European Union Intellectual Property Office Report on IPR Infringement 2018

• 11/06/2018
• Articles

On 7 June 2018, the European Union Intellectual Property Office (“EUIPO”) published a “Synthesis Report” on intellectual property right (“IPR”) infringement (the “Report”). Based on research since 2013, the Report details the contribution of intellectual property to the EU economy and the cost of counterfeiting and piracy to international trade. It also outlines actions being undertaken by national, regional and international bodies to combat IPR infringements, and specifically counterfeiting and piracy activities.

The total contribution of IPR-intensive industries to the EU economy accounts for approximately 42% of GDP (€5.7 trillion) and 28% of employment. As a result of the high value associated with IPR, actors seek to benefit illegally through a number of different methods, including the production and distribution of counterfeit and pirated products. Counterfeiting has become an extremely lucrative activity. For example, according to the International Institute of Research against Counterfeit Medicines, an investment of $1,000 can yield a return of $500,000 on counterfeit pharmaceuticals. This high yield combined with low risk in comparison to other crimes makes counterfeiting an attractive activity. Furthermore, with the advent of better technology, counterfeiting has evolved significantly as online marketplaces are increasingly facilitating the sale of both counterfeit products and pirated digital content.

On the demand side, the Report recognises that the main incentives for consumers include lower prices, easy accessibility and a high degree of social acceptability in some countries. However, counterfeit products also pose risks for consumers, such as health and safety consequences, inferior quality and performance, and the potential for legal action.

While traditionally associated with luxury and branded goods, counterfeiting is diversifying towards other sectors. High-risk sectors include: pharmaceuticals; foodstuffs; perfumery and cosmetics; articles of leather; clothing and textile fabrics; jewellery; tools of base metal; electrical machinery, equipment and parts; optical, photographic and medical equipment; toys and watches.

Within these sectors, increased counterfeit activity results in high economic costs. As regards the presence of counterfeit goods in the EU, for the pharmaceutical industry, in the period of 2012-2015, the estimated direct and indirect infringement economic costs are staggering: €16 billion in direct lost sales; 6.6% of sales; €26.9 billion total lost sales; 55,700 direct employment loss; 131,700 total employment loss; and €2.3 billion in government revenue loss.

The costs of combatting IPR infringement are equally significant and are borne by companies in detecting infringement and dealing with it. These costs encompass: the cost of employee time dedicated to IPR enforcement; the cost of external legal assistance; court fees in connection with infringement-related litigation; and storage and destruction costs. Such costs constitute a significant barrier to the use by small and medium-sized enterprises (“SMEs”) of IPRs as the burden of dealing with infringement is particularly onerous for smaller companies. This is particularly worrying as IPR ownership is essential for SMEs to grow; therefore, IPR infringement represents a major threat to the fostering and growth of innovation within SMEs.

The final section of the Report outlines the actions being taken by various actors in response to the problem of IPR infringement. These actions include providing rights owners with information on the changing infringement landscape, through EUIPO’s ACRIS and ACIST databases, working with Europol on wider responses to IP crime, supporting the European Commission on both assisting innovative SMEs with the management and protection of their IPRs and in efforts to undermine the business models utilised by counterfeiters and, finally, by providing citizens with information on the availability of legal digital content offers and on the economic impact of purchasing counterfeit goods or accessing illegal content.

In conclusion, the Report acknowledges that the current approach needs to be strengthened and advocates for closer coordination among EU institutions and bodies involved in the fight against IPR infringement and closer collaboration at the enforcement level.