IBT – Problem 9.2 Intellectual Property Piracy Victor H. Bouganim WCL, American University

Victor H. Bouganim, WCL, American University, Spring 2001 Intellectual Property Piracy Problem 9.2, Textbook p.801 F The Rockers are a world famous music group –DACCA is their recording label u New York corporation u Owns several European subsidiaries –Licensed to produce DACCA CDs and tapes –Assumed by DACCA of New York that these sales would take place in Europe copyrights for their sound recordings u Hold copyrights for their sound recordings wherever national law permits protection F Sales of the Rockers’ most popular recordings are in decline in the U.S. –Competition from piracy and ‘gray markets’

Victor H. Bouganim, WCL, American University, Spring 2001 Copyright F Economic rights F Moral rights A bundle of exclusive rights attached to protected works ©

Victor H. Bouganim, WCL, American University, Spring 2001 Copyright Conventions - WIPO F Berne Convention for the Protection of Literary and Artistic Works, 1896 revised in the Paris Act 1971, as amended in 1979 F Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, 1961 –Joint administration of UNESCO F WIPO Copyright Treaty (WCT), 1996 F WIPO Performances and Phonograms Treaty, 1996

Victor H. Bouganim, WCL, American University, Spring 2001 Copyright Conventions - Others F TRIPS, Art F Universal Copyright Convention (UCC), 1952, revised in Paris, 1971 –Administered by UNESCO F Regional Conventions –NAFTA, 1993, Art –Pan-American u Mexico City Convention, 1902 u Buenos Aires Convention, 1911 –EU Directives - Copyright Harmonization

Victor H. Bouganim, WCL, American University, Spring 2001 TRIPS Copyright Regime F Members shall comply with Articles 1 through 21 of the Berne Convention (1971) and the Appendix thereto. However, Members shall not have rights or obligations under this Agreement in respect of the rights conferred under Article 6bis of that Convention or of the rights derived therefrom. [TRIPS, Article 9.1] F Berne Convention, Article 6bis – Moral Rights: –to claim authorship –to object to certain modifications and other derogatory actions F Rationale for exclusion –not a trade-related issue –possible barrier for full exploitation by a licensee –not recognized in some countries. E.g., USA.

Victor H. Bouganim, WCL, American University, Spring 2001 TRIPS Copyright Rules F Copyright scope and exceptions F Digital Copyright –Computer programs –Databases F Rental Right F Enforcement F Dispute Settlement F Related Rights –Performers –Producers of Phonograms –Broadcasters

Victor H. Bouganim, WCL, American University, Spring 2001 Scope of Copyright Protection F Copyright protection shall extend to expressions and not to ideas, procedures, methods of operation or mathematical concepts as such. [TRIS, Article 9.2] F Copyright protection extends to expressions and not to ideas, procedures, methods of operation or mathematical concepts as such. [WCP, Article 2]

Victor H. Bouganim, WCL, American University, Spring 2001 Copyright Works - USA Copyright Act 1976 F Literary works u compilations u computer programs F Musical works F Dramatic works F Pantomimes and choreographic works F Pictorial, graphic, and sculptural works F Motion pictures and other audiovisual works F Sound recordings F Architectural works

Victor H. Bouganim, WCL, American University, Spring 2001 Copyright - Exclusive Rights Economic Rights F Reproduction F Publication F Adaptation F Public Performance F Communication F Distribution Rental right

Victor H. Bouganim, WCL, American University, Spring 2001 Rental Right F In respect of at least computer programs and cinematographic works, a Member shall provide authors and their successors in title the right to authorize or to prohibit the commercial rental to the public of originals or copies of their copyright works. [TRIPS, Article 11] F Phonograms – Art F WCT, Article 7. F In respect of computer programs, this obligation does not apply to rentals where the program itself is not the essential object of the rental.

Victor H. Bouganim, WCL, American University, Spring 2001 Limitations and Exceptions F Members shall confine limitations or exceptions to exclusive rights to certain special cases which do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the right holder. [TRIPS, Article 13]

Victor H. Bouganim, WCL, American University, Spring 2001 TRIPS – Enforcement Measures F Provided enforcement and measures for protection against intellectual property infringement –Article 41 u guarantee of enforcement under members’ national laws –Article 51 u Suspension release by Customs Authorities –Article 60 u De Minimis Imports –Article 61 u Criminal Procedures

Victor H. Bouganim, WCL, American University, Spring 2001 IP Enforcement - Obligations TRIPS – Article 41 F Members shall ensure that enforcement procedures as specified in TRIPS are available under their law –Including expeditious remedies designed to prevent further infringements F “These procedures shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse.” F Enforcement procedures shall be fair, equitable and not unnecessarily complicated or costly

Victor H. Bouganim, WCL, American University, Spring 2001 Suspension by Customs TRIPS - Article 51 F Right-holders may –lodge an application in writing with competent authorities, administrative or judicial, for the suspension by the customs authorities of the release into free circulation of infringing goods F Members may –enable such an application to be made in respect of goods which involve other infringements of intellectual property rights. –provide for corresponding procedures concerning the suspension by the customs authorities of the release of infringing goods destined for exportation from their territories.

Victor H. Bouganim, WCL, American University, Spring 2001 De Minimis Imports TRIPS – Article 60 F Members may exclude from the application of the above provisions small quantities of goods of a non- commercial nature contained in travelers' personal luggage or sent in small consignments.

Victor H. Bouganim, WCL, American University, Spring 2001 Criminal Procedures - I TRIPS – Article 61 F Members shall –provide for criminal procedures and penalties to be applied at least in cases of willful trademark counterfeiting or copyright piracy on a commercial scale. F Members may –provide for criminal procedures and penalties to be applied in other cases of infringement of intellectual property rights, in particular where they are committed willfully and on a commercial scale.

