COUNCIL OFBrussels, 30 May 2011
THE EUROPEAN UNION
10668/11 ADD 1
PI 56 CODEC 903
COVER NOTE
from:
Secretary-General of the European Commission, signed by Mr Jordi AYET PUIGARNAU, Director
date of receipt: 26 May 2011
to: Mr Pierre de BOISSIEU, Secretary-General of the Council of the European Union
No Cion doc.: SEC(2011) 612 final
Subject: COMMISSION STAFF WORKING PAPER - IMPACT ASSESSMENT Accompanying document to the proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on entrusting the Office for Harmonisation in the Internal Market (Trade Marks and Designs) with certain tasks related to the protection of intellectual property rights, including the assembling of public and private sector representatives as a European Observatory on Counterfeiting and Piracy
EUROPEAN COMMISSION
Brussels, 24.5.2011 SEC(2011) 612 final
COMMISSION STAFF WORKING PAPER
IMPACT ASSESSMENT
Accompanying document to the
Proposal for a
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
on entrusting the Office for Harmonisation in the Internal Market (Trade Marks and
Designs) with certain tasks related to the protection of intellectual property rights,
including the assembling of public and private sector representatives as a
European Observatory on Counterfeiting and Piracy
Disclaimer
This impact assessment commits only the Commission's services involved in its preparation. The document has been prepared as a basis for comment and does not prejudge the final form of any decision to be taken by the Commission.
TABLE OF CONTENTS
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1.Introduction .................................................................................................................. 4
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2.Procedural issues and consultation of interested parties .............................................. 5
2.1. Procedural issues .......................................................................................................... 5
2.2. Consultation of interested parties ................................................................................. 5
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3.Problem definition ........................................................................................................ 7
3.1. Reasons for ineffective enforcement of intellectual property rights in the EU............ 7
3.1.1. Lack of reliable, objective data .................................................................................... 7
3.1.2. Divergences in the enforcement legislation of Member States and the application by the courts ...................................................................................................................... 8
3.1.3. Insufficient coordination and exchange between responsible authorities in the Member States on best practices .................................................................................. 8
3.1.4. Insufficient exchange on successful private sector strategies ...................................... 9
3.1.5. Insufficient knowledge of persons involved in enforcement ....................................... 9
3.1.6. Insufficient use of technologies to prevent counterfeiting ........................................... 9
3.1.7. Insufficient awareness of consumers on the impact of IPR infringements .................. 9
3.1.8. Demand for counterfeit products and pirated content ................................................ 10
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5.Objectives ................................................................................................................... 21
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6.Policy options and analysis of their impacts .............................................................. 24
6.1. Introduction ................................................................................................................ 24
6.2. Option 1 sub-option 1a: Increase of DG MARKT's human and budgetary resources .................................................................................................... 24
6.3. Option 1 sub-option 1b: Outsourcing on a commercial basis to an external contractor ..................................................................................................... 26
6.4. Option 2 sub-option 2a: The tasks are carried out through an industry led initiative financed by private sector stakeholders...................................................................... 27
6.5. Option 2 sub-option 2b: The tasks are carried out through an industry led initiative financed through a Commission grant/program ......................................................... 29
6.6. Option 2 sub-option 2c: The tasks are carried out in the framework of a public- private partnership ...................................................................................................... 30
6.7. Option 3 sub-option 3a: The tasks of the Observatory are entrusted to a new EU agency .................................................................................................................. 30
6.8. Option 3 sub-option 3b: The tasks of the Observatory are entrusted to an existing agency......................................................................................................................... 32
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7.Comparing the options ............................................................................................... 34
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8.Monitoring and Evaluation......................................................................................... 36
ANNEX I: MEMBERS OF THE EUROPEAN OBSERVATORY ON COUNTERFEITING AND PIRACY.......................................................................................................................... 38
ANNEX II: IPR INFRINGEMENTS IN THE EU AND EU POLICY ON IPR PROTECTION .................................................................................................................. 44
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1.INTRODUCTION
The economic well-being of the EU relies on sustained creativity and innovation; therefore measures for their effective protection are indispensible in ensuring its future prosperity. The Europe 2020 Strategy
1 has therefore identified "Smart Growth" as one of the Commission's
three policy priorities for the future. In this respect, intellectual property rights (IPR) are vital business assets that help to ensure that innovators and creators get a fair return for their work and investments.
Unfortunately, legitimate businesses are not the only ones to realise the importance of IPR and the organised infringement of rights has become a global phenomenon. Counterfeiting and piracy
2 are causing worldwide concern. Infringers of IPR not only deprive EU creators of
their appropriate rewards but also harm competitiveness, destroy jobs in the Member States, deny much needed revenue to public finances and, in some cases, threaten the health and safety of EU citizens.
Strong legislation has been put in place across the EU to protect and enforce IP rights. This legislation has been complemented by various practical measures, adopted by both public authorities and private sector bodies, at national and international levels in order to improve existing knowledge about counterfeiting and piracy and to enhance the cooperation of all actors involved in fighting this phenomenon. In the same way the Commission has taken a lead by launching a European Observatory on Counterfeiting and Piracy, at a high-level conference in April 2009 involving Members of the European Parliament, Member States' representatives and representatives from industry and from the consumers' side. The Observatory's main objectives include data collection and the analysis of the overall scope, scale and impact of IPR infringements in the EU, improving cooperation between those engaged in protecting and enforcing IPR, ensuring the dissemination of best practices in enforcement and developing greater consumer awareness.
Since the launch of the Observatory, the political discussion has further evolved. As a result, additional fields of activity for the Observatory have been identified. As a result, there has been increasing concern that the Observatory needs to continue to deliver on its aims. Consequently, this has caused a need to re-examine the Observatory's structure. In this respect, the Commission is concluding a Memorandum of Understanding with the Office for Harmonisation in the Internal market (OHIM the EU trademarks and designs office) to enable the Office to support the delivery of some of the Observatory's tasks related to trademarks and designs. However, at this point in time, this is a relatively short term initiative.
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2.PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES
2.1. Procedural issues
The preparation of this Impact Assessment was monitored by an Inter-Services Steering Group, composed of Directorates General MARKT, SANCO, ENTR, TRADE, HOME, INFSO, TAXUD, SG, LS, BUDG, HR, EMPL, AGRI and the JRC. The Steering Group met on three occasions. Its last meeting was convened on 14 December 2010.
A draft of this Impact Assessment Report was submitted to the Impact Assessment Board (IAB) on 12 January 2011. The Board met on 9 February 2011. In its opinion dated 11 February 2011, the Board found that the report provided the necessary evidence base for action in the area, but suggested further improvements in the analysis on a number of issues.
Thus, the IAB made recommendations to strengthen the analysis of impacts and specific issues affecting the Observatory, to clarify the various problem drivers and to update the definition of the baseline scenario to take account of the Memorandum of Understanding that the Commission intends to sign with the Office for Harmonisation in the Internal Market (OHIM) on short term support in view of the Observatory's activities.
Following the comments from the IAB, in particular the problem definition (section 3) was modified by moving general explanations on the EU's policy on intellectual property rights and the scope and impact of infringements of such rights to a new Annex II and by extending the explanations on the Observatory's role and the problems it is currently facing. Furthermore, the baseline scenario in section 3.3 was adapted as well as the objectives in section 5 and the evaluation of the different options in section 6.
The initiative that this Impact Assessment relates to has been introduced into the Commission's agenda planning as 2011/MARKT/009.
2.2. Consultation of interested parties
Since its inception, issues surrounding the structure and financing of the Observatory have been discussed regularly, both at the four Observatory meetings
Crime and Justice Research Institute (UNICRI) and EUROPOL have been invited as observers, to the Observatory meetings involving public authorities.
The conclusion, from discussions within the Observatory, has been that a more sustainable infrastructure is necessary to allow the Observatory to work successfully. Some Member States, however, felt that this should not lead to the creation of new structures.
Members of the European Parliament are regularly informed about the work and developments of the Observatory and on two separate occasions, in 2010, the European Parliament Forum on counterfeiting, contraband and organised crime openly discussed the future of the Observatory and focused, in particular, on a possible transfer of the Observatory's tasks to the Office for Harmonisation in the Internal Market (the trade marks and designs registration office of the European Union, OHIM) at Alicante, Spain.
Outside of the Observatory meetings, a wider range of stakeholders have been made aware of the issues facing the Observatory in terms of its potential for delivering on current and possible future aims. For example, DG Internal Market and Services (DG MARKT) has been invited to discuss the issue at meetings of the AIM (Association des Industries de Marque, representing some 1800 companies in 21 countries) Anti-Counterfeiting Committee, and the Committee members were invited to provide their views.
In addition, within the context of the Commission's Stakeholders' Dialogue on illegal up- and downloading
5, issues regarding the structure of the Observatory, including the possible
transfer of its tasks to the OHIM, have been discussed on two separate occasions with representatives of copyright holders, the telecommunications sector and Internet service providers.
At the political level, the Council, as a reaction to the two Commission Communications concerning the Observatory
6, adopted two Resolutions7 welcoming the creation of the
Observatory and asking the Commission to elaborate further on its role and tasks, whilst supporting this through existing structures. Furthermore, the European Parliament on 22 September 2010 adopted a report on the Commission's 2009 Communication asking for an enhanced involvement of the OHIM in enforcement related matters
OHIM, particularly in the field of enforcement (anti-counterfeiting). In the context of the study, the views of users were sought on the possible involvement of the OHIM in enforcement related activities. In total, eighteen business, IP and trade mark associations with national, European and/or international membership contributed to this process. The question was finally discussed at a specific workshop at the Pan-European IP summit 2010 held in Brussels on 2 and 3 December 2010
10 where the idea received broad support. Equally, the
proposal was viewed positively by the OHIM governing bodies, the Administrative Board and the Budget Committee
11, in their meetings in November 2010.
In view of this specific, targeted and continuous consultation process, it was considered that there was no need to organise a supplementary, standard consultation exercise.
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3.PROBLEM DEFINITION
Despite comprehensive IPR policies, at national, EU and international levels, infringements of intellectual property rights occur on a massive scale and cause considerable damage to the European economy by hampering growth, destroying jobs and, in some cases, putting at risk the health and safety of consumers
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12.Details on the EU policies to protect intellectual
property rights and on the current situation concerning IPR infringements can be found in Annex II.
3.1. Reasons for ineffective enforcement of intellectual property rights in the EU
The reasons for the problems in effectively enforcing IPR, in the EU, are, to a large extent, related to a lack of knowledge, both in relation to the precise scope and impact of IPR infringements and about the effective policies and methods to prevent and fight such infringements. Other major issues relate to the legal framework to combat IPR infringements and the considerable demand for counterfeit products and for downloads of illegal content play a role.
3.1.1. Lack of reliable, objective data
Existing studies suffer because there has been no agreed methodology for collecting and analysing data on counterfeiting and piracy. Furthermore, the studies have been 'snapshots' of limited phases of time, which have been commissioned by different industries and have employed different approaches. Moreover, due to the secretive nature of counterfeiting, obtaining comprehensive data for all product sectors has been virtually impossible. Added to this, some sectors of industry have been hesitant to disclose information on the scope of the problem in certain areas, as they fear damaging both consumer confidence and the reputation of their brands. Finally, as far as online copyright infringements are concerned, a rapidly changing technical environment makes the collection and analysis of data a considerable challenge.
targets for enforcement or to design more focused consumer campaigns. Therefore, a mechanism to collect and analyse data, based on an agreed methodology, is an essential step in overcoming these problems.
3.1.2. Divergences in the enforcement legislation of Member States and the application by
the courts
The recently published Commission report13 on the application of the so-called IPR
Enforcement Directive14 reveals differences as to how the Directive was transposed in the
Member States and in the practical application of its provisions, e.g. concerning the use of provisional and precautionary measures such as injunctions, procedures to gather and preserve evidence (including the relationship between the right of information and protection of privacy), corrective measures and calculation of damages.
To what extent these divergences and possible other legislative shortcomings are responsible for the current situation, will need to be evaluated in the context of forthcoming discussions on a possible review of the IPR Enforcement Directive, a potential new proposal for a Directive on criminal sanctions, the planned review of the Customs Regulation and in regulatory dialogues with third countries.
