Sehr Geehrter Herr Kollege Scholz

QBPC expresses its appreciation to the author of this article, Mr. Jan Wrede, an IP lawyer from De Simone & Partner, for granting QBPC permission to post this article on its website for members to read and discuss. The article served as the basis for Mr. Wrede’s presentation on criminal sanctions and counterfeiting at the German Trademark Association Annual Meeting (October, 2006).

Criminal Sanctions in International Trade Mark Law1

1. Introduction

Subject matter of the present article is a comparative overview of the actual criminal measures in trade mark law in 38 jurisdictions, with barycentric focus on the situation within the European Union. An excursus refers to the particular situation in Italy.

2. First Paces of International Harmonization

Criminal law is traditionally understood as national issue2. The main reason is to avoid regulating the legal autonomy of states in this delicate matter too much from the outside. Consequently, multilateral or bilateral treaties, which principally aim at removing trade barriers, even though touching the protection of intellectual property in a more or less general manner, usually leave concrete criminal sanctions in the hand of the single governments. Hence, also either of the two most important IP-Treaties of the 19th and 20th century (i.e., the Paris Convention and the TRIPS Agreement) regulate criminal sanctions only in a rather superficial way.

2.1 Paris Convention (1883)3

According to Art. 9, “goods unlawfully bearing a trade mark … shall be seized on importation” or “where the unlawful affixation occurred”, also ex officio.

1 The article is a slightly modified translation taken from the German professional journal Markenrecht Nr. 11/12 2006, which on its part contains a revised version of a lecture held by the author on the 16.11.2006 at the Markenforum in Munich. 2 Presidency declaration on behalf of the European Union marking the entry into force of the Rome Statute of the International Criminal Court of 01.07.2002, EU Bulletin 7/8-2002. 3 With 170 member states, including all European Union member states, but not the European Union itself, which, however, is bound to the substantive provisions of the Paris Convention through Art. 2.1 TRIPS. 1 Art. 10 foresees the same sanction in case of false indications of origin, whether these refer to the geographical or entrepreneurial provenance. Most member states have already implemented national laws corresponding to these articles. On the other hand, where this is not the case, and seizure is not even available under civil law, Art. 9.6 just hopefully mentions future possible amendments of the national law, without imposing such. Thus, in practice the Paris Convention is of no importance for criminal enforcement.

2.2 TRIPS Agreement (1994)4

Art. 51 - 60 govern special requirements related to border measures5: according to Art. 51 and Art. 59, counterfeit trade mark goods may be seized and destroyed, also ex officio, Art. 58. Members may provide for exceptions for small quantities of goods, Art. 60.

Criminal procedures are the subject matter of Art. 61: “Members shall provide for criminal procedures and penalties to be applied at least in cases of wilful trade mark counterfeiting … on a commercial scale. Remedies available shall include imprisonment and/or monetary fines sufficient to provide a deterrent, consistently with the level of penalties applied for crimes of a corresponding gravity. In appropriate cases, remedies available shall also include the seizure, forfeiture and destruction of the infringing goods and of any materials and implements the predominant use of which has been in the commission of the offence.” As the present analysis shows, many member states have not yet adopted the requested minimum standards or levelled penalties. They could only be forced to do so following a WTO dispute proceeding. In the European Union, unless national implementation has occurred, TRIPS "is not susceptible to being directly invoked in Community or member state courts6". Secondly, in the field of criminal law, the principle „nulla poena sine lege7” as well as the requirement of legal certainty (Art. 61 does not impose concrete sanctions) and the prohibition against reasoning by analogy are barring a direct application or an interpretative

4 Agreement on Trade-Related Aspects of Intellectual Property Rights, in Annex 1 C of the Agreement establishing the World Trade Organization of 15.04.1994; with 150 member states, including all European Union member states and the European Union itself. 5 These obligations have been met by the European Union and its member states by Customs Regulation 1383/2003 and its precedent Regulations, respectively. 6 11th Whereas Council Decision 94/800/EC of 22.12.1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994); confirmed by ECJ C-300/98 of 14.12.2000, no. 44. 7 Art. 7 European Convention on Human Rights and Fundamental Freedoms. 2 transposition of Art. 61, on which courts, public prosecutors or the victim companies could rely.

3. First Paces of Community Wide Harmonization

Criminal law und criminal procedural law fall, in line of principle, in the competence of the member states. Nevertheless, also this legal field is touched more and more upon by Community law and may, case by case, justify the competence of the European Communities8, also for intellectual property9. As a recent example, in September 2005, Council framework decision 2003/80/JHA of 27.01.2003 on the protection of the environment through criminal law was annulled by the Grand Chamber of the ECJ10 only because the competence lied with the European Communities and not with the so-called „Third Pillar“. Debatable remains, thus, only the range of the said competence.

