Amend ACTA: Scope of Agreement and Border Provisions

Peter Maybarduk
September 14, 2010

Amendment

In Chapter 2, Section 2, Border Measures,

DELETE

[EU/CH]: For the purposes of this section, "goods infringing an intellectual property right" means goods infringing any of the intellectual property rights covered by TRIPS.2 However, Parties may decide to exclude from the scope of this section, certain rights other than trademarks, copyrights and GIs.

ACCEPT modified US/Sing/Aus/NZ/J/Can provision:

Parties shall provide for the provisions related to border measures to be applied in cases of [willful] trade mark counterfeiting and copyright piracy [on a commercial scale].

In Chapter 1, ADD

The scope of this agreement shall be limited to enforcement measures in cases of willful trademark counterfeiting and copyright piracy on a commercial scale.

Justification

First, the EU/Switzerland proposal still assumes a default position that ACTA's border measures will apply to all classes of intellectual property, including patents. Countries may exclude patents if they choose. A default rule such as this, even if not a requirement, still establishes a norm. If the parties adopt the EU/CH proposal, then ACTA would promote a presumption in favor of applying special border measures to patents, wherever the agreement's considerable influence may extend.

Emerging global IP enforcement trends make this concern all the more salient. EC Council Regulation 1383/2003, controversial for its role in recent detentions or seizures of generic medicines, still applies to patents (although it is under review). The EU is exporting similar standards through its economic partnership agreements. East African nations are debating new laws, regulations and proposed laws that impose much broader and harsher boarder measures. An ACTA assumption that preemptive border measures -- ex ante, ex parte, ex officio - should commonly apply to patents, even with safeguards in place, still lends legitimacy and momentum to a flawed idea. Adopting the recommended modified US/Sing/Aus/NZ/J/Can provision, above, would correct this particular problem.

Second, and also under the EU/Switzerland proposal, ACTA would still require countries to apply extraordinary border measures to geographic indicators and to all classes of trademark and copyright infringement -- not only willful counterfeiting and piracy. The inclusion of civil trademark claims in ACTA's border measures creates risks for access to medicines similar to those raised by patents.

In intellectual property usage, the term "counterfeit" applies correctly to a subset of trademark infringement. Under the TRIPS Agreement, "counterfeit trademark goods shall mean any goods, including packaging, bearing without authorization a trademark which is identical to the trademark validly registered in respect of such goods, or which cannot be distinguished in its essential aspects from such a trademark[.]" This definition is incorporated into the latest ACTA text under General Definitions (previously at footnote 23).

A trademark counterfeit is distinct from a case in which the commercial design or packaging of one firm's registered medicine is alleged to create a "likelihood of confusion" with another firm's established trademark. For example, pharmaceutical firms sometimes give their products commercial names derived in part from an active ingredient's international nonproprietary name (INN).5 Products based on the same active ingredient may therefore bear similar names. Generic medicines also sometimes feature packaging or pill design with similar qualities to established marks, specifically because the products are bioequivalent, and designed for consumers' interchangeable use. Many pharmacies place generics on their shelves next to brand-name products, often featuring somewhat similar coloring or designs.6 Similar packaging is used to communicate a similar (bioequivalent) product. Policy goals favoring generic substitution support this general practice.

Similar marketing names or similar packaging for drugs sometimes do form the basis of civil trademark infringement claims. Trademark owners have a legitimate commercial interest in defending their marks. Judicial recourse is, and should be, available in such circumstances. But in neither case has the generics manufacturer fraudulently misrepresented the source of its product. And neither would be properly termed "counterfeiting."

ACTA should reflect this distinction. Civil trademark claims typically require a weighing of many factors. Assessing infringement requires legal process and analysis outside the competence of customs authorities. Notably, many courts have tended to grant narrower trademark and trade dress protection to pharmaceuticals than to other classes of products. This is due to the functionality of pill design, as well as the consumer interests served by communicating bioequivalence. The risk is high that customs agents, encouraged to stop as much infringing activity as possible, would sometimes apply trademark infringement standards too zealously. At least one recent EU customs detention of generic medicines in transit cited - wrongly, it turned out -- trademark infringement grounds. And the potential for spurious claims and rights holder abuse applies to civil trademark infringement much as it does to patents. A better standard would target willful counterfeits specifically and exclusively.

limited and discretionary provisions providing for payment of a security,11 while important, may prove inadequate if, as seems likely, many allegations of infringement are never fully resolved. Moreover, customs agents operating under directives and incentives to stop as much infringing activity as possible will be likely to err on the side of over enforcement. This will come with costs to legitimate companies including unwanted legal expenses and uncertainty. This includes intellectual property owners, which, in the course of doing business, find themselves on both sides of infringement disputes.

Customs and law enforcement should be considered competent to act on their own authority against criminal, willful commercial scale trademark counterfeiting and willful commercial scale copyright piracy. And of course, judicial orders or equivalent legal process can properly empower customs and law enforcement to take action against a particular civil infringement. But customs and law enforcement are not competent to arbitrate civil intellectual property infringements on their own authority (ex officio), or upon the mere application of a rights holder (ex parte).

Distinguishing competition and criminality

ACTA's draft text applies extraordinary rules and ex officio law enforcement measures appropriate to criminal activity to the context of market competition and civil infringement.

Law enforcement can appropriately target willful trademark counterfeiting, by spotting fakes and following leads to track criminal operations. But other intellectual property infringements - civil infringements, including among others patent and "similar," non-counterfeit trademark infringement - are not criminal acts, and do not generally represent a fraud on the public. Civil infringements are generally commercial disputes between legitimate entities, for which traditional legal remedies are and should be available. The parties are generally known, and can be served with legal process. Because civil infringements are not fakes, and the parties generally do not operate in a cloak of secrecy in the manner of criminal organizations, they do not require preemptive law enforcement interdiction (be it ex officio or on a rights holder application) wherever they appear in the channels of commerce.

The inclusion of civil infringements in ACTA's draft border measures section places customs authorities in the role of arbiters in commercial disputes. Rights holders could use this customs authority to launch harassing actions against legitimate competitors. Customs authorities are less prepared than courts to separate well founded from spurious rights holder claims. ACTA's

Willfulness

There may be reason to distinguish between cases of willful trademark counterfeiting and cases of arguable counterfeiting where no intent to fraudulently misrepresent source is evident. Note the TRIPS definition of counterfeiting does not require a showing of intent. The "substantially indistinguishable mark" counterfeiting standard could also be different in some limited cases than a standard of fraudulent misrepresentation of source. Perhaps one firm could use a packaging design nearly identical to an established design, but employ a different name. This could amount to "substantially indistinguishable" use of a mark or trade dress classifying the product, in some analysis, as counterfeit, but it might still represent more an effort to indicate similarity (or bioequivalence) to the first product than an effort to claim the product is actually produced by the other company.

Notably, TRIPS creates an enforcement distinction between counterfeiting in general and cases of "willful trademark counterfeiting on a commercial scale," the latter being subject to criminal penalties (Article 61). This is the appropriate standard for special border measures intended to target activity that cannot be adequately addressed by civil judicial process. While the intent of the alleged infringer may not always be evident, this is initially true of many law enforcement targets. It remains important to apply the legal standard most rationally related to the policy goal of stopping criminal counterfeiting, and to maintain a clear and consistent distinction between alleged civil infringement and criminal activity in enforcement procedures.

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