This question therefore lies outside the scope of this Impact Assessment.
3.1.3. Insufficient coordination and exchange between responsible authorities in the
Member States on best practices
Despite the fact that there has been clear progress in how Member States are tackling counterfeiting and piracy at national levels, the cross border nature of the problem means that more effective collaboration between national administrations is needed to get the problem under control. Administrative cohesion requires a clearer understanding of national authorities' strategies and structures, and improved transparency in relation to the methods used for exchanging information. Currently, there are shortcomings in these areas that prevent a consistently high level of IPR enforcement, throughout the Internal Market.
However, the scope of COPIS is mainly limited to exchanges between customs authorities and the application system is specifically tailored to their needs.
3.1.4. Insufficient exchange on successful private sector strategies
Similarly, an external study carried out on behalf of DG Enterprise and Industry in 200716
confirms that there is currently not enough exchange on successful private sector strategies. Such an exchange would be beneficial for businesses of all dimensions, in order to create synergies and allow them to focus on strategies that have proven to be effective. This is particularly important for SMEs, who require access to information and specific support in protecting their IP rights.
3.1.5. Insufficient knowledge of persons involved in enforcement
Counterfeiting and piracy is a fast moving environment. Those engaged in enforcement (prosecutors, customs, police etc) therefore need to be fully aware, not only of the most recent trends in the market, but also of developments concerning methods of investigation. In particular, they need to appreciate the possibilities and limitations attached to cross-border cooperation and how best to coordinate action most effectively.
Although there are training measures, in Member States and at the EU level, these measures lack general coordination and often, only cover one target group. For example, the OHIM organises series of seminars for judges sitting in trademark and design courts in the Member States. These seminars are likely to involve over 300 judges in 2010-2011, and will help to ensure that the judges share a common understanding of enforcement decisions. However, at present, the seminars do not address the needs of prosecutors, enforcers or customs.
3.1.6. Insufficient use of technologies to prevent counterfeiting
Numerous innovative techniques and systems have been developed by industry sectors to prevent copying and to track and trace fake products within supply chains and sales points. However, there is a continuing lack of interaction between business sectors. Therefore there is insufficient mutual support and many businesses cannot take advantage of new technical developments to protect themselves. For this reason, continual research is needed to make knowledge available on new technical tools that can be used to prevent or 'track and trace' counterfeited products.
awareness and the scale of the problem. In this context it should be noted that, according to the Eurobarometer survey, the percentage of citizens from the EU-12, who unknowingly buy counterfeit products is much greater than those in the EU-15. For example, approximately every second Romanian has later discovered that he or she has bought a counterfeit product. Most of these products were fashion wear and accessories (38 percent), music (13 percent), and consumer electronics, films and perfume (each between 9 and 11 percent). In contrast, in Denmark, less than 10 percent of the population have been deceived into buying fakes.
These figures show that consumers need to be more aware and have a better understanding of the risks, to allow them to make more informed decisions when buying products and services.
3.1.8. Demand for counterfeit products and pirated content
Not all consumers buy counterfeits inadvertently. Surveys regularly show that there is a considerable share of European consumers that knowingly acquire products that infringe intellectual property rights. This is also true for up- and downloading of illegal digital content.
Where consumers knowingly acquire counterfeits considerable differences can be observed, depending on the product sector. The 2009 Eurobarometer survey showed that the vast majority of the population in the EU (63 to 73 percent, see Figure 2 below) think that no matter the reason, it is neither acceptable nor justified to intentionally buy counterfeit goods.
On the other hand, this still leaves one out of four people who believe it is acceptable to buy counterfeit luxury products. Moreover, every third person feels that it is justified to buy counterfeit products when it is considered that the price of the original is just too high.
Figure 2: Justifications to Buy Counterfeit Products
It's ok to buy counterfeit products, ...
... when price for
original too high72636273
... when original
acceptable or at least 'not as bad as' downloading in order to re-sell and make profit. This mitigating stance is reinforced by the view that CDs, DVDs and cinemas are all considered to be very expensive and that many citizens, even if they could not download the material, would not pay the legitimate prices.
Where consumers knowingly buy counterfeit products or up- and download illegal content, awareness measures have a limited impact
18 (possibly with the exception of measures
focusing on the lower quality of counterfeit products, including those that potentially endanger health and safety). Also the question of consumer demand for counterfeit products and illegal downloads will therefore largely have to be addressed in another context, in particular in the impact assessments to be drawn up to examine a review of the IPR Enforcement Directive and the appropriateness of adopting a new proposal for a Directive on criminal sanctions.
3.1.9. Lack of expertise in third countries
Developing and emerging countries are particularly vulnerable to counterfeiting and piracy and are used by complex criminal networks as manufacturing and distribution bases. These countries face significant challenges and sometimes do not have the structures and experience to combat IPR infringements.
Organisations such as WIPO, Interpol and WCO already provide certain training measures for enforcement authorities in these countries. However, while WIPO offers technical assistance to enable some developing countries to tailor their IP systems to their needs, these efforts do not always match EU needs. In particular, they have to take account of the interests of other WIPO members that are significant target regions, such as the US and Canada. For these countries, the sources of counterfeits are often different from those assailing the European market. In addition, WIPO resources are constrained and therefore they face significant challenges in ensuring that their technical assistance has a sustainable impact.
At the EU level, a recently published study, commissioned by the Commission's Directorate General for Trade
19, notes that the different actions under the Commission's Enforcement
Strategy lack coordination between Commission services and with other institutions and agencies that carry out activities in this field, such as the European Patent Office (EPO) and the OHIM.
meetings and to support and contribute to the needs of the network. Furthermore, a number of international organisations (e.g. WIPO, OECD) are participating in the Observatory's meetings as observers. Meeting agendas are proposed by the Observatory's secretariat which is provided by the Commission services (DG MARKT).
At the time of its establishment, the Observatory was assigned four main tasks. In April 2009, the Council had defined the two primary aims of delivering independent data and assessments on the scope and scale of counterfeiting and piracy in the internal market and raising public awareness
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20.The Commission Communication of September 2009 added further
responsibilities associated with exchanging and promoting best practices in relation to public authorities and spreading of best private sector strategies
21.
Despite the comparatively short time since the Observatory's establishment and even before it became fully operational, the Council and the European Parliament called for new tasks to be added to the Observatory's mission. Thus, the latest Council Resolution related to the Observatory invited it to assess the needs for the implementation of European Union level training programmes, for those involved in combating counterfeiting and piracy
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22.The recent
European Parliament Resolution additionally called for the Observatory to compile scientific research on counterfeiting and IPR regulation
23.
Finally, the more recently published study commissioned by DG TRADE recommends that the Observatory should become a single point of contact, within the Commission, for external parties, and an international point for the creation and dissemination of best practice
24.
For this reason, the Commission intends to assign these three new tasks to the Observatory, in the context of its forthcoming IPR strategy, which is planned for spring 2011.
3.2.2. The Observatory's problems to cope with its current and future tasks
Experience acquired during its first year of existence has shown that even if its current range of tasks are not expanded, the Observatory's organisational structure does not allow it to become fully operational.
Observatory is obliged to make use of Commission resources, which are not specifically designed to meet its growing responsibilities and needs. Furthermore, with only two administrators, forming the secretariat to the Observatory, it is not possible to provide the expertise needed to deliver all of the specialist tasks with which the Observatory has been entrusted.
Instead, the current resources only allow the Observatory to deliver on its minimum objectives and the Commission is consequently constrained to strictly prioritising the Observatory's activities. At present, the Observatory's work is essentially limited to the
following:
two Observatory meetings of the private sector representatives, the representatives from
the Member States or both groups; due to the lack of dedicated budgetary resources for the Observatory the costs of these meetings, in the past, could only be financed with help from Council Presidencies and private stakeholders, granted on an ad hoc basis
25;
around ten meetings of working groups per year (e.g. on legal matters, public awareness,
statistics etc);
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the organisation of one annual conference as an awareness raising activity;
an external study that is aimed at developing a general methodology to collect and analyse
the data. The results of this study are expected for the end of 2011.
For this reason, the Observatory currently has serious difficulties in delivering its original tasks in terms of data collection, spreading best practices and improving cooperation and raising public awareness:
Concerning data collection and analysis, the Observatory should in future apply a
methodology (developed in the external study) on a regular basis and produce general and sector-specific reports. However, ensuring the Observatory's capacity to produce reliable information and data for all 27 Member States necessitates the setting up of a data gathering mechanism, as well as an appropriate IT structure to run relevant analytical systems and databases, on a day to day basis. A system such as this requires relevant expertise in statistics and IT development. Furthermore, it would require significant investment, in terms of establishment, maintenance and running costs. Such skills and means for investment are currently unavailable within the Observatory.
human resources and thus, in the current circumstances, it would be difficult for the Observatory to deliver on this aim.
The current resources of the Observatory are also not sufficient to take more
comprehensive action to raise consumer awareness. Moreover, the introduction of extensive consumer awareness programmes, based on successful campaigns already carried out in the EU, requires sustainable funding and the employment of specialists in this area.
3.3. Likely consequences if no measures are taken (baseline scenario)
3.3.1. The situation of the Observatory in the mid-term
With the new tasks that have been identified for the Observatory, its situation is bound to deteriorate.
Technical training programs and professional awareness events require experts, specialist
materials, resources, appropriate training facilities and adequate administrative staff, to examine training needs, ensure coordination with already existing measures and design new programs. Gaining access to such resources will be impossible without sufficient financial means.
The same applies as far as research on new technical tools that can be used to prevent or
'track and trace' counterfeited products.
Furthermore, technical enforcement training and assistance at an international level cannot
be provided in the current situation. Presently the Observatory has no means to provide such capacity building programmes in third countries.
3.3.2. Assistance to be provided by the Office for Harmonisation in the Internal Market
(OHIM)
Given the need to increase the Observatory's activities in the short term, the Commission has decided to conclude a Memorandum of Understanding (MoU) with the OHIM. Through the MoU, the OHIM commits to providing technical support to the Observatory, through certain related activities that the OHIM already carries out as "accessory activities" to the registration of trademarks and designs. However, the MoU will be limited to trademarks and designs, in accordance with the OHIM's constrained framework and therefore, the OHIM will, in particular, be unable to work on issues specific to other IP rights, such as copyright or patents.
the organisation of three meetings of the Observatory in 2011.
Despite these improvements, the Observatory will still, without any improvements concerning its infrastructure and funding, continue to be unable to carry out a considerable number of tasks. These include:
Data collection, public awareness measures and training related to patents and copyright;
Identification and exchange of best public and private practices, and improving day-to-day
cooperation;
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Research on technical tools to prevent counterfeiting and piracy;
International cooperation and assistance.
Furthermore, while the MoU initiative will be very beneficial in the short term, it also has a clear link with a possibility of having the Observatory moved entirely to the OHIM. Assistance in organising a public awareness event and a number of Observatory meetings, through the MoU, is currently limited to the year 2011, and as such, the issue will need to be readdressed at the end of 2011, in the light of any future developments. If as a result a decision were to be taken to tackle the current problems of the Observatory through another measure (i.e. other than entrusting OHIM with the tasks of the Observatory in a more enduring way, it could then be anticipated that the OHIM would not be prepared to commit to a more long standing relationship beyond 2011. In the same way, it cannot be expected, in such a scenario, that the assistance being made available by the OHIM under the MoU to DG MARKT could be extended into 2012.
The Observatory also cannot rely, in the longer run, on the ad hoc financial support received from Council Presidencies and private stakeholders in the past. Therefore, taking no action could even mean that the current meeting activities of the Observatory would have to be reduced in the future, due to a further reduced operational budget and further reduced human resources to manage its activities.
3.3.3. Impacts of the current situation
effect on GDP across the EU, to within the region of EUR 8 billion per year27. A study by
Frontier Economics, in 2009, indicated that 2.5 million jobs were destroyed in G20 countries alone by counterfeiting and piracy
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28.While these are largely industry figures, for the reasons
explained above, they provide an indicator on the size of the problem.