3.1 Customs Regulation 1383/200311

First milestone within the offensive of the European Union is the Customs Regulation. It has come into force on 01.07.2004 and is since then directly applicable in all member states. It goes back to similar precedent Regulations12, which were into effect since 01.01.1988. Every owner of intellectual property rights valid in the European Union (such as copyrights, designs, trade marks, patents) may apply to a national customs department for surveillance of his exclusive rights. Owners of Community rights (in particular, Community Trade Marks and Designs) have the faculty to extend the application to one or more of the other member states, Art. 5 IV. The Customs take action when suspected goods are found. In this case, the applicant may ask for the names and addresses of the consignee, the consignor, the declarant

8 ECJ C-226/97 of 16.06.1998, no. 19. 9 Reto Hilty, Annette Kur, Alexander Peukert, Stellungnahme des Max-Planck-Instituts für Geistiges Eigentum, Wettbewerbs- und Steuerrecht zum Vorschlag für eine Richtlinie des Europäischen Parlaments und des Rates über strafrechtliche Maßnahmen zur Durchsetzung der Rechte des geistigen Eigentums, KOM(2006) 168 endgültig, GRUR Int. 2006, Heft 8-9, p. 722 ss. 10 ECJ C-176/03 of 13.09.2005. 11 Council Regulation (EC) No. 1383/2003 concerning customs action against goods suspected of infringing certain intellectual property rights and the measures to be taken against goods found to have infringed such rights of 22.07.2003. 12 Council Regulation (EC) No. 3842/86 of 01.12.1986 laying down measures to prohibit the release for free circulation of counterfeit goods; Commission Regulation (EC) No. 3077/87 of 14.10.1987 laying down provisions for the implementation of Council Regulation (EC) No. 3842/86 laying down measures to prohibit the release for free circulation of counterfeit goods; Council Regulation (EC) No. 3295/94 of 22.12.1994 laying down measures to prohibit the release for free circulation, export, re-export or entry for a suspensive procedure of counterfeit and pirated goods; Council Regulation (EC) No. 241/1999 of 25.01.1999 amending Regulation (EC) No. 3295/94 laying down measures to prohibit the release for free circulation, export, re-export or entry for a suspensive procedure of counterfeit and pirated goods. 3 or the holder of the goods, as well as their origin. Furthermore, the goods may be inspected or handed over by way of sample. If the importer does not object, the seized goods may be destroyed according to the so-called simplified procedure, normally on costs of the applicant13. Otherwise, a civil or criminal action has to be started within 10 working days (20 on request, 3 in case of perishable goods), or else the goods will be released. The Regulation does not entitle to block personal belongings of a non-commercial nature within the limits of the duty-free allowance. The same, it cannot be enforced in case of parallel imports14, Art. 3.1. All in all, the Customs Regulation is a welcomed procedure, rather quick, cost effective and non-bureaucratic, apt to bar counterfeit goods from getting into the trade. The absolutely recommendable application is indeed filed by more and more IP owners, also because there is no government fee to be paid or security bond to be deposited any more. On the other hand, the Regulation refers only to goods, not to the involved importers. Moreover, the Customs cannot check everything everywhere. As a single bulwark, it is therefore not enough to stand up against the daily flood of counterfeits.

3.2 Enforcement Directive 2004/4815

Second cornerstone of the European Union is the Enforcement Directive. It provides several modern civil law instruments, such as the right of information (disclosure), provisional and precautionary measures, recall of goods, destruction, damages and publication of judicial decisions. However, the Directive leaves it completely up to the own initiative of the IP right holders to start a civil action16. Criminal sanctions are absent. The Directive should have been implemented in national law within 29.04.200617. It has been implemented so far in 11 member states18: Austria, Bulgaria, Czech Republic, Denmark, Finland, Hungary, Ireland, Italy, Romania, Spain, UK.

