Today, as on every June 8, we celebrate World Anti-Counterfeiting Day—the perfect occasion to discuss the harm caused by this scourge.

In Spain, there is a tendency to think that counterfeits are always associated with luxury products from large global companies, but the reality is quite different. The sale of counterfeit goods poses a serious socioeconomic risk worldwide. As shown in the latest report published by the EUIPO and the OECD in January of this year, titled“Risks of Illicit Trade in Counterfeit Goods for Small and Medium-Sized Enterprises,” SMEs whose intellectual property is infringed are 34% less likely to survive after five years.

Product counterfeiting threatens a large number of industries. Counterfeit goods can be found in everyday consumer products, such as clothing, as well as in luxury items. In addition to economic damage, counterfeit goods often pose a serious risk to consumer health—as is the case with counterfeit medicines, food, cosmetics, etc.—because while legitimate suppliers are subject to strict regulations that ensure their products do not harm consumers, counterfeiters do not comply with these standards.

According to the Spanish Food Code, any food product shall be considered counterfeit if any of the following circumstances apply: a) it has been prepared or labeled to imitate a well-known product; b) its actual composition does not match the composition declared and advertised; and c) any other circumstance capable of misleading the consumer.

Among the most commonly seized counterfeit food products in recent years are olive oil—more than 60,000 liters of which have been seized—and wine. In 2021, the Mossos d’Esquadra seized 750,000 bottles of wine and 3.2 million counterfeit quality seals.

Other counterfeit products that pose a serious threat to people’s health and safety include vehicle parts and accessories, tobacco—11 illegal factories were shut down last year—and face masks; between 2020 and 2021, at the height of the pandemic, 60% of the face masks purchased were counterfeit.

A RECENT CASE

A few days ago, details emerged of a large-scale operation led by the National Police in various European countries, in collaboration with agencies such as the EUIPO and EUROPOL, in which approximately 2 million counterfeit products were seized and more than 370 people were arrested.

More than 3,900 seizures were carried out in 17 countries, resulting in the removal from the market of products affecting 258 brands and valued at 85.8 million euros. During the operations, it was determined that most of the seized products originated in China, Hong Kong, Turkey, and Vietnam.

Alberto Gallo, junior associate at ELZABURU

On May 24, Recommendation (EU) 2023/1018 on combating commercial-scale online piracy of sports content and other live events, such as concerts and theatrical performances, was published in the Official Journal of the EU.

This Recommendation encourages Member States, national authorities, rights holders, and intermediary service providers to adopt effective, balanced, and appropriate measures to combat unauthorized rebroadcasts of such events. By stepping up the fight against online piracy, the Recommendation will help strengthen the competitiveness of the EU’s creative and sports industries.

The Recommendation focuses on three main areas:

– Prompt handling of notifications related to live events: This underscores the importance of hosting service providers taking urgent action to minimize the damage caused by illegal rebroadcasting.

– Dynamic injunctions: The Recommendation promotes the use of injunctions tailored to live events and, in the case of live sporting events, encourages Member States to grant sporting event organizers the standing to seek an injunction when this is not currently possible.

– Commercial offerings and awareness-raising: It recommends that organizers and broadcasters of sporting and live events increase the availability, affordability, and appeal of their commercial offerings to end users throughout the Union. It calls on Member States to raise awareness among consumers about legal options for accessing this type of content and to raise awareness among law enforcement authorities about the problem of piracy.

It also strengthens cooperation between the relevant national authorities and between rights holders and intermediaries to better address the issue of unauthorized retransmissions of live events. Cross-border cooperation among Member States is important given the nature of piracy, which transcends national borders.

Finally, the Recommendation establishes a robust monitoring system to assess its impact on the fight against piracy and to explore new measures if necessary, with the support of the EUIPO Observatory.

Given that the implementation of the Digital Services Act will advance the broader fight against illegal content on online platforms, the Commission will assess the effects of the Recommendation by November 17, 2025 (the deadline by which the Commission will assess how the Digital Services Act interacts with other legal acts, including copyright legislation).