Concerning piracy (or online copyright infringements), the economic impact is less clear at this stage, due to the very recent nature of this phenomenon. The most recent study in this area carried out, in 2010, by Paris-based TERA Consultants and commissioned by the International Chamber of Commerce's Business Action to Stop Counterfeiting and Piracy (BASCAP) initiative, indicates that EUR 10 billion and more than 185,000 jobs were lost due to piracy in the music, movie, TV, and software industries in the EU in 2008
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29.However,
other studies30 deny any negative economic effect of piracy and point to potentially positive
implications for consumer welfare.
Counterfeiting threatens the health and safety of European consumers. Apart from the general problem of consumers buying counterfeit products in good faith and suffering monetary loss, there is also the growing concern about the perceptible increase in volumes of substandard and hazardous fake products, which pose significant health and safety risks for citizens. In its 2009 'Report on EU Customs enforcement of intellectual property rights'
31,
DG TAXUD notes that while, in the past, luxury goods were most frequently hit by IPR infringements, more and more potentially dangerous items, used by European consumers in their daily lives, are being detained by customs. These include medicines, cosmetics, foodstuffs, beverages, shampoos, toothpastes, toys, household appliances, automotive components, electrical components, chemicals and toiletries
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32.In total, approximately
17 million items, or 18 percent of the total number of detentions made by EU custom's authorities in 2009, had the potential to place consumers at risk
33.
The rise of potentially dangerous counterfeit consumer products was illustrated in May 2010, when a two-year Europol investigation resulted in the seizure of 800 tons of counterfeit electrical products, including fake electricity generators, power drills and chainsaws, which did not comply with any European safety standards
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34.UNICRI also confirms that dangerous
counterfeits have infiltrated the automotive markets and that the incidence of counterfeit spare parts in the automotive sector could represent a loss to the industry of USD 12 billion per
year35. In addition, UNICRI reports that according to the Toy Industries of Europe (TIE), one
toy out of ten, in Europe, could be a counterfeit36.
According to the 2009 Frontier Economics study, the economic cost of deaths resulting from counterfeiting amounts to EUR 14.5 billion and the additional cost to health services, incurred in treating injuries caused by dangerous fake products approximately adds another EUR 100 million
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37.Moreover, the Centre for Medicine in the Public Interest, a US-based medical
research group, predicted that worldwide sales of counterfeit medicines would reach USD 75 billion in 2010, which is a 90 percent surge from 2005
38.
IPR infringements create serious problems for European SMEs. The 2007 study carried out on behalf of the DG Enterprise and Industry confirmed that SMEs were found to have been affected by lost sales, as a direct result of counterfeiting and piracy
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39.The report noted
that, in 2006, 20 percent of SMEs in the EU estimated that around 5 percent of job losses in their companies had been specifically due to counterfeiting and piracy and that the problem also reduced their ability to retain key staff. The staff of these SMEs was concerned about the future prospects of the businesses, due to the continued rise of counterfeit and pirated products. Moreover, the report confirmed that many SMEs lack sufficient knowledge, resources and finances to pursue infringers. In 2008, the Commission carried out a Best Practice project aimed at helping SMEs to better enforce their intellectual property rights, by improving available support. As part of the project, SME support and IPR enforcement experts from Member States analysed SMEs' perceived needs and available enforcement options
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40.As a result, the Best Practice Group encouraged the co-ordination of IPR
enforcement activities at national and EU levels, thus supporting the creation of an EU Observatory on counterfeiting and piracy to actively help SMEs fight the dangerous phenomenon of counterfeiting and piracy.
IPR infringements result in losses of tax revenues due to a reduction in declared sales. Value added tax (VAT) authorities in the UK alone estimate losses equivalent to GBP 1.5 billion due to the circulation of counterfeit goods
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41.This deficit in tax revenue may result in
tightening government expenditure in crucial areas, such as social policies42. The Frontier
Economics' study estimated that, in 2009, EUR 62 billion in tax revenue and higher welfare spending was lost in G20 countries due to counterfeiting and piracy
Counterfeiting and piracy is attractive to organised crime. At present, profit margins from counterfeiting and piracy are extremely high and, in comparison to other forms of illegal activities, the penalties are low. As a result, they have become an attractive investment for organised crime
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44.UNICRI confirms that organised crime manages a significant proportion of
counterfeit trafficking. The global trade in counterfeiting and piracy involves complex manufacturing chains and connections between legitimate and other illegitimate business partners, some of whom operate in other illicit trades such as illegal immigration and human trafficking
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45.A 2009 report from Rand (Center for Global Risk and Security)46, which
compiled responses from 120 law enforcement representatives from over 20 countries, confirms the existence of "compelling evidence of a broad and continuing connection between film piracy and organised crime. Piracy is high in payoff -- with profit margins greater than those of illegal narcotics -- and low in risk, often taking place under the radar of law enforcement." In particular, the Rand report also identified movie piracy as a funding method of the IRA, D Company India/Pakistan (both are major organised crime and terrorist organizations). Additionally, Interpol provides examples of how counterfeiting and piracy financially supports groups such as Chechen separatists, Hezbollah and Al-Qaeda
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47.The
Frontier Economics' study offers the added information that during 2008, G20 countries suffered EUR 20 billion in increased costs of crime due to counterfeiting and piracy. One example where the involvement of organised criminal networks became evident was in a joint operation of law enforcement agencies concluded in May 2010
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48.With the support of Europol
and Eurojust, agencies from seven European Union Member States took action against a network of criminals who were behind a substantial system of trafficking counterfeit commodities. Europol identified a criminal network centred in the vicinity of Naples which stretched to Australia, Iceland and Finland. The subsequent seizure of materials and assets exceeded a value of EUR 11 million.
3.3.4. Likely development of the situation over the next few years
Past experience and information currently available suggests that, with the economy recovering from the crisis, an increase in counterfeiting and piracy can be expected. Therefore, its dangerous and damaging impacts will become even more prevalent and serious in future years.
40 percent), this would mean that in 2014, we could expect the number of registered cases to have at least doubled, thus approaching around 100,000 per year.
Concerning training and awareness raising measures as well as research and data collection, and considering the position of the Member States in times of austerity in public budgets, there are no indications that any additional action to strengthen enforcement can be expected. The same is true for the exchange of best practices and private sector strategies and the improvement of day-to-day cross-border cooperation, which are difficult to organise at a national level. On the private sector side, important activities can be expected particularly in the area of research on "tracking and tracing" methods. However, there is likely to be some reluctance on the part of companies to share their results, which may be considered to be valuable assets that could provide a competitive advantage.
With reference to international activities, taking into account the number of institutions and agencies involved the existing coordination problems at EU level are likely to remain.
-
Problem tree
The European Observatory on Counterfeiting and Piracy is unable to
deliver on its aims
Lack of hu manLack of Lack of infrastructu re in Lack of Broadened
resourcesfin ancin gter ms of IT, meetin g expertiserange of
facilities etc.tasks
Lack of independent robust figures and statisticsLack of promotion and spread
of best practice s among public authoritiesLack of speading of successful private sector strategiesLack of professional European public awareness campaignsLack of technical training and development programsLack of research a nd information
on technical tools and resourcesLack of interna tional cooperation and technical assistanceLack of a comprehensiveEU-wide system for the exchange of information
S OCIET YCON SU M ER SCOM PANI ES
-Lost jobs-Safety ris ks-Les s investm ents d ue to m or e risks
-Lower ta x rece ipts-Lowe r va lue/q ual ity pro ducts-Low er focus o n in no vatio n
-Increased crim e -Unw illing purchas es-Safety ris ks
-Low er va lu e/q uality pro ducts p roduce d/so ld
Sign ifican t h arm to t he European econ omy, h ealth an d security of European citizen s
-
4.SUBSIDIARITY
Many of the activities that have been assigned to the European Observatory on Counterfeiting and Piracy are of a cross-border nature, involving all 27 Member States, and therefore they cannot be effectively delivered by individual Member States. As far as there is a need to improve bilateral cooperation between two Member States, in individual cases procedures could theoretically be improved at this level. However, given that the tools and methods needed in such a context would be similar for all Member States, it seems more efficient to develop them at EU level. This will ensure that solutions that are developed do not build on individual Member States' specificities, but provide benefits for all Member States. Furthermore, as far as relations with third countries are concerned, coordination within the Commission services and with other EU and international agencies must take place at the EU level.
Therefore, an EU initiative seems to be the most effective and appropriate way forward. Such an initiative could potentially be based on Articles 114 and 118(1) TFEU (ordinary legislative procedure). A legislative proposal could be tabled in spring 2011.
-
5.OBJECTIVES
General objective: To enhance effective enforcement of IPR, in order to avoid significant harm being caused by counterfeiting and piracy to the European economy and to the health and safety of European citizens.
Specific objective: To enhance knowledge, among public authorities and private stakeholders about the scope, impact and trends related to counterfeiting and piracy and about effective techniques to fight the problem, and to improve day-to-day cooperation; to inform consumers of the economic impact and dangers related to counterfeiting and piracy and to help avoid them from being misled into buying fake products; to improve the coordination of actions directed towards third countries.
These objectives are in line with existing EU policies and strategies, such as Europe 202049.
They also fit with the Commission's main priorities and proposals concerning its IPR strategy for Europe
O b je c tiv e s h ie ra r c h y
E n ha n ce p ro p e r en fo rc em e n t o f IP R in E u rop e to a vo id
ha rm c au s ed to the E u ro pe an ec on o m y an d to the
h e alth a n d sa fe ty o f E u rop e n c itize nsG E N E R A L
b y co u nterfeitin g an d p ira cyO B J E C T IV E
Ind e p e nd e n t,
E U w id e
co lle c tion
a nd a n al ys is
o f o b je c tive
a nd re liab le
d ata E xc h a n g e o f
b e s t
p ra c tic e s
b e tw e e n
p u blic
a u th o ritie s
a n d b e tw ee n
p ri va te s ta ke ho ld e rsP u b lic a n d
p rofe ss io n a l
a w a re n e s s c a m p aig n sT r a inin g
p ro gra m s for p ro fess io n a lsR e s e a rch o n
to o ls to fig h t
c o u n terfe itin g a n d p ria cyC oo p e ra tio n
w ith a n d
ca p a c ity
b u ild in g in
th ird co u n triesP o ss ib ility to
ex c ha n g e info rm a tion
be tw e e n
en fo rc em e n t
au th o ritie s
S P E C IF IC
O B J E C T IV E
E n s u re th at th e E u ro p ean O b se rv a to ry o n C o u n te rfe itin g an d P ira cy h as
n ec es sa ry in frastru c tu re to d elive r its a c tiv ities effe ctiv e ly th ro u g h :
O P E R A T IO N A L
O B JE C T IV E S
S u ffic ie n t
h um a n res ou rc e sS u sta in a ble
fu n din gN e ce s sa ryIT an d
m e etin g c a p a citiesE x pe rtis e
re q uire d to
c a rry o u t its
ta s ksN ec e ss ary
in d e p en d e n c e fro m ve s te d in te res ts
-
6.POLICY OPTIONS AND ANALYSIS OF THEIR IMPACTS
6.1. Introduction
The following three main options are explored with a view to the achievement of the objectives identified in section 5:
Option 1: The tasks are delivered within the Observatory which continues to be administered by DG MARKT, with uplift in available resources:
Sub-option 1a DG MARKT's human and budgetary resources are increased.
Sub-option 1b The management of the Observatory is outsourced on a
commercial basis to an external contractor.
Option 2: The tasks are delivered by an external body, on the basis of an industry led
initiative:
Sub-option 2a Industry led initiative, financed by private sector stakeholders.
Sub-option 2b Industry led initiative, financed by a Commission grant/program.
Sub-option 2c Public-private partnership (PPP).
Option 3: The Observatory is entrusted to an EU agency:
Sub-option 3a The Observatory is entrusted to a newly created EU agency.
Sub-option 3b The Observatory is entrusted to an existing EU agency.
Whichever option is chosen, the Commission will retain the political control of EU IPR enforcement policies which are to be considered core tasks of the Commission.