3.3 Proposal for a Criminal Directive 2006/16819

13 This procedure is not yet applicable in all member states. 14 This may be regulated more strictly under national customs laws. 15 Directive 2004/48/EC of the European Parliament and of the Council of 29.04.2004 on the enforcement of intellectual property rights. 16 In this sense expressly the 29th Whereas of the Directive. 17 Respectively 01.01.2007 for Bulgaria and Romania. 18 As of 31.12.2006. 19 Amended proposal for a Directive of the European Parliament and of the Council on criminal measures aimed at ensuring the enforcement of intellectual property rights COM(2006) 168 final of 26.04.2006, yore COM(2005) 276 of 12.07.2005. 4 Third main pillar of the European Union in the battle against modern piracy is the proposed Criminal Directive. According to the European Commission, the harmonization - and hence, factually the tightening - of the existing national criminal laws in the IP field is absolutely necessary to enable owners to act effectively in the internal market against infringement and counterfeiting of their IP rights20. After the repeal of a first proposal21 because of expected competence problems22, on 26.04.2006 a new proposal for a European Criminal Directive was published. It is, with 11 articles, relatively short und foresees basically the following rules:

- Art. 3 determines that all intentional infringements of an intellectual property right on a commercial scale shall be treated as criminal offences. This is also true for attempting, aiding or abetting and inciting such infringements.

The proposal does not define the term „commercial scale“. Though notwithstanding, there is a definition in sentence 3 of the 14th Whereas of the parallel Enforcement Directive: „Acts carried out on a commercial scale are those carried out for direct or indirect economic or commercial advantage; this would normally exclude acts carried out by end-consumers acting in good faith”.

The same applies to the term „intellectual property“. Initially, the intent was to take over the explanatory definition to Art. 2 Enforcement Directive23. It contains - according to the Commission “at least” - the following intellectual property rights: “copyrights, rights related to copyright, sui generis rights of a database maker, rights of the creator of the topographies of a semiconductor product, trade mark rights, design rights, patent rights, including rights derived from supplementary protection certificates, geographical indications, utility model rights, plant variety rights, and trade names, in so far as these are protected as exclusive property rights in the national law concerned”.

- Art. 4 introduces, next to the two main penalties (i.e., custodial sentences and fines), in particular also the “confiscation of the object, instruments and products stemming from infringements or of goods whose value corresponds to those products” as a mandatory measure. On the other hand, further penalties, such as destruction, a ban on engaging in

20 See 3rd, 5th, and 7th Whereas Criminal Directive and 28th Whereas Enforcement Directive. 21 Proposal for a Directive of the European Parliament and of the Council on criminal measures aimed at ensuring the enforcement of intellectual property rights (2005/0127 COD) of 12.07.2005. 22 Caused by the abovementioned judgement ECJ C-176/03 of 13.09.2005. 23 Statement by the Commission concerning Article 2 of Directive 2004/48/EC of the European Parliament and of the Council on the enforcement of intellectual property rights (2005/295/EC) of 13.04.2005. 5 commercial activities or the publication of judicial decisions, are only “available in appropriate cases”.

- Art. 5 defines the level of penalties: according to Art. 5.1, “offences … are punishable by a maximum sentence of at least four years’ imprisonment”; according to Art. 5.2, fines are up “to a maximum of at least € 100.000”, in case of criminal organisations or health or safety risks, “of at least € 300.000”.

- Furthermore, right holders are allowed to assist the official investigations, Art. 7.

- Art. 8 states that investigations and prosecution may also be carried out ex officio.

All in all - a good move into the right direction. Nevertheless, the Criminal Directive has also met with severe criticism: The German Markenverband24 observes that instead of scaling up the maximum penalties, it would have been better to introduce „deterring minimum penalties“ as the only opportune preventive means, „so that the risk of imprisonment becomes a more than theoretical option for the professional forger“. Moreover, the destruction of counterfeit goods and the machinery to produce these should become mandatory, excluding their restitution after having removed the infringing trade marks. The Munich-based Max-Planck-Institut25 still sees competence problems for the Criminal Directive, because according to the European legal principle of subsidiarity, the regulation of this subject matter is not indispensable. The main reasons for this conclusion lie within the already existing obligation of the member states to imply Art. 61 TRIPS, and because the whole effects of the full implementation of the Enforcement Directive are still unknown. In any event, harmonisation should be limited to cases of „clear cut piracy“, while questions of the range of protection in cases of mere similarity should be resolved exclusively by civil law. The latter argument is also welcomed by ECTA26. It should be made sure that only classical trade mark piracy cases are subject to criminal sanctions, not cases of simple similarity normally resolved by civil law. Since companies are always acting „on a commercial scale“, they should not be criminalised too hastily. Moreover, due to their complex nature and the

