European Union Intellectual Property Rights Enforcement Directive No. 2 (IPRED2)

Criminalizing Intermediaries

On 25 April 2007, only three years after passing of the first controversial European Union Intellectual Property Rights Enforcement Directive (IPRED), which imposed harsh civil sanctions in cases of infringement of intellectual property rights (IPR), the European Union Parliament is again pushing for a new law, this time legislating severe criminal measures against infringers. The new proposal for a directive on enforcement of IPRs is feared that it may lead to criminalization of legitimate consumers and businesses and has raised grave concern not only among NGOs, consumer groups and library associations but also among market players, especially in the e-communications and the internet sector of the European-wide economy.

Backers of the IPRED2 proposal claim the new law is necessary to fight massive trademark counterfeiting and copyright infringement in the European Union. The EU Parliament Rapporteur shepherding the directive throught parliament is Nicola Zingaretti from Italy, the brother of Italian film actor Luca Zingaretti.

EC legislators contend that the draft directive’s extreme penalties, i.e. custodial sentences of at least four years’ imprisonment and criminal fines of at least 300,000 Euros (approximately US$ 404,730), accompanied with severe additional measures, such as total closure of enterprises, bans on commercial activities, placing companies under judicial supervision or judicial winding-ups, will bring fraudsters under the rule of law and even “combat organized crime”.

But critics of the proposal say that the IPRED2 is too vague and its scope will not remain limited only in cases of explicit counterfeiting and piracy activities. The powers created under the proposed directive can be easily misused, and legitimate businesses, telecoms or content intermediaries, even individuals exercising their legal rights of private use run the risk of facing the directive’s extreme criminal sanctions. These sanctions threaten to create a devastating effect on Europe’s knowledge based economy, will hamper lawful flows of information among EC Member States, and impede the public’s access to knowledge.

The most controversial part of IPRED2 is Article 3, which criminalizes “all intentional infringements of an intellectual property right on a commercial scale, and aiding or abetting and inciting the actual infringement”. Misuse of this vague wording will certainly result in harmful unintended consequences, such as prosecuting children or grandparents for file-sharing of music and jailing ordinary businessmen, something which has already happened under the controversial US Digital Millennium Copyright Act (DMCA). Criminalization of “aiding or abetting and inciting” infringement will be used to prosecute search engines, blogging tool platforms, and other information providers, which, under European law, do not have the appropriate legal safeguards that limit liability for digital intermediaries, as is the case under US law.

According to Andrew Cranfield of EBLIDA, a European library association, “IPRED 2 creates legal uncertainty and confusion which will act as a barrier for libraries and archives in their efforts to digitize and bring digital information to end users”. In the same line, Jim Murray of BEUC, the European Consumer Organizations Association, draws attention that “under this current proposal the children of MEPS, together with millions of other young Europeans, would be subject to ill-defined threats of criminal sanctions”. Ante Wessels of Foundation for a Free Information Infrastructure (FFII), a European digital rights organization, perceives that the secondary liability clause poses “a major threat for software developers and internet service providers”.

The proposed directive also faces well-founded criticism on the allegation that the European Community has overridden its legislative powers in enacting EU-wide criminal law, which is generally excluded from its jurisdiction as a field regulable only by national governments. The Dutch Parliament addressed a letter to the EU Commission, stating that “the present proposal falls outside the powers of the community”, while it fails to “comply with the principles of subsidiarity and proportionality” and requested a reasoned response. Similar statements have been issued by the German Max Planck Institute for IP Law and the Law Society of England & Wales on the matter. IPRED2’s legal flaws are so grave that, even after its enactment, its annulment by the European Court of Justice is more than likely, should Member States challenge Community competence on these grounds.

Even spokesmen for some recording and the trademark associations expressed doubts on the proposal. The International Federation for the Phonographic Industry (IFPI) regional director for Europe alleged that national authorities are more appropriate actors to define what constitutes intentional infringement of IPRs. In addition, an International Trademark Association’s representative said that the draft law could result in differing interpretations between member states and is therefore not the best solution in the fight against counterfeiting and piracy.

Efforts guided by a large coalition of NGOs, consumer associations, and librarians have succeeded in excluding patents from the scope of the IPRED2 and in ameliorating its weak points during its passage in the EU Parliament. But this does not change the fact that the draft IPRED2 is dangerous for criminalizing ordinary digital activities and impeding business in the EU to an unintended and far-reaching extent. It is also unnecessary as a legislative measure, given that its objective of harmonizing IP criminal law in the EU has already long been achieved by the implementation of the WTO TRIPs Agreement, Article 61, which has bound Member States since 1996 to enact criminal measures against commercial infringements. It is also misguided on the basis that large scale counterfeiting and piracy in some EU Member States is due to inefficiencies of law enforcement authorities and not to lack of severe criminal laws.

Two draconian EC Directives for the enforcement of intellectual property rights in just three years may prove to be too much for the ecology of the European digital environment. They clearly show the strategic choice of the European Community to approach the information society phenomenon with heavy-handed, un-balanced and anti-innovation regulation, that is explicitly one-sided in favor of large IPR holders and to the detriment of information production and dissemination and access to knowledge. Taking into account the recent embarrassment regarding its worldwide-unique brainchild of overly restrictive database protection in the EU (see here), it remains to be seen whether the latest legislative initiatives of the Community on iron-clad enforcement of IPRs will bring any better results.

Links for more info on EU IPRED2:
Text of the IPRED2 proposal
History of the proposal by EurActiv
Advice Adopted by the Dutch Parliament
Statement of the Law Society of England & Wales
Analysis by the Max Planck Institute for IP Law

Critique of EU IPRED2: