2019 EU COMMISSION REPORT ON IPR PROTECTION FRAMEWORK IN THIRD COUNTRIES SUMMARY

During the past weeks, the European Commission has released its biannual report on the state of IPR protection in third countries. The scope of this document is to provide European businesses and stakeholders with a general view of the legal and administrative IP framework in countries outside of the Union, to strengthen the co-operation with said countries and to promote innovation in IP protection and enforcement systems.

Today, it has been fully acknowledged the key role of IPRs in economic growth and, conversely, the severely negative effects of weak IP protection and enforcement measures. According to a 2019 joint study between the EUIPO and EPO, it has been confirmed that IPR-intensive industries generated, between 2014 and 2016, 38.9% of all European jobs and contributed to 45% of the EU GDP.

IP infringement and sale of counterfeit goods are still critical issues: it has been estimated that, between 2013 and 2016, the share of counterfeit and pirated goods in world trade increased by up to 10.4% and in the EU market by up to 42.3%. Moreover, the plague of counterfeit goods does not just affect business revenues but the job market as well: it is estimated that, between 2012 and 2016, IPR infringement was the direct cause of loss of 335.053 jobs within the clothing industry. In addition, the Commission has confirmed the rise of the “small consignments” trend: in addition to complex trading routes and the exploitation of several, strategic transit points, infringers increasingly avoid detection and minimise potential sanctions/fines by shipping massive quantities of small parcels.

The European report currently presented has been drafted based on the public consultation of many different entities, including right-holders, consumer groups, universities, EU Delegations and EU Member States. In addition, the Commission has collected data from available reports provided by governmental bodies, relevant IPR agencies and organizations (i.e. OECD) and many other sources.

Furthermore, in accordance with the structure established during the past years, the report gathers specific countries under three “priority groups”, based on their influence within the global market and the severe level of inadequacy of their IPR protection and enforcement framework.

The Commission has highlighted that most of the countries from the three priority groups share the following issues:

• Forced technology transfer practices and vague/arbitrary criteria for the concession of compulsory licensees;
• Lack of authority of the Customs agencies to initiate ex officio actions;
• Counterfeit goods are not destroyed and/or the procedure is too long/expensive;
• Considerable backlog of the IP Offices in patents, trademarks, etc. registrations and related procedures;

Despite its consistent efforts to reform its IPR administrative bodies, to update its IP legislation and even the creation of specialized IP Courts in Beijing, Shanghai and Guangzhou, Priority 1 continues to feature only China, in consideration of its worldwide role as the main source of counterfeit/pirated goods: according to a 2018 European Commission’s report and a 2019 EUIPO-OECD report, China and Hong Kong have been identified as the source of counterfeit goods in 80% of the EU customs seizures. Chinese patent applications keep being prioritized and granted, at the expense of foreign/European companies seeking protection, and Chinese companies persevere in using patented foreign technologies, without paying adequate royalties or facing effective sanctions. Furthermore, stakeholders frequently complain about being systematically required to disclose trade secrets/proprietary technologies, in order to get access to the Chinese market, with little and/or un-effective IP administrative protection.

The Commission has reported that the most common issues among the countries from Priority 2 and 3 are the following:

• Restrictive or vague patentability criteria and enforcement difficulties;
• Vague/broad criteria for compulsory licence concession;
• Lack of efficient practices, dedicate training, resources and dissuasive sanction in IPR enforcement;
• Lack of an effective protection system for undisclosed test and other data, generated to obtain marketing approval for pharmaceutical products;

Priority 2 includes India, Indonesia, Russia, Turkey and Ukraine. In the past two years, India turned out to be the country to improve the most from this group: in 2018 and 2019, it acceded to the WIPO Copyright Treaty, the WIPO Performances/Phonograms Treaty, the Nice Agreement on TM International Classification of Goods and Services and introduced beneficial changes for patent protection.

On a different note, the report highlights some concerning developments in Russia and Turkey: Russia currently faces a wave of organised crime groups, mainly targeting Western countries with counterfeit medicines; in 2017, the Turkish Industrial Property Code adopted the international exhaustion principle, thus liberalizing parallel imports.

Priority 3 includes Argentina, Brazil, Ecuador, Malaysia, Nigeria, Saudi Arabia and Thailand. In the past two years, Nigeria has gone to great lengths to protect and enforce IPRs: in 2017, the country acceded to 4 major international IP agreements (i.e. WIPO Copyright Treaty) and it has obtained remarkable results in the war against counterfeit medicines in West Africa (from 2001 to 2006, the share of counterfeit drugs dropped from 41% to 16%). Nigeria, however, still holds a prominent role in the global trade as a transit point for counterfeit electronic and electrical goods coming from China.

In conclusion, the report clearly shows that, over-all, the goal is still far ahead for these countries, but at the same time, through their efforts and consistent exchanges with the EU Commission, the latest results confirm a steady growth and a strong will to pursue a fair and proficient relationship with the European stakeholders.