By Antonis Broumas
An unexpected implication in the legislating procedure of the proposed EU Directive on criminal measures aimed at ensuring the enforcement of intellectual property rights (IPRED2) puts legitimate businesses under clear threat of criminal sanctions. A “mistake” that quietly emerged during the drafting of the consolidated text of the proposed Directive threatens to outlaw parallel imports in the EU, when they lack IP right-holders’ permission.
Purchase of goods from a country, in order to export and sell them in another country, is the basis of cross-country trade. However, such business practice may invoke sanctions under civil law in the EU, if it is exercised without clearance of IP rights. This case is usually referred to as “parallel imports”, in the sense that it takes place in parallel with imports of goods with the permission of right-holders. Such illegitimacy follows the uncleared goods, no matter how many times they are re-sold in the EU-wide market. Due to the fact that they usually happen in business practice, often unintentionally, and that they refer to original, not pirated or counterfeited, goods, parallel imports are clearly excluded from the scope of criminal law in most, if not all, EU member states.
Wisely thinking, at its first reading of the IPRED2 the European Parliament voted clearly twice against the criminalization of parallel imports. But, during the supposedly routine consolidation process of the voted amendments with the text of the Directive this has been overturned. In specific, amendments 11 and 15 of the Directive, which contain a clear exclusion of parallel imports from its scope, have both been replaced in the consolidated text by amendment 38, which may be interpreted to have exactly the opposite result. Thus the wording of the former amendments (11 & 15) that excluded “parallel importation of original goods which have been marketed with the agreement of the right-holder in a third country” from the scope of IPRED2 has been transformed into “parallel importation of original goods from a third country which have been allowed by the rightholder”, which is the wording of amendment 38. Taking into account the fact that all three amendments amend different articles and have different legal meanings and functions, their merging constitutes a violation of the European Parliament Rules of Procedure and a flaw in democratic legislating process of the EU.
But possible consequences are even worse. According to professor Annette Kur, Research Fellow at the Max Planck Institute for Intellectual Property, Competition and Tax Law “this is a change of considerable weight”. Whilst, in the first case, consent of the right-holder refers to the mere act of marketing goods in a country outside the EU, after the flawed consolidation of the Parliament’s reading of the Directive such consent allegedly refers to the act of importing the goods inside the EU, thus putting parallel imports in the scope of the IPRED2 and making them a crime with severe penalties .
Extending the clench of criminal law in the EU to possibly unaware or unscrupulous but otherwise legitimate businessmen, instead of large-scale for-profit pirates and counterfeiters, is now a threat more than ever. Civil sanctions are the best and ought to remain the only treatment of parallel imports under EC law. If Brussels, in one of its first, and largely ambiguous, attempts to pass community-wide criminal law, insists in such “mistakes”, “to import or not to import”, this will be the question for people aiming to do business in the EU.
Links :
European Parliament amendments on IPRED2
The much debated consolidated text of the proposed Directive