Dr. Juan José Caselles, Head of the Anti-Piracy Department at Elzaburu

Background

SPATEN-FRANZISKANER-BRÄU GmbH is the owner of two international trademarks, “Franziskaner” (No. G807592) and “Franziskaner Weissbier” (No. G1241072), both of which are licensed to Budweiser Investment (China) Co. Ltd. (hereinafter “Budweiser”) for use and maintenance in China.

On March 7, 2019, Budweiser filed a trademark infringement lawsuit, alleging that Guangzhou Keyuan Import & Export Co. Ltd. had infringed its trademark rights by importing, without its permission, a shipment of beer identical to the two international trademarks mentioned. The defendant argued that the imported beer was a “legal parallel import,” since it was produced in Europe by the trademark owner (SPATEN-FRANZISKANER-BRÄU GmbH) and exported by its affiliate, and therefore did not constitute an infringement of the trademark rights in question.

The Yuexiu District People's Court ruled in favor of the plaintiff at the first instance, ordering the defendant to destroy the infringing products and compensate the plaintiff for its losses. The Guangzhou Intellectual Property Court, however, overturned the first-instance ruling and held that the defendant's products constituted legitimate parallel imports.

The Decision

The Court of Appeals first clarified the definition of “parallel importation of trademarks” as “the cross-border trade in products manufactured or sold abroad by the trademark owner and bearing the trademark lawfully affixed thereto, which are imported into a third country or sold through customs without the consent of the trademark owner or its licensee.” Generally speaking, parallel importation of a trademark is identified by the following five constituent elements.

1. The rights holder has legal authority over the trademark in both the exporting and importing countries;
2. Imported products are manufactured and introduced to the foreign market by the trademark owner or with the owner's consent;
3. Trademark rights in both exporting and importing countries are held largely by the same person or entity;
4. The goods are imported into the target territory without the consent of the trademark owner in the importing country; and
5. The import does not violate the importing country's legal customs control procedures.

In this case, the court found that the beer in question was produced and marketed in Germany by SPATEN-FRANZISKANER-BRÄU GmbH, and sold and exported by INBEV BELGIUM S.A. to OKUNI TRADING BUANGKOK CRESCENT, the authorized importer and distributor of “Franziskaner” beer in Singapore. Subsequently, STARBEV PTE LTD resold the aforementioned goods, which it had purchased from OKUNI TRADING, to the defendant, and OKUNI arranged for shipment from Singapore to China directly in accordance with the sales contracts between OKUNI and STARBEV and between STARBEV and the defendant. The available evidence showed that the manufacturer of the goods, the seller and shipper in Europe, the licensor who authorized the import and sale in Singapore, and the plaintiff in the case were all companies belonging, directly or indirectly, to the Anheuser-Busch InBev NV/SA group.

Therefore, the court found that the parallel-imported goods were genuine.

Second, since the Trademark Law of the People’s Republic of China does not explicitly prohibit parallel imports of trademarks, the court must base its ruling on the legislative intent and the principles of trademark law in each case—that is, to safeguard the function of trademarks and protect the interests of consumers.

The primary function of a trademark is to distinguish the origin of goods. In this case, the trademark used on the allegedly infringing goods was owned by the same rights holder in both the country of origin (Germany) and the final country of import (China). Therefore, for the relevant public in the Chinese market, the allegedly infringing trademark did not disrupt the unique relationship between the trademark owner and the parallel-imported goods, and thus did not give rise to a likelihood of confusion.

Furthermore, both the parallel-imported goods and those authorized for sale on the Chinese market were subject to the same quality control system as the rights holder’s products and had been marketed by the rights holder in accordance with market standards, such that the quality assurance inherent in the trademark can be applied.

In light of the foregoing, the court ruled that the Chinese trademark in question had not been infringed, since the parallel-imported products did not undermine the functions of the Chinese trademark nor create a risk that consumers would mistakenly identify the origin of the products.