In terms of human resources, under this option, DG MARKT would retain two AD staff to continue to carry out policy related tasks, including those aligned to IP rights other than trademarks and designs. In addition, the DG MARKT personnel would provide briefings and coordinate policies linked to the work of the Observatory.
Annex III shows that in this scenario seven staff would have to be employed during the first two years, in addition to the current three staff members. The majority of these additional staff (four persons) would to be employed as officials or temporary staff, dealing with essential, substantive work strategies and initiatives related to raising public awareness, training, the development of technical tools and databases and systems to improve information exchange The other three members of staff, as well as the replacement for the assistant currently on secondment from the OHIM and dealing with the Observatory could be contract agents, providing support in terms of IT and the organisation of meetings. At cruising speed (24 additional persons plus the replacement for the assistant), staff should probably consist of fifteen officials/temporary agents and ten contract agents. The posts for the temporary staff and/or officials would have to be made available from the Commission's establishment plan, which however will not increase over the next three years, in line with the Commission's own commitment not to request any new posts for the period between 2009 and 2013
-
51.In this
situation, an increase in staff numbers of the magnitude mentioned above seems hardly realistic.
Furthermore, even in a situation where the staff would be made available, the largely technical work to be carried out in the context of the Observatory would constantly need to compete with other primary tasks of the Commission, in particular policy making. Therefore, a permanent threat would exist that staff assigned to support its activities could be reallocated, even on a temporary basis, to other urgent tasks in the policy field. This would jeopardise the continuity of the Observatory's work.
Finally, although the Commission's IT services would be technically able to run systems, such as those required by the Observatory, there would be a serious risk that the creation and management of these systems would not be assigned the necessary priority, but ranked after other primary tasks, scheduled to ensure the running of the Commission's daily activities. A similar risk would also exist with a view to certain tasks related to public awareness strategies and campaigns.
Table 1: Costs of option 1a (compared to baseline scenario)
Years Staff Costs52 Admin Meeting/ Costs IT systems Total yearly costs
required Costs missions
costs
Basic Sophisticated Basic IT Sophisticated
IT
n53 8 0.77 incl. 0.5 1.9 2.9 3.17 4.17
n+1
n+2 + 25 2.57 incl. 0.59 2.23 3.01 5.398 6.17
6.3. Option 1 sub-option 1b: Outsourcing on a commercial basis to an external contractor
6.3.1. Description
Under this sub-option, DG MARKT would not run the Observatory's operational activities itself, but only act as the supervising contract manager, employing one or several external contractors to help deliver the Observatory's tasks.
6.3.2. Analysis
The governance structure of the Observatory would remain unaffected as the Commission would continue to be in charge.
Also most of the Observatory's activities set out above could be successfully carried out through an external contractor and therefore most of the objectives set out in section 5 could be met. An exception applies however in relation to the task of data collection and analysis. In this respect, the problems encountered in the context of previous studies on the scope and impact of counterfeiting and piracy makes it appear unlikely that private stakeholders and public authorities would be willing to share data, which is often perceived as sensitive, with external private sector contractors, even if the Commission would remain ultimately responsible. Therefore, although it would be technically possible to outsource this activity, it seems questionable as to whether the objective pursued would be attainable.
actions would be focused on very divergent issues, such as public awareness, enforcement, legal matters, technical assistance, IT, specialised research, training etc. Also, most of these actions are designed to run over extended periods of time. An ideal contractor would therefore need to be a specialist in all of these aspects and at the same time be able to provide the guarantee that all of these actions could be secured over a considerable time span. Based on current knowledge, finding a suitable contractor, with the necessary capabilities, facilities and capacity, seems unlikely. Instead, it is estimated that to deliver the Observatory's pillars of work, between seven and ten different contractors, with specialised competencies, would be required (for details see Annex V).
The management of these contracts (including the preparation of calls for tender, evaluation processes, contract negotiations, monitoring of contract performance and ensuring coherence between the different projects) would cause additional costs.
In contrast to option 1a, all staff currently working on the Observatory's activities would also need to be maintained. In particular, the AST official to organise meetings etc would continue to be needed as this 'horizontal task' would not be included within the contracts.
An estimation of potential contracts and indicative costs is outlined in Annex V. Compared to the baseline scenario, they can be summarised as follows:
Table 2: Costs of option 1b (compared to baseline scenario)
Years Contract AdmiCost for COM Cost Costs IT systems Total yearly costs
costs n meetings staff
(other Costs +missions contract
than IT) managemBasic SophisticBasic Sophisticated
ent ated IT IT
n 2.11 incl. 0.56 4-6 0.26-0.4 1.9 2.9 4.83-5.83-5.97
n+1 4.97
n+2 + 2.11 incl. 0.66 4-6 0.26-0.4 2.23 3.01 5.26-6.04-6.18
To deliver the Observatory's tasks and therefore most of the results should be technically feasible.
However, as far as data collection and analysis are concerned, it should be recalled that there have been many studies carried out by industry bodies on the phenomenon of counterfeiting and piracy. All have been contested due to their perceived partiality. Therefore there are serious doubts about whether such an initiative would guarantee the necessary independence and objectivity to produce reliable analyses. Furthermore, in this context, it seems doubtful that it would be possible to mobilise public and private stakeholders, to make them cooperate and provide the necessary information. The same difficulties are also likely to arise in respect of the objectives aimed at ensuring exchanges of best practices and fostering cooperation with third countries.
With a view to other activities, the necessary independence from vested interests would have to be guaranteed through specific measures. In particular, where the level of financial contributions from stakeholders differed, there would be a risk that certain sectors, through higher contributions, might seek and gain a disproportionate influence on the way the work is prioritised and carried out. As a result, certain aspects of work might be neglected if they were of no immediate interest. In order to avoid such influence of vested interests and to ensure continuous funding, under this option, contributions would need to be determined by way of regulation.
Concerning the sustainability of the infrastructure in terms of human resources, funding and IT, the assessment of this option is negative. Despite the considerable problems presented by counterfeiting and piracy in the past, industry has never been able to work together in order to set up such an initiative. Consequently, there is no reason to assume that the Commission's request to launch such an initiative would change this situation.
The calculation of the costs of carrying out the different activities of the Observatory can be based on that made for option 1b, as it can be assumed that any such industry initiative would largely resort to outsourcing, with all the implications this brings in terms of infrastructure, overheads etc, instead of directly employing the necessary staff. Furthermore, a private initiative of this sort would necessitate the management of contracts with their related overheads. Therefore total staff costs could be estimated to be at least as high as the Commission's or even higher, as the size of the Commission leads to considerable economies of scale in this respect.
Table 3: Costs of option 2a
YearContra ct costs Admin Cost for Staff for contract Cost Costs IT systems Total yearly costs
s Costs meetings
(other +missions managem
than ent Basic SophisticBasic Sophisticated
IT) ated IT IT
n 2.11 incl. 0.628 4-6 0.26-0.4 1.9 2.9 4.89-5.89-6.03
n+1 5.03
n+2 + 2.11 incl. 0.69 4-6 0.26-0.4 2.23 3.01 5.29-6.07-6.21
5.43
Under this option, there would be no costs for the EU budget. Instead, certain savings would be made as the current work of the Observatory would not have to be financed any more from the EU budget: these savings would amount to EUR 38,773 for reimbursements of Member States' experts and the organisation of the Observatory's meetings
54.
6.5. Option 2 sub-option 2b: The tasks are carried out through an industry led initiative financed through a Commission grant/program
6.5.1. Description
Under this option, the Commission would offer a grant, e.g. through an EU program, for an initiative to be run by the private sector. As under option 2a, the private sector stakeholders would be responsible for delivering the objectives set out in section 5.
6.5.2. Analysis
The impact on the Observatory's governance structure would be largely the same as under option 2a. Also the disadvantages concerning the potential to deliver the Observatory's tasks under this option are largely the same as those in the previous option.
overall cost, compared to the baseline scenario, would lie between EUR 4.85 per year at the lower end or EUR 5.99 million at the upper end in years n and n+1, depending on the design of the IT systems to be developed, and between EUR 5.25 million and EUR 6.17 million from year n+2.
6.6. Option 2 sub-option 2c: The tasks are carried out in the framework of a public- private partnership
6.6.1. Description
Under this option, the Commission and the private sector would cooperate under the terms of a contract, which would determine the contributions and the modalities of the work to be carried out by an entity outside the Commission services.
6.6.2. Analysis
This option would avoid a number of the disadvantages outlined in the previous options. The contract would determine the level of influence of each of the partners, including the Observatory's governance structure and the Commission's role in that context, and ensure continuous funding, at least for the duration of the contract. The continuous involvement of the Commission would facilitate an assurance that public authorities and private stakeholder both contribute to the work in an appropriate way.
However, the close involvement of the private sector would probably continue to make data collection and objective analysis an issue. The feasibility of this option can also be questioned, as although the private sector, in this scenario would have to contribute only a part of the costs, it seems doubtful that industry would be ready to commit to such an initiative.
In terms of timing, this option is likely to be similar to option 2b. The costs for the EU budget would depend on the modalities of the contract. Here, an equal share for the Commission on the one side and the private sector on the other would seem most appropriate. This means that the yearly costs for each side can be estimated to be half of those for sub-option 2a, i.e. between EUR 2.45 and 3.02 million in years n and n+1, and between EUR 2.65 and 3.11 million from year n+2.
6.7.2. Analysis
EU agencies are fairly independent bodies with their own legal standing, and their own budget and establishment plan. The Commission only exercises remote control functions via the 'parent DG' ('DG de tutelle'), without influencing the agency's day-to-day management which normally is the responsibility of the agency's director. The agency director therefore, under this option, would also be responsible to determine the governance and functioning of the Observatory, to the extent that this is not dealt with in the agency's basic regulation. The Commission would retain political control and responsibility for enforcement related policy initiatives.
Agencies are set up by an act of secondary legislation in order to accomplish a very specific technical, scientific or managerial task. Accordingly, the option of creating a new EU agency has the potential to allow the delivery of all the objectives described in section 5.
The range of tasks to be carried out by a new agency and the number of staff required are identified in Annex III.
However, the probable size of the Observatory is unlikely to justify the creation of a new agency. As identified in the external evaluation of EU decentralised agencies, carried out on the Commission's behalf in 2009
55, a certain minimum size ("critical mass") in terms of
human resources is required for an agency to undertake its tasks efficiently. The evaluator concluded that this critical size lies somewhere between 50 and 100 staff members. The "critical mass challenge" was also highlighted in a recent study by the European Parliament
56
which revealed that agencies with less than 100 people have a much higher proportion of administrative staff, which suggests that they face certain efficiency constraints. As indicated in Annex III, the tasks of the Observatory would only justify operational staff of 25 people, which would clearly lie below this indicative threshold.
The figures contained in Annex III illustrate the problem. With operational staff of 25 people at cruising speed (of which about sixteen could be contract agents as this staff type can be employed in agencies on a permanent basis
57), the agency would require at least five
additional staff members to deal with administrative tasks (human resources, finance, IT etc). The staffing costs would therefore, in total, amount to EUR 1 million during the first two years. In addition, the setting up of the agency would also require additional resources from inside DG MARKT which would incur additional costs of EUR 127,000 /year during the first two years (for details see Annex III), and also under this option the current two AD officials in DG MARKT would continue to take care of policy related tasks. From the following year there would be a reduction of costs, due to the completion of IT development and the setting up of the agency.
The total costs of this option are detailed in Annexes III and IV. They can be summarised as
follows:
Table 4: Costs of option 3a (compared to baseline scenario)
Years Agency Cost incl. Meeting/ Costs IT systems Total yearly costs
staff facilities mission costs
required Basic Sophisticated Basic IT Sophisticated
IT
n-n+1 15 1.93 0.5 1.9 2.9 4.33 5.33
n+2 + 30 2.68 0.59 2.23 3.01 5.5 6.28
Agencies are financed either from the European Union's budget or via fees paid by their users. The Observatory does not provide any payment related services or products to businesses;
therefore, its activities will not generate any fees. In these circumstances, the costs of the agency would need to be entirely covered by a subsidy from the EU budget.
