Italy: Italy 2000 – Trademark Anti-Counterfeiting Strategies

Counterfeiting and piracy of commercial goods is a phenomenon that has become a global problem and represents between 5 and 7 percent of world trade.

The intellectual property rights that are most frequently infringed concern registered trademarks, design patents and copyrights, particularly in the field of clothing, perfumes and jewellery, as well as audio-visual electronic goods and computer parts or high-tech goods. In economic terms, the over-all impact of this counterfeiting represents a loss of approximately U.S. $55 billion of sales and of 250,000 jobs per year, of which 100,000 jobs are lost in the European Union alone (source: International Customs Association, 1998).

In Italy, this problem is of utmost importance, as it has a significant impact on the local economy and on the international reputation and perception of our Country.

According to the latest available information, counterfeiting and piracy - identifiable either in the production phase as in the distribution phase – earns its culprits an estimated $3.28 billion in Italy alone, slightly less than the figures registered in Taiwan and South Korea.

This article provides a general outline of the recent developments in Italy (within the context of the European Union) with regards to the laws which have been adopted on the subject of counterfeiting and the further protection of intellectual property rights. The authors also wish to illustrate the basic strategies, the legal and non-legal remedies available to IPR owners, as well as the need for consumer education and protection.

The EU Commission presented at the end of 1998 a Green Paper on "Combating Counterfeiting and Piracy in the Single Market", the purpose of which was to assess the economic impact of counterfeiting and piracy on the Internal Market. The Commission identified and underlined four specific areas in which it was of the view that government and business joint initiatives and interventions should be reinforced, in order to fight against the crimes of counterfeiting and piracy with greater effectiveness. These are, in summary:

• the development of private surveillance systems, organised and planned for entire sectors of production or commercialisation;
• the co-ordination of all initiatives on local (i.e. national) and regional (i.e. the Internal Market) levels, taken by businesses, anti-counterfeiting organisations and administrations; the reinforcement of co-operation between government authorities and between the same and private organisations active in the fight against counterfeiting; increasing public and consumer awareness about the facts and consequences of counterfeiting and piracy;
• the creation at an institutional level of a centralised anti-counterfeiting organisation in each Member State;
• a more effective application of the existing body of laws relating to counterfeiting and piracy.

In Italy, the surveillance and monitoring of the market is generally carried out by individual businesses – within their own commercial and distribution operations – or is left to the initiative of industry associations, anti-counterfeiting associations or other associations for the protection and defence of intellectual property.

Recently, in light of Italy’s international obligations under the TRIPs’ Agreement and the European Union, there has been a significant mobilisation of public authorities in the fight against counterfeiting, which has resulted in the creation of an "anti-counterfeiting pool", lead by the Procura della Repubblica (or Italian Attorney-General) in the jurisdictions of Milan, Rome and Naples. This group co-ordinates the investigations of the law enforcement authorities, constituted by the Polizia di Stato, Carabinieri (State Police) and the Guardia di Finanza, the latter having powers especially in customs and tax-related matters. Investigations and seizures may be conducted on the basis of a substantiated complaint, and trademark owners may be called to identify whether the seized goods are counterfeited. These depositions are submitted to the Italian judge handling the case leading to a judgement and indictment.

The body of Italian laws protecting intellectual property against counterfeiting would be per se adequate but its effectiveness is actually undermined by insufficient enforcement.

Furthermore, the economic convenience for the consumer of benefiting from cheaper counterfeit goods and the substantial (and illicit) economic incentive to counterfeiters represent a real obstacle to implementing effective anti-counterfeiting strategies.

It is therefore necessary to create a culture of appreciation of original brand goods and to educate the consumer on the legal, health and public welfare risks involved in the purchase of counterfeit goods. This would constitute an effective preventive measure to the phenomenon of counterfeit goods. On the other hand, it is interesting to note that a recent Italian market study (source: Istituto di Centromarca per la lotta alla contraffazione, which is a founding member of the Glogal Anti-Counterfeiting Group) has shown that even if Italian public opinion firmly condemns counterfeiting, the Italian consumer demonstrates some apathy towards the phenomenon and a certain availability to consider the purchase of counterfeit goods, due to lack of awareness or under-evaluation of the dramatic economic and social consequences related to this act. Such collateral economic and social effects, beyond the loss of jobs and income, include the use of child-labour, the encouragement of corruption and money laundering.

