Wednesday 29 January 2014

Financing villainy: the relationship between counterfeit goods and organized crime

Under the title “Look behind”, on 14 January the United Nations Office on Drugs and Crime (UNODC) launched a public awareness campaign aimed at highlighting the close global relationship between organized crime and piracy and counterfeiting of goods. The campaign is based on an advertising spot that premiered on the NASDAQ screen in New York's Times Square, subsequently to be broadcast via the most influential media in the more than ten languages into which it has been translated. By investments of this kind, the UN is showing that it is ever more aware of the danger posed by piracy and counterfeiting, as well as the repercussions of these activities on society and its members.

The counterfeiting business moves billions of dollars around the world every year, a fact that is not lost on the international networks of organized crime. Countless criminal organizations have been associated with this type of illicit trafficking, and their relationship with these activities has been duly proven. Italian groups such as the Cosa Nostra or the Neapolitan Camorra, as well as the Russian Mafia, have been linked to counterfeit goods trafficking in operations conducted by INTERPOL in Latin America and by Europol in Europe. In Asia, where the manufacture of very low-quality goods bearing third party distinctive signs is astonishingly simple to carry out in view of the low production costs, groups such as the Japanese Yakuza and the Chinese Triads dominate these production and distribution processes, with capacity to expand operations throughout the world.

Bodies such as INTERPOL have warned that the web of an international criminal organization often lies behind the counterfeit market, and the profits made by this illicit trade serve to finance other crimes such as human trafficking, money laundering and drug trafficking. The low penalties handed out for crimes against industrial property only serve to encourage organized crime groups to participate in what is a multi-million dollar market (the benefits of which might even exceed those of drug trafficking) and for which criminal punishment in the event of conviction is ludicrous compared to the potential profits to be gained. 
By Frank Schwichtenberg
Vía Wikimedia
Trafficking of counterfeit goods is closely linked to the following crimes:

·   Money laundering. Criminals use counterfeiting to launder money obtained from their various illicit activities. By introducing these goods into regular distribution channels, passing them off as originals through supposedly legitimate businesses, they are able to ensure that any profit has been properly laundered by the time it reaches the bosses of these groups.

·   Labour exploitation. As mentioned in the campaign's spot, the mafias engaged in counterfeiting activities take advantage of the situations in developing countries to produce goods of this type there. Working in conditions that are more than precarious for ridiculously low or non-existent wages over the course of interminably long hours is the daily reality for thousands of people (many underage) who are exploited by these criminal groups in factories.

·   Extortion and bribery. With a view to facilitating the flow of illicit items across different countries, these organisations habitually resort to bribery or corruption of however many individuals may be necessary. Extortion and threats to distributors and retailers alike who do not wish to "cooperate" are another feature of crimes against industrial property.

·   Fiscal crimes (tax fraud). According to figures released by the Organization forEconomic Cooperation and Development (OECD), the value of the counterfeit goods traded globally each year amounts to around 250,000 million dollars, a figure that evades government coffers and reaches criminal organisations in its entirety.

Although industrial property crime still enjoys a certain degree of social tolerance and is considered a "minor" crime, there is no doubt that it also represents a serious risk to consumer health. Buying counterfeit goods is not a simple and innocuous way of saving money without repercussions for the rest of society; rather, it actively contributes to the financing of organized crime, it encourages the continued exploitation of workers slaving away in factories, and it serves to fatten the wallets of the "capos". Unlike other activities by international mafias, trafficking in counterfeit goods has the advantage of exponentially multiplying the number of potential consumers, in that the activities are not directed at a handful of poor wretches, African warlords, or terrorist groups. They are directed at people who are perfectly normal and have no connection whatsoever with any type of criminal activity, taking advantage of their blindness to the damage that purchasing these items causes both to themselves and to all the victims behind the trade. This is why the public needs to be made aware of all that lies on the other side of counterfeit goods and, once again, to look behind.

Visit our website:

Friday 24 January 2014

CJEU rules legal the technological measures preventing the use of homebrews on Nintendo consoles

The CJEU yesterday handed down a judgment (case C-355/12) resolving a request for preliminary guidance in a dispute that has arisen in Italy between the companies Nintendo and PC Box. The roots of the conflict were PC Box’s manufacture and sale of devices which, once installed in a Nintendo video game console, allow users to circumvent the piracy protection system and use counterfeit games. PC Box created the so-called homebrews expressly for use with Nintendo game consoles, and their aim is to deactivate technological protection measures so that consumers can play games by other manufacturers, listen to MP3s, and watch movies and videos.

