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New EU Law Proposed - Criminal Sanctions for IP Infringement
Monday, August 01 2005 @ 05:39 PM EDT

They probably mean well. They are thinking about criminal gangs and counterfeit goods that may, in some cases, actually harm or kill people, as well as the revenue lost. So EU lawmakers have come up with a proposed law that ensures that "all intentional infringements of an intellectual property right on a commercial scale, and attempting, aiding or abetting and inciting such infringements, are treated as criminal offences."

Several lawyers are already pointing out that actors like SCO would have a field day with such a law, because they could sue Linux end users in criminal court:

Richard Penfold, a partner at law firm DLA Piper Rudnick Gray Cary, said last week that the proposed directive could "quite possibly" allow the imprisonment of the boss of a company that is using infringing software, although it would depend on whether the defendant can argue that the infringement was unintentional. . . .

Ross Anderson, the chair of the Foundation for Information Policy Research, said the proposed directive could help SCO or other companies in future IP infringement cases against open source software.

"In future somebody like SCO will have another course of action open to them — the threat of criminal charges. This threat would enable SCO to cast a larger legal cloud," said Anderson.

Who'd be crazy enough to do that, others ask:
But Paul Stevens, a partner at Olswang, said it was unlikely that software users would be affected by the directive, as any company that pursues criminal cases against users is likely to suffer from the bad publicity.

"It's not that often that companies who have IP rights pursue cases against users," he said. "Most IP owners want you to continue buying their product and to continue dealing with them. If they started threatening someone with prison or a criminal record, how do you think their customers will feel?"

Who'd be crazy enough to do it? Um. SCO would. They already are suing end users.

That's just exactly the problem with powerful laws. Anyone can use them, and you have to figure someone will try to abuse them.

Don't you remember SCO's Complaint accusing IBM of violating export laws? Darl McBride comparing Linux users to pirates? Their worst minions accusing Linux users of even worse, of being criminals even? Falsely accusing the Linux community of taking the SCO site down with a DOS attack, an attack it later was shown came instead from criminal gangs pushing spam? SCO put that slander in their SEC filings, and they've never corrected it. Remember him writing to Congress about Linux destroying the US economy? What about their threat to use the DMCA to take down and confiscate Linux end users' computers or their software, like AutoZone? Remember the threat of a preliminary injunction? That's what I think they meant. Here's what they asked the court for in the way of "relief":

1. Injunctive relief pursuant to 17 U.S.C. Section 502 against Defendant’s further use or copying of any part of the Copyrighted Materials;

2. SCO’s actual damages as a result of Defendant’s infringement and, to the extent applicable and elected by SCO prior to trial pursuant to 17 U.S.C. Section 504, SCO’s statutory damages and enhanced damages;

3. Attorney’s fees and costs pursuant to 17 U.S.C. Section 505; and

4. Pre- and post-judgment interest, and all other legal and equitable relief deemed just and proper by this Court.

As you can see, they not only looked into a preliminary injunction, they asked for a permanent one, against further "use". They may not believe all they said, but they surely said it, and they tried to do it. And if they had had any usable patents or even any demonstrable copyrights, do you imagine for one minute they'd hesitate to use it? Do you think they care about going over the top? Or even about losing customers? Once a company decides its only hope is extreme litigation, what does it care about customers? Lawsuits like SCO's come about in a framework where a company is going down the drain and sees IP legislation as its ticket to survival.

Just a little reality check. Speaking of which, the next time someone tries to tell you Linux is "antiAmerican" or criminal or used by pirates or aiding enemies of the US or other nonsense, I'd like to point out to you that the Department of Defense has authorized the use of Open Source software and the Pentagon uses it extensively:

In fact, the U.S. military to a large degree depends on free and open-source software for infrastructure support, software development, security and research, Bedford, Mass.-based Mitre found.
In case you missed the memo, it's here [PDF]. In fact, right now, the Navy is soliciting Linux kernel work from small businesses. (See items 139 and 143.) For that matter, if you want the stamp of approval to go even higher, you might like to know that the White House runs its web site on Apache on Linux, according to Netcraft. The fact that I even have to say all that tells you just how far some have been willing to go to achieve their ends. Such types must be considered when drafting legislation, because they wait like drooling hyenas in the bushes by the edge of the savannah, just waiting for a chance to pounce and cash in.

I thought it would be useful to show you the heart of the proposed legislation, Articles 3 and 4, and I've done it like this: the law's wording is presented first, and then their explanation is below it, in colored text, followed by a snip of the explanatory memo that is included in the proposed legislation [PDF], which you can read in its entirely if you wish.


on criminal measures aimed at ensuring the enforcement of intellectual property rights

Proposal for a COUNCIL FRAMEWORK DECISION to strengthen the criminal law framework to combat intellectual property offences {SEC(2005)848}

Article 3 Offences

Member States shall ensure that all intentional infringements of an intellectual property right on a commercial scale, and attempting, aiding or abetting and inciting such infringements, are treated as criminal offences.
This Article obliges Member States to consider all intentional infringements of an intellectual property right on a commercial scale as a criminal offence. It also covers attempting, aiding or abetting and inciting such offences. The “commercial scale” criterion is borrowed from Article 61 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), concluded on 15 April 1994 and signed by all the members of the World Trade Organisation. Article 61 obliges Members to “provide for criminal procedures and penalties to be applied at least in cases of wilful trademark counterfeiting or copyright piracy on a commercial scale. 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. In appropriate cases, remedies available shall also include 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 offence. 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 wilfully and on a commercial scale.”

