Critics blast E.U. anti-piracy proposal

In an effort to stamp out digital counterfeiting and piracy of products like music and movies, European lawmakers are criminalizing many legitimate businesses, according to companies such as Nokia Corp. and Microsoft Corp.

IT vendors are not the only ones concerned. Legal academics in Europe share these companies’ concerns about the proposed law on intellectual property enforcement, which is due to be debated in the European Parliament in the coming weeks.

If the proposal was adopted in a form championed by a leading European Parliamentarian, a teenager who illegally downloads music from the Internet could face a jail sentence. So too could the teenager’s Internet service provider (ISP), if it didn’t agree to reveal the music file sharer’s identity.

If it takes the form proposed by its author, the European Commission, the law would discourage technology firms such as Nokia from innovating, according to its opponents.

The Commission and the Parliament both want to make the proposed law broad-ranging, and by doing so both institutions have been accused of being biased towards the owners of copyright, patents, and other forms of intellectual property.

No one questions the main aim of the bill. Counterfeiting costs the computer industry about 3 billion euros (US$3.5 billion) in sales last year, because approximately 35 per cent of software acquired in Western Europe last year was pirated, according to industry lobby group, the Business Software Alliance, based in Washington, D.C.

According to the International Federation of Phonographic Industries, one in three music CDs sold around the world last year were pirated copies. The federation estimates that sales of pirate CDs that year were worth US$4.6 billion.

Everyone agrees that a pan-European law punishing counterfeiters is the only sensible way to deal with counterfeiting rings, which rarely limit themselves to one country.

However, the critics argue that the proposal extends far beyond the murky world of criminals.

Nokia, for example, fears that by covering patents, the directive threatens the economic well-being of innovation-based businesses in Europe.

“It is vitally important that this directive strikes the right balance between protecting the interests of rightholders without unfairly impeding others from competing in the same market,” said Tim Frain, Nokia’s director of intellectual property.

Patent infringement is an everyday risk for innovators, and risk assessment is a business decision, said Frain, adding that if patent infringement were to be made punishable by criminal sanctions, it would act as a strong disincentive for executives.

Introducing such harsh remedies for good faith infringements would present new risks and liabilities for companies conducting bonafide business in Europe, he said.

Microsoft’s senior legal counsel, Marie-Therese Huppertz, shares some of Frain’s concerns. Questioning whether there should there be the same rules for patent infringements as for counterfeiting, she agreed that criminal sanctions for patent infringers may well stifle innovation.

The argument for excluding patents from the scope of the proposed law appears to have won over Janelly Fourtou, the European Parliamentarian responsible for preparing the Parliament’s position on the proposal.

The issue of patents is complex, Fourtou said. Last month a debate in the European Parliament on a proposal for a law on software patents provoked one of the most bitter and aggressive lobbying efforts the House has ever seen, according to several members of Parliament (MEPs).

Fourtou said she doesn’t want the IP enforcement bill to get bogged down in a similar dispute. However, the Commission’s desire to include patents may still win the day.

While trying to narrow the scope of the bill to exclude patents, Fourtou is at the same time seeking to expand its reach in the field of copyright, and by doing so she has been criticized for having an undeclared vested interest.

The Commission’s proposal tried to avoid the situation that has occurred in the U.S., where the record industry has sued individuals who have illegally downloaded music from the Internet, including most famously, a 12-year-old girl from New York. (The suit against the 12-year-old was settled, for US$2,000.)

The Commission proposal tries to hone in on counterfeiting gangs by limiting the suggested penalties to those offenders who steal works for commercial purposes.

Fourtou plans to remove these words from the proposed law. She said that in addition to targeting counterfeiters and pirates, she wants this law to deter file sharers on the Internet.

“Even if you aren’t downloading music for profit, you still are having a very negative effect on authors and musicians,” she said. “Even a young boy who does it innocently causes an economic counter-effect.

“The Internet is a new way of living for young people. It would be very good to send out a message to them, teach them right from wrong. If we don’t put up a barrier then everything will be grey,” she said.

By seeking to include file sharers within the scope of the proposal, Fourtou has been criticized for promoting the interests of her husband, Jean-Rene Fourtou, the chief executive of Vivendi Universal SA, owner of one of the biggest record companies in the world, Universal Music Group Inc.

Fourtou was put in charge of the debate on the proposal in March. Her husband was appointed chief executive officer of Vivendi in July of last year. She said she never declared her family’s vested interest in the issue she was being asked to take charge of because she never thought it would be a problem.

“My conscience doesn’t have a problem with this,” she added.

Whether she has been influenced by her husband or not, some lawyers argue that Fourtou’s amendment stretching the reach of the proposed directive gives too much power to rightholders.

William Cornish, a professor at the University of Cambridge, and Josef Drexl, Reto Hilty and Annette Kur from the Max Planck Institute in Germany said in a recent article published in the European Intellectual Property Review this month that they are worried that E.U. lawmakers have gone too far in their efforts to protect rightholders.

“Instead of relating only to piracy and counterfeiting, the draft is couched in more general terms,” the academics said. They questioned whether there is a need for such a law, and if there is, whether the text proposed by the commission is proportional to the problem it seeks to address.

They also criticized the lawmakers for rushing it through and for listening too closely to lobbyists. “Haste and political pressure from interest groups do not make for good counsel when it comes to regulating complex and sensitive fields like that of sanctions and procedural measures for IP protection,” they wrote.

Thomas Vinje, a partner in the Brussels law firm Morrison & Foerster, whose clients include Nokia, shares the concerns expressed by the academics. He said Fourtou’s amendments make a bad situation worse. “She is putting a dangerous weapon in the hands of, among others, the big record companies,” he said.

ISPs will lose the legal certainty they had under existing E.U. laws, Vinje said, because this bill seeks to make them liable for criminal sanctions if they don’t provide information on suspected IP infringers on their network. Infringers could include an individual illegally downloading songs from the Internet.

The European commissioner responsible for the proposed directive, Frits Bolkestein, said in an interview last month that criminal sanctions, which usually lie beyond the scope of such Europe-wide laws, are necessary in the case of intellectual property enforcement “because the issue of counterfeiting is becoming overwhelming in importance,” he said.

He said he was unaware of the concerns the bill raised among legitimate businesses. His spokesman Jonathan Todd said later that if there are things that could give rise to problems for legitimate businesses “we would consider making amendments” to the directive.