European Commission Report Highlights Intellectual Property Infringements in Third Countries

The European Commission has published a report on the protection and enforcement of intellectual property rights in third countries. The report highlights the losses intellectual property right (IPR) infringements cause to the European economy. It raises remaining concerns and identifies areas where the protection and enforcement of European intellectual property rights can be improved. Moreover, the EU names three groups of countries on which it will concentrate its enforcement efforts. Companies from Hong Kong and mainland China may wish to be aware that the latter continues to be placed at the top of the list ahead of twelve other countries in Asia, Eastern Europe, South America and Africa.

The 59-page Commission report, in the form of a staff working document, states that progress has been made to protect European IPRs in global markets since the publication of the last report, but that concerns and room for improvement remain. IPR infringements include the breach of trademarks, patents and geographical indications as well as forced technology transfer, IP theft, counterfeiting and piracy.

The report claims that EU companies suffer losses in the billions of euros and that jobs are put in jeopardy. Trade Commissioner Phil Hogan highlighted that 82% of EU exports “are generated by sectors which depend on intellectual property” and that “protecting intellectual property […] is critical for the EU’s economic growth and […] ability to encourage innovation and stay competitive globally.” The aim of the report is to enable the EU to focus its actions and protect IPRs more effectively.

To target its efforts, the EU maintains a list of “priority countries”. The updated list is divided into three groups: (1) China (Priority 1); (2) India, Indonesia, Russia, Turkey, Ukraine (Priority 2); (3) Argentina, Brazil, Ecuador, Malaysia, Thailand, Nigeria and Saudi Arabia (Priority 3). The latter two countries are new additions while all others were already listed in the same category in the previous report.

Producers from Hong Kong and mainland China may be interested to note that one of the reasons given for Nigeria’s inclusion was its role as one of the main transit points for counterfeit electrical and electronic goods from mainland China and Hong Kong. Mainland China remains the highest priority for the EU due to “the scale and persistence of problems in the area of IPR protection and enforcement.”

The Commission found that a majority of counterfeit and pirated goods entering the EU originate in mainland China with regard to value and to volume, stating that more than 80% of seized goods come from mainland China and Hong Kong. It lists, in particular, technologically advanced items, expensive fashion items as well as fake medicines and toys as being affected.

Priority 2 countries are defined as presenting “systemic problems” in the area of IP protection and enforcement and have made no or limited progress to address this. Priority 3 countries present “some serious problems” in the area but the seriousness and the number of problems is lower in this category as compared with category 2.

Aside from these priority countries, the report also reviews the situation in countries with which it has concluded trade deals and a number of countries where the EU will continue to monitor IPR enforcement closely. Thus, the Philippines are now part of the monitored group after having been removed from the list of priority countries as was the US.

Particular concerns identified by the report with regard to mainland China were forced technology transfer, a low level of protection for trade secrets and thus IP theft, the continuously high level of counterfeiting, copyright piracy and the absence of an effective system for protecting undisclosed test and other data generated to obtain a marketing approval for pharmaceuticals and plant protection products.

The report acknowledges the actions of the Chinese government regarding administrative, legislative and practical reforms. As persisting concerns, the report criticises the broad margin of discretion left by legislation and lists areas in need of further action which may be of interest to exporters from Hong Kong and mainland China. They include counterfeiting and potentially increased numbers of such goods entering the EU due to the Chinese Belt & Road Initiative, the level of damages awarded for IPR infringements, and general shortfalls in enforcement.

As the report explains, the EU has provided technical support and training as well as promoted awareness of IPRs and their enforcement in the past two years. To strengthen international cooperation in the area, the EU was also active in the framework of the WTO, WIPO and the OECD on these issues.

As regards mainland China, EU action will focus on five key channels of cooperation: (a) the EU-China Dialogue to facilitate an exchange of views on a strategic level (meeting annually) and technical level (meeting twice a year); (b) IP Key China, a technical cooperation programme to exchange best practices and increase enforcement cooperation; (c) the EU-China Joint Customs Cooperation Committee to build a strategic framework for customs cooperation and the relevant action plan (regarding this, Hong Kong companies may be aware that the Commission has adopted an action plan in direct cooperation with the Hong Kong authorities); (d) the IPR SME Helpdesk to support EU SMEs free of charge in protecting and enforcing their IPRs in mainland China by providing information and training; and (e) the negotiation of a bilateral agreement (which remains to be adopted through the EU legislative procedure) to protect respectively 100 geographical indications (GIs) in each other’s territories.

This report is part of the regular review of European IPR protection and enforcement in global markets. The EU IPR enforcement strategy is in place since 2014 and reflects the EU position that a well-designed system to protect IPRs is key to promoting investments, innovation, growth and global business activities.