The Italian court referred two questions to the CJEU. Firstly, whether the technological protection measures installed by Nintendo into its consoles to prevent the use of third-party programs, games and other content is in conformity with Community legislation, and, specifically, whether the concept of an effective technological measure set out in article 6 of EC Directive 2001/29 is applicable thereto. And, secondly, which criteria should be applied to evaluate the scope of legal protection against circumvention of effective technological protection measures.

(i) The first question is not without relevance, since the technological measures adopted by the complainant consist of an encryption system installed in the consoles and video games that prevents the use of video games lacking the encrypted code as well as the use of any other type of software, such as that aimed at reading MP3 files, videos or movies. According to PC Box, such technological measures go beyond the scope of the Directive, which excludes any type of interoperability between the console and equipment other than that of the company which produces the system. Recital 48 of the Directive states in this regard that the legal protection provided in respect of technological measures “should respect proportionality and should not prohibit those devices or activities which have a commercially significant purpose or use other than to circumvent the technical protection.”

Nintendo 3DS AquaOpenConsole
By Evan-Amos
Via Wikimedia Commons

However, according to the CJEU, there is nothing in EC Directive 2001/29 applicable to video games to suggest that Article 6.3 thereof does not refer to technological measures such as those used by Nintendo in its consoles. The concept of an effective technological measure is defined in a broad manner and also includes application of protection systems including encryption of the physical housing of video games such as the consoles themselves, which serves to prevent interoperability with equipment or devices lacking the encrypted code.

(ii) Secondly, the Italian court raises a question relating to the criteria or parameters in respect of which the scope of legal protection against the circumvention of technological protection measures should be assessed, and, specifically, whether account should be taken of the intended use attributed by the right holder to the product in which the protected content is inserted.

In this regard the Court holds that further to the said recital 48 of EC Directive 2001/29, the national court should take into account criteria such as the existence of other effective technological measures comparable to those adopted by the complainant, which would have caused less interference with the activities of third parties not requiring authorisation by the right holder, the costs of different types of measures, as well as other purposes of the devices used by the defendant aside from the circumvention of the technological measures and the frequency with which they are effectively used by third parties.

The fact is that a definite conclusion cannot be drawn from the CJEU’s judgment as to whether or not the homebrews manufactured and sold by PC Box are legal, since the assessment thereof is left in the hands of the national court depending on the proof of effective use provided by third parties. What has been clarified is that the concept of the effective technological measure set out in EC Directive 2001/29 also encompasses measures that serve to prevent the interoperability of a console with equipment, devices and software other than that of the company which produces the console.

By Maico Amorim
Via Wikimedia
Also of interest is the CJEU’s declaration relating to the legal definition of video games. In the Court’s opinion, video games constitute “complex matter”, comprising not only a computer program but also graphic and sound elements with a unique creative value, and should thus be protected by copyright together with the entire work, in the context of the system established by EC Directive 2001/29.

Visit our website:

Tuesday 21 January 2014

International Mediation Day: the relationship between mediation and industrial and intellectual property

By Ferran Cornellà
Vía Wikimedia
Since today is International Mediation Day, I thought I would share some thoughts on the role of this type of conflict resolution in the field of industrial and intellectual property (IP).

Mediation used to be identified in Spain with the resolution of family and work-related conflicts. And this remained more or less the case until the 2008 Directive revealed to many that mediation could also serve to resolve conflicts of a civil and commercial nature.

Since then, we have been witness to a legislative process that culminated a few months ago with the approval of Real Decree implementing the Mediation Act of 2012. There is still much to do in this field but we are progressing. In fact, the matter remains highly topical.

But on this day I want to remind everyone of the bodies and individuals who were working on mediation in IP before it became a relevant issue.

I should begin by mentioning the WIPO Arbitration andMediation Center, which celebrates its 20th anniversary in 2014. The Center has been highly efficient in resolving domain name conflicts, but has also extended its activity into other areas, becoming a leading player in the promotion and establishment of mediation in the field of IP.

