2008 KEI Comments on ACTA Anti-Counterfeiting Treaty


Comments of Knowledge Ecology International on the Proposal for Anti-Counterfeiting Trade Agreement (ACTA)  
 
Submitted to United States Trade Representative
Request for Public Comments, via email:  acta@ustr.eop.gov
 
March 20, 2008

Knowledge Ecology International (KEI)* offers the following comments on a proposal for a new Anti-Counterfeiting Trade Agreement (ACTA) with future provisions on international cooperation, enforcement practices, and the legal framework for IPR enforcement. 

Table of Contents

The Lack of Transparency is Not Encouraging
Definitions
Counterfeiting
Piracy
Infringement
Priorities for Law Enforcement
Low quality counterfeits
High quality counterfeits
Remedies
Other Solutions

The Lack of Transparency is Not Encouraging

The Request for Comment in the February 15, 2008 Federal Register (Volume 73, Number 32), contains very little information about the proposal.  The “Fact Sheet” on the USTR website has very little real information.  We have, in fact, located an undated “Discussion Paper on a Possible Anti-Counterfeiting Trade Agreement,” that has apparently been circulated to lobbyists for some businesses, but not to civil society groups, which contains far more detail than one can obtain from the Federal Register Notice or the USTR web page.  KEI suggests USTR be more open about this project.

Definitions

Based upon the documents now available, the ACTA is placed in the context of “counterfeiting and piracy,” but there is no definition of either.

Counterfeiting

The term “counterfeiting” should not be over-used, and, in particular, it should not become a propaganda term.  It should be understood to relate to cases where a product is deceptively represented as a product that is produced and legitimately owned by another.  For example, a watch that contains a Rolex name, but is not made by Rolex, a copy of Microsoft Office software that is in fact not manufactured or legitimately licensed by Microsoft, or a copy of a drug that is falsely presented as having been legitimately manufactured by Pfizer, could be said to be a counterfeit.
 
A copyrighted work that is copied and redistributed is not a counterfeit, unless it is redistributed deceptively as legitimately being offered for sale by the rights-owner.
 
There are countless cases of counterfeit goods being placed in commerce, and it is useful and important to address the appropriate measures to curb such activity.  The term “counterfeit” should not be used to describe all activities that may constitute an infringement of a patent, copyright or trademark, however.
 
Items which are similar to other goods, including goods of inferior quality which are sold for a lower price, should not be considered counterfeits, unless there an intent to deceptively represent the content or origins.
 
Generic drugs, car parts or other products that do not use a brand name are not counterfeits.   Unauthorized uses of a product that are allowed by law, such as personal copies of copyrighted works made under legitimate exceptions to copyrights, or generic medicines that are off-patent or legitimately licensed under voluntary or non-voluntary licenses, are not counterfeit products.   Not all infringements of patents or copyrighted goods can be usefully described as counterfeits, and often the issue of what constitutes infringement is a matter of controversy, particularly, but not only, in the area of patents, where issues concerning patent validity and relevance are  quite difficult, or in the area of copyright, where the relationship between rights and exceptions to rights are complex.
 
It is important, however, to differentiate between counterfeiting (i.e fake goods) and the importation of legitimate stock at a lower price, as “grey market” parallel traded goods that are acquired legitimately in one market, and resold legally under under the exhaustion of rights doctrine in another market.  There is a tendency by some to conflate the two issues in order to stigmatize the practice and ignore the benefits of parallel trade.  Restrictions on parallel trade can lead to anti-competitive behavior, and by facilitating market segmentation and price discrimination, lead to higher prices for consumers in markets that have a lack of competition.

Piracy

According to the federal register notice, the proposed agreement will focus on both piracy and infringement.  Although there is not an agreed upon definition of piracy, the terms piracy and infringement should not be considered as synonyms.  Piracy is a colorful and emotive term that does not elevate or inform  debates about enforcement in areas where the intent or the appropriateness of infringing activities are subject to nuance or legitimate policy debate.   For example, in the recent U.S. Supreme Court decisions involving eBay and KRS, the Court addressed cases where the exclusive rights of a patent should not be enforced, and a court should permit infringement under a court authorized royalty payment (eBay), or where government agencies and lower court judges make errors in their evaluations of the validity of patent claims (KSR).  Do these cases involving disputes over infringement merit or benefit from the phrase “piracy?”  Is Microsoft a “pirate” for insisting on the right  to continue to infringe the z4 patents in order to use an infringing DRM technology to protect Microsoft software itself from infringement by unauthorized uses?  Is the maker of the popular computer game Guitiar Hero a pirate because it faces an assertion of patent claim?  The International Trade Commission (ITC) endorsing piracy by refusing to prevent the importation of all mobile phones that use infringing semi conductor chips?  Is Abbott Laboratories  a “pirate” for seeking a compulsory license for its infringing use of patents on a Hepatitis C virus (HCV) genotyping test kit?  Does the USTR engage in “piracy” when its employees copy and share copyrighted articles about counterfeit products, an activity allowed under 28 USC 1498?  Are the owners of MySpace, Facebook or YouTube pirates because of the extensive evidence of unauthorized use of copyrighted works on those services?

