1421 March 2013

SPECIAL REPORTIntellectual property

Rights and wrongs

The ‘app’ sector, driven bythe huge growth in smart-phone use, poses new chal-lenges for regulators. Themarket in apps – fromgames to news content –was worth an estimated €2 billion globally last year,with each user download-ing an average of 37 appson their phones andtablets. Even the EuropeanCommission has got in onthe act, offering an app that lets stranded air passengers check their

rights on the spot.The Commission is also

carrying out a study toanalyse the impact of theapp economy on growthand jobs in Europe. The re-sults have not been pub-lished but, anecdotally atleast, things appear veryhealthy.

Donal Cullen, chief exec-utive of Spanish PointTechnologies, an app devel-oper based in Dublin, de-scribed the sector as “buoy-ant” despite the gloomy

economic environment.App companies across Eu-rope are finding it difficultto fill jobs, he said.

Like traditional softwarecreators before them, appdevelopers are protected bya wide range of intellectualproperty rights, whichmake their businesses vi-able by enabling them tosafeguard their inventionsand ideas through copy-right, patents, and trade-marks. But this is still afledgling industry. Cullen,

An app-etite for successwhose company works inpartnership with Mi-crosoft, compared the cur-rent situation in the appmarket in Europe to that ofthe mobile-phone marketbefore the implementationof the GSM standard in theEU in 1987. He said that forapp developers, uniformlegislation across the EU onintellectual property – and,crucially, data protection –was critical. “We need a setof transparent and Euro-pean-wide rules. We wantto do business anywhere inEurope and need to knowthat the rules and regula-tions are the same in eachmember country,” he said.

Protecting dataThe EU is revising its data-protection rules, andthe specific case of apps hascome under great scrutiny.On 14 March, the EU’s data-protection watchdogswarned that apps were col-lecting “large quantities ofpersonal data”, for examplethrough a phone’s photo albums or by using data based on location.“This often happens with-out the free and informedconsent of users, resultingin a breach of European da-ta-protection law,” said Ja-cob Kohnstamm, chair-man of the Article 29Working Party, which

brings together data-protection agencies fromacross the EU. He called forgreater compliance by appdevelopers with the EU’sexisting rules.

His concern is shared byViviane Reding, the Euro-pean commissioner for jus-tice, fundamental rightsand citizenship. On 4March, she told a Britishtelevision programme thatthe EU needed to force achange in the way that appswork.

“Nobody has the right toget your personal data with-out you agreeing to this,”she said. “They are spottingyou, they are following you,

The ability to protect a cre-ation, whether in the form ofan invention, a design, orartistic expression, is part ofthe bedrock on which theWestern economy rests. Astechnological networksbring the world closer to-gether, being able to definethat protection at a Euro-pean level is becoming evermore important.

Many of the rules govern-ing intellectual property (IP)have evolved over centuries,but have generally been pe-culiar to nation states. Butnow, as the same globallyrecognised brands temptshoppers from Delhi toDresden, as teenagers try todownload or stream thesame pop song in Londonand in Limassol, as outward-looking businesses want topatent their inventions inevery member state of the

European Union, the pres-sure to have a common IPregime has become almostirresistible.

Some of the many chal-lenges of regulating IP comeunder the spotlight in thisspecial report. One front isthe traditional fight at bor-ders against counterfeitgoods: T-shirts, DVDs, med-icines. But fresh battlesemerge with new technolo-gy: the mobile-phone andtablet app market has ex-ploded, raising differentconcerns about data protec-tion and the ability to givepatent protection to newideas across the EU.

The app sector was barelyhalf as big as it is now evenas recently as May 2011,which is when the EuropeanCommission launched awide-ranging intellectualproperty rights strategy.

Even back then, people werebemused at being unable todownload the same songfrom one European countryto the next. That problem re-mains and in the meantimethe fast-moving nature oftechnology has only addedto the challenges faced bylegislators.

