Australia should lead in counterfeit crackdown

11 October 2011

The new Anti-counterfeiting Trade Agreement (ACTA) is the latest international effort aimed at combating the more than US$200 billion dollar global trade in counterfeit and pirated goods.

ACTA aims to establish a new international legal framework and standards for enforcement to improve intellectual property protection and crack down on proliferating counterfeiting and piracy operations.

Australia’s Trade Minister has announced that "Australia would not be required to change existing domestic laws in order to implement ACTA". He is right. But this is only because many of the more interesting aspects of ACTA are couched in the permissive tones of what signatory states may do in implementing the agreement, rather than specifying what states shall do.

What is clear is that ACTA will make no difference to the trade in counterfeit and pirated goods in Australia without the government taking the bull by the horns and implementing some of the progressive measures suggested in the agreement.

The provisions of ACTA dealing with measures to control the importation of counterfeit goods is a good example. Australia already has in force arrangements whereby Australian Customs may seize shipments of counterfeit goods on attempted importation into Australia. ACTA goes a step further, suggesting a country may authorise its customs authority to impose fines or other penalties once seized goods are determined to be infringing.  This is not part of the Australian enforcement scheme and the forthcoming Raising the Bar amendments to IP laws in Australia do not change this.

Instead, the importer of counterfeit goods can simply consent to their forfeiture once seized and otherwise suffer no repercussions for their illegal conduct. There is, in effect, very little disincentive for a counterfeiter. Losing some shipments to seizure by customs authorities is simply a cost of doing business, recouped by the profits made on other goods successfully imported without being stopped by customs.

If the government is serious about stopping counterfeiting in Australia, the imposition of fines by our Customs Service would be a very effective means of doing so.

After all, it is worth creating a considerable disincentive for counterfeiting. Often, authorities and the public at large see counterfeiting as no more than a slight or harmless infringement of the intangible property rights of large financially sound corporate entities.  In fact, counterfeiting is the low-risk, high-profit cash cow of organised crime and even terrorism. This is not just speculation by vocal rights owners, it is accepted as fact by the CIA, Interpol and the EU Council and Commission amongst others. It has been the subject of discussion at the World Economic Forum in Davos.

A further aspect of ACTA on which Australia could take a leadership position concerns the assessment of damages for infringement of IP rights in civil actions. Often, a rights holder cannot, without incurring extreme expense, prove the damage to its reputation which is caused by a single instance of counterfeiting activity. Reputational damage is death by a thousand cuts and each individual cut, or instance of counterfeiting, has a limited effect on reputation. Equally, consumers are savvy and many purchase the counterfeit goods knowing that they are fake. So the rights holder regularly cannot prove that the sale of a counterfeit product represents a lost sale of one of its genuine products. This leaves the rights holder in an unenviable position, particularly since the courts are generally reluctant to make large awards of damages simply to deter future infringers.

ACTA suggests that countries implement systems that provide for options in assessing damages. These include pre-established damages (that is, a fixed sum for each infringing product) or presumptions for determining damages, for instance a presumption that damages is the quantity of the goods sold multiplied by the profit that the rights holder would have made had it sold a genuine product. This is an excellent suggestion which, if implemented in Australia, would act as a considerable deterrent to counterfeiters and a greater incentive for rights holders to take action to stamp counterfeiting out.

There are various other suggestions in ACTA including developing expertise amongst enforcement authorities, raising public awareness, co-operating and exchanging information on counterfeiting with other countries who are signatories of ACTA, co-ordinated regional and multi-lateral operations to combat anti-counterfeiting and so forth.

It remains to be seen how well Australia performs at this. However, the Minister’s initial conclusion that Australian law is already adequate is not promising.

The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.

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