24 Press release of 04.07.2006, published in www.markenverband.de. 25 Reto Hilty, Annette Kur, Alexander Peukert, footnote 10. 26 European Communities Trade Mark Association, Comments on the Proposal for a Directive on Criminal Measures aimed at ensuring the Enforcement of IP Rights, addressed to the European Parliament, 17.11.2005. The author was involved in the drafting of the comments. 6 difficulties to subsume them in a non-ambiguous manner under the elements of the offence, also patent infringements should be excluded from the scope of the Criminal Directive. Meanwhile, even the European Council27 retains that competence problems are possible and suggests to analyze this aspect more thoroughly, as well as the effects of the Enforcement Directive. At the same time, it recommends to limit the scope of the Criminal Directive to those rights already harmonized at Community level, in the first place copyrights, their neighbouring rights, data bases, trade marks, designs and geographical indications. To be excluded from the original definition are, in particular, patents, supplementary protection certificates, utility models and trade names. The author supports the abovementioned criticism to a large extent: the experience in international anticounterfeiting shows that high penalties are an effective means to combat trade mark piracy only if severely put into practice. In order to guarantee proper prosecution, the introduction of minimum custodial sentences would have been, indeed, considerably more significant. At the same time, criminal measures should be reserved to blatant cases of piracy, so as not to impede the freedom of legitimate trade. This would also be congruent with Art. 2.1(a) Customs Regulation, which refers to false but identical trade marks, the valid legal status in some states28, and Art. 61 TRIPS, which aims at punishing wilful trade mark counterfeiting. It should also throw new light on the question of competence. Last but not least, it has to be borne in mind that criminal sanctions are no panacea to stop unscrupulous racketeers once and for all29; hand in hand therewith, it is necessary to enact a consequent work of education and sensitisation of traders and consumers. No doubt the Commission has still enough room for manoeuvres to establish itself on this important field as pathbreaking.

27 Press release no. 13068 of 06.10.2006. 28 F.i. Italy, Sweden, South Africa, UK, USA. 29 Very instructive André Klip, Criminal Law in the European Union, inaugural address at the University of Maastricht, 29.04.2004, http://arno.unimaas.nl/show.cgi?fid=3673#search=%22criminal law%20niethelande %20yearhunthet%20national%22. 7 4. National Rules in the EU Member States30

Until the entering into force of the Criminal Directive31, the expiration of the 18-months implementation deadline32, and the effective 27 national implementations, for sure a lot more water will run down the Senne33. By then and as hitherto, only the national rules will apply. These should now be presented in relation to the two main sanctions custodial sentences and fines in cases of organized crime, classified in two groups: a) Protection which corresponds to the Criminal Directive State Imprisonment Fine Netherlands 4 years € 670.000 Spain 1 - 4 years undetermined France 5 years € 500.000 Germany 5 years € 1.800.000 Estonia 5 years undetermined Slovakia 3 - 8 years undetermined UK 10 years undetermined b) Protection which does not correspond to the Criminal Directive34 State Imprisonment Fine Luxembourg - - Belgium 8 days - 6 months € 143 - € 11.000