Infringement

Governments can and should make distinctions between a brazen and criminal enterprise to steal protected works and inventions, including deliberate deception about the content or origin of works (counterfeits),  and the increasingly common disputes involving  infringement that raise questions about the validity of the intellectual property claim, the extent to which a use is truly protected, and the appropriateness of remedies to address infringement.
 
It is important for governments to address the enforcement of intellectual property rights, including policies that address infringement.  But in real life, disputes over infringement are highly heterogeneous and sometimes involve complex disputes over facts and public policy.
 
Efforts to fashion a treaty that deals with counterfeits, brazen acts of piracy, and routine disputes involving infringement, covers a lot of territory.  The title of the treaty or trade agreement should not casually mix everything together under a single banner of the word counterfeit, unless the purpose is to use an emotive and misleading term to demonize users, justify economically disproportionate remedies and prejudice defenses based upon assertions of legitimate or tolerated uses.

Priorities for Law Enforcement  

Low quality counterfeits

Counterfeit products that are of a low quality are always a concern to consumers, and particularly when the products present risks to consumers, such as drugs with poor quality or the wrong active pharmaceutical ingredients, or car parts that are prone to failure.  The highest priorities for law enforcement should be in areas of risk to health and safety.  

High quality counterfeits

High-quality counterfeit products present different issues.  Examples of high quality counterfeits are (deceptively marketed) copies of digital software, recorded music or audiovisual works, manufactured goods that are made in the same factories as the brand name goods, or pharmaceutical drugs that are medically the same as the legitimate products.
 
It important for governments to provide a minimum level of protection to trademark owners, and in the long run, this will benefit consumers even in cases where the counterfeit products are of a high quality.  Governments should protect trademark, patent and copyright owners from competition from high-quality counterfeit products, and consumers benefit from the greater incentives to develop new products, and to maintain high quality.
 
That said, governments have priorities in terms of law enforcement, and consumers have many problems, including a lack of enforcement of consumer protection laws that go far beyond  counterfeit products.  How much money and time should governments devote to enforcement of high quality counterfeit items?  Here some sensible distinctions need to be made.  For example, clearly a global failure to enforce laws against the counterfeiting of software, movies and recorded music could destroy livelihoods.  However, the impact of low enforcement is less important to livelihoods in some industries if it occurs in economies or communities of users that are marginal to the primary commercial market for the good.  For example, countries with very low household incomes that use copies of software products that have a global market are unlikely to have a significant impact on the global market, but may expand access to the goods in the developing country.  In those circumstances, it may be difficult to justify large outlays of scarce enforcement resources, given competing priorities law enforcement.

Remedies

Methods and sanctions that are designed to prevent counterfeiting should be carefully considered by policy-makers to ensure that they are properly targeted and do not have adverse effects on competition, innovation, consumer protection or privacy rights.  For example, right holders are increasingly using technical means such as digital rights management tools to prevent unauthorized copying of works, but these technologies also have adverse effects on legitimate usages of products.  Increased regulatory requirements on the packaging of goods and other preventive measures can be used to raise the cost of entry into the market for competitors.  Criminal sanctions in particular must be carefully targeted.  There is a tendency to confuse the effects of commercial scale counterfeiting, and non-commercial scale copying or infringement by consumers and to apply the same criminal sanctions to both.  There should be a distinction between organized commercial counterfeiting, and the ‘infringement’ activity of consumers.

Other Solutions

Before investing enormous public sector resources to enforce private intellectual property rights, policy makers should at least consider the reasons why infringement flourishes today, and some alternative solutions to some of the more important problems.
 
The widespread infringement of patented inventions in software and information technology sectors is based upon deep flaws in the patent system itself.  The issues recently addressed by the US Supreme Court in the KSR and eBay decisions illustrate the concerns of many that the USPTO standards for inventive step are too low, and it is highly problematic to enforce exclusive rights in products that use complex technologies where it has become impossible to avoid infringement.  Likewise, the entire rise of user generated content illustrates the widely share belief by the public that they should enjoy some freedom to remix copyrighted content for personal use.   Excessive pricing of copyrighted works in developing countries has created a huge market for infringing works.  High prices for pharmaceutical products in the US and Europe attracts criminal counterfeiters, who can make greater profits manufacturing fake copies of Pfizer's Lipitor or Viagra, than distributing cocaine or heroin.

In many of these case, a combination of reforms in the intellectual property systems, curbs on excessive pricing, and the development of new systems of rewards for creative and inventive communities may be more fruitful avenues for addressing the twin concerns of enforcing private  intellectual property rights, and providing sustainable incomes for our workforce.