INTELLECTUAL PROPERTY RIGHTS (8866/06)
Letter from the Chairman to Gerry Sutcliffe
MP, Parliamentary Under Secretary of State, Home Office
Select Committee E (Law and Institutions) considered
this proposal at its meeting of 7 June 2006.
We note that there are likely to be difficulties
with this proposal as a result of the Commission's wide interpretation
of the ECJ judgment in Case C-176/03 Commission v Council.
We fully support a cautious approach to the present Directive.
Is there a realistic prospect of the proposal being agreed in
its current form? As you know, we are due to meet on Wednesday
21 June but any information you can provide in advance of that
meeting would be most helpful. We shall likely raise this proposal
with you in the course of your evidence.
IP RIGHTS UNDER
Although limiting the obligations created by
the Directive to IP rights under Community law appears to be an
attractive way to limit the proposal, we are concerned that this
may create its own problems. How would this work in practice?
Is there a danger that two concurrent regimes for sentencing in
IP offence cases will apply in the UK, one where the offence is
derived from Community law and the other where it is not?
You say that you are not convinced that further
approximation in this area is necessary. Has an impact assessment
been prepared by the Commission? We have not seen this and would
be grateful to receive a copy.
We raised a number of points in the context
of correspondence on the original proposal. Those which remain
unanswered are set out again in our comments below.
In addition to the implications of Case C-176/03,
the Committee is concerned by the Commission's assertion (in the
explanatory memorandum accompanying the original proposal) that
the mere existence of disparities between the national systems
of penalties distorts the internal market and justifies the adoption
of this Directive. This which would appear to have potentially
wide implications in the context of Article 95 (internal market)
as well as Article 65 (judicial cooperation in civil matters).
Your predecessor undertook in her letter of 17 November 2005 to
return to the Committee on this subject and we look forward to
hearing your views.
We note that you favour limiting the application
of the Directive to counterfeiting and piracy, rather than extending
it to cover all IP rights. Is this a position supported by other
Member States? If the Directive is to cover all IP rights, will
this term be defined in the body of the text, either fully or
by reference to Commission Statement 2005/295/EC?
We agree that it is necessary to clarify the
meaning of "on a commercial scale", particularly as
the Directive would introduce criminal liability for offences.
We note that the term also arises in Directive 2004/48/EC; however,
in that instance efforts have been made to explain its meaning
in the recitals. The recitals of the present proposal do not contain
a similar explanation.
Article 5(1) refers to offences committed "under
the aegis of a criminal organisation within the meaning of"
the Framework Decision on the fight against organised crime. Is
the reference to the latter only intended to mean that "criminal
organisation" is to have the same meaning in both instruments
or is something more intended? We note that the organised crime
Decision does not use the phrase "under the aegis of"
but "within the framework of". It would be helpful to
ensure consistency of expression wherever possible.
We have decided to retain the present proposal
under scrutiny. As the original version (document 11245/05) has
been superseded by the present amended proposal, we take this
opportunity to clear that version from scrutiny. We would of course
expect any document containing substantial changes to the present
proposal to be submitted to Parliament for scrutiny.
8 June 2006
Letter from Gerry Sutcliffe MP to the
Thank you for your letter of 8 June 2006. I
note that the proposal is retained under scrutiny by the Committee.
I will take each of your points in turn.
I agree that the true meaning and effect of
the judgment of the ECJ in the environment Framework Decision
case will have a profound impact on this proposal. The difficulty
at the moment, of course, is that Member States and the Commission
cannot reach agreement on the competence issue. The situation
is now further complicated by the Commission's challenge to the
maritime pollution FD. As you know, the European Parliament has
intervened in support of the Commission. But 19 Member States,
including the UK, have intervened in support of the Council. The
UK intervention supports the Council's defence that the effects
of the judgment of the ECJ in the environment case should be restricted
to the environment. We have not yet been given access to other
Member State's interventions but it is likely that a number of
Member States will take the same position. Accordingly, a political
agreement for anything other than the maintenance of the status
quo looks very unlikely in advance of the judgment in the maritime
pollution case which is not expected before 2008. If the ECJ rules
in favour of the Commission in the maritime pollution case, the
prospects for a proposal that resembles the current draft will
be enhanced substantially. Much will of course depend on the detail
of that judgment when it is handed down.