Comments

In this ruling, the court took a neutral stance on parallel imports of trademarked goods, holding that the legality of a parallel import must be assessed on a case-by-case basis in light of the circumstances of the specific case. If the trademark rights used on the parallel-imported goods are held substantially by the same person as the trademark rights in the importing country, and the function of the Chinese trademark is not affected, there is no reason to prohibit the parallel import.

Author: Dan Liu

For the first time since 2017, Spain has been removed from the “Notorious Markets List 2020,” a blacklist compiled annually by the Office of the United States Trade Representative (USTR) that highlights online and physical markets that allegedly engage in or facilitate significant trademark counterfeiting and copyright piracy.

After three consecutive years of including the “La Jonquera” market in Girona on the blacklist for selling counterfeit goods, Spain is no longer on the counterfeit blacklist. However, U.S. authorities emphasize that such activities have declined in many physical markets due to the lack of tourism and other circumstances caused by the pandemic; therefore, they will continue to monitor these markets and may reassess them should such infringing activities resurface.

In the previous report from 2019, the U.S. government called on Spain to commit to adopting a comprehensive approach to addressing the situation in the Els Límits area, in the Girona municipality of La Jonquera, where foreign nationals were flocking in large numbers to buy counterfeit goods.

Thanks to the joint efforts of the various agencies involved in combating the sale and distribution of counterfeit goods in Spain (the Customs Surveillance Agency, the National Police, and, in particular, the Civil Guard), Spain has been removed from this shameful list. Congratulations to all of them for their ongoing efforts in the fight against counterfeiting!

Removing Spain from the counterfeit blacklist will prevent Spain's trade interests with the United States from being affected.

Access the 2020 Report on Markets Notorious for Counterfeiting and Piracy [in English]

Author: Juan José Caselles

Finally, yesterday, December 15, the European Commission published the previously announced proposal for the Digital Services Act, as well as the proposal on digital markets (link to related article).

These new regulations:

1. better protect consumers and their fundamental rights online;
2. establish a strong framework for transparency and accountability for online platforms; and
3. They promote innovation, growth, and competitiveness within the single market.

According to the published press release, the Digital Services Act will introduce a series of new, EU-wide harmonized obligations applicable to digital services, carefully scaled according to the size and impact of those services, such as:

• rules regarding the removal of illegal goods, services, or content online;
• safeguards for users whose content has been mistakenly removed by the platforms;
• new requirements for platforms to adopt risk-based measures to prevent abuse of their systems;
• far-reaching transparency measures, including those related to online advertising and the algorithms used to recommend content to users;
• new powers to oversee the operation of platforms, for example, by facilitating researchers' access to key data from those platforms;
• new rules on the traceability of businesses in online markets, to help identify sellers of illegal goods or services;
• an innovative cooperation process among public authorities to ensure effective enforcement throughout the single market.

Platforms that reach more than 10% of the EU population (45 million users) will be considered systemic and will be subject not only to specific obligations to manage their own risks but also to a new supervisory framework. This new accountability framework will consist of a council of national digital services coordinators, with special powers granted by the Commission regarding the supervision of very large platforms, including the power to impose sanctions directly on them.

The European Parliament and the member states will now discuss these Commission proposals under the ordinary legislative procedure. Once these rules are adopted, they will be binding throughout the EU. We will need to keep an eye on any changes that may be made during the legislative process. In any case, the effort to bring some order to the digital world could not be more appropriate.

Author: Juan José Caselles

Online platforms (such as search engines, social media, and e-commerce platforms) are playing an increasingly important role in our daily lives. However, current EU rules for digital services have remained largely unchanged since the adoption of the E-Commerce Directive in 2000, and there are significant discrepancies in how that Directive has been implemented across the EU.

The Commission announced a review of the internal market rules for digital services in its 2019 communication ,“Shaping Europe’s Digital Future.” Two public consultations were conducted, both of which concluded on September 8, 2020, with the following structure:

1. Evaluation of the E-Commerce Directive and clarification of liability rules for digital services, and
2. Possible introduction of an ex-ante regulatory instrument to monitor the practices of dominant platforms that have significant network effects and act as“gatekeepers.”