Initial successesThe Commission’s strategyencompassed almost everyaspect of IP: patents, trademarks, geographical indications, multi-territorialcopyright licensing, digital libraries, counterfeiting andpiracy, and enforcement bycustoms officers. Officials canalready point to some suc-cess: a deal on the unitarypatent is a major break-through; the swift agreementreached between the Euro-pean Parliament and the Eu-

ropean Council on ‘orphanworks’ – which are protectedby copyright though their cre-ators cannot be found – iscontributing to the creation of a joined-up digital single market.

But more needs to bedone. Adapting copyrightrules to the digital age, revis-ing a 2001 law, remains amajor sticking-point for theEU. Michel Barnier, the Eu-ropean commissioner for theinternal market, has yet topropose legislation. “I wanta copyright framework thatpasses the single-markettest, making more contentavailable to more citizensacross borders,” he insistedin November. Yet legislationis unlikely to be proposeduntil next year at the earliest,if at all. The most significantquestion may be whetherBarnier is prepared to putforward plans as revolution-ary as those desired by Neel-ie Kroes, the commissionerfor the digital agenda, whosaid in December that“artists, entrepreneurs and

citizens [would] benefitfrom a borderless, digitalsingle market, where access-ing and distributing contentis easy and legal, generatingmore value and more visibil-ity”. Current indications arethat he is not.

Some warn that the posi-tions of hardware manufac-turers, rights-owners andconsumers, as well as groupslobbying for better data pro-tection, are so far apart thatsatisfactory legislation will beimpossible. “The Commis-sion faces a significant chal-lenge,” said Lisa Peets, a spe-cialist in intellectual propertyat Covington & Burling, a lawfirm. “It needs to balanceconsumer interests in unfet-tered access to content onlineagainst the interests of thedigital industries that havebeen, and remain, key to Eu-rope’s economic growth.”

Telecoms companies,which would benefit from ajoined-up digital single mar-ket, are pushing the Com-mission to come up withproposals. The European

Telecommunications Net-work Operator’s Association(ETNO), which representslarge firms such as Telefóni-ca and Deutsche Telekom.Its director, Daniel Pataki,said that reform of the copy-right systems and licenceswould ease access to con-tent, which he regards as es-sential to encourage the de-velopment of legal offers andstimulate consumer take-upof high-speed broadband.

He said that any reformshould address the currentfragmentation of copyrightsystems across the EU, which“hamper the development ofpan-European offers”, andshould “adapt licences andwindows of release to theneeds of online world”.

With people and busi-nesses becoming ever moreconnected, IP issues are inthe limelight as never before.Their likely inclusion in EU-US trade talks suggests thatin a brave new digital world,failure to join up even Europe’s IP rules could be aserious mistake.

European policymakers need to keep abreast of technological changes if they are to draw up credible newrules on intellectual property, writes Ian Wishart

REUTERS

1521 March 2013

AT ITS CORE

KNOWLEDGE AND EXPERTISE

· FACILITATING

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· INFORMING AND

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· R AISING AWARENESS

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AAPA .EU

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INTELLECTUAL PROPERTY

Customs officers in the Eu-ropean Union are seizing anincreasing quantity of goodsthat they suspect violate intellectual property rights.While a great deal of discus-sion on intellectual propertyfocuses on digital rights, thetrade in counterfeit tangiblegoods remains big business.

The European Commis-sion, which published its lat-est figures on counterfeitgoods last summer, reportedthat in 2011, the last year forwhich figures are available,more than 91,000 ship-ments were stopped by cus-toms officers, a 15% increaseon 2010. Those shipmentscontained an estimated 114million articles worth morethat €1.2 billion at genuinemarket prices. More fakemedicines are detained bycustoms officers than anyother product – they accountfor a quarter of all goodsseized. Sizeable quantities ofcigarettes, toys, electricalgoods, shoes and clothingare also impounded. Morecounterfeit goods are seizedfrom China than any othercountry.

In May 2011, the Commis-sion proposed a revised reg-ulation of the customs en-forcement of intellectualproperty rights, as part of awider IPR strategy. Onceformally adopted by the Eu-ropean Parliament and theCouncil, it will replace thecurrent regulation, whichdates from 2003.