30 The author would like to express his gratitude for the kind assistance of following colleagues: Austria: Dr. Alexandra Braunböck, Attorney at Law, and Dr. Georg Schönherr, LL.M., Attorney at Law, Schwarz Schönherr Rechtsanwälte OEG, Vienna; Belgium: Annick Mottet Haugaard, Attorney at Law, and Christian Dekoninck, Attorney at Law, Lontings & Partners Avocats, Brussels; Bulgaria: Olga Sirakova, Attorney at Law, Interius, Sofia; Cyprus: Alexandros Georgiades, LL.M., Attorney at Law, Dr. K. Chrysostomides & Co. Law Office, Nicosia; Czech Republic: Dr. Vladimír Rott, Rott, Růžička & Guttman Patent, Trade Mark, and Law Offices, Prague; Denmark: Mads Marstrand-Jorgensen, Attorney at Law, Norsker & Co., Copenhagen; Estonia: Olga Treufeldt, Patent Attorney, Patendibüroo Turvaja OÜ, Tallinn; Finland: Ari-Pekka Launne, Attorney at Law, Kolster OY AB, Helsinki; France: Charles de Haas, Attorney at Law, Cabinet Gilbey de Haas, Paris; Germany: Dr. Christof Krüger, Attorney at Law, HK Krüger Rechtsanwälte, Munich; Greece: Nicolas Dontas, Attorney at Law, Dontas Law Offices, Athens; Hungary: Dr. Tamás Gödölle, Attorney at Law, Bogsch & Partners, Budapest; Ireland: Alice Crabb, Attorney at Law, Tomkins & Co., Dublin; Latvia: Alexandra Fortuna, Attorney at Law, Foral Patent Law Office, Riga; Lithuania: Giedre Domkute-Lukauskiene, Attorney at Law, AAA Baltic Service Company - Law Firm, Vilnius; Luxembourg: Nicolas Decker, Attorney at Law, Cabinet d’Avocats Decker & Braun, Luxembourg; Malta: Antoine Camilleri, Attorney at Law, Mamo TCV Advocates, Valletta; Netherlands: Tjeerd Overdijk, Attorney at Law, Steinhauser Hoogenrad Advocaten, Amsterdam; Poland: Anna Stopińska-Ślefarska, Attorney at Law, Polservice Patent and Trademark Attorneys Office Ltd., Warsaw; Portugal: João Pereira da Cruz, Attorney at Law, J. Pereira da Cruz, S.A., Lisbon; Romania: Nicoleta Tarchila, Attorney at Law, Cabinet Enpora, Bucharest; Slovakia: Martin Guttmann, Attorney at Law, Rott, Růžička & Guttman Patent, Trade Mark, and Law Offices, Bratislava; Slovenia: Vlado Potrč, Attorney at Law, Patentna Pisarna d.o.o., Ljubljana; Spain: Fernando Rodriguez, Attorney at Law, Pintó Ruiz & del Valle Abogados & Economistas, Madrid; Sweden: Mattias Karlsson, LL.M., Attorney at Law, Awapatent AB, Gothenburg; UK: Christopher Morcom QC, Attorney at Law, Hogarth Chambers, London. 31 The further process can be followed at http://ec.europa.eu/prelex/detail_dossier_real.cfm? CL=de&DosId=193131. 32 Art. 9. The German government fosters a 24-months-deadline. 33 Yore river through Brussels; nowadays flowing subterranean under the Boulevard Anspach. 34 Unless put in brackets. 8 Cyprus 1 year € 1.300 Czech Republic 2 years € 180 - € 3.600 Lithuania 2 years € 3.623 Austria 2 years (undetermined) Finland 2 years (undetermined) Poland 2 years (undetermined) Sweden 2 years (undetermined) Slovenia 3 years - Italy 3 years35 € 2.065 Malta 3 years € 23.500 Hungary 3 years36 € 10 - € 40.000 Bulgaria 3 years (undetermined) Denmark 3 years (undetermined) Portugal 3 years (undetermined) Romania 1 month - 3 years € 500 Latvia (5 years) € 34.000 Ireland37 (5 years) € 125.000 Greece (3 month - 5 years) € 600

Thus, only about one quarter of the member states already have enacted laws corresponding to the new rules. The others still will have to amend their criminal laws, be it regarding custodial sanctions, fines or even both. In practice, however, it has also to be considered that the maximum penalties already implemented in the national laws are almost never applied. Very often, all that is imposed are fines in the range of € 500 - € 2.000, even in grave circumstances imprisonment is normally only threatened under probation. Custodial sentences are imposed, if at all, in case of repeat offenders. Especially confiscation of revenues, ban on engaging in commercial activities and publication of judgements are only regulated in single countries. As experience shows, in most member states public authorities (exception made for Customs) are rather reluctant to prosecute piracy. In this regard, it is noticeable that in almost every country, copyright is protected much stronger than trade marks or patents. Last but not least, criminal law generally does not provide for damage claims38 - unlike Art. 13 Enforcement Directive. This may altogether be grounds for the fact that in practice civil actions are the first choice for most IP right holders. Despite being the third party in the Commission’s catalogue of anticounterfeiting measures, the Criminal Directive should thus not be interpreted as being

35 Art. 514 Criminal Code, which foresees a minimum imprisonment of 1 year, has never been applied since its introduction in 1942, because the element of the offence „damage to national economy“ never subsisted. 36 In case of damages exceeding € 1.850.000, the minimum imprisonment is 2 years. 37 Not protected are service marks. 38 This is actually the case only in Denmark and Romania; in Italy only as to the claim as such. The Criminal Directive does foresee confiscation of revenues, but since this is a sanction, all the money belongs to the public authorities. 9 the final solution, but be accompanied by further also social-economic initiatives, so as to make the offer39 und purchase of counterfeits more and more unattractive.