Victor H. Bouganim, WCL, American University, Spring 2001 Criminal Procedures - II TRIPS – Article 61 F Remedies available shall include –imprisonment and/or –monetary fines sufficient to provide a deterrent, consistently with the level of penalties applied for crimes of a corresponding gravity. F the seizure, forfeiture and destruction of the infringing goods and of any materials and implements the predominant use of which has been in the commission of the offense

Victor H. Bouganim, WCL, American University, Spring 2001 Piracy F “The unauthorized and illegal reproduction or distribution of materials protected by copyright, patent or trademark law” F “The test of piracy is not whether the identical language, the same words are used, but whether the substance of the production is unlawfully appropriated.” Source: Black’s Law Dictionary, seventh edition F Unlicensed manufactures have lower production costs because they don’t pay royalties F Piracy occurs in developed countries as well in developing ones F In countries where enforcement is weak - piracy flourishes

Victor H. Bouganim, WCL, American University, Spring 2001 Parallel Import - Gray Market F Parallel Import F Where products manufactured by the trademark (or other IP rights) owner or his licensees for sale in other countries are imported into the U.S. F Gray Market F Goods lawfully bearing patents, trademarks or copyrights which originate abroad and which compete without permission in domestic markets

Victor H. Bouganim, WCL, American University, Spring 2001 Counterfeiting F Counterfeit –an imitation intended to pass for an original and is therefore false F Counterfeit Mark –A mark which is identical or substantially identical to the registered trademark

Victor H. Bouganim, WCL, American University, Spring 2001 Counterfeiting Products ™ ®©™ ®© F Products which are identical to the genuine products, but were produced without the authorization of the IP rights owners. F Perfect imitation including all IP symbols.

Victor H. Bouganim, WCL, American University, Spring 2001 Intellectual Property Piracy Problem 9.2, Textbook p.801 F The Rockers are a world famous music group –DACCA is their recording label u New York corporation u Owns several European subsidiaries –Licensed to produce DACCA CDs and tapes –Assumed by DACCA of New York that these sales would take place in Europe copyrights for their sound recordings u Hold copyrights for their sound recordings wherever national law permits protection F Sales of the Rockers’ most popular recordings are in decline in the U.S. –Competition from piracy and ‘gray markets’

Victor H. Bouganim, WCL, American University, Spring 2001 Intellectual Property Piracy Problem 9.2: The Setting F Sales of the ROCKERS’ most popular recordings are in decline in the U.S. –Competition from DACCA European subsidiaries capitalizing on currency differences u European wholesalers selling CDs to K-Market in the U.S. u K-market sells the ROCKERS’ recordings for less than the U.S. produced recordings

Victor H. Bouganim, WCL, American University, Spring 2001 Class Discussion F Will Part III of the TRIPS Agreement assist in combating international piracy? F What must the ROCKERS and DACCA do to benefit from TRIPS? F What are the legal remedies available to DACCA in combating piracy? F Can DACCA stop the parallel importation and the ‘gray market’ in the ROCKERS recordings?

Victor H. Bouganim, WCL, American University, Spring 2001 Infringing Importation Copyright Act § 602 F Importation into the US without the authority of the owner of copyright of copies or phonorecords of a work that have been acquired outside the US is an infringement of the exclusive right to distribute copies or phonorecords… F In a case where the making of the copies or phonorecords would have constituted an infringement of copyright their importation is prohibited. F In a case where the copies or phonorecords were lawfully made, the United States Customs Service has no authority to prevent their importation...

Victor H. Bouganim, WCL, American University, Spring 2001 The Scope of Piracy Apple ROM-less Computers F In their Effort to stop pirated copies of Apple computer systems entering the U.S., Apple attempted to stop importation of computers, which did not include chips with the Apple copyrighted materials (“ROM-less” computers). F The Copyright Act (Sec. 602) is operative against importation of protected ROMs. F “Pirated copies” are actual copies of a copyrighted work without the right-holder authorization. F Importation of ROM-less Computers Not Banned Under the Copyright Act.

Victor H. Bouganim, WCL, American University, Spring 2001 Combating Counterfeiting F Trademark Counterfeiting Act 1984 –Established counterfeiting as a crime –Damages and/or profits and attorney’s fees may be recovered in a civil action –Ex parte seizure orders may be issued by federal courts –Gray market goods, parallel goods are expressly excluded from coverage F The Anti-counterfeiting Consumer Protection Act 1996 –Trafficking in counterfeit goods is an offense under the Act –Importers must disclose the identity of any trademark on imported merchandise –Ex parte seizure of counterfeit goods are largely authorized –Damages and penalties were increased –Custom’s officials no longer have the authority to return goods to their source

Victor H. Bouganim, WCL, American University, Spring 2001 Tariff Act 1930, Sec. 526 Materials, p. 501 F Prohibit the importation of any merchandise bearing valid US trademarks, unless written consent of such marks is produced at the time of making entry. F Prohibited merchandise shall be subject to seizure and forfeiture. F Civil actions may be brought by the trademark owners for injunctions and damages. F Exemption: Articles accompanying any person arriving in the US, when such articles are for personal use and not for sale and are within set limits.

Victor H. Bouganim, WCL, American University, Spring 2001 A.T. Cross Co. v Sunil Trading Co. Dist. SD NY, 1979 F This case involves a scheme in which bogus Cross pens, manufactured in a foreign country were passed through the U.S. by means of New York’s foreign trade zone for shipment to another foreign country where the pens were sold as authentic Cross pens. F Plaintiffs Alleged trademark infringement, unfair competition and false designation or origin under the Lanham Act, 15 U.S.C. §§ 1051 F Result: Lanham Act’s jurisdictional parameters reach within the foreign trade zone