Furthermore, the establishment of a new agency is complex and time consuming. Recent examples, such as the setting up of the Agency for the Cooperation of Energy Regulators (ACER) in Ljubljana, have shown that, apart from the time needed for the adoption of the agency's basic regulation (which can be estimated at between 18 to 24 months), it can still take several years for the agency to be fully up and running. Therefore, this option would not ensure appropriate support for the Observatory's activities in the short and medium-term.
6.8. Option 3 sub-option 3b: The tasks of the Observatory are entrusted to an existing agency
6.8.1. Description
Under this option, the Observatory would be run by an existing agency, which currently carries out other tasks. This would allow the Observatory to profit from existing administrative structures (such as human resources and finance).
It therefore seems more rational to consider the Office for Harmonisation in the Internal Market (OHIM) which is the EU agency responsible for registering Community trade marks and designs, valid in all 27 EU Member States. Given the clear relationship between the protection of IP rights and their enforcement, the expertise already available within the OHIM appears particularly pertinent to taking over the Observatory's tasks. The OHIM also has natural working relations with national IP offices, many of which are responsible for leading on national enforcement strategies and coordination structures. Consequently, networks exist that could be further developed by the OHIM to ensure that the work of the Observatory is carried out. Moreover, the OHIM also has an established basis for expertise in the area of enforcement of trademarks and designs, through its seminar series for judges. In addition, enforcement is incorporated into other training activities and the Office has already promoted IP awareness through tools such as the 'Hands off My Design' e-learning website. Furthermore, the OHIM has created a legal database of infringement cases, drawn from information throughout the EU. It will also develop other enforcement related projects, through the OHIM Cooperation Fund. One such project will create a multi-modular tool to assist investigations by allowing customs and other enforcement authorities to consult information on registered trade marks and designs, as well as contact information for right holders and other information to allow easier detection of counterfeit goods.
The expertise available within the OHIM concerning the enforcement of trade marks and designs provides a good basis for expanding this work. Additional expertise would in particular need to be acquired in relation to copyright issues and patents. This could be achieved through the recruitment of specialist staff and, possibly, the training of existing, redeployed staff. This basis would create important synergies between the tasks of the Observatory and those currently carried out by the OHIM. As a result, such synergies could significantly limit the number of additional staff needed to be employed to carry out the tasks of the Observatory (for details see Annex VI). Instead of the 25 staff mentioned in Annex III, only 19 staff would be required to be employed as of the third year, as economies equivalent to that of six man-years could be made through synergies within existing functions. The total costs of this option, which are detailed in Annexes V and VI, can be summarised as follows:
Table 5: Costs of option 3b (compared to baseline scenario)
handover of tasks could be done through a smooth and staged transition that would ensure that the Observatory's tasks continue to be carried out without any disruption.
The possibility of involving the OHIM in enforcement related activities, and more generally, in broadening the scope of its competences has already been discussed and supported, in particular, by Member States and the European Parliament. In its conclusions of 25 May 2010 on the future revision of the Trade Mark system in the EU, the Council invited the Commission to include in its modifications to the Community Trade Mark Regulation and Trade Mark Directive "the establishment of a clear legal basis for the involvement of the OHIM in enforcement-related activities, including the fight against counterfeiting, in particular through fostering its cooperation with the National Offices, in accordance with their national competences, and the European Observatory on Counterfeiting and Piracy"
-
58.The
European Parliament addressed this issue in its Resolution of 22 September 2010 in which it called on the Member States and the Commission to extend cooperation between the OHIM and national intellectual property offices, to cover the fight against IPR infringements. Moreover, the Parliament's Forum on counterfeiting, contraband and organised crime viewed the idea to entrust the OHIM with the management of the Observatory as the most suitable solution to enhance the Observatory's effectiveness.
Furthermore, the issue of introducing additional tasks to the OHIM, particularly in relation to enforcement (e.g. anti-counterfeiting activities), was analysed within the framework of an external study, commissioned by the Commission, on the overall functioning of the trade mark system in Europe
-
59.The Max-Planck-Institute that carried out the study concluded that a
role for the OHIM in this area should be foreseen. The survey of user organisations showed that while in general they do not perceive a particular need for the OHIM to expand its activities they would see merit in assistance related to enforcement of IP rights.
In legal terms, entrusting the management of the Observatory to the OHIM would require a change to the agency's current legal basis or the adoption of a new Regulation on new tasks for the OHIM in relation to enforcement activities. Such a Regulation could possibly be based on Articles 114 and 118(1) TFEU. In practice, the management of the Observatory could be entrusted to a new section which would be established in the OHIM and function as an integral part of the Office.
sector to launch such an initiative, and also does not thus offer a suitable solution to the problem. The risk of undue influence by vested interests would pose a problem with a view to the overall objectives of the initiative. Furthermore, the sensitivity of some of the information to be handled would create an additional problem as far as data collection is concerned.
These two options are therefore not contained in the Table 6, below, which provides a summary of the analysed suitable options:
Table 6: Comparison of options
Assessment Effectiveness (achievement of objectives) Efficiency Overall
assessment
Sustainable funding Stable structure Human resources IT capacity Indepen- dence from vested interests Time needed Overall costs Implication for EU budget
Options
Option 0
(base-line
scenario)
Option 1b + + + + - between between +
EUR 4.83 EUR 4.83
and 6.18 million / and 6.18 million /
year year
Option 2b + - + + - -- between between -
EUR 4.89 EUR 4.85
and 6.21 million / and 6.17 million /
year year
Option 2c + + + + -- between between +
EUR 4.89 EUR 2.41
and 6.21 million / and 3.07 million /
objective defined in section 5. However, both options have high overall costs and a high impact on the EU budget, which is strongly negative. Options 2c (public private partnership) and 3a (newly created EU agency) also offer solutions that would reach all the objectives set out in section 5 a least to a certain extent. However, again, both have an adverse impact on the budget and in the case of option 3a this is particularly negative. Both options would also result in a significant delay in getting all activities up and running.
By contrast, option 3b would provide all of the advantages of option 3a but also allow the objectives to be achieved relatively soon. Furthermore, it would lead to a very cost-efficient solution (with overall costs ranging from EUR 3.3 to 5.52 million) and would allow the costs to be covered from budgetary means outside the EU budget (which would benefit of certain savings). Option 3b is therefore the preferred option.
-
8.MONITORING AND EVALUATION
Should a decision be taken to entrust the tasks of the Observatory to the Office for Harmonisation in the Internal Market (OHIM), then the full effect of the resulting conditions will need to be monitored, measured and evaluated, to ensure the decision has achieved its intended objectives. To this end, five years after the entry into force of the Regulation entrusting the OHIM with the management of the Observatory, the Commission should establish an evaluation report and transmit it the European Parliament and to the Council.
This report would be composed of:
(1) An assessment of the results that will be published by the Observatory in quarterly highlight reports and in its annual report, based on comprehensive, objective data.
(2) Any audit reports carried out by the OHIM on the work of the Observatory;
(3) A survey of public and private stakeholders on their perceptions of the Office's work, in terms of comprehensiveness, reliability, accuracy, usefulness, objectivity and independence of its results.
· Quality of reports and research (accuracy and usefulness), quality and impact of strategies
that will be developed in the fields of public awareness, research and training, including the number of campaigns carried out successfully and the number of persons trained, accessibility of databases and the extent to which these databases have been used in practice.
ANNEX I: MEMBERS OF THE EUROPEAN OBSERVATORY ON
COUNTERFEITING AND PIRACY
-
1.MEMBER STATES
Table 7: Member States' representatives to the Observatory
Member State Ministry/Office
Austria Federal Ministry of Finance
Belgium Federal Public Service of Economy
Bulgaria Bulgarian Patent Office
Cyprus Permanent Representation of the Republic of Cyprus to the EU
Czech Republic Generalni reditelstvi cel (the General Directorate of Customs)
Denmark Danish Patent and Trademark Office
Finland Kotka Customs
France CNAC (Comité National anti-contrefacon) INPI (Institut National de la Propriété Industrielle)
Germany Federal Ministry of Justice
Greece Hellenic Industrial Property Organization
Hungary Hungarian Patent Office
Ireland Customs Division, Office of the Revenue Commissioners
Member State Ministry/Office
Romania Public Ministry, Prosecutor's Office attached to the High Court of Casation and Justice
Slovakia Slovak Industrial Property Office
Slovenia Slovenian Intellectual Property Office
Spain Oficina Española de Patentes y Marcas
Sweden Ministry of Foreign Affairs
United Kingdom Copyright and Enforcement Directorate, Intellectual Property Office
-
2.PRIVATE STAKEHOLDERS
Table 8: Private sector representatives to the Observatory
Organisation (acronym) Full name Description
ABAC BAAN Association Belge Anti- Contrefacon ABAC-BAAN is a Belgian non-profit organisation that helps companies to fight counterfeiting, does not focus on a single segment
of the market.
ACT Association of Commercial Television in Europe Association of Commercial Television in Europe (ACT) is a trade association representing the interests of the commercial broadcasting sector in Europe. The ACT has thirty member companies active in 34 European countries, operating several hundred free-to-air and pay-tv channels and distributing several hundred channels and new services.
AIM Association des Industries de Marque (European Brands Association) AIM is the European Brands Association. It represents the branded goods industries in Europe on issues which affect the ability of brand manufacturers to design, distribute and market their brands. AIM's membership groups 1800 companies of all sizes through corporate members and national associations in 22 countries. These companies are mostly active in every day consumer goods. They employ some two million workers and account for over 350 billion Euro in annual sales in Europe alone.
Organisation (acronym) Full name Description
APM Aktionskreis gegen Produkt- und Markenpiraterie e.V. REACT Germany The German Anti-Counterfeiting Association (APM) is a cross- industrial alliance in the protection of intellectual property anda joint initiative by the German Association of Chambers of Industry and Commerce (DIHK), the Federation of German Industry (BDI), and the German Brands Association. It currently has 74 members.
ARCC The Romanian Anti- counterfeiting Association The Romanian Anti counterfeiting Association (ARCC) was established for the primary purpose of monitoring the cases of counterfeiting by their identification by any means necessary and drawing up strategies and programs to bring them to pubic attention.
BASCAP Business Action to Stop Counterfeiting & Piracy Business Action to Stop Counterfeiting and Piracy BASCAP is an initiative launched by the International Chamber of Commerce to connect and mobilize businesses across industries, sectors and national borders in the fight against counterfeiting and piracy and to pool resources and expertise.
BEUC The European Consumers' Organisation Has a membership of 43 national consumer organisations from 31 European countries (EU, EEA and applicant countries). BEUC acts as the umbrella group in Brussels for these organisations.
BSA Business Software Alliance Business Software Alliance (BSA) is a non profit trade association created to advance the goals of the software industry and its hardware partners. Headquartered in Washington, DC, BSA is active in more than 80 countries, with dedicated staff in 11 offices around the globe. Members include HP, Adobe, Apple, Cisco, Dell, IBM, Microsoft, Siemens, Symantec etc.
BUSINESSEUROPE Confederation of European Business Through its 40 member federations, BUSINESSEUROPE represents 20 million companies from 34 countries.
CECCM Confederation of European Community Cigarette Manufacturers CECCM is a non commercial association which was formed to represent the common views of major European based cigarette manufacturers and several National Manufacturers Associations.
Organisation (acronym) Full name Description
ECPA European Crop Protection Association ECPA represents the crop protection industry's European regional network. Their members include all major companies and national associations across Europe currently there are 59 members listed on their website.
EDIMA European Digital Media Association EDiMA is an alliance of new media companies whose members provide new media platforms offering European consumers a wide range of online services, including e-content, media, E-commerce, communications and information/search services. EDiMA represents some of the largest new media companies and Internet platforms operating at the European level and interested in the development of the European online market. Current members: Amazon, Apple, B!, e-bay, Orange, Google, Microsoft, Music choice, Napster, Nocial, Real, Tiscali and Yahoo.