5. National Rules in some exemplary third States40

In view of the ongoing globalisation not only of international trade, but also of the activities of organized forgers - who nowadays avail themselves in the same way as honest companies of international logistics and division of labour41 - the above drafted situation inside the European Union shall be compared with the existing rules in 11 further states. For sake of order, classifying them in the same two „European“ groups: a) Protection which corresponds to the Criminal Directive State Imprisonment Fine South Africa 5 years € 1.000.000 China 3 - 7 years undetermined Japan 10 years € 2.000.000 USA42 10 years € 3.950.000 b) Protection which does not correspond to the Criminal Directive43 State Imprisonment Fine Brazil 1 month - 1 year (undetermined) Canada 2 years € 3.500 Australia 2 years € 160.000 India 3 years € 3.500 Turkey (1 - 4 years) € 7.500 - € 25.000 Russia (5 years) € 2.950 - € 8.850 Switzerland (5 years) € 63.500

39 Giancarlo di Risio, CEO of Versace, holds that imitation of the high quality of their own products is either impossible or not lucrative (Il Sole 24 Ore of 16.10.2006). 40 The author would like to express his gratitude for the kind assistance of following colleagues: Australia: Stephen Stern, Attorney at Law, Corrs Chambers Westgarth Lawyers, Melbourne; Brazil: Margaret Nunes da Silva, Attorney at Law, Patent & Trade Mark Agent, Rio de Janeiro/Trieste; Canada: Gregory Ludlow, Attorney at Law, Kappel & Ludlow Barristers & Solicitors, Patent & Trademark Agents, Toronto; China: Regina Feng, Trade Mark Attorney, Beijing Janlea Trade Mark Agency Co., Ltd., Peking; India: Safir Anand, Attorney at Law, Anand and Anand Advocates, New Delhi; Japan: Hirohisa Suzuki, Patent Attorney, Shiga International Patent Office, Tokyo; Russia: Vladimir Biriulin, Attorney at Law, Gorodissky & Partners, Moscow; South Africa: Musa Mbuyisa, Attorney at Law, Spoor & Fisher Patent Trade Mark and Copyright Attorneys, Pretoria; Switzerland: Dr. iur. Dipl. Chem.-Ing. Michael Kikinis, Attorney at Law, Rechtsanwälte Kikinis Rohner Schwenninger Weinmann, Zurich; Turkey: Okan Can, Attorney at Law, Deriş Patents & Trademarks Agency JSC, Istanbul; USA: Geordie Zug, Attorney at Law, King & Spalding LLP, New York. 41 Fabio Antonacchio, Contraffazione dei marchi: panoramica sul sistema sanzionatorio, 2005, www.rivista.sse.it. 42 In the matter of trade marks, in the year 2005 the Federal public prosecutors initiated 195 proceedings, 76 of which concluded in a criminal indictment. These ended in 26 cases, that is 13,33 %, with a conviction to imprisonment between several months and more than 5 years. 43 Unless put in brackets. 10 Thus we do not have - quod erat expectandum - any harmonization neither on international level. Art. 61 TRIPS shall not produce relief, because it does not contain any concrete specification of the penalties to be implemented, but only the requirement of consistency with corresponding offences within every respective national system. Nor are there actually any multilateral negotiations taking place, which might aim at a stronger harmonization of international criminal law in the IP field. The European Union as one of the main victims of trade mark counterfeiting should have seized the occasion, creating exemplary international high standards with the Criminal Directive, in particular through the introduction of minimum custodial sentences. Ultimately, the TRIPS Agreement does only impose a catalogue of principal minimum protection standards, which may be extended either in terms of procedural as well as substantial law, Art. 1.1 TRIPS. Afterwards, a unified European position may also be represented externally in a better way, be it before the WTO or in case of bilateral negotiations.

6. Excursus Italy

Italians foremost poet, Dante, threw forgers directly in hell, where they had to suffer various (skin) diseases44. On the earth’s surface, at that time, such culprits (then predominantly money forgers) usually were burnt alive at the stake. Meanwhile, also the administration of criminal justice south of the Alps has been modernized. The Italian creativity has coined some peculiarities, though, two of which shall be briefly addressed in the present excursus.

6.1 The Case Law of the Italian Criminal Supreme Court in Case of Self-evident Trade Mark Infringements

Back in the summer of 1999, a judgement of the Italian Criminal Supreme Court45 spread like a wildfire through specialised IP circles: a street vendor of false branded goods had been acquitted. Motivation: the falsification was obvious to such an extent that the buyer was not misled about the real origin of the article (a hand bag). What was the reason for such finding?