The purpose of the revisedlegislation is to widen the listof possible infringementsthat can be dealt with bycustoms officials. The Com-mission’s proposal would extend the list to includetrade names and devices de-signed to circumvent anti-copying measures. Parallelimports and ‘overruns’(goods produced in excess ofthose permitted under a licencing agreement) wouldstill be excluded from thescope of the regulation.

The new law is also de-signed to tackle the increas-ing number of counterfeitand pirated goods bought

over the internet and deliv-ered in small parcels to cus-tomers’ homes rather than aspart of large consignments.

But there is concern thatthe legislation will not closea loophole that has, since2011, allowed a significantquantity of fake goods to slipthrough the net.

Before then, EU customsofficials would routinely stopcounterfeit goods in transitthrough the EU bound forother destinations. Thatchanged after a EuropeanCourt of Justice decision in2011 on a case related to theseizure of counterfeit Nokiaand Philips products boundfor non-EU countries. TheECJ ruled that fake goods intransit could not be seized be-cause there was no act of in-fringement taking place inthe EU. As a result, customsofficials who had for yearsbeen seizing counterfeitgoods in transit through the EU were no longer able todo so.

The ‘goods in transit’ loop-hole will not be closed by thenew regulation, although itcould be covered by a reviewof the substantive law ontrademarks (the communitytrademark regulation andthe trademark directive),which is to be proposed bythe Commission this spring.

Stuart Adams, a memberof the International Trade-mark Association’s anti-counterfeiting committeeand a lawyer at London-based firm Rouse, said it wasdisappointing that the tran-sit issue was not included inthe revision of the customsenforcement regulation. “Itis important because manycountries look to the EU’strademark rules and proce-dures and use them as bestpractice,” he said. “Dealingwith the problem in the cus-toms regulation was alwaysgoing to be difficult, as itdeals with procedures ratherthan the underlying law.”

He said he had hoped thatlegislators would have comeup with ways to solve theproblem. “We suggested try-ing to reverse the burden ofproof, so that adequate evi-dence of the final destinationwould have to be providedby the people dealing in thegoods, which is easy to do ifit’s a consignment which re-ally is going somewhere be-yond the EU,” he said. “Un-fortunately we could notconvince the legislators.”

Impounded medicinesThere is another concern:that any changes to the rulescould affect life-saving med-icines destined for the devel-

The number ofcounterfeit goodsbeing seized inthe EU is growingat an alarmingrate, writes Ian Wishart

oping world. In 2008, aftercustoms officers in the EUseized several shipments oflegitimate generic medicinesin transit to South Americaand Africa because theywere believed to have in-fringed European patents,India complained to theWorld Trade Organization.MEPs and campaign groupshave warned of the conse-quences for the developingworld of detaining genericmedicines.

The revision of the cus-

toms regulation does notchange or add to the rulesdefining what an IPR in-fringement is, but it does tryto offer “further clarification”of the procedures that cus-toms officials will need to ap-ply. However, there is a bal-ance to be struck betweenbeing able to stop counter-feit goods in transit and allowing life-saving medi-cines to get through.

“The EU is trying to steer apath through these two com-peting ideas,” said Adams,

who suggests that counterfeitgoods in transit should beconsidered as infringing EUrules only if they are to bemarketed in the Union andin either the country of originor country of destination.

“That would capture a lotof counterfeit goods, butwould not have any effect onthe trade in generic medi-cines – these may infringepatent rights but are notcounterfeit – unless, ofcourse, they bear infringingtrademarks,” Adams said.

Fighting global counter-feiting and protecting intel-lectual property is one of theEU’s biggest challenges. Get-ting it right at the EU’s bor-ders remains as importantas ever.

they are getting informa-tion about your friends,about your whereabouts,about your preferences.That is certainly not whatyou thought you bought in-

to when you downloaded afree-of-charge app.”

As in many areas, tech-nology is moving so fastthat regulators are strug-gling to keep up. The app

industry offers great bene-fits to the European econo-my, but authorities knowthey need to act to ensurethat protection is in place.