In October 2020, the study assessing the added value of the Digital Services Act for the EU was presented, and the European Parliament adopted a resolution on October 20, 2020, regarding the Digital Services Act and the issues raised concerning fundamental rights.

The next step will be the publication of the Digital Services Act, scheduled for December 9, 2020. We will need to pay close attention to its final text, particularly regarding the possible creation of national authorities empowered to take action against illegal content. What does seem clear is that freedom of expression cannot be used to sell counterfeit-branded products online.

Author: Juan José Caselles

The European Union Intellectual Property Office (EUIPO) and the Organization for Economic Cooperation and Development (OECD) have published a report on counterfeit pharmaceuticals worldwide.

This report is based on an analysis conducted in 2019—which found that imports of counterfeit and pirated goods totaled $509 billion in 2016, or about 3.3% of global trade—but focuses on the pharmaceutical sector.

In 2016, international trade in counterfeit pharmaceutical products totaled $4.4 billion, representing 0.84% of global trade in pharmaceutical products.

Counterfeit medicines pose not only potential economic harm to this sector but also significant health risks, as counterfeit medicines are often not properly formulated and may contain dangerous ingredients.

This report, which covers the period from 2014 to 2016, shows that the counterfeit drugs seized included medications for serious illnesses, including malaria, HIV/AIDS, and cancer. They also included antibiotics, lifestyle-related treatments, pain relievers, diabetes medications, and central nervous system drugs.

India remains the leading source of counterfeit pharmaceutical products, accounting for 53% of the total value of counterfeit pharmaceuticals and medicines seized worldwide in 2016. Following India are China (30%) and the United Arab Emirates (4%).

Among the countries most affected by the trade in counterfeit pharmaceutical products are the United States, the United Kingdom, France, Austria, Germany, and Switzerland. Specifically, with regard to counterfeit pharmaceutical products shipped to the European Union, India remains the primary source economy, accounting for 47% of the total value of counterfeit pharmaceutical products and medicines seized by EU customs authorities, followed by China, with 37%.

With regard to modes of transport, between 2014 and 2016, courier, postal, and express services were the primary modes of transport for counterfeit pharmaceuticals and medicines exported to EU economies, both in terms of value and volume.

Among the factors driving the trade in counterfeit medicines and pharmaceutical products are profitability—in some cases, the profit margin reaches 7,900%—; the low risk of detection, due to the difficulty customs officials face in accessing simple field tests to help them classify suspicious products; low risk of prosecution, since most counterfeits are only detected once they reach retailers or patients, and it is often difficult to trace them through complex supply chains or to prove where the criminal activity took place; and lenient penalties—the global average prison sentence for trademark counterfeiting is 6 years.

Regarding the impact of counterfeit medicines, the report reveals the serious consequences that can result from the use of counterfeit medicines.

One of the sources consulted, the World Health Organization, indicated that counterfeit and substandard antimalarial drugs may be responsible for the deaths of 116,000 people in sub-Saharan Africa.

Counterfeit medicines not only affect individuals on a personal level, but also directly impact legitimate drug manufacturers, who suffer consequences such as loss of revenue, damage to their brand, and increased costs for security measures.

In an effort to combat counterfeit drugs, governments and the industry have worked hand in hand to combat substandard and counterfeit pharmaceutical products. It is worth noting, for example, that in 2016 the MEDICRIME Convention—drafted by the Council of Europe—was launched, providing countries with a model legal framework to address counterfeit medicines and other types of pharmaceutical crimes that threaten public health.

This treaty calls for multilateral collaboration among nations, disciplines, and sectors, and lays the groundwork for cooperation with and among international organizations such as INTERPOL, Europol, UNODC, the World Customs Organization, and the WHO, in order to put an end to this international threat to public health.

In short, the fight against counterfeit medicines is always an urgent, ongoing, and unavoidable necessity for society as a whole. The current global COVID-19 crisis will serve as a tragic reminder of the serious harm caused by the sale of counterfeit pharmaceutical products and of the urgency of putting an end to such practices worldwide.

Author: Alberto Gallo