EU in New Push to Tackle Global Counterfeiting

By Stephen Mbogo | July 7, 2008 | 8:18 PM EDT

Berlin, Germany ( - European lawmakers are proposing measures to strengthen the fight against a vice that costs Western companies billions of dollars each year and is used by organized criminals to raise funds.

Under legislation under consideration in the European Parliament, any infringement of intellectual property rights would be treated as a criminal offense and could carry a $240,000 fine and/or four years' imprisonment.

According to E.U. Parliament data, intellectual copyright theft costs the bloc $6 billion a year. An estimated 37 percent of all software used in the 27-member E.U. is copied or pirated in some form or another.

Professor Alfred Steinherr of the German Institute for Economic Research said the new law is good, because a region like the E.U. - a global leader in luxury goods that are often targeted by pirates - is losing a lot of money.

At the same time, he said, the costs of piracy are not so great that they affect the region's socio-economy.

''The losses are exaggerated,'' he said. ''The effects are one or less percentage of the profits. Nobody really loses a job because of piracy."

Steinherr said one of the major drivers of piracy was outsourcing of the manufacturing process. If, for example, a clothing line in New York City is supplied from China, the factory in China may release some branded merchandise into the local market, which finally gets into the global market cycle.

The E.U. proposals come at a time when the United States is taking stronger action against countries like China, whose businesses are frequently accused of copyright infringement.

In April, the U.S. filed complaints against China at the World Trade Organization (WTO) over the issue. Washington is challenging Beijing's laws for copyright and trademark protection, and its alleged failure to remove import and distribution restrictions on copyright U.S. goods including newspapers, magazines and video games.

The U.S. says its businesses lose $25 billion a year from Chinese piracy and counterfeiting.

The E.U., Mexico, Japan and Canada have expressed interest in participating as interested parties in the U.S. case against China at the WTO.

According to a study by a U.S.-based global consulting firm, L.E.K., the American movie industry lost $1.3 billion because of piracy in 2006.

U.S. Trade Representative Susan Schwab said in a recent statement that China and Russia remain the world's main violators of intellectual property rights.

"Innovation is the lifeblood of a dynamic economy here in the United States, and around the world," she said, "We must defend ideas, inventions and creativity from rip-off artists and thieves."

Schwab said she hoped the situation in Russia would improve once it starts implementing legal steps it committed itself to as part of a bilateral agreement with the U.S. ahead of accession to the WTO.

Other countries cited by Schwab's office as major violators of intellectual property rights include Argentina, Chile, Egypt, India, Israel, Lebanon, Thailand, Turkey, Ukraine and Venezuela.

The proposed E.U. law would hold legal consequences to those who obtain commercial profit from piracy, but not to private home users. While piracy for home use is not legal, according to the proposed law, it will be dealt with by national legislation.

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