EU bolsters power to tackle in-transit counterfeits

The European Parliament (EP) has voted in favour of strengthened seizure powers for goods in transit that breach trademarks.

The new provision - part of a comprehensive re-working of trademark law which also makes it easier to freeze and confiscate assets after a criminal conviction - were backed by 631 votes to 19 with 25 abstentions in the EP today.

"Today, less than 1 per cent of the proceeds of crimes such as drug trafficking, counterfeiting, human trafficking and small arms smuggling are frozen and confiscated," said the EP in a statement released after the vote.

Since the Philips (C-446/09) and Nokia (C-495/09) cases heard by the Court of Justice of the EU (CJEU) in 2011, it has been established that goods coming from a non-EU country that are imitations of goods protected in the EU by intellectual property (IP) rights cannot be considered counterfeit or pirated simply on the basis of the fact that they are in-transit, i.e. brought into the customs territory of the EU without being marketed or sold there.

Effectively, this means that customs can identify counterfeit shipments passing through the EU's borders, but is powerless to prevent that shipment reaching its final destination if that is outside the EU.

In part, the situation arose from some misguided actions by customs a few years ago that resulted in legitimate generic medicines - often manufactured in India - being intercepted en route to markets in Latin America and Africa. A series of incidents prompted a complaint by India to the World Trade Organization (WTO).

The new provisions adopted today will allow customs to stop trademark counterfeit goods - even if destined to a country outside the EU - but according to the lawmakers behind the legislation will not affect the trade of legitimate goods or contravene WTO rules.

The legislation specifically indicates that "member states should take appropriate measures with a view to ensuring the smooth transit of generic medicines," noting that the issue of access to medicines is mainly related to patents and only to a lesser extent to trademarks.

The European Federation of Pharmaceutical Industries & Associations (EFPIA) - representing branded drugmakers - welcomed the vote, saying: "the capacity of European customs to act is essential in this fight against the trade of counterfeits."

Noting that trademark-intensive industries account for 21 per cent of all direct jobs in the EU and for 34 per cent of EU Gross Domestic Product (GDP), EFPIA pointed to a 65 per cent reduction in seizures between 2011 and 2012 as evidence that the EU risks becoming a hub for the counterfeits trade.

"We salute this vote and the political courage of MEPs Marielle Gallo and Bernhard Rapkay who sponsored the transit provisions which were adopted today," it added.

However, health advocacy group Medecins Sans Frontieres (MSF) believes the provisions are insufficient to prevent the law being used to block access to generic medicines in developing countries, and had lobbied hard to try to exclude the in-transit provisions from the trademark changes.

Helle Aagaard, EU policy and advocacy advisor, MSF Access Campaign, said ahead of the vote: "If this position is made EU policy, it could drastically change how quickly and effectively MSF can deliver medicines to patients in need, because these medicines could end up being either seized or delayed while in transit through Europe."

Romanian MEP Monica Luisa Macovei, who served as rapporteur for the overall trademark legislation, said the legislation would also help authorities crack down on active and passive corruption in the private sector, active and passive corruption involving officials of EU institutions or of EU member states, participation in a criminal organisation, child pornography or cybercrime.

"Our priority must be to follow the money across borders and confiscate criminals' profits. Only then can we hope to reduce serious crime. Sending some criminals to jail whilst leaving the dirty money in circulation is intolerable," she commented.

The MEP vote sets up formal approval by the Council in the coming weeks, after which Member states will have 30 months to transpose the directive into their national laws.