Status of the Work of the Legal Sub-Group of the European Observatory on Counterfeiting and Piracy


The findings of the Legal Sub-Group of the EU Observatory on Counterfeiting & Piracy regarding the evaluation of the implementation of Directive 2004/48/EC (“the Enforcement Directive”) in the Member States (Damages and Corrective Measures) have been released on the Observatory’s website.

In the context of the European Observatory on Counterfeiting and Piracy, the private sector members called for the establishment of a professional and technical group of legal practitioners, to horizontally assess intellectual property rights legal framework.

The Observatory’s “Legal Sub-Group” is composed of officials from the EU’s DG MARKT and other relevant DGs, plus 11 IPR law practitioners engaged in national and international advocacy, IPR enforcement, litigation, research and education, under the leadership of the Enforcement Unit of DG MARKT (European Commission). The Sub-Group is chaired by Benoît Lory, assisted by Zuzana Heckova. The Commission provides the secretariat and does the “leg work”.

The Legal Sub-Group has met 8 times since its inception last autumn. The Sub-Group has created several questionnaires on diverse topics of interest with respect to IPR enforcement, which have been sent to national experts in the 27 EU Member States. The questionnaires focused on the practical aspects of IPR enforcement, and asked the experts to summarise the relevant case law in this area and to point to the strengths and weaknesses of their own national systems. The answers of the national experts were subsequently compiled by the Sub-Group’s members, who analysed them, drafted comparison tables, formulated summaries and ultimately highlighted discrepancies, shortcomings and best practices and then drafted recommendations to the Commission. The Sub-Group’s activities aim to be transparent.

So far, the work of the Legal Sub-Group has focused on the comprehensive review and evaluation of the implementation of Directive 2004/48/EC (“the Enforcement Directive”) in the Member States. This study is almost complete. In addition, the Sub-Group also filed a response to DG TAXUD’s consultation on Regulation 1383/2003 (“the Border Measures Regulation”). The Sub-Group also shared its views with DG JLS regarding the Criminal Sanctions proposal.

The Sub-Group is conducting an in-depth analysis of the main provisions of the Enforcement Directive regarding the issues of Damages, Corrective Measures, Evidence/Right of Information and Injunctions.

Here are the findings of the Sub-Group regarding Damages and Corrective Measures. The conclusions of the Sub-Group regarding the issues of Evidence/Right of Information and Injunctions will be released in the next few weeks.

In a nutshell:


Damages are a primary remedy for IPR infringements, as they assume a double role, i.e. compensation and deterrence. The Enforcement Directive requires the Member States to provide compensation for “all appropriate aspects” which the rights holder has suffered, unfair profits made by the infringer, compensation for non-economic harm and reasonable costs.

However, the Sub-Group’s findings on the implementation of the provisions of the Enforcement Directive relating to Damages are that the national regimes often fail to compensate rights holders for all of their losses. Even where the rights holder prevails against the infringer, this is an economic incentive to infringe.

Best practices that have been identified by the Sub-Group in the Member States include measures:
aimed at ensuring that rights holders are able to recover all the losses sustained as a result of an infringement;
that enable rights holders to recover the actual amounts spent on investigating, taking legal action against, and rectifying an IPR infringement;
designed to ensure that infringers do not retain any economic benefits from their infringing activities.

The Sub-Group derived several recommendations from the national surveys. In its opinion, the Member States should:
ensure that all the economic consequences suffered by the rights holder are compensated, regardless of whether or not the infringement was on a commercial scale;

provide lump-sum damages as an alternative to lost profits;
provide a “predetermined” calculation method for determining lump-sum damages – at least in copyright and trade mark cases;
provide that all costs reasonably incurred by the rights holder should be compensated;
implement rules for awarding damages and costs in IPR cases that ensure that no economic benefit of an infringement remains with the infringer;
provide that the defendant’s mere objection to the rights holder’s evidence of damage should not be sufficient, without substantiation by evidence, to defeat the rights holder’s prima facie case for damages. Indeed, damages shown by the rights owner in prima facie evidence should be presumed to be correct unless the defendant can establish that the damages claimed exceed the harm suffered.