EECA - ESIA European Semiconductor Industry Association EECA-ESIA represents the European-based semiconductor industry. The semiconductor industry provides the enabling technologies at the forefront of the development of the information society. This sector supports around 115,000 jobs directly and up to 500,000 induced jobs in Europe, in a market valued at over 21bn (bn) in 2009.
Currently they have 18 company members, 8 national member associations and 3 research institutes.
EFPIA European Federation of Pharmaceutical Industries and Associations The European Federation of Pharmaceutical Industries and Associations (EFPIA) represents the pharmaceutical industry operating in Europe. Through its direct membership of 32 national associations and 40 leading pharmaceutical companies, EFPIA is the voice on the EU scene of 2,200 companies committed to researching, developing and bringing to patients new medicines that will improve health and the quality of life around the world.
Euratex European Apparel and Textile Confederation EURATEX is the association of the European textile and clothing industry.
Organisation (acronym) Full name Description
FESI Federation of the European Sporting Goods Industry FESI is the European representative of the sporting goods industry vis-à-vis the European Institutions as well as other European authorities and bodies. FESI represents some 1,800 companies with an annual turnover of more than 60 billion Euro.
GACG Global Anti- Counterfeiting Group (GACG Network) GACG is an informal network of national and regional IP protection and enforcement organisations. There are currently 23 Members covering 36 Countries (incl. Andema, ABAC/BAAN, MARQUES, Indicam, SACG, Unifab).
IFPI International Federation
of the Phonographic Industry IFPI represents the recording industry worldwide, with a membership comprising some 1400 record companies in 66 countries and affiliated industry associations in 45 countries.
INDICAM Instituto di Centromarca per la lotta alla contraffazione INDICAM represents nearly 180 companies, industry associations, law and IP firms, security consultants and other organisations daily engaged against counterfeiting activities that hit branded products. Members mainly Italian and International brand manufacturers operating in the Italian market.
INTA International Trademark Association INTA is a membership association of more than 5,900 trademark owners and professionals, from more than 190 countries, dedicated to the support and advancement of trademarks and related intellectual property.
ISFE Interactive Software Federation of Europe ISFE represents the interests of the interactive software sector vis-à- vis the EU and international institutions. Initially founded by the national interactive software trade associations in the UK, France, Germany and the Netherlands, ISFE was enlarged in January 2002 to include any company representing the industry within the 27 Member States plus Norway, Iceland, Switzerland and Liechtenstein. Thirteen major publishers of interactive software and thirteen interactive software trade associations throughout Europe have joined ISFE.
Organisation (acronym) Full name Description
SNB-REACT European Anti- Counterfeiting Network SNB-REACT is a non profit coalition with the objective to actively fight counterfeit trade. SNB-REACT members come from all sectors;
sports, footwear, football, fashion, merchandising, fragrances, household, automotive industry, mobile phone industry, toys and various.
SROC Sports Rights Owners Coalition SROC is an informal group of representatives of international and national sports bodies with a particular focus on rights issues. SROC operates as a forum through which sports bodies can share information and experiences.
TIE Toy Industries of Europe TIE is a non-profit trade association for the European toy industry.
At present membership includes 9 direct member companies and all major national toy associations, representing approximately 80% of European toy sales.
UEAPME The European Association of Craft, Small and Medium- sized Enterprises UEAPME is the employers' organisation representing the interests of European crafts, trades and SMEs at EU level. As the European SME umbrella
organisation, UEAPME incorporates 82 member
organisations from 34 countries consisting of national cross-sectorial SME federations, European branch federations and other associate members, which support the SME family. UEAPME represents more than 12 million enterprises, which employ around 55 million people across Europe.
UNIFAB Union des Fabricants Unifab is a French association whose members are companies and trade organizations of all sizes and sectors.
ANNEX II: IPR INFRINGEMENTS IN THE EU AND EU POLICY
ON IPR PROTECTION
-
1.THE EU POLICY ON IPR PROTECTION
Studies typically suggest that R&D spending is associated with an increase in productivity, with estimated gross rates of return (including both net return to capital and depreciation) ranging from 10 to 20 percent
-
60.Conditions which are conducive to investment include a
surety that investments in new creations and R&D are properly protected and can generate an appropriate return for investors and the creative industries. For the EU where, due to our high social standards and labour costs, most areas cannot compete on the basis of price, this is a crucial aspect. A 2007 survey involving over 400 EU-based executives
61 revealed the view of
these executives that, as Europe's industrial base has declined, the continent has come to rely upon its knowledge based workers. Ideas were therefore considered, by these executives, to be the EU's most valuable resource. In this respect, 53% of them said that the use of intellectual property rights will be very important or critical to their business models in two years, compared to 35% who considered this to be the case at the time of the survey.
The Commission therefore has been committed to creating a high-standard intellectual property (IP) culture
-
62.In the EU acquis, this policy is reflected in the Charter of Fundamental
Rights of the European Union, which states, in its Article 17(2), that intellectual property shall be protected. At the level of secondary law, harmonisation measures have been adopted in relation to certain aspects of copyright (such as the resale right of authors
63, the term of
protection64, exemptions from copyright in the digital environment65, and trademarks66).
Furthermore, the EU has created specific EU intellectual property titles that provide a unitary level of protection throughout the EU, namely the Community trademark
67 and the
Community design68, which are both administered by the OHIM. EU legislation also provides
for unitary protection throughout the EU for geographical indications (GI) of agricultural products and foodstuffs
69, wines70, spirit drinks71 and aromatised wines72.
Although the main focus of this policy is to safeguard the interests of right holders, it is not limited to this aspect as it clearly serves other interests in the market. For example, IP rights increase competition by facilitating the entry of newcomers to a market, in particular SMEs, which can attract venture capital or license production to incumbents. Furthermore, particularly in the aftermath of the financial crisis, the possibility of using IP rights as security facilitates SMEs' access to bank loans
73.
IPRs also form the basis for cultural creation, high quality journalism and a democratic press. Thus, copyright is fundamental to intellectual and cultural creation. It is also crucial for the maintenance of media plurality. The culture and media sectors can only be sustained when accompanied by adequate protection and income for those who devote their life to the creative impulse or those who invest heavily in creative industries.
IP protection also serves the interests of consumers by ensuring that buyers of goods and services can rely on acquiring products that meet their expectations in terms of quality, security standards and, in the case of luxury goods, brand and origin reputation. This aspect is of significant importance. In 2009, DG MARKT conducted a Eurobarometer survey
74, which
included a large scale quantitative telephone survey, delivering representative results for the EU population. The survey, which discussed internal market issues in depth, incorporated Focus Groups made up of citizens and business representatives, from all Member States. The results showed that one out of five EU citizens had on at least one occasion unintentionally bought a counterfeit product.
-
2.ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS
In the EU, the enforcement of all IP rights (including trademarks, copyrights and related rights, patents and geographical indications) is considered, in the first place, to be the task of the right holders. In this respect, the IPR Enforcement Directive provides right holders with civil law tools to enforce their rights before the courts.
These particular enforcement measures are complemented by a wider range of measures at national, EU and international levels, which are aimed at preventing and combating infringements of intellectual property rights on a larger scale.
investigations, through information and intelligence about products, consignments and potential infringements. Moreover, industry stakeholders regularly assist in offering training and awareness raising programmes for police, prosecutors, customs officials and other enforcement personnel. Finally, industry takes pursues violators of intellectual property rights through the courts
75.
2.2. Public sector
2.2.1. EU Member States
At national levels, over the years, Member States have put in place a wide variety of structured frameworks for combating counterfeiting and piracy. These enforcement structures, that in many Member States, are developed and led by national IP offices, have resulted in significant success stories
-
76.However, the frameworks have often been developed in
accordance with national requirements and needs. As such, different national structures are often unsuitable for use in other Member States. Consequently, there is no particular model that is applied all over the EU.
2.2.2. European Union
Over the past decade, several steps have been taken, both legislative and non-legislative, to improve the enforcement of intellectual property rights within the EU.
In the legislative area, the IPR Enforcement Directive, referred to above, has harmonised the laws of Member States in respect of civil measures for the enforcement of all IP rights. Furthermore, the Commission is currently assessing whether it is necessary to complement this Directive through criminal law measures. Depending on the result of this assessment, the Commission could present a new legislative proposal, which would replace the 2006 proposal for a Directive on criminal sanctions
-
77.Moreover, in the food and beverage sectors, the EU's
official feed and food control system78 includes geographical indications within the
architecture for the enforcement of food law.
To comprehensively fight infringements of intellectual property rights and safeguard EU competitiveness, internal market based schemes are complemented by those that focus on the EU's external borders and on third countries. The EU Customs Action Plan to combat IPR infringements for the years 2009-2012
Finally, the Commission has put in place a range of Free Trade Agreements (FTAs), negotiated with third countries, on provisions of protection for IP rights and has developed a long-term strategy for the enforcement of IPR in third countries
81, which is due to be
reviewed in 2011.
These regulatory measures are complemented by non-legislative measures. Various initiatives to exchange best practices are carried out by the European Commission. DG Enterprise and Industry and DG TAXUD regularly organise programmes linked to anti- counterfeiting work for customs and market surveillance authorities. Furthermore, the Commission has launched initiatives to improve businesses' knowledge about the tools available to successfully pursue infringers of their IP rights and to prevent infringements, both in Europe and abroad. One example is the China IPR SME Helpdesk, which provides EU SMEs, active in China, with the business tools they need to develop their IP rights and manage related risks.
In respect of actual enforcement activities, Europol has taken a lead by launching, in January 2008, an analysis work file (AWF), to focus on product piracy and IPR infringements
-
82.This AWF is the means by which Europol provides support, through
intelligence analysis, to investigations carried out by the competent authorities of the EU Member States.
However, the primary, inclusive initiative at the EU level is the European Observatory on Counterfeiting and Piracy. The functions and main pillars of the Observatory's work were described by the Commission its September 2009 Communication
-
83.One of the Observatory's
main objectives is to better map out the phenomenon of counterfeiting and piracy by collecting, analysing and reporting data related to IPR infringements, and to use this information to foster more effective responses. Other objectives involve spreading best practices for enforcement and developing awareness raising activities, in order to inform consumers of the negative economic and societal impact of counterfeiting and piracy and the potential dangers related to counterfeit products.
2.2.3. International enforcement related initiatives
members84. Other major international initiatives include the - recently concluded -
negotiations on the Anti-Counterfeiting Trade Agreement (ACTA)85.
In addition, various international organisations, such as the WIPO Advisory Committee on Enforcement and the World 26,704 in 2005 to 43,572 in 2009 Organisation (WCO) have taken action to assist countries to strengthen their systems and infrastructures, to enable more effective enforcement of intellectual property rights. Moreover, the Global Congress on Combating Counterfeiting and Piracy regularly brings together high level representatives from governments and from the private sector, to pool their experiences and enhance international coordination and cooperation. The Congress is convened by leaders from INTERPOL, WCO, WIPO, the International Chamber of Commerce initiative BASCAP (ICC/BASCAP), the International Trademark Association (INTA) and the International Security Managers Association (ISMA).
In terms of actual enforcement activities, since 2003, Interpol's Intellectual Property Crime Programme and Action Group (IPCAG)
86 has developed a strong partnership with
government authorities, enforcers and major business sectors affected by counterfeiting and piracy. In particular, a regular work program is carried out alongside the World Health Organisation's International Medical Products Anti-Counterfeiting Task Force (IMPACT)
87.
This has resulted in major operations, with seizures of counterfeit items worth millions of euro, including illicit medical products.
-
3.THE SITUATION CONCERNING IPR INFRINGEMENTS IN EUROPE TODAY
Despite these measures, the number of intellectual property rights infringements has continued to increase over recent years. In the latest OECD study, published in 2009, it was estimated that counterfeit and pirated goods in international trade have grown steadily over the last decade, from just over USD 100 billion in 2000, to up to USD 250 billion in 2007
88.
The OECD estimates this amount as being larger than the national GDPs of about 150 economies. While these figures are widely used to portray the overall dimensions of the problem, they are not fully comprehensive. The OECD reports that the collection of data was extremely difficult and often the figures were incomparable due to the different methodologies used for collection, analysis and reporting.