Ian Wishart

REUTERS

Flushing out the fakes

REUTERS

1621 March 2013 INTELLECTUAL PROPERTY

S p e c i a l r e p o r t s c a l e n d a r 2 0 1 3

11 April Regulating healthcare

18 April EU studies

16 May Europe’s cities

30 May Croatia

13 June Lithuania’s presidency of the Council of Ministers

27 June Entrepreneurship

11 July Energy markets

19 September Green technologies

3 October Data protection

10 October EU studies

23 October Climate change

21 November MBAs

12 December Greece’s presidency of the Council of Ministers

For more information, go to

www.europeanvoice.com/specialreports 

For an inventor or business,being able to protect ideascan mean the difference be-tween success and failure.However, obtaining a patentis not just about safeguard-ing intellectual property. It isalso one of the clearest indi-cations of the health of acountry’s economy and itslevel of competitiveness inrelation to its rivals.

A growing, dynamic econ-omy that makes it easy forbusinesses and entrepre-neurs to flourish is likely togenerate a great manypatent applications, in con-trast to those where inven-tors and industry are ham-pered by red tape andstruggle under a bureaucrat-ic burden.

So, as Europe looks to recover from the economicdownturn, is it right to beworried that in 2012 thegreatest number of Euro-pean patents were filed by aSouth Korean company?According to the EuropeanPatent Office (EPO), whichstudies all patents registeredin Europe, 2012 was the firstyear in which an Asian com-pany – in this case the tech-nology giant Samsung –filed more European patents

than any other firm. Justfour European companiesmade the top ten: Siemens,a German electronics and engineering company;BASF, a chemicals company,also based in Germany;Bosch, a German engineer-ing firm; and Ericsson, aSwedish telecoms company.For the first time, a Chinesecompany makes the top ten:ZTE, a mobile-phone man-ufacturer.

On the increaseIf that list gives some causefor concern, the overallnumber of patent filingsprovides some reason for op-timism, according to BenoîtBattistelli, the EPO’s presi-dent. The number of patentsfiled by European firms lastyear was 2.3% higher thanin 2011 – a “clear indication”,he said, that European industry “has opted to inno-vate its way out of the eco-nomic crisis”.

But others beg to differ.While 2012 showed a degreeof improvement on the yearbefore, the worry is that Eu-rope is beginning to lag behind. Half of the growthin patent filings in 2012came from Asian countries.

Some countries warrantdeeper investigation. TakeFrance, where, according tothe European Commission,household disposable incomeis falling, unemployment isrising and very little growth isforecast for 2013. Yet Francesaw a 4.7% increase in patentapplications in 2012, almosttwice the European averageand ahead of the UnitedKingdom, which saw a 2.6%increase.

But even this increasemight not be enough to keepFrance near the front in the

competitiveness race. Twoyears ago, China, South Ko-rea and France applied foraround the same number ofpatents. Now, both Asiancountries have moved ahead,with China registering al-most 50% more applicationsthan France in 2012.

Europe’s leaders are pin-ning their hopes on the cre-ation of a unitary Europeanpatent giving industry aboost by making it easierand cheaper to get protec-tion for intellectual propertyacross the EU. However,

according to Bruno van Pottelsberghe of Bruegel, aBrussels-based think-tank,the unitary patent is “notlikely to have any impact on innovation efforts in Eu-rope”.

He said that “prohibitive-ly expensive” translationcosts, the “not particularlycoherent” layers of national,European and unitarypatent offices, and the messycompromise between mem-ber states that will see theunitary litigation court setup in Paris, London and

Munich, are all shortcom-ings that need to be over-come if the full potential ofthe European patent is to berealised.

Many industries in Eu-rope remain creative andcompetitive with the rest ofthe world, as the number ofpatents filed in 2012 shows.But if the emergence of Asiaas the origin of a rapidly increasing number of appli-cations is an early indication,the world economy couldlook very different in a fewyears’ time.

Asia picks up the pace in the patent raceThe number of patent applications isone indicator of economic strength.And it suggests bad news for Europe,writes Ian Wishart

SHOW OF STRENGTH Samsung registered more patents in Europe than any other firm in 2012. REUTERS