Corrective Measures

The Enforcement Directive also aims to establish measures to correct, prevent and deter further infringements (recall, definitive removal and/or destruction of infringing goods).

The Sub-Group has established that almost all Member States provide these remedies. However, there is very little jurisprudence or experience on recall/removal. In many Member States, the distinction between recall and definitive removal seems to be rather unclear.

It is also unclear under the Directive (and the national implementing legislation) who should bear the costs of destruction. Moreover, the proportionality requirement laid down in Article 10(3) of the Directive (and in the national implementing legislation) is unclear. Finally, discrepancies have been noted regarding the possibility for the courts or law enforcement authorities to allow secondary use of infringing goods.

Best practices that have been identified in the Member States concern:
the possibility for rights holders to seek the recall of infringing goods as a preliminary measure;
the possibility for the courts to order the infringer to pay for the destruction costs;
national leglslation ensuring that the goods remain in a bailiff’s custody until destruction, and are destroyed by, or under the supervision of, a bailiff.

The recommendations of the Sub-Group regarding corrective measures are as follows:

Destruction (including at an early stage) of infringing goods should be a general principle, to which there should only be a few exceptions;
The proportionality requirement, as well as the notions of “removal” and “market recall” should be more precisely defined;
Definitive removal/market recall of the goods should in all cases be obligatory – exceptions and secondary use should be permitted only in special cases;
Costs for storage and destruction should be borne by the infringer, who ought in most cases to be compelled to post a financial guarantee pending the proceedings;
Good faith should not be normally considered a valid defence for the infringer for not paying the costs of destruction;

Costs of destruction should be ordered against all the parties implicated in the infringing activity, including intermediaries, who are better placed than anyone else to identify the infringer and recover these costs from the latter.

Evidence and right of information

The conclusions of the Sub-Group regarding the national implementation of the provisions of the Enforcement Directive regarding evidence and the right of the information are not yet complete. The preliminary findings of the Sub-Group can, however, be summarised as follows:

All Member States appear to allow for the disclosure of evidence (banking, financial or commercial documents) in IPR infringement cases. However, a number of them limit disclosure to commercial-scale infringements.

Most Member States have also specified measures for preserving evidence such as search orders, temporary injunctions and seizure orders. In some countries, however, search orders are more difficult to obtain than seizure orders. Finally, the search or seizure of computers is subject to limitations in some Member States.

Hearsay evidence is not admissible in the large majority of Member States.

The IP rights holder’s “right of information” exists in all Member States. However, there are some discrepancies in its application. In particular, the criterion of “commercial scale” (Article 8(1) of the Directive) is applied and interpreted in different ways, not always in conformity with the Directive. In most Member States, ISPs are considered as intermediaries who may be ordered by the courts to co-operate in the disclosure of evidence process. However, many problems have been reported concerning the application of the provision, due to conflicts with data protection and retention rules.

The preliminary recommendations of the Sub-Group on this topic include:

The need to provide for a right to disclosure of evidence beyond commercial-scale infringements;
The need to harmonise conditions for obtaining seizure and search orders and to update provisions relating to the search and seizure of computers;
The need to clarify the relationship between the right of information and data protection and retention rules.

Future Work

In the coming months, the Sub-Group’s work will concentrate on:
the completion of the Enforcement Directive review,
the Criminal Sanctions proposal and, more generally, criminal IPR enforcement,
the issue of trans-shipment, transit and other suspensive procedures,
the interface between IPR enforcement and Data Protection,
cross-border injunctions,

cross-border recognition of judgements,
cross-border gathering of evidence, and
the interface between IPR enforcement and good-faith intermediaries.

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