Developing countries face EU funding ban if they break intellectual property rules

Trade Commissioner Karel de Gucht is willing to get tough with developing countires over IP enforcement. [Atlantic Council/ Flickr]

The European Commission will ban developing countries from EU programmes, or cut their funding, if they persistently break intellectual property rights rules, according to a trade strategy published yesterday (1 July).

The executive yesterday adopted two initiatives to fight IPR infringement – one for breaches in the EU and the other internationally. Such breaches hit economic growth and employment, it said. Both plans will be put into practice this year and next.

While both communications are non-binding, the Commission has not ruled out hard rules to enforce IPR breaches in the future.   

The international strategy sets out how trade policy tools can be used to protect IPR and block trade in goods breaching them. As well as cash cuts or bans, these tools include trade agreements, legislative action and dispute settlement.

The plan to fight IPR breaches within the EU focuses on commercial scale infringements. These can include counterfeit car parts or fake medicines, often produced by criminal gangs.

IPR protects inventions, literary and artistic work and the logos, names and images used by business. Intellectual property is divided into industrial property, such as patents, and copyright for art, films and music.

Developing countries

The Commission said, “Some countries persistently break international commitments on IP rules in ways that have a major impact on the EU. Sometimes their authorities are unwilling to cooperate or cooperation shows limited results.

“In such cases, restricting their participation or funding in specific EU-funded programmes may be considered. This would be in serious and clearly targeted cases.”

Programmes financed by the European Development Fund or the Development Cooperation Instrument would not be used to enforce compliance. 

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) requires that developed countries offer their companies incentives to transfer technology to least-developed countries (LDCs), and help LDCs to be able to use that technology. That would continue to be honoured, the Commission said.

The Commission said its Development Agenda was “mainstreamed” into its strategy. In trade agreements with developing countries, existing EU rules are taken as a starting point and tailored to the country’s stage of development.

Trade Commissioner Karel de Gucht said, “Our businesses, creators and inventors should be duly rewarded for their creative and innovating efforts. For that, and to maintain the incentives that drive innovation and creativity, we must keep working on improving standards with our international partners.

“We will remain open to adapting our approach according to their levels of development, but underline the positive impacts that intellectual property can have on growth, jobs and consumers.”

The Commission carries out a survey every two years to find out how IPR is being enforced outside the EU.  It uses this report to identify which countries are the worst offenders and are “particularly detrimental to EU interests.”

In 2012, EU border control agencies registered 90,000 cases of goods suspected of infringing intellectual property rights (compared to fewer than 27,000 in 2005). The OECD estimates that the annual loss from IPR infringements to the world economy is around €200 billion.

The strategy said the EU would provide training and technical assistance to developing countries to improve their IP enforcement. 

Follow the money

The plan to strengthen IPR in the EU sets out ten non-binding initiatives to improve respect of IPR and targets those breaking IPR on a business-scale. The drive is separate to the executive’s ongoing analysis of existing legislation for digital copyright, which is not covered by either plan.

Internal Market Commissioner Michel Barnier said, “The adoption of this Action Plan shows how we want to re-orientate our policy towards better compliance with intellectual property rights by the private sector.

“Rather than penalising the individual for infringing intellectual property rights, often unknowingly, the actions set out here pave the way towards a ‘follow the money’ approach, with the aim of depriving commercial-scale infringers of their revenue flows.”

The action points are to;

  • raise awareness of the risks of IPR infringement, the benefits of IP respecting products and promote the efforts of the EU funded European Observatory on infringements in IPR in Alicante.
  • launch a series of consultations on applying due diligence through supply chains to prevent commercial scale infringements.
  • develop voluntary agreements to reduce online profits of IP-breaching products
  • analyse  and report on existing national initiative to improve IP enforcement for SMEs
  • issue two Green Papers on the need for future EU action based on national schemes and on other schemes tackling commercial scale infringements
  • establish a member state expert group on IP enforcement.
  • set up training programmes for member state authorities with the Observatory
  • publish and promote a guide on best practice for public authorities to avoid purchasing counterfeit products.
  • publish a report on the economic impact of the EU’s IP policy every two years.

The Commission said it could not delegate monitoring and evaluation of its policies to an external agency, in this case the Observatory, necessitating the need for extra resources for the report.

Intellectual property rights defend inventions, literary and artistic work and the logos, names and images used by business.

Counterfeiters and pirates in the EU and abroad cost the economy and hit legitimate businesses by breaching them.

  • 2014-2015: Implementation of action points in the two plans

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