The infringement must be intentional, that is to say that the act must be deliberate, whether it is an actual infringement, an attempt at infringement, or aiding and abetting or inciting such an offence. This does not affect specific liability systems such as the system laid down for Internet service providers in Articles 12 to 15 of Directive 2000/31/EC on electronic commerce 3.

Article 4 Penalties

1. For the offences referred to in Article 3, the Member States shall provide for the following penalties: a) for natural persons: custodial sentences; b) for natural and legal persons: i) fines; ii) confiscation of the object, instruments and products stemming from infringements or of goods whose value corresponds to those products. 2. For the offences referred to in Article 3, the Member States shall provide that the following penalties are also available in appropriate cases: (a) destruction of the goods infringing an intellectual property right; (b) total or partial closure, on a permanent or temporary basis, of the establishment used primarily to commit the offence; (c) a permanent or temporary ban on engaging in commercial activities; (d) placing under judicial supervision; (e) judicial winding-up; (f) a ban on access to public assistance or subsidies; (g) publication of judicial decisions.
This article concerns penalties: besides imprisonment for natural persons, the Directive lays down a range of penalties to be imposed on both natural and legal persons, such as fines and the seizure of goods belonging to the offender, including the infringing goods and the materials, implements or media used predominantly for the manufacture or distribution of the goods in question. Other penalties are provided for specific cases: destruction of infringing goods and goods principally used in the manufacture of the goods in question, total or partial closure, on either a permanent or a temporary basis, of the establishment or shop primarily used to commit the infringement. Provision is also made for a permanent or temporary ban on engaging in commercial activities, placement under judicial supervision or judicial winding-up, and a ban on access to public assistance or subsidies. Finally, the publication of judicial decisions is provided for. This can serve as a means of dissuasion and as a channel of information both for right holders and for the public at large.
There is also a memo to explain why they think such a law is necessary:

Intellectual property offences have become a very worrying phenomenon, linked in some cases to organised crime. We now have a substantial cross-border trade in goods which infringe intellectual property rights, involving: illegal production of counterfeit goods, organised networks for the transport of goods from the place of production to the place of consumption, sale of illegal goods and laundering of the profits.

To combat intellectual property offences effectively, Directive ..../../EC must be supplemented by means of measures for the approximation of criminal legislation and cooperation under Title VI of the Treaty on European Union.

This proposal for a Framework Decision therefore aims to strengthen the criminal-law measures to approximate the provisions laid down by law or regulation in the Member States concerning intellectual property rights offences and to facilitate and encourage cooperation between the Member States to repress these offences.

As regards impact on fundamental rights, it should be emphasised that the direct objective of this initiative is to implement Article 17(2) of the Charter of Fundamental Rights which states that “Intellectual property shall be protected”; it does this by approximation of legislation while respecting the different legal traditions and systems of the Member States as well as other fundamental rights and principles recognised by the Charter. The level of sentences has been chosen pursuant to the seriousness of the different forms of wrongful conduct, in accordance with Article 49(3) of the Charter to the effect that sentences should not be disproportionate to the offence. . . .

Article 2 – Level of penalties This article concerns the level of criminal penalties: offences must incur a maximum term of at least four years' imprisonment when they are committed under the aegis of a criminal organisation. The same applies where the offences carry a health or safety risk. The threshold of four years' imprisonment was chosen because it broadly corresponds to the criterion used to identify a serious offence. It is the threshold selected in Joint Action 98/733/JHA and in the proposal for a Council Framework Decision on the fight against organised crime [COM(2005)6 final] and in the United Nations Convention against Organised Transnational Crime. For natural persons or legal entities who commit the offences listed in Article 3 of Directive ..../.../EC, the penalties include criminal and non-criminal fines to a maximum of at least EUR 100 000 for cases other than the most serious cases and to a maximum of at least EUR EUR 300000 for those which carry a health or safety risk.

A risk to personal health or safety shall exist where the counterfeit product placed on the market directly exposes people to a risk of illness or accident. In the case of risk which may have serious consequences such as death or infirmity, it must be possible to impose aggravated penalties. . . . .

Article 4 - Joint investigation teams

The Framework Decision of 13 June 2002 12 provides the structure needed to set up joint investigation teams. To facilitate criminal investigations into intellectual property offences, the Member States must allow the holders of intellectual property rights concerned, or their representatives, and experts to assist the investigations carried out by these teams. It is very difficult to carry out investigations in this area and it is often essential to have the active participation of the victims, of representatives of the holder of the intellectual property rights or of experts in order to reach conclusions, and in particular to establish that products have been counterfeited. Member States have a good deal of latitude in this regard.

SCO in 2005 looks like a paper tiger, but think back to when they began, back to 2003. They were the bully on the block, and a lot of companies at first were terrified. Some even signed up for their baloney IP license, which Novell in its recent court filing has just called a scheme. Just think what an ethically challenged company, willing to try anything to save its own skin or to prop up its share price even temporarily for personal gain, could do with a law whereby they could shut down its victim defendant and send the CEO to prison. Note the law includes jail time for aiding or encouraging. I can see it now. Richard Stallman in the klink.

You need to think of worst case scenarios when writing new laws, because, as we have learned the hard way, they will happen.

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