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Modernising IP enforcement: EU Commission report envisages “stronger involvement” of intermediaries

Posted by Sam Frances on Tuesday, June 14th, 2016 at 16:09

In late May, the EU Commission published an inception impact assessment on its initiative to modernise the enforcement of intellectual property rights, giving an important insight into their attitude towards the evolution of Europe’s framework for IP enforcement in the future, and in particular the role of intermediaries.

The report focusses on perceived shortcomings in the existing Intellectual Property Rights Enforcement Directive (IPRED), and lays out five main objectives in order to “ensure the enforcement of intellectual property rights are fit for purpose”:

  • “Clarifying the application of the right of information” under Article 8 of IPRED. Justified requests under Article 8 are said to be either “systematically denied” or “granted without proper assessment of the validity of the request”.
  • Clarifying the rules on cross-border injunctions
  • “Clarifying the rules for the calculation and allocation of damages and legal costs”
  • “Promoting the setting up of specialised national courts in matters of infringement and validity of IPR.”
  • “Strengthening the involvement of intermediary service providers in the prevention of IPR infringements”

Strengthening the involvement of intermediaries

Of most interest to network operators will be the call for greater involvement of intermediaries in enforcing intellectual property rights. The report complains that the IPRED “does not establish an explicit liability of intermediaries for IPR infringements, in cases of failure to act”.

Yet, given that intermediaries unwittingly provide the essential infrastructure for IP infringements on a commercial scale, they can play a key role in the enforcement of IPR.

Of course, it does not follow from the fact that intermediary services can be used for infringing purposes that there is any further action that intermediaries should or can usefully take to thwart infringement. Indeed, one of the central underpinnings of the European information economy is the recognition, embodied in the E-commerce Directive, that intermediaries should not be asked to monitor or police the actions of their users. Nevertheless, this statement provides a clear indication of the direction in which the Commission is moving.

Elsewhere the Commission employs the euphemistic phraseology of cost-benefit analysis is employed to gloss over the co-option of intermediaries to protect the revenues of another industry at their own expense.

A legislative amendment … could result in direct economic costs for affected stakeholders, positive for some (e.g. for rightholders having access to more efficient enforcement tools and as a result of fairer and more appropriate calculation and allocation of damages and legal costs), negative for others (e.g. for intermediaries in case of stronger involvement in IPR enforcement). Due account should be taken of the indirect benefits occurring to all economic stakeholders that result from operating in a secure business environment that stimulates investment.

Cross-border injunctions

The report argues that “while infringements typically take place in various jurisdictions, the enforcement landscape is still fragmented”.

Rightholders find it very difficult to execute injunctions in other Member States, in a cross-border context. Reasons given are costs and length of proceedings, strict requirements for injunctions against certain intermediaries (e.g. internet service providers) and the absence of a harmonised system of substantive law.

The stage is set for greater harmonisation and a lowering of the bar for cross-border injunctions against intermediaries, as well as other unintended consequences, such as encouraging jurisdiction shopping.

Damages and legal costs

The level of damages awarded to rightholders “in many cases does not even cover the litigation costs and thus does not appropriately compensate for the actual prejudice suffered”, argues the Commission.

The implication would appear to be that trivial losses from infringement, which are dwarfed by the costs of litigation, should give rise to disproportionate awards in order to cover rightsholders’ legal costs.

This complaint is all the more confusing when considered alongside another "issue" identified by the Commission: that reimbursement of legal costs to the successful party in IP enforcement cases “often only cover[s] a fraction of the total costs incurred”. It would seem that solving this issue would also resolve the complaint that damages do not cover litigation costs.

While not directly impacting on network operators, the argument that rightsholders are not receiving sufficient compensation for infringement can be seen as playing justificatory role in the narrative of the report. Without the assertion that rightsholders are not able to gain sufficient compensation from the courts, it would be harder to justify calling for greater involvement from intermediaries.

A legislative amendment to IPRED?

Although the Commission does not explicitly state their preferred policy option for “modernising IP enforcement”, only the option of a legislative amendment to IPRED escapes substantial criticism.

The option of leaving things as they are is clearly disfavoured.

Without an EU policy change, the measures, procedures and remedies provided for in the current legal framework and aimed at ensuring the enforcement of intellectual property rights covered by that framework risk to become inapplicable in a fast moving knowledge and internet based economy. Without clarification of the EU legislative framework diverging interpretations at national level will persist, to the detriment of a common high level of protection. Without effective means of enforcing intellectual property right, innovation and creativity will be discouraged and investment diminished.

The option of improved enforcement and implementation of existing legislation is also given short shrift, since “such an option would only improve the efficiency of IPR enforcement and address the problems related to possible misapplication of the current legal framework at national level”.

Similarly, improved guidance “in the form of an Interpretive Communication or similar instruments” will be sufficient “only if … the problem is limited to the fragmented application or misinterpretation of the existing rules”.

Self-regulatory solutions are praised as providing “an efficient alternative to civil proceedings”, but the Commission also raises doubts about the effectiveness of such initiatives.

It remains to be assessed … if purely voluntary initiatives, in particular in view of the coexistence of rights, such as the protection of personal data, and regulatory challenges, such as competition rules, can be sufficient to improve the level of enforcement.

Next steps

In parallel with the inception impact assessment on Modernising the enforcement of intellectual property rights, the Commission published an evaluation framework setting out how it plans to assess the effectiveness of IPRED. The planned completion date for this evaluation is the third quarter of 2016.

For more information, see:

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