IP RIGHTS UNDER
The ECJ ruled in the environment case that the
Community could legislate to require Member States to apply criminal
law in order to ensure the effectiveness of community rules on
the environment. If that principle is extended to other policy
areas we would argue that it must be on the basis that the criminal
provision applies only to national laws implementing existing
community norms or standards. As regards intellectual property
the fact that we may be required to apply common sanctions to
Community and national rights, which are largely equivalent, should
not present any difficulty. Much will depend on the final detail
but we recently undertook a provisional assessment of Community
standards or norms in the intellectual property area. In general
terms they cover trademarks, designs, copyright and related rights,
plant varieties and geographical indications. I stress that this
is a very provisional preliminary assessment used here for illustrative
purposes only, but on the basis of the existing extent of Community
rules the Directive may oblige the UK to create new offences,
with a maximum of no less than "x", in respect of infringements
of plant variety rights and geographical indications rights. On
the evidence of the current proposal it is likely that the agreed
minimum maximum penalty will be well within the level of existing
UK national penalties for the protection of IP rights and therefore
it will be a relatively simple task to incorporate the new offences
into a coherent and internally consistent UK regime.
I attach a copy of the Commission's impact assessment.
Unfortunately this has only been issued in French and no translation
is available. Should an English translation become available I
will forward it on to you.
You ask whether the mere existence of disparities
between the national systems of penalties distorts the internal
market and justifies the adoption of this Directive. We do not
consider that the mere existence of disparities between the laws
of member States justifies Community internal market measures.
Action by the Community should not go beyond what is necessary
to achieve its internal market objective and should only require
the approximation of the laws of member States where the existing
disparities are inhibiting the proper functioning of the internal
The definition of intellectual property rights
has proved in the past to be fraught with difficulty. During the
negotiations of the adopted enforcement Directive of 2004 (2004/48/EC)
it was not possible to reach agreement on this issue. Consequently,
after the adoption of the Directive, the Commission published
their Statement 2005/295/EC setting out their view of the scope
of the term "intellectual property rights" for the purposes
of legislation. Earlier this year the Austrian Presidency asked
delegations for written views on which of the rights set out in
the Commission's Statement should be included within the scope
of the current draft instrument. The views expressed ranged from
those, including the UK, who favoured a very limited scope, to
those who favoured inclusion of all of the items on the Commission's
list. Generally speaking the consensus would appear to favour
the inclusion of the majority of the rights listed in the Commission's
Statement. Views are also divided on the best way to express in
the body of the text any definition of the rights to be included,
but due to the suspension of discussion of the substantive issues
pending agreement on the way forward on the competency issue,
this topic has not yet been subject to any detailed discussion
I note your comments on the definition of "on
a commercial scale". The Government agrees with your suggestion
and would favour the inclusion in this instrument of a definition
modelled on that which appears in the recitals to the 2004 enforcement
In the Government's view the provision of Article
5(1) stipulating that the phrase "under the aegis of a criminal
organisation" is to have the meaning of the Framework Decision
on the fight against organised crime is intended only to ensure
that the phrase "criminal organisation" is consistently
interpreted. We agree, however, that there should be consistency
between the two instruments and that therefore the reference in
the intellectual property instrument should be "within the
framework of' rather than "under the aegis of".
I hope you find my explanations helpful. I am,
of course, available to answer any further questions you may have.
Undated received 12 July 2006
Letter from the Chairman to Gerry Sutcliffe
Thank you for your letter received on 12 July
2006, which has been considered by Sub-Committee E (Law and Institutions).
We are grateful to you for the clarifications
you provide. In particular we are pleased that you agree with
some of our suggestions to enhance the clarity and consistency
of the proposed Directive and we trust that you will press for
these changes when the negotiations recommence.
You confirm that a political agreement for anything
other than the maintenance of the status quo looks very
unlikely until the judgment in the Ship source pollution case
is handed down in 2008. We recall that the Working Group has suspended
discussion of substantive articles; are discussions likely to
recommence prior to the judgment in that case? What timetable
is currently envisaged for progress on this dossier?
Regardless of how the First Pillar v Third Pillar
dispute is finally resolved, the issue of an Article 95 legal
base will remain relevant. As we have previously said, we are
concerned at the proposed use of Article 95 for this Directive.
