Out-Law / Your Daily Need-To-Know

New plans outlined to tackle 'commercial scale IP infringements'

Out-Law News | 04 Jul 2014 | 4:03 pm | 2 min. read

A new "due-diligence scheme" is to be developed by the European Commission to help businesses assess their suppliers for compliance with intellectual property (IP) laws.

The voluntary scheme will be created following a series of consultations the Commission intends to hold "on applying due diligence throughout supply chains as a means to prevent commercial scale IP infringements".

The action is one of a number the Commission has committed to taking in a bid to help companies better protect and enforce their IP rights. The actions are outlined in a new communication the Commission has issued on enforcement of IP rights (13-page / 286KB PDF).

"The Commission will launch a series of consultation actions with all relevant stakeholders including civil society on applying due diligence throughout supply chains as a means to prevent commercial scale IP infringements," the Commission said in its new communication. "On the basis of the collected information it intends to develop an EU due-diligence scheme for this purpose. It will, in the first instance, seek to encourage the voluntary take-up of the scheme that it will monitor closely to determine if further initiatives are required."

Intellectual property law expert Iain Connor of Pinsent Masons, the law firm behind Out-Law.com, said that companies "face serious legal and business continuity risks" if they do not properly assess the risk of IP rights infringement within their supply chain.

"IP rights infringements may not be picked up until products and services are established in the market, and rights holders will often seek to enforce their rights with applications before the courts for injunctions banning sales of infringing goods or services," Connor said. "Rights holders will often bring legal proceedings in jurisdictions in which they are most confident of obtaining speedy redress and may target infringers with the deepest pockets, even if they are not the direct abuser of their IP rights."

"It is therefore important for businesses to introduce a number of measures to protect themselves against major disruption to their business and potentially huge claims for damages. Companies should have a clear and public policy for respecting IP that is communicated to suppliers and should engage in risk assessment exercises to identify, so far as possible, where the likely risks of the unauthorised use of IP will arise and take action to mitigate against the risk materialising," Connor said.

"Businesses should review their contracts with suppliers and seek to obtain indemnifications against the risk of third party claims being brought against them. Businesses should also audit their supply chain periodically for IP rights compliance and think about whether to purchase special IP infringement insurance to protect themselves from liabilities that may arise if they are pursued for infringement as a result of failings further down their supply chain," he said.

In its communication paper, the Commission also said it would promote the creation of agreements between rights holders and third party "business partners" that would see those business partners take action to cut funding to commercial scale IP infringers.

"The Commission will establish new stakeholder dialogues in 2014 and 2015, comprising advertising service providers, payment services and shippers, with the objective of achieving in the course of 2015 further memoranda of understanding that will help keep IP-infringing products off the internet," the Commission said. "The goal is to deprive IP infringers of their revenue streams."

Among the other actions contained in the plan is a commitment from the Commission to achieve better coordination between national agencies across the EU in the way they monitor for and combat IP rights infringement. It also wants to enhance available training in tackling cross-border IP rights infringement.

In addition, the Commission said it would launch a pilot screening programme to analyse public purchases of medicines and gauge "the scale of the problem" of IP rights infringement in that sector.

"On the basis of these activities the Commission shall publish and promote a guide on methodologies to assist public authorities in detecting and preventing counterfeit products from entering into public services," it said.

Editor's note 07/07/2014: the story was updated to include comments from Iain Connor.