Tuesday, 6 September 2011

European Commission publishes Memorandum of Understanding on the sale of counterfeit goods over the internet

Author: Leigh Smith (McDermott Will & Emery UK LLP)

Memorandum of Understanding on the sale of counterfeit goods over the internet, 4 May 2011

Journal of Intellectual Property Law & Practice (2011), doi: 10.1093/jiplp/jpr139, first published online: September 5, 2011

On 4 May 2011, participants in one of the European Commission's Stakeholder Dialogues signed a non-binding Memorandum of Understanding on the sale of counterfeit goods over the internet, aimed at collaboration between interested parties in the reduction of the sale of counterfeits via e-commerce platforms.


Legal context

Stakeholder Dialogues are used by the European Commission to bring together a representative group of participants in a particular field to discuss the common issues affecting that field. The desired outcome of a Stakeholder Dialogue is to find solutions based on voluntary cooperation within the pre-existing legal framework, thus avoiding the need for legislative reform. The current dialogue, which focuses on the problems of IP rights enforcement, forms part of the wider Digital Agenda for Europe, outlined by the Commission in May 2010.

Facts

The Stakeholder Dialogue comprised a number of meetings in 2009 and 2010, which resulted in the Memorandum of Understanding on the sale of counterfeit goods over the internet (the ‘MoU’). The MoU was signed on 4 May 2011 and was effective from 5 May 2011. The signatories to the MoU include anti-counterfeiting organizations, as well as leading rights holders and trade associations with a vested interest in the field. The majority of the MoU focuses on the relationship between two categories of signatories: ‘rights owners’ and ‘internet platforms’. The latter are defined in the MoU as providers of e-commerce trading services.

The MoU, which is stated to be non-binding, provides that the signatory companies will commit themselves to undertake certain measures to combat counterfeit sales and to collaborate in the fight against the sale of counterfeit goods over the internet, while the signatory trade associations will further promote the MoU among their members. Explicitly excluded from the ambit of the MoU are parallel imports, or so-called grey goods. The MoU includes a moratorium on litigation whereby the signatories state that they are willing to cooperate and assist each other to reduce internet counterfeit sales and agree not to initiate any new litigation against each other concerning matters covered by it.

With regard to mechanisms of enforcement other than litigation, the MoU notes the importance of notice and takedown procedures, describing them as ‘indispensable’ in the fight against the sale of counterfeit goods over the internet. It states that rights owners should have the ability to notify internet platforms of sellers engaged in such sales. Internet platforms agree to take such information into consideration as part of the preventive measures they are required to introduce under the MoU. Internet platforms agree to take appropriate, commercially reasonable, and technically feasible measures to identify and/or prevent the sale of counterfeit goods. However, the MoU is clear that the primary responsibility for enforcement remains with the rights owners. To this end, rights owners agree to take commercially reasonable and available steps to monitor sales on internet platform websites.

Internet platforms commit to adopt, publish, and enforce IPR policies, which should be clearly communicated and indicated on their websites and reflected in the contracts they conclude with their sellers. Further, they commit to disclose, upon request by rights owners, relevant information including the identity and contact details of alleged infringers and their user names insofar as permitted by applicable data protection laws (recognizing that in some Member States a court order may be required). Rights owners commit to making requests for disclosure in good faith and in compliance with data protection laws.

As for repeat infringers, internet platforms commit themselves to implement and enforce deterrent repeat infringer policies, which will include the suspension or restriction of accounts or sellers. Rights owners are to provide information to internet platforms concerning repeat infringers. In return, internet platforms will use their best efforts to prevent re-registration of permanently suspended sellers. All signatories commit to cooperating and assisting law enforcement authorities such as customs and border authorities, where appropriate.

There will be an assessment period of 1 year to review and measure progress. After the assessment period, signatories may extend the MoU indefinitely. The signatories will meet biannually to review the MoU and take further steps if necessary.

Analysis

The European Commission's response to the MoU has been positive, describing the MoU as striking ‘a fair balance between the interests of the parties concerned’ and ‘a good first pragmatic step to strengthen the fight against counterfeiting and piracy on the internet’. Further, ‘The agreement on the MoU demonstrates that voluntary arrangements can, in certain circumstances, provide flexibility to adapt quickly to technological developments and deliver efficient solutions.’

Whether ‘efficient solutions’ are actually delivered will no doubt form the subject of the reviews envisaged by the MoU. Arguably, much of its content reflects the present relationship between rights owners and the internet platforms, especially with regard to notice and takedown procedures. There is already a broad consensus on the importance of notice and takedown procedures. Where disagreement lies, however, and what the MoU carefully avoids, is the more controversial minutiae of these procedures, such as the evidential threshold an internet platform will apply before removing listings or releasing the details of sellers of alleged counterfeit goods. The explicit exclusion of grey goods also avoids a complex area which would have benefited from clarification.

While the European Commission encourages these voluntary arrangements, arguably the better solution in the long term is appropriate legislation to deal with counterfeiting and piracy in the digital age. This could perhaps at least be addressed as part of the review of the Community trade mark regime, when this review is formally set in motion, or the planned review of the IP Enforcement Regulations, scheduled for 2012.

Practical significance

As the MoU is non-binding and signed by only a small portion of the participants in the market, the practical significance of the MoU is likely to be limited. It is more of a symbolic gesture, which through its reviews may lead to something more concrete, whether a binding agreement or by influencing the European Commission's legislative policy.

In the meantime, signatories should ensure that their actions are aligned with the wording and spirit of the MoU. Although it explicitly states that it does not create any binding obligations on the signatories, a signatory can request that the European Commission call a plenary meeting of the signatories if it believes that another signatory is ‘not respecting the principles’ established by the MoU. The European Commission can then request that the signatory withdraws from the MoU, although it does not appear that the signatory would in fact have any obligation to do so.

Non-signatories affected by the contents of the MoU should consider whether, as a first step, they are willing to adopt the contents of the MoU as best practice in their enforcement activities. As the MoU is open to additional signatories, non-signatories may wish to consider signing both to be seen to be aiming for the higher standards envisaged by the MoU and to have the opportunity to shape the approach to IP enforcement online in the future.

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