Although this legal base was used for Directive 2004/48/EC on
civil enforcement of IP rights, we do not consider that this in
itself justifies its use in the present case. Some support for
this view can be found in the Court's recent judgment in Cases
C-317 and 318/04 Parliament v Council and Parliament
For Article 95 to be appropriate, the Directive
should have as its objective and subject-matter the establishment
and functioning of the internal market by contributing to the
removal of obstacles to the freedom to provide goods and services.
The recitals to the proposed Directive make reference to the internal
market, as does the Impact Assessment you provided. However, no
evidence is provided to show that the absence of harmonised sanctions
has any real impact on the internal market. The Impact Assessment
does little more than assert an impact on the internal
market. It is for consideration whether the proposed Directive
has been too hastily adopted by the Commission, coming as it does
so soon after the adoption of Directive 2004/48/EC and therefore
before the full impact of that Directive has been measured.
Our concern is that the proposed Directive may
be intended to achieve a substantially different goal. The Impact
Assessment explains that "La contrefaçon représente
souvent un volet de l'enterprise criminelle, ayant de multiples
liens avec d'autres formes du crime organisé"
which in turn helps "financer d'autres activités
criminelles comme le traffic d'armes, la contrefaçon d'argent,
la traite des êtres humains, le vol de voitures ou le traffic
de drogue" (page 6). It later refers to the role of counterfeiting
and piracy in funding terrorism. Reference is also made to consumer
protection and the dangers to health associated with counterfeit
What assessment has been made, both by the Government
and within the Council, of the true objective of the proposed
legislation? You say that you do not consider that the mere existence
of disparities between the laws of Member States justifies Community
internal market measures. Are the Government satisfied that the
proposed Directive is a genuine internal market measure? If so,
is the impact of disparities among Member States' laws on the
internal market such as to satisfy the Article 95 test?
Why do the Government favour a limited scope
for the definition of intellectual property rights and what impact
would a wider definition have on the current position in the UK?
We have decided to hold the proposal under scrutiny.
25 July 2006
Letter from Gerry Sutcliffe MP to the
Thank you for your letter of 25 July 2006 regarding
the above proposed Directive. I have dealt with your points in
turn below but I should first stress that in respect of the first
two my responses are by necessity provisional. We will of course
provide you with a fuller response on these points in due course.
You asked about the timetable for work on this
dossier. At present this is unclear but the dossier has been referred
to the Article 36 Committee meeting of 12-13 September. Papers
are not yet available but our understanding is that one of the
questions the Committee will be asked to consider is whether the
negotiations on the substantive Articles can resume pending the
judgment in the ship source pollution case.
Your comments on the Article 95 legal base are
very interesting and helpful. I agree that there are many question
marks about the Commission's justification for the proposed measures.
Our initial view is that we are yet to be convinced that this
dossier is an internal market measure as we are still in the process
of examining the case and will provide you with a more detailed
view once we are in a position to do so.
You asked why the Government favours a limited
scope for the definition of Intellectual Property Rights and what
impact a wider definition would have on the current position in
the UK. A precise definition of Intellectual Property Rights is
difficult to achieve. No agreement, for example, was reached during
the negotiations of Directive 2004/48/EC despite lengthy consideration.
However, the recitals
in the proposed Directive suggest that the purpose is to deal
with counterfeiting and piracy rather than the full range of intellectual
property rights. Consequently the Government's view is that the
measure should be restricted, and any extension beyond wilful
trade mark counterfeiting and copyright piracy,
needs clear justification. Our experience is that these are the
infringements that may be linked to serious/organised crime and
are suitable for criminal proceedings. Infringements of other
forms of intellectual property rights, such as patent rights,
would on the other hand present problems for the criminal courts
due to their technical complexity involved; this in turn would
lead to resource issues. Our view is that the protection of these
less easily identified infringements is a matter more rightfully
dealt with by the specialist civil courts, such as the Patents
Court or Patents County Court. The Government is of the view that
there is no strong and compelling evidence to justify any extension
beyond the scope set out in Article 61 of the TRIPS.
I hope you find my explanations helpful.
22 August 2006
164 Extract from recital 5 "Certain criminal
provisions need to be harmonised so that counterfeiting and piracy
in the internal market can be combated effectively". Back
As defined in Article 61 of the TRIPS Agreement (Trade-Related
aspect of Intellectual Property Rights). Back