EU Ready to Get Tough on Counterfeiters

Jose Manuel Durao Barroso, president of the European Commission — the executive branch of the European Union (E.U.) — says the trafficking in fake goods is as lucrative for organized criminals as dealing in narcotics and weapons, only at a lower risk for prosecution. He says the 27 countries making up the E.U. are preparing to clamp down on those pirating consumer goods as vehemently as they've assailed the guns and drugs dealers.

"The fact is, counterfeiting now takes place on an industrial scale — the days when fake goods meant shifty men with a suitcase full of Rolexes, or teenagers swapping cheap computer games, are over," Barroso said in a speech given at the Global Anti-Counterfeit Summit March 10 in Brussels — an event organized by the Authentics Foundation. "Today, the Organization for Economic Cooperation and Development estimates that global trade in fake goods is worth around $200 billion — higher than the gross domestic product of more than 150 countries."

Barroso says the battle against counterfeiting and piracy requires concerted action in three areas: within the E.U., at its borders, and in its relations with third countries.

Within The E.U.
Within the E.U., legislation on the enforcement of intellectual property rights was beefed up in 2004, and provides strong civil penalties as a deterrent against counterfeiters. Still, Barroso says the European Commission is convinced that to fight counterfeiting effectively, member states also must deem intellectual property rights (IPR) infringements on a commercial scale as a criminal offense.

"If accepted, member states would also need to implement minimum sentences, and a range of other penalties that would apply to both individuals and companies, including fines, confiscation of the guilty party's assets, and the closure of premises," he says. "Some legal issues complicate this proposal at present, but I am confident that a way forward can be found."

At the Borders
E.U. customs seized more than 128 million counterfeit and pirated goods in 2006, a jump of 70 percent compared to 2005. The E.U. customs have developed new risk analysis techniques and instruments to exchange information to combat counterfeiting and piracy.

Barroso also suggests industry, particularly brand owners, can better protect their intellectual property by improving communications with customs officials.

Cooperating With Third Countries
Barroso says the final pillar of effective supply-side action against counterfeiting activity is cooperation with third-party countries.

"Here we have put in place a comprehensive strategy," he says. "First, we talked to E.U. businesses to get a sense of the problem and where we need to act. Then we substantially increased our efforts, creating specific dialogues with key partners, such as China, Russia, Ukraine and several Latin American countries."

Barroso says the E.U.'s investigations "confirmed what we already suspected, which is that the vast majority of fake goods intercepted on their way into the E.U. — around 80 percent — are made in China.

"Also high up on the list is the United Arab Emirates, because so much traffic passes through the ports there, often to hide the true origin of the fake goods." The investigation also identified problems in Russia, the Ukraine and Turkey, as well as in South America and Southeast Asia.

"We are taking a lead in the debate at the World Trade Organization; we are reinforcing intellectual property rules in bilateral free trade agreements; we are shifting technical assistance resources to enforcement; and we are working closely with industry and establishing reinforced cooperation with countries that share our concerns, like the U.S., Japan and Switzerland," Barroso says.

Still, "China remains the elephant in the room," Barroso says. "Unless we successfully engage China, then everything else we do is a mere sideshow."