44 Dante Alighieri, The Divine Comedy, The Hell, 29th Canto (published 1314). 45 Italian Criminal Supreme Court no. 2119 of 17.06.1999. 11 The accuse was based on Art. 474 Criminal Code (trade with or import of goods bearing false signs). This article is systematically inserted into the section of offences against the public confidence. From this point of view, it was no big leap to deny the applicability of Art. 474, since in the absence of deception, the public confidence as such (here: in the trade mark, which guarantees the authenticity and origin of the goods) was not undermined. Nevertheless, it has become highly unlikely that other vendors could rely with success on the said judgment even today, due to the increased attention which trade mark protection has enjoyed in subsequent case law. The Criminal Supreme Court (in particular, the II., but also the V. Senate responsible for the 1999 sentence) has, indeed, in several judgments made a clear volte-face on its former verdict: first, the requirement of the „obviousness“ of the counterfeit has been increased46. This also under the aspect of a possible post sale confusion, because any second customer, not present at the time of the first purchase, could still be deceived (f.i., in lack of a price indication or not knowing that the good came from a street vendor)47. Second, the judges have come to the conclusion that the concrete misleading of the customer plays no role at all48, because the protected “public confidence” does not depend on the personal perception of a single customer. Instead, it is safeguarded as such in an abstract way. Consequently, trade marks may not be counterfeit under no circumstances. After all, Art. 474 refers to cases of likelihood of deception49, so that - again - it is of no importance whether or not there has been an actual case of misleading. Following this interpretation, the - at that time correctly badly scolded - cited judgment should by now be regarded as practically and dogmatically obsolete.

6.2 The Criminal Responsibility of the Customer in Italy

Six years later, in the summer of 2005, another notice made its way from the Italian boot around the world: a tourist bought a pair of obviously fake sun glasses (for € 10), and the vigilant eye of the law fined her with € 10.00050 for intentional purchase of counterfeit branded goods. Basis for this fine is a law-decree of the same year51 which allows, indeed, to hold the customer liable in this regard. The application of the said sanction is left with the

46 Italian Criminal Supreme Court no. 27303 of 09.05.2003; no. 3336 of 26.01.2000. 47 Italian Criminal Supreme Court no. 39863 of 02.10.2001; Tribunal San Remo of 04.10.2001. 48 Italian Criminal Supreme Court no. 29377 of 23.06.2006; no. 7046 of 21.02.2002; no. 13031 of 11.10.2000. 49 Italian Criminal Supreme Court no. 3169 of 15.12.2000; no. 968 of 11.10.2000. 50 In case of payment within 60 days there is an abatement to 1/3, i.e. € 3.333,33. 51 Law-Decree 14.03.2005 no. 35. In case of commercial acts, the fine is increased to € 20.000 - € 1.000.000. 12 communes, some of which have become rather active52. Most others reacted with more reticency, probably so as not to jeopardize tourism as important means of income53. What is of interest here is the ratio of the said law: should the customer bear the burden of such duty? Let’s draw our attention to similar situations. Who intentionally purchases illicit goods, is generally subject to penalties. This is true for firearms, drugs or the download of copyrighted contents from the internet. In Italy, the purchase of goods has been prohibited ever since, if the buyer had knowledge or suspicion that they stem from a crime, Art. 712 Criminal Code. Already some years ago, the Italian Supreme Court ruled that the intentional purchase of counterfeit goods may qualify as concealment of stolen goods54. It cannot be denied that objectively the buyer does abet the illegal activities of the forgers. On the other hand, one counter-argument is that intention can, in practice, be proven only with great difficulty; consequently, in most cases the law is not applicable55, or - even worse - is applied unwarrantedly. Empirical studies and consumer surveys show that the level of attention, when purchasing everyday goods, most often is appallingly low. The average consumer is normally not paying attention to whether or not purchasing a fake or an original, even if objectively the fake character is recognizable56. As a result, the practical value of the mentioned law is nil57. Purchasing single items is, moreover, of private concern and should not lead to the criminalisation of whole parts of the population, especially not among the younger generation. Instead, customers should learn - through education campaigns - by themselves that the purchase of low quality goods without any warranty is, in the long run, of no avail. Parallel to the repression by law, the multilingual initiative „Bad Bag“ has been called to life by several Italian communes, by way of which education of locals and tourists is used to achieve a voluntary boycott of purchasing fakes. Also internationally, the discussion about the pros and cons of criminal liability of customers has not ended yet. It remains to be seen whether or not the Italian way will be taken as an example58.