The Center has not only acted at a broad level in IP but has also sought out specific means to resolve conflicts in the Film & Media, ICT, R+D and technology transfer sectors. WIPO mediation is now an alternative for resolving conflicts regarding DESCA agreements on R+D projects in the EU. Work is also underway to use WIPO mediation in connection with FRAND licenses, and the Spanish collection agencies AGICOA and EGEDA have used its resources to set up their own systems. In addition, the Offices of Singapore and Brazil have implemented mediation systems in cooperation with the Center.

Other bodies in Spain have also used mediation as a tool for resolving IP conflicts. These include Alicante University and specifically UAIPIT, which has held its famous International Congress under Professor Lydia Esteve since 2009, an event that has always featured the subject of mediation in this field. In addition, IE Law School includes mediation in its programmes on intellectual and industrial property, and leading associations in the entertainment sector such as DENAE and foundations such as FIDE have for years promoted and organised training sessions on this subject. Furthermore, the subject has this year been added to the Master’s at Madrid’s Autonomous University.

Therefore, Spain is not lacking defenders, promoters and champions of mediation in this field. I am simply citing those I know and with whom I cooperate, with apologies to the rest, for there are surely many more.

When I discovered it a few years back, I realised that mediation is a highly efficient means of resolving conflicts in this field. With the passing of time I feel the same and even more strongly, after many years of litigation.

Industrial and intellectual property rights have a special nature of their own and the business that surrounds them requires a fast and efficient means of resolving conflicts, which does not scar the relationships between the parties, since IP plays a vital role in many areas of activity, all of them a small world in which the participants frequently cross paths.

Although some voices are in favour of a broad approach to mediation, I still believe that specialization is required, at least in this subject. As I see it, those who work with and are aware of industrial and intellectual property rights are the ones best placed to give the parties what they are looking for: a positive result, an efficient agreement. As time passes and once mediation becomes fully established in Spain, I believe that this criteria will take hold.

In any case, let us celebrate this international day and promote mediation in our daily professional activity. In the end we will all benefit.

Visit our website: 

Friday 10 January 2014

Private copying exception: not applicable to copies made from illegal sources

Yesterday, 9 January, Advocate General Pedro Cruz Villalón released his opinion in a case that once again requested further clarification on how to apply the exception laid down in Article 5.2.b) of Directive 2001/29, that is, the so-called private copying limitation (Case C-435/12) [in French].

The defendants in the main proceedings are Stichting de Thuiskopie, a Dutch entity in charge of collecting and distributing fair compensation for private copying as provided by the said Directive. The complainants are several companies that manufacture and import storage media and hence are obliged to pay compensation.

The main issue in the proceedings, which has been referred to the Court of Justice for a preliminary ruling, is whether Article 5.2.b) of the Directive is also applicable to copies of works obtained from illegal sources, and in that case whether such copies are to be included when calculating the compensation to be paid to rightholders. Unlike the legislation in other countries, like Spain, Dutch copyright law does not specify that the exception is applicable only to copies of works obtained legally. The text of the Directive does not make this distinction either.

The Dutch collecting society basically considers that since there are no effective technical means to prevent works from being copied, fair compensation payable to rightholders for private copying should also take into account copies made from illegal sources, particularly via the Internet. So doing would achieve effective compensation for the actual damage sustained by rightholders pursuant to the public availability of works on the web.

However, the Advocate General's opinion appears to take the opposite tack. Pedro Cruz Villalón maintains that, undeniably, while legislation along the lines proposed by the defendant collecting society could provide a lawful and suitable framework for addressing copyright infringement on the Internet, providing compensation for harm sustained by rightholders from this type of piracy is not the rationale for the private copying exception.

As an exception to copyright, private copying should be interpreted in accordance with the three-step test set forth in Article 5.5 of the Directive and hence should be strictly interpreted. Accordingly, this route, notwithstanding that it would allow rightholders to receive compensation, cannot be used to expand the scope of application of the exception to illegal copying, because so doing would entail making legal a practice that can only be regarded as wholly unlawful. It therefore inevitably follows that compensation for private copying should take into account only copies made from works accessed legally.

As concerns Spain, this opinion has interest because it once again calls into question the new system put into practice by Royal Decree no. 1657/2012 (in Spanish) of 7 December 2012 establishing a system of fair compensation charged against the federal budget. According to the Advocate General in Recital 43 of his opinion, compensation is to be funded by those responsible for causing harm, that is, by the physical persons making copies for private use. It seems clear that a system like Spain's is not in consonance with this interpretation.

Visit our website: