Sworn enemies unite against draft EU IP law

The European Commission headquarters, Brussels. Picture courtesy EC.

Big companies like the Finnish mobile phone maker Nokia and the software giant Microsoft on one hand and the grass-roots Foundation for a Free Information Infrastructure (FFII) on the other are fighting the proposal, as are generic medicines manufacturers and traditional drug giants such as AstraZeneca.

But after winning a court case in September that confirmed its powers to draft criminal laws, commission officials are busy polishing a proposal for a law they believe will help deter counterfeiting of goods such as medicines, watches and designer clothes, as well as pirated CDs and DVDs.

The draft law aims to harmonise a patchwork of codes that already exist at national level across the Union. It follows a string of laws passed over the past six years designed to help rights holders protect their intellectual property from imitations often originating from countries in Asia, where copycat products are produced for a fraction of the price of the originals.

Unlike previous laws including an intellectual property enforcement law, a copyright law and a general code on e-commerce that deals with intellectual property infringements, this new proposal will have the deterrent effect of criminal sanctions behind it.

Criminal sanctions

In September Europe's top court, the Court of Justice in Luxembourg, ruled for the first time that the European Commission can propose criminal sanctions to enforce Europe-wide laws. Until then only national governments could impose criminal sanctions. The intellectual property draft law will be the first Europe-wide law to make use of the new powers.

Better protection of European creations is seen as one way of making Europe more competitive and more innovative. But the proposed new law applying criminal sanctions to patent infringements will have the exact opposite effect, argue the proposal's critics.

While no one disagrees with the need to protect intellectual property - and all companies and academics contacted support clamping down on serious counterfeiting criminals - they see no point in including patents within the scope of the proposed law.

"Intellectual property rights holders have more than sufficient instruments to maintain their rights with civil sanctions," said Bernt Hugenholtz, a professor at the University of Amsterdam.

He, along with fellow IP academics from Max Planck institutes in Germany, is particularly concerned about the inclusion of patents within the scope of the draft directive, which was initially proposed by the commission in the summer.

Patent cases are so difficult to determine, he said, that public prosecutors are unlikely to devote time to them. "Public prosecutors have other things to do, like catch really serious criminals such as murderers and rapists," Hugenholtz said.

"Criminal sanctions are required when public order is at stake. But it's not society that is affected by individual patent cases, it's someone’s bank account or the assets of a company," the professor said.

'Ludicrous', says Nokia

Including patents within the scope of the law is "ludicrous," said Tim Frain, director of intellectual property at Nokia. Frain has to advise managers at Nokia about the risks of infringing existing patents when they develop new functions for mobile phones.

"It's never black and white. Sometimes third party patents are so weak that I advise managers to go ahead and innovate because after making a risk analysis we feel we can safely challenge the existing patent," he said. "But with this law, even if I'm certain the existing patent is no good, the manager involved would be criminally liable."

"It is hard to predict what the impact of this law would be because it would be enforced at a national level by national police forces who I am sure have much better things to do than to chase petty patent infringements," said Hartmut Pilch, a campaigner with the FFII.

Less than six months ago he and Frain were on opposite sides in one of the most fiercely fought lobbying battles in European lawmaking history, over a proposed law on software patents. Free and open source software groups triumphed in that battle because the proposed law was scrapped.

But this latest legal threat has brought the two sides together. "This law doesn’t make much sense for anyone in the patent world," Pilch said.

Accused

Some of the biggest patent owners have themselves been accused of patent infringement. Microsoft owns around 5,000 patents itself and is currently fighting 32 patent infringement claims, the company's spokesman in Brussels, Tom Brookes, said.

"The law could trigger abusive criminal litigation which would have a chilling effect on innovation," said Francisco Mingorance, European affairs manager at the Business Software Alliance, a trade body representing firms including Microsoft and Apple Computer in Brussels.

Greg Perry, director general of the European generic medicines association (EGA), described the plan to criminalise patent infringements as "nonsense".

"At times researchers need to breach an existing patent in order to challenge it. With this law in place it would be the end of your career, and probably your company's too if you were found guilty under criminal law," he said.

Generic drugs makers are constantly battling with branded drugs makers to get access to their most popular pills. The big pharmaceutical companies try to keep the patent monopoly on their best selling pills going as long as they can before sharing the profits with the makers of legal generic equivalents.

In June the European Commission found the British-based drugs firm AstraZeneca guilty of abusing the patent protection granted to its best-selling anti-ulcer drug, Losec.

"By criminalising this whole area lawmakers will be putting a steel ringfence around the holders of drug patents, many of which may not be justified," Perry said. And the pharmaceutical giants, which are used to fighting generic drug makers over patents, for once agree with them.

"We would support the removal of normal patent infringements from the scope of this law," said Steve Brown, a spokesman for AstraZeneca.

Even industries that should theoretically benefit most from the proposed law, such as the music and film industries, say it won't add much to their legal armoury in their battle with the pirates.

"We are grateful for the efforts of the European Commission to protect intellectual property but in the fight against copyright abuse this is a modest proposal," said Thomas Dillon, legal counsel for the Motion Picture Association, a trade body representing most Hollywood studios.

The 25 countries in the European are already obliged to fight copyright and trademark infringements with criminal sanctions, under an agreement on intellectual property protection agreed by the World Trade Organization.

'It does nothing for us'

"This proposed law doesn't add anything for us. The only area where it does have a new effect is in its inclusion of patents," Dillon said. Under WTO rules, countries are not obliged to impose criminal sanctions for patent infringements.

The European Commission takes the opposite view. ''Regarding the substance of the proposal, our view is the reverse of the people you have been speaking to,'' said Friso Roscam Abbing, a commission spokesman on justice-related issues. ''We believe that we need to protect innovators, therefore we want to send a strong signal to those people infringing intellectual property that they face criminal sanctions.''

With so many dissenting voices many people are wondering how the European Commission can be so out of step with the people who know most about patent enforcement. Some speculate that the commission is using this law as a political guinea pig with which to test its new powers after the September court ruling.

Others believe the problem has arisen because the officials within the commission’s justice department drafting the proposal are new to intellectual property. Until recently it has been dealt with by the internal market department, which is responsible for writing harmonising laws across the 25-nation Union.

Ironically, by criminalising IP infringements the justice officials may be undermining the fight against counterfeiters and pirates, said Hugenholtz. "It is true that organised crime is involved in piracy and counterfeiting, but you won't make the situation better by criminalising IP infringements, you will probably be making it worse," he said.

By including patents within its scope, the commission is taking its eye off the ball, said Thadeus Burns, senior legal counsel for the American conglomerate General Electric in Europe.

"This law should be focused on piracy and counterfeiting. We’re not looking at a problem with patents here," he said.