52 Florence, Rimini, Venice, Ventimiglia. 53 With a part of 7 % of the gross national product and more than 2.000.000 employees (Legambiente). 54 Italian Criminal Supreme Court no. 23427 of 09.05.2001 (Great Senate); no. 388 of 05.02.2001; no. 10874 of 27.07.1990. 55 About one dozen of cases have been known. Italian consumer protectors recommend to ask for a reduction of the amount by relying on the own unawareness of the counterfeit nature of the purchased good. 56 Prof. Cesare Galli on occasion of his speech at the SISPI conference in Milan on 16.09.2006; in this sense also Italian Civil Supreme Court no. 6150 of 1978 on the general unawareness of consumers of everyday goods. 57 Biagio Roberto Cimini, Presentazione della legislazione nazionale italiana in materia penale, 2006, www.giustizia.it. 58 The Criminal Directive renounces to co-involve consumers. Other internationally known cases primarily regard copyright violations (f.i. on-line file sharing). 13 7. Compendium and Perspectives

The author fosters the idea to align national criminal laws in the IP field. The harmonization of the internal market necessarily signifies equal opportunities, which must also refer to the protection available under criminal law. This would, moreover, impede forum shopping through use of extra-legal spheres (example: Luxembourg). Hence, first of all some member states have to improve their legal systems significantly (not at least because of Art. 61 TRIPS). But also those member states already disposing of sufficient legal remedies in their law books should ask themselves why, in practice, the foreseen sanctions are almost never applied. In this regard, at least in piracy and counterfeit cases on a professional level, the introduction of a minimum custodial sentence (f.i. 1 year) could cause a higher degree of deterrence and awareness not only for (potential) offenders, but also among the public. Intensifying collaboration on a European or even international level is another option to be adopted, as currently put into practice in an exemplary way by the Customs. Whereas it remains doubtful whether the criminal involvement of customers is a move into the right

14 direction59. One is reminded here of the parallel conducted critical discussion about the range of the Digital Rights Management60. Recent surveys in Germany (of January 2005 and February 2006) suggest that more than 80 % of the interviewed think of counterfeit goods simply as a fraud61. Though notwithstanding, wide parts of the European population do not believe that the purchase of fakes should be prosecuted62. Then there are cases where the customer is not aware to buy a fake, be it because he believes the good to be a second hand article, be it because he has no (conscious) idea what branded goods are63. As experience shows, prevention and repression as the classical scopes of criminal law alone are not sufficient to impede criminal activities at a 100 %. This is especially true for the lucrative organized crime in the IP field. Next to a tightening of the criminal sanctions, there is thus also need for a stricter political engagement directly in and with the countries hosting the forgers. Also there, the applicability of criminal sanctions should be intensified (example: China), and effective publicity be made, in particular against the exploitation of people working under poor or risky conditions. The same, also inside the European Union a well directed educational campaign is of the essence (example: initiative Bad Bag): first, to disburden trade mark counterfeiting from the shadowy existence as a mere peccadillo, second, to pillory it as serious threat for the economy and as job killer, third, to remind customers of the advantages of original goods in terms of quality, warranty and reputation. Also the increasing exploitation of children in the manufacture of fakes is securely totally unacceptable in Europe. Last but not least, also the long-ranging financial consequences of methodical fiscal evasion and unfair competition should be stressed more: the member states have to face a loss of tax income in the range of millions of euros, the sale of fakes as well as the subsequent money laundering is falsifying competition and penalising honest companies. Combating piracy is another high cost factor in their balance sheets. Increased taxes and prices will be the logical consequences. Thus, the roaring trade in fakes has a clear negative impact on the purchase power and employment chances of all customers - especially nowadays another important set of arguments. Concluding, the following six theses shall be presented with the purpose to promote the further discussion:

1. Counterfeiting is no peccadillo.

59 Against this f.i. Prof. Edda Müller, President Verbraucherzentrale Bundesverband e.V. (German Association for Consumer Protection), press release Markenverband of 26.04.2006, www.markenverband.de. 60 See f.i. the initiative against criminalisation of internet users (Verbraucherzentrale Bundesverband, Online- Netzwerk Campact, Kampagne fairsharing, Netzwerk freies Wissen), www.wir-haben-privat-kopiert.de. 61 Meinungsforschungsinstitut TNS Infratest of 08.09.2006. 62 Biagio Roberto Cimini, footnote 58. 63 Cesare Galli, Italian Civil Supreme Court, footnote 57. 15 2. Criminal laws should internationally be harmonized. 3. In case of counterfeiting, minimum custodial sentences should apply. 4. Criminal laws alone do not suffice. 5. A stronger sensitisation of customers is required. 6. A coordinated international collaboration of governments and associations is required.