected
to the offence). The Minister explains that there are some concerns
that language of this nature may impede a successful prosecution
of intellectual property related criminal activity where a report
or accusation is necessary for a successful prosecution.
Conclusion
8.20 We thank the Minister for her detailed and
helpful Explanatory Memorandum. We share the concerns expressed
over the use of the EC Treaty to propose an instrument requiring
the imposition of criminal penalties, and we ask the Minister
for her assessment of the position following the judgment of the
ECJ in Commission v. Council.
8.21 It appears to us that the Commission has
not demonstrated that the measures are either essential in themselves
or necessary for the purpose of effectively enforcing intellectual
property rights and we view with grave concern the proposition
that Member States can be forced, under the codecision
procedure provided for in the EC Treaty, to introduce new criminal
offences into their national laws.
8.22 We also share the Minister's concerns over
the use of Article 34 EU to adopt measures which go beyond promoting
cooperation between the authorities of the Member States. We view
with particular concern the provisions of Article 4 of the Framework
Decision, and we ask the Minister if she considers it contrary
to the principles of Article 33 EU to make such detailed rules
as to how police investigations are conducted in the Member States.
We also ask the Minister if she agrees that a rule obliging Member
States to allow private persons to become involved in the conduct
of police investigations raises issues of principle and accountability,
as well as practical concerns.
8.23 We shall hold the document under scrutiny
pending the Minister's reply.
18 A Community Patent Regulation has been proposed,
but has not been adopted. Back
19
Council Regulation (EC) 40/94 on the Community trade mark, OJ
No L11 of 14.1.94, p. 1. Back
20
See Council Directive 91/250/EEC of 14 May 1991 on the legal protection
of computer programs, OJ No L122 of 17.5.1991, p42 and Directive
2001/29/EC of 22 May 2001 on the harmonisation of certain aspects
of copyright and related rights in the information society OJ
No L 167 of 22.6.2001, p.10. Back
21
OJ No L195 of 2.6.2004, p.16. Back
22
Recital No 28. Back
23
This provides that nothing in the EU Treaty "shall affect
the Treaties establishing the European Communities or the subsequent
Treaties and Acts modifying or supplementing them". Back
24
OJ No L 68 of 15.3.2005, p.49. Back
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