An EU Council Regulation on Customs, No. 241/99/EC, in force since July 1, 1999, protects Community trademarks and provides specifically for the blocking of counterfeit goods by customs authorities of EU Member States at any border of these Member States. The blocking order can be made by any customs authority of one of the Member States and be effective and enforceable in one or more other Member States. This regulation also provides for co-operation between EU customs authorities in matters related to patent infringement and supplementary protection certificates. At this time, the Italian government is in the course of preparing a customs regulation which will give application to this EU Regulation.

Notwithstanding these recent developments, the ability to litigate trademark infringement matters before Italian courts remains at the cornerstone of an effective anti-counterfeiting strategy for registered trademark owners. In view of this fact, it should be understood that counterfeiting includes any unauthorised and unlawful use of a registered trademark by third parties, which may damage its reputation, reduce its value and distinctiveness (i.e. unlawful use of the mark, the form, or use of a servile imitation of the graphic representation and the communicational message connected with the mark or form).

The owner’s decision to act in defence of its trademarks and other IPR’s will be taken solely in the interest of protecting its business assets and market share.

The legal instruments provided under the Italian Trademark Law for the protection of a registered trademark are:

• at the preliminary stage, the description of the alleged infringement, the seizure and the injunction, either before the commencement of the main action or at an interlocutory stage; and
• at the final judgement in the main action, 1) an order for punitive damages for the breach of a preliminary injunction or other order in a previous judgement; 2) the destruction of the counterfeited marks and of all the goods which bear said marks, if they are not differentiable from the infringing mark or marks; 3) the publication of the judgement; and 4) the award of damages.

The position of Italian courts on civil damages is not unanimous, but the prevailing orientation is to calculate damages awards based on the counterfeiter’s net profit earned from the sale of the counterfeit goods; however, it has also be held that it is possible to assess damages based on the counterfeiter’s volume of sales or also on the net lost profits which the trademark owner could reasonably have earned if, how and where he could have sold his original goods but for the counterfeiter’s acts.

The counterfeiting of a registered trademark is also a criminal act under the Italian Penal Code, which provides a sanction in the seizure of the goods by customs authorities (in application of the EU Council Regulation No. 3295/94/EC, preceding the recent aforementioned Regulation No. 241/99/EC).

Therefore, in order to plan a meaningful and effective anti-counterfeiting action, it is necessary to correctly identify at the preliminary stage the objectives and to evaluate the strategies and measures to be adopted.

With the assistance of specialised investigation agencies, it will be possible to collect at the onset all the information and evidence required to prove the existence of an act of counterfeiting, the site(s) where such acts are being committed, the identity of the persons involved and the estimated volume of the counterfeiting operations.

On the basis of this evidence the trademark owner will be able to assess the opportunity of combining civil and criminal proceedings, by resorting to a order for description (civil proceeding) as a means of collecting all the available information and evidence required to substantiate a further complaint to a criminal judge, who will be at liberty to complete the investigation and if deemed appropriate, appoint the police authorities to collect further evidence as needed.

Although the deterrent effects of criminal proceedings on the counterfeiter are undoubtedly relevant, as this measure can be extremely effective in its initial stage, at a later stage it can become much less relevant or completely unpractical, considering the excessive duration of proceedings and the consequent risk of time limitations.

The choice of proceedings will necessarily be based upon the type of infringement the trademark owner wishes to defend against the identity of the authors of the infringement and the defined priorities of intervention, since it would not be effectively possible to defend against all the reported cases of infringement.

On these premises, and given that the trademark owner has also properly identified the infringers and assessed their economic ability to sustain significant damages awards, the trademark owner will be in a position to decide whether to commence a civil action for the recovery of the damages incurred as a result of the counterfeiting.

There is no doubt that a well designed trademark defence strategy, which every trademark owner should systematically foresee and plan, as well as a timely and focussed defensive action, are indispensable to deter future counterfeiters from adopting initiatives identical or similar to those already defended against.

The trademark owner will normally include in its trademark defence policy and planning all the ordinary activities in the way of a permanent monitoring and surveillance service – which can be provided with the assistance of the designated trademark attorneys - in a given territory, of all conflicting trademark registrations – of which the trademark owner may request the whole or partial cancellation – or of all conflicting trademarks for which an application is pending – in order to block their registration by means of oppositions in administrative proceedings. The benefit of these ordinary surveillance activities is to help prevent and suppress possible future acts of unlawful imitation and abuse as premises to the defence against the more complex phenomenon of counterfeiting.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.