TT Talk - Tackling counterfeiting in international trade

Last December the European Commission (EC) reviewed Directive 2004/48/EC on the Enforcement of Intellectual Property Rights (IPR). The Directive aimed to provide tools and a framework of cooperation and intelligence. The review noted appreciable success but accepted that the Directive had not completely succeeded in meeting the challenge of the rise of the internet, and highlighted a need for measures - in particular, injunctions - to protect IPR holders and preserve evidence.

Among other things, the Directive targeted 'intermediaries'. For these purposes an intermediary does not need to have a contractual relationship with an IPR infringer, or with any other party. It is sufficient that your services are used by a third party to infringe an IPR. The definition is aimed principally at internet service providers (ISPs), but without over-stretching its language it can be, and has been, extended to include freight forwarders, carriers, and shipping agents.

The EC is convinced that, for the system to work properly, injunctions and other precautionary action must not be dependent on the liability of the intermediary at whom they are directed

In October 2007, after the Directive had been running three years, the EU started negotiations with ten other countries (Australia, Canada, Japan, Mexico, Morocco, New Zealand, Singapore, South Korea, Switzerland, and USA) on the Anti-Counterfeiting Trade Agreement (ACTA).

The development of ACTA has been remarkable in a couple of ways.

Firstly, it was negotiated by a select group of industrialised countries, outside the more traditional multinational structures, such as the United Nations and the World Trade Organisation. Developing countries were not included, although there is a declared ultimate aim to embrace states where 'IPR enforcement could be improved', in particular: China, Russia and Brazil.

Secondly, it was negotiated in secret, at least until much of it leaked into Wikileaks and elsewhere.

The EC has justified the slightly unusual gestation of ACTA on grounds of 'flexibility'.

In October last year, after eleven rounds, a final 'deliberative' draft of ACTA was published. The stated aim is not to change national law, or create new IPRs, but to enhance international cooperation and address enforcement. The approach was similar to that of Directive 2004/48/EC but concentrated more sharply on ISPs ('on line service providers'), for example by imposing a requirement to disclose information to IPR holders in certain circumstances.

Although the final draft makes no specific mention of carriers, forwarders or other agents, it does deal quite extensively with border procedures. There is a fear that forwarders and others will incur costs and penalties similar to ISPs, in circumstances where they have no liability and handle physical cargoes that can be disguised, misdescribed and concealed in a way that digital information handled by ISPs cannot. Certainly, there is provision for damages and costs, in addition to criminal sanctions, that could impact the transport industry.

FIATA, while supporting the general thrust of ACTA, strongly resists any move in this direction, and in September 2010 issued a position paper. They fear above all that authorities will look to forwarders or carriers as an easy target for costs of storage or destruction of goods found to be in breach of IPR at the border. FIATA correctly insist that these costs must be for the account of the IPR holder, for at least the following four reasons:

  • IPR is not the responsibility of the forwarder under the contract of carriage;

  • Customs rules, generally, do not allow the forwarder (or carrier) to examine the goods so as to detect IPR breaches;

  • In passing information to the authorities, the forwarder must rely on what it has been told by the consignee, consignor and other third parties; and

  • IPR verification is a business requirement of the IPR holder, not of the forwarder.

There remains considerable controversy over ACTA, which has yet to be finalised and opened for signature. As such, the potential exposure for the transport industry may seem remote. Nevertheless, amongst other reports, the World Economic Forum Global Risk Report 2011 ( states that 'illicit trade is now thought to represent between 7 and 10% of the global economy', of which counterfeiting of drugs and electronics alone account for about a third of the cost. The driver for change is clear; the issue is how to make enforcement effective.

Staff Author

TT Club