Figure 1: Cases registered by EU customs
Source: EU Customs report 2009
In the above figure, the slight decrease in cases from 2008 to 2009 is likely to be linked to the economic crisis than to a general change in trend. However, once again, these figures only provide an indication of the scope and scale of the problem, as they are limited to the situation at the external borders of the EU and depend on the activities and detection rates of national customs authorities.
In the online world, copyright infringements have increased at an exponential rate over the last few years. According to a French survey, 38 percent of the French Internet users admitted to having downloaded music from "torrent sites" in 2009, while only about 28 percent downloaded from such sites the year before
-
89.Furthermore, another 2010 study revealed that
44 percent of the Dutch Internet population over the age of 15 admitted file sharing in the previous 12 months (this equates to around 4.7 million people). 40 percent of these downloaded music
ANNEX III: STAFFING NEEDS AND COSTS UNDER
OPTIONS 1A (COMMISSION) AND 3A (NEWLY CREATED AGENCY)
This Annex sets out the staffing needs of the European Observatory under options 1a and 3a.
In the estimates, account is taken of the fact that contract agents (CA), in the Commission, can only be recruited for a maximum of three years
91, whereas they can be recruited on potentially
unlimited duration contracts in an agency. For option 1a, this means that most of the required staff would need to be officials and temporary agents (TA). The long-term stability required for the build up of expertise could not be guaranteed if a larger share of the staff needed to be recruited on such contracts. Only in the area of IT services, due to the nature of these services contract agents could be used under all options.
-
1.ESTIMATE OF STAFFING NEEDS OF THE OBSERVATORY UNDER OPTION 1A/
YEAR N92 AND N+1 (PRIORITY ACTIONS)
Where the secretariat of the Observatory would continue to be provided by the Commission services, these would have to be reinforced by 7 staff members during the first two years in order to deliver the most urgent tasks. The current two administrators (AD) would continue to deal with more policy oriented work (briefings etc) and to coordinate the work technical work set out hereunder. The assistant (AST) would continue to take care in particular of the organisation of meetings. Given that the assistant currently made available by the OHIM would not be at the disposal of the Commission any more, an additional post would have to be made available for these tasks.
Table 9: Staffing needs under option 1a in years n and n+1
Observatory's main Human resources required AD/Category IV AST/ Categories II and III
functions
Preparation of policy, briefings etc 1 person 1 Senior Administrator -
Observatory's main Human resources required AD/Category IV AST/ Categories II and III
functions
Training and professional development 2 persons 1 Senior Training Specialist to carry out research and assessments of training programmes existing at national, European (EJN, ETN, Europol etc) and international level (WIPO, OECD etc) and aimed at those engaged in enforcement related activities and to develop such training programs on European level. 1 Assistant
Technical tools and systems for prevention and investigation purposes 1 person 1 Senior Technical Researcher to research, catalogue, promote and spread technical tools and systems used to prevent and investigate counterfeiting and piracy, for example tracking and tracing. -
Case Law database 1 person 1 Junior Lawyer to collect and assess case law within and outside the EU; to assist in the development and maintenance of a data base of relevant case law; to provide legal advice on the service on all enforcement related matters. -
Systems to improve information exchange 2 persons 1 Junior IT Systems Analyst to ensure the global project management, and -
1 Junior IT Analyst to coordinate the development of a cross border system to allow authorities to rapidly exchange information on counterfeiting and piracy issues, including rapid notification and alert facilities on seizures of potentially dangerous items and other significant enforcement related developments, and the implement of such a system at a European level.
Total: 10 persons 8 Administrators 2 Assistants
-
2.ESTIMATE OF STAFFING NEEDS OF THE OBSERVATORY UNDER OPTION 3A/
agency, another two AD man years (i.e. one administrator per year) would be required in the Commission services.
This option, in the first two years, would therefore lead to two plus one administrators working on tasks related to the Observatory inside the Commission, plus eight administrators and two assistants working in the agency on the tasks of the Observatory, i.e. in total eleven staff more than under the baseline scenario. To these staff, administrative staff in the agency will have to be added (see section 4.1 below)
-
3.ESTIMATE OF STAFFING NEEDS OF THE OBSERVATORY UNDER OPTIONS 1 A AND 3A/
YEARS N+2 TO N+5
In the year following the entry into force of the legal instrument, the Observatory should grow into its final setting which, by this stage, would allow it to run all activities envisaged. In view of the size of the project, it would seem appropriate that under both options a Head of Service should be appointed, as well as an administrator coordinating the Observatory's work.
Table 10: Staffing needs under options 1a and 3b as of year n+2
Observatory's main Human resources required AD/Category IV AST/ Cat. II and III
functions
Management 1 person 1 Head of Service to manage the overall project. -
Support 3 persons 1 Junior Policy Adviser to administer and implement day to day work programme. 2 Secretaries
of the Service
Data collection, measurement and analysis 3 persons 1 Senior Economist/ Statistician to build and implement an international methodology to collect and assess data and to analyse global trends. -
Observatory's main functions Human resources required AD/Category IV AST/ Categories II and III
Developing greater technical assistance at
an international level in cooperation with IP offices 2 persons 1 Senior Administrator to work in conjunction with international organisations like WIPO, WTO etc. and Community agencies like Eurojust, Europol, to develop synergies between national IP offices and enforcement working groups. -
1 Junior Administrator to assess, plan and provide technical assistance on enforcement matters in line with international needs.
Researching and making information available on technical tools and systems for prevention and investigation purposes 2 persons 1 Senior Technical Researcher to assess and catalogue technical tools and systems, for example tracking and tracing. -
1 Junior Administrator to create and facilitate and expert group to identify needs, design strategies to improve technologies and techniques, organise events and develop publications to promote benchmark techniques, practices and standards in the area of technical tools and systems.
Legal Section 2 persons 1 Senior Lawyer and 1 Junior Lawyer to collect and assess case law within and outside the EU, to assist in the maintenance of the data base of relevant case law, to provide legal advice to the service on all enforcement related matters. -
Information exchange system 2 persons 1 Junior IT Systems Analyst to ensure the global project management for a cross border system to allow authorities to rapidly exchange information on enforcement issues. 1 Assistant
Researching promoting and spreading best practice amongst public authorities 2 persons 1 Senior Administrator to research, promote and spread best practices. 1 Assistant to provide support
-
4.ESTIMATE OF STAFFING COSTS
The staffing costs have to be measured against the baseline scenario. As set out in the Impact Assessment, under the baseline scenario only two administrators would in future take care of the Observatory's tasks, given that the assistant has been put at the Commission's disposal only on a temporary basis by the OHIM and that it could not be expected that such secondment would be extended where a decision was taken to establish a sustainable infrastructure for the Observatory outside the OHIM. The tables below therefore only calculate the costs that would be incurred in addition to those of the baseline scenario under the two different scenarios.
4.1. Staffing costs in years n and n+1
With a view to option 1a, the costs of the staff can be calculated on the basis of the average budgetary costs applicable to the Commission. These costs include the costs for overheads. Under these options, the additional staffing costs (compared to the baseline scenario), during the first two years would therefore amount to EUR (4 x 127,000 + 4 x 66,000=) 772,000.
Table 11: Types of staff under option 1a in years n and n+1
Functions (Option 1a) Commission
Official/TA CA FG IV CA FG III CA FG II
General coordination - - - 1
Public awareness 1 - -
Training 1 - 1 -
Technical tools 1 - - -
Table 12: Types of staff under option 3a in years n and n+1 (compared to baseline scenario)
Functions (Option 3a) Commission EU Agency
Official/T
A CA FG IV CA FG III CA FG II Official/T
A CA FG IV CA FG III CA FG II
Setting up the service 1 - - - 1 - - -
Coordination and - - - 1 - 1
policy tasks (COM)
Public awareness - - - - 1 - 1 -
Training - - - - 1 - 1 -
Technical tools - - - - 1 - - -
Case Law database - - - - - 1 - -
Info exchange - - - - - 2 - -
Head Administration - - - - 1 - - 1
Human Resources - - - - - 1 - -
Finance - - - - - 1 - -
Total 1 - - 5 6 2 2
The Director of an agency is recruited at AD14 level94. Assuming that the other
officials/temporary agents would be recruited at AD8 level for senior staff and AD 5 level for junior staff, and contract agents at the entry grades (13, 8 and 4) the total staffing costs for this option in the first two years would amount to EUR ( 1x 136,000 + 4x74,000 + 6x36,000 + 2x29,000 + 2x23,000 + 30% for allowances etc =) 1 million /year. Compared to the baseline scenario, furthermore the cost for one additional Commission official would have to be added for the setting up of the service, bringing the total staffing cost under this option during the first two years to EUR (1 million + 127,000 =) 1.13 million.
Under option 3a, the costs of the agency staff can be estimated at about EUR (1x136,000 + 9x74,000 + 12x36,000 +5x29,000 + 3x23,000 + 30% =) 1.882 million. To this sum, the EUR 800,000 for the building would need to be added, leading to a total staffing cost (including overheads) of EUR 2.68 million.
Table 13: Types of staff under options 1a and 3a as of year n+2
Functions Commission (Option 1a) EU Agency (Option 3a)
Official/T
A CA FG IV CA FG III CA FG II Official/T
A CA FG IV CA FG III CA FG II
Management 1 - - - 1 - - -
Policy support 1 - - 2 - 1 - 2
Data collection 3 - - - 1 2 - -
Public awareness 1 1 1 - 1 1 1 -
Training 1 1 1 - 1 1 1 -
Technical assistance 2 - - - 1 1 - -
Technical tools 2 - - - 1 1 - -
Legal section 2 - - - 1 1 - -
Information exchange - 1 1 - - 1 1 -
Best practices (public) 1 - 1 - 1 - 1 -
Successful strategies (private) 1 - 1 - 1 - 1 -
Head of Administration - - - - 1 - - 1
of the private stakeholders in September 2009, and one of the public authorities in December 2009; also in 2010 one meeting of the private stakeholders was held in February, and the first plenary meeting, bringing together both public authorities and private stakeholders, was held in June). Reimbursements are made only for the participation of the public sector.
The meetings in 2010 that were partially borne by the Spanish EU Presidency and by private stakeholders can be summarised as follows:
5.1.1. 2010 Expenditure borne by the Commission budget
Plenary meeting at Madrid (June 2010)
flight tickets & accommodation for all national representatives in Madrid (10/06/2010) : Total EUR 19,892.15
Member States' meeting: N/A
Private sector meetings (February 2010)
Catering 16/02/2010 Total EUR 1228,10
Subgroup meetings:
Legal Subgroup: Total EUR 611,93
Statistics Subgroup: N/A
Public Awareness Subgroup: Total EUR 740.35
Flights for winners to the RealFAKE competition awards ceremony:
cost of the organisation of the meeting (room, conference organisers, limited interpretation regime) can be estimated at about EUR 25,000 per meeting.
As financial contributions from third parties were made on an ad hoc basis in the past, the Observatory cannot rely systematically on any comparable support in the future if its functioning is to be ensured. Consequently, for the purposes of this Impact Assessment, the full costs of the meetings have to be taken into account. The additional budget required, compared to the baseline scenario, in order to meet the Observatory's full potential can therefore be estimated as follows:
Costs for the Observatory's current activities that, in the past, have been borne by third
parties: about EUR 40,000 / year
Reimbursement of MS experts for two additional meetings involving the public authorities:
EUR 100,000 / year
Costs of meeting rooms, interpretation and conference organisers for three additional
meetings per year: 3 x EUR 25,000 = EUR 75,000 / year
Costs of subgroup meetings - currently the Observatory has three sub groups: public
awareness, legal and statistic group, that are made up only of private stakeholders and that meet currently in a limited composition only a couple of times a year, due to the limited management capacity of DG MARKT. Once the Observatory has sufficient resources, these groups should meet on a monthly basis, which would lead to a total of 36 sub group meetings a year. These groups should be enlarged to comprise a limited number (maximum five) of representatives of public authorities for whom mission costs would have to be reimbursed. Furthermore, their activities could also be extended to other areas of action: EUR 200,000 /year
Mission costs of Observatory staff: EUR 30,000 / year during the first two years, and
100,000 / year as of year n+2.
Costs of publication and production of promotion materials, specialised information,
ANNEX IV: IT COSTS
IT costs are composed of the costs for the development of the system ("development costs"), the hosting costs, maintenance and support costs.
Hosting costs arise where physical space is rented on a server allowing information, web pages and files to be viewed. The vendor charges costs for the storage and retrieval of the information.
Maintenance covers the activities necessary to correct faults after delivery, to improve the performance or other attributes or to adapt the system to a modified environment.
Support costs cover all activities necessary to ensure customers can use efficiently the information system. Technical support concerns the diagnosis and resolution of faults during the operation of the system, and the provision of a contact point for all fault reporting, upgrades and repairs. Users support delivers all necessary help to end-users to use the functionalities, including training. Also promotional activities fall into this category.
While development and hosting costs arise during the development phase of the system, after the end of that phase costs arise from hosting, maintenance and support. In the present case, the development phase can be estimated to extend over the years n and n+1 so that the systems would become operational in year n+2.
-
1.C
OSTS OF A DATA COLLECTION SYSTEM AND A CASE LAW DATA BASE95
A data collection system and the case law data base are relatively simple information storage and analysis systems. The main costs arise here for the staff that gathers the information, formats it and feeds it into the system. This latter staff would be regular staff working for the Observatory, so that its costs are reflected in Annexes III and IV, and not in this Annex.
In terms of IT costs, for the data collection system, a cost estimate of EUR 300,000 seems appropriate for development and hosting in years n and n+1 (i.e. EUR 150,000 / year), and EUR 150,000 / year for hosting, maintenance and support from year n+2 onwards.
2.1. Yearly costs during the development phase (years n and n+1) Tables 14 and 15
2.1.1. Basic web-based system
IT system Development Hosting Total
Users and management 100,000
Classification products
100,000
management
Fraud management and
50,000
notification
Agents' and right
50,000
holders' contact details
TM and designs
100,000
synchrony
Machine Translations 25,000
Stats and monitoring 50,000
Total Basic System 475,000 300,000 775,000
TOTAL INCL. RISK
950,000 600,000 1,550,000
Subtotal premier system 250,000 250,000 500,000
TOTAL (basic system +
additions premier 725,000 550,000 1,275,000
system)
TOTAL INCL. RISK
1,450,000 1,100,000 2,550,000
FACTOR (x2)
2.2. Yearly running costs after completion of the development phase (as of year n+2) Tables 16 and 17
2.2.1. Basic web-based system
Support costs Total
Annual
IT system Hosting (technical and user
Maintenance
support)
BASIC WEB-
300,000 200,000 462,000 962,000
BASED SYSTEM
TOTAL INCL.
RISK FACTOR 600,000 400,000 924,000 1,924,000
(x2)
2.2.2. Interconnected premier system
TOTAL INCL.
RISK FACTOR 1,100,000 550,000 1,056,000 2,706,000
(x2)
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3.TOTAL YEARLY IT COSTS TABLE 18
Years Info exchange system Others
Basic System Sophisticated System
Including risk factor Including risk factor
n n+1 1.55 2.55 0.35
ANNEX V: COSTS OF OPTIONS 1B AND 2
This Annex sets out the costs that would arise if support tasks to the Observatory where outsourced to external contractors (option 1b), taken on by a private sector initiative (option 2a), financed through a Commission grant (option 2b) or carried out in a PPP (option 2c).
-
1.ANNUAL INIDCATIVE CONTRACT COSTS
In order to calculate the total cost of these options, the Observatory's tasks have been divided into ten different activities (data collection, training etc). Due to the different nature of these activities, consortia of tenderers will not easily be formed: these specialists normally do not work together and have no professional contacts. Consortia therefore only seem conceivable with a view to the two activities in the area of promoting cooperation and spreading best practices, and with a view to the IT related tasks (listed under no 3 in table 19 hereunder).
Table 19: Estimated costs of contracts
Activity Annual indicative contract costs
(EUR)
-
1.Data collection, measurement and analysis 500,000
Contracted team of researchers, economist and statisticians
-
2.Promoting cooperation and spreading best practice96
2a. Programmes to develop and spread best practices amongst public bodies, including enforcers 130,000
2b. Programmes to develop and spread successful strategies amongst private sectors bodies
Activity Annual indicative contract costs
(EUR)
Simple web-based system for users to log-in and register for alert system according to product category; only free text information, machine translation function Years n and n+1 1,550,000
3b. Rapid information exchange system (costs depending on features of the system to be chosen, see Annex IV) and including risk factor Years n+2 + 1,924,000
Interconnected premier system allowing for upload and use of pictures and other visual content, automatic feeding of information into national IT systems of Member States concerned Years n and n+1 2,550,000
Years n+2 + 2,706,000
3c. Developing a case law database Years n and n+1
200,000
Years n+2 +
150,000
-
4.Developing strategies and initiatives for raising public awareness500,000
98
-
5.Training and Development designing and organising technical training, awareness events and programmes155,000
99
-
6.Researching, assessing and making information available on technical tools and resources - tracking and tracing250,000
-
2.ESTIMATE OF OTHER BUDGET REQUIRED - COSTS OF ORGANISATION OF EXPERT
MEETINGS
For the Observatory meetings etc, an additional budget will be required.
For option 1b, this additional budget would correspond to that of option 1a, as the Commission services would continue to take care of the organisation of the meetings. To that end, as under option 1a, also under option 1b the assistant currently seconded from the OHIM would have to be replaced by a Commission staff member, adding additional EUR 66,000 / year to the overall costs and leading to a total annual cost of about EUR (495,000 + 66,000 =) 561,000 in years n and n+1, and EUR (592,000 + 66,000=) 658,000/ year as of year n+2.
For the different sub-options, under option 2, these costs would be the following:
Reimbursement of Member States' experts for three meetings involving the public
authorities: EUR 150,000 / year
Costs of meeting rooms, interpretation and conference organisers for five meetings per
year (two meetings each of the public authorities and of the stakeholders plus one plenary
meeting): 5 x EUR 25,000 = EUR 125,000 / year
Costs of subgroup meetings - currently the Observatory has three sub groups: a public
awareness, legal and a statistics group, made up of only private sector stakeholders, that currently meet in a limited composition and only a couple of times a year, due to the limited management capacity of DG MARKT. Once the Observatory has sufficient resources, these groups should meet on a monthly basis, which would lead to a total of 36 sub group meetings a year. These groups should be enlarged to comprise of a limited number (maximum five) of representatives of public authorities for whom mission costs would have to be reimbursed. Furthermore, their activities could also be extended to other areas of action: EUR 200,000 /year
Mission costs of Observatory staff: EUR 30,000 / year during the first two years, and
under the different sub-options of option 2, these costs would arise for the external body taking over the tasks from DG MARKT.
It is estimated that running five contracts would require the equivalent of three AD and/or AST staff. In the case of seven to ten separate contracts, this equates to 4 to 6 AD/AST staff engaged solely in the tender procedures and their direct follow up. Even if, under option 1b, all of these staff were recruited on contract agents' contracts, the costs can be estimated at between around EUR 264,000 and 396,000 a year. For the sub-options of option 2, these costs can be estimated to be at least as high as the Commission's or even higher, as the size of the Commission leads to considerable economies of scale in this respect.
ANNEX VI: SYNERGIES AND COSTS UNDER OPTION 3B (OHIM)
-
1.ESTIMATE OF STAFFING SYNERGIES IN CASE OF OBSERVATORY'S TRANSFER TO THE
OHIM / YEARS N+2 TO N+5
If, under option 3b, the management of the Observatory was entrusted to the OHIM, the Observatory's needs in terms of operational staff, during the years n and n+1, would be the same as under option 3a. However, due to the fact that the Observatory staff could use the Office's administration and infrastructure, the average costs of staff (including overheads) would differ, and therefore the cost of this option would be lower than those of option 3a (see below, section 2.1).
In the years n+2 to n+5, the number of operational staff to be employed to run the Observatory would also differ, due to synergies that could be realised with existing OHIM functions. Table 20 indicates the total resources required to perform the main functions of the Observatory between years n+2 and n+5. It shows the number of persons that would need to be recruited to work in the Observatory and alongside this, to what extent functions that are carried out by the OHIM could already be used for the purposes of the Observatory and could therefore lead to savings in terms of human resources.
Table 20: Staffing needs under option 3b as of year n+2
Observatory's main functions Total resources required Description To be Economies by using existing
recruited OHIM
functions
Management 1 Head of Service to manage the overall project 1 HoS -
Policy Support 3 1 Junior102 Policy Adviser to administer 1 Junior Administrator and 2 Assistants -
and implement day to day work programme and 2 Assistants.
Observatory's main functions Total resources required Description To be Economies by using existing
recruited OHIM
function
Training and Development delivering technical training, awareness events and programmes 3 1 Senior Training Specialist to carry out research and assessment of training programs on enforcement and two support specialists. 1 Senior 1 Junior Training specialist and
1 Assistant by integrating the organisation of the training programs with the existing OHIM training scheme.
Training Specialist
Developing greater technical assistance at
an international level
in cooperation with IP offices 2 1 Senior and 1 Junior Administrator to work in conjunction with international organisations like WIPO, WTO etc. and EU agencies like Eurojust and Europol, to develop synergies between national IP offices and enforcement working groups. 1 Senior 1 Junior Administrator, by coordinating this activity with the work of the OHIM Department for institutional affairs and external relations
Administrator
Researching and making information available on technical tools and systems for prevention and investigation purposes 2 1 Senior Technical Researcher to assess and 1 Senior 1 Junior Administrator, by cooperation with the OHIM Information Technologies Department
catalogue technical tools and Researcher
systems, for example tracking and tracing and 1 Junior Administrator to support research work.
Legal Section 2 1 Senior Lawyer and 1 Junior Lawyer to collect and assess case law within and outside the EU, to assist in the maintenance of the data base of relevant case law, to provide legal advice to the service on all enforcement related matters. 1 Senior and
Observatory's main functions Total resources required Description To be Economies by using existing
recruited OHIM
function
Researching promoting and spreading successful private sector strategies 2 1 Senior Administrator to research, promote and spread best practices and
1 Assistant 1 Senior Administrator and 1 Assistant -
Total 25 persons - 19 persons 6 man years
-
2.ESTIMATE OF STAFFING COSTS
Table 21: Types of staff under option 3b as of year n+2
Functions OHIM (Option 3b)
Official/TA CA FG IV CA FG III CA FG II
Setting up of the service 1 - - -
Policy support 1 - 2
Data collection 1 2 - -
Public awareness 1 - 1 -
Training 1 - - -
Technical assistance 1 - - -
In the following years, these costs would rise to about EUR (9 x 155,000 + 10 x 66,000=)
2.06 million.
-
3.ESTIMATE OF OTHER BUDGET REQUIRED IN CASE OF ENTRUSTING THE
MANAGEMENT OF THE OBSERVATORY TO THE OHIM - COSTS OF ORGANISATION
OF EXPERT MEETINGS
Reimbursement of Member States' experts and consumer representatives for two meetings
of the public authorities/private stakeholders and one plenary meeting: 3 x EUR 50,000 = EUR 150,000 / year
Costs of subgroup meetings (to be developed as set out in Annex III): EUR 200,000 /year
Mission costs of Observatory staff: EUR 30,000 / year during the first two years, and
100,000 / year as of year n+2
No additional costs would have to arise for meeting facilities and meeting organisation (all
available within the OHIM) and for publications etc (infrastructure and general budget of OHIM could be used)
The total of other budget required would therefore amount to EUR 380,000 during years n and n+1, and EUR 450,000 as of year n+2. At the same time, the EU budget would be alleviated by the costs borne by it in the past. On the basis of the figures provided under point 5 of Annex III for 2010, these savings can be estimated at EUR 38,773 for reimbursements of travel expenses of Member States' experts and the organisation of the Observatory's meetings.
| publicatiedatum | 30-05-2011 |
|---|---|
| kenmerk | 10668/11 ADD 1 |
