IP & Crime
Intellectual property crime. The very phrase reads as an oxymoron. Intellectual property law is generally perceived in context of civil law. However, violating intellectual property laws can lead to criminal sanction. Penitentiary for pirates, custody for counterfeiters – or just a fine “sufficient to provide a deterrent”.[i] The criminal law also provides for the seizure of infringing stock and the destruction of dodgy products. How did the elastic legal concept of intellectual property law converge with the rigidity of the criminal law? To understand ‘IP crime’, we must pull apart its two constituents, explore their contours, and then fuse them together again.
Starting with crime as most people intuitively understands what crime is. Except for those who study it, that being the criminologists; “Crime does not exist. Only acts exist, acts often given different meanings within various social frameworks.”[ii] Crime is not fixed according to a prescribed set of rules, but an evolving framework adapting over time to reflect societal norms. Inherent in this evolution of crime are factors beyond a purely legalistic formulation to include a broader consensus infused with elements of morality, offence against society, and harm to its members.[iii]
Society is not limited to national borders, extending beyond with issues concerning international matters. For example, the Paris Agreement on climate change was signed by 196 parties, reflecting a pre-existing, long established norm across numerous countries. However, norms are not monolithic. Even when 196 parties seemingly agree. As with crime, they are fluid, diverse, and often contradictory. They are always disputed, however, the criminal law remains the most disputed area for international agreement. In part, this stems from a traditional view:
“Criminal law – together with the disposition of the police monopoly on the use of force – has traditionally been thought of as an area belonging to the core of national sovereignty and competence.”[iv]
A lack of agreeable standards underlies the weak structures of international criminal law and the inability to hold to account perpetrators of genocide and other crimes against humanity. Illegality is neither universal nor immutable. However, most countries do legislate for the criminalisation of intellectual property infringement. This is not a coincidence, and cannot be traced back to morality in the same manner as the general criminalisation of murder can be. Professor Yar explains how behaviours and norms become criminal offences:
“the mobilization of censorious feeling against some category of behaviour may well be enough to institute a process of criminalization, marking its transition from mere social disapproval to formal prohibition, with all the force of the state’s crime and control apparatus arrayed against it.”[v]
Censorious feeling at an international level comes in the guise of treaties. The “sensitive nature of criminal matters and attendant concerns regarding sovereignty”[vi] mean international criminal law typical only ever creates general frameworks designed to protect a minimum standard. Regarding IP crime, this framework is the TRIPS Agreement, specifically Part III Section 5.
TRIPS is ostensibly a trade agreement, as per its full title: Agreement on Trade-Related Aspects of Intellectual Property Rights. Yet it is this trade agreement which formalised international censorious feeling creating a framework for the criminalisation of IP infringement. TRIPS as a framework represents the fusion between the two constituents of IP crime; before analysing this framework, a brief exploration of the other element is required.
Intellectual property brings together a range of historically unrelated rights, “it united invention with literary and artistic creativity, and, indeed, with industrial and corporate symbols in the form of trademarks, by providing an underpinning concept.”[vii] Intellectual property is now a globally recognised area of law with its own designated agency of the United Nations – the World Intellectual Property Organization (WIPO). WIPO provides us with a high-level definition: “Intellectual property (IP) refers to creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce.”[viii]
The WIPO definition alludes to the four principal categories of intellectual property by pointing to the ‘intangible thing’ protected:
|WIPO description||Intellectual Property Right||Common categories / examples|
|Inventions||Patents||Pharmaceutical products / Technology / Engineering|
|Literary and artistic works||Copyrights||Media / Arts / Literature|
|Designs||Design rights||Fashion / Furniture / Toys|
|Symbols, names and images used in commerce||Trade marks||Brand names / Logos / Slogans|
Intellectual property law is generally a matter of civil law, infringement being a tort. However, at certain thresholds, the long arm of the criminal law intervenes.
Towards an international norm for IP crime
Intellectual property crime was a scattered affair, until the link between international trade and intellectual property became widely accepted.[ix] The link cumulated in the Agreement on Trade-Related Aspects of Intellectual Property Rights. Whilst the Agreement does not lack in general acceptance – with over 160 signatories, it is not without controversy.[x] Broad acceptance is in large part because signing TRIPS is mandatory for World Trade Organization (WTO) membership.
TRIPS mandates a minimum level for IP protection, providing “substantive obligations that are not simply matters of national discretion”[xi], including the obligation of criminal sanctions when appropriate. IP as crime is now generally accepted and legislated for, although warnings about enforcement of such provisions remain: “in its essence, criminal law constitutes a ‘dangerous weapon’ that makes the harm of any enforcement measure even worse”.[xii] Not to be taken lightly. And it can be argued TRIPS, by only including a single provision on criminal procedures, was aware of this danger. That single provision is Article 61:
“Members shall 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.”
Aggrieved members of TRIPS can file a dispute at the World Trade Organization who administrate the agreement and interpret the provisions. One such dispute, China – Intellectual Property Rights, was filed by the USA against China. The Panel in China[xiii]summarised the IP crime framework: “Section 5 of Part III of the TRIPS Agreement, dedicated to criminal procedures and remedies, is considerably briefer and less detailed than the other Sections on enforcement in Part III”. The other sections referred to being those covering civil enforcement procedures and remedies.
The treaty negotiators were concerned with the long arm of international criminal law overreaching into national affairs. China was the first dispute decided by WTO which considered Article 61, along with various other concerns the US had regarding Chinese IP protection regulation and enforcement mechanisms. Both the US and China claimed victory on how Article 61 should be interpreted. Fortunately, the Panel broke down the provision in question, “the Panel notes that the first sentence of Article 61 contains no fewer than four limitations on the obligation that it sets forth” – the all-important first sentence of Article 61 sets out the limitations:
- IPRs protected = trade marks and copyright;
- IPR violation = counterfeiting or piracy;
- Intent = requires wilful intent;
- Severity = when violation occurs on a commercial scale.
Meaning, trademark counterfeiting and copyright piracy need not be criminal offences if a WTO member so chooses. As the Panel observed “Article 61 does not require Members to provide for criminal procedures and penalties to be applied to such counterfeiting and piracy per se unless they satisfy certain additional criteria.”. It is only when the counterfeiting or piracy is both “wilful” and “on a commercial scale” a country must provide for criminal sanctions.
Counterfeiting / Piracy, And More
Wilful requires the infringer to deliberately and knowingly engage in counterfeiting, “this word, focusing on the infringer’s intent, reflects the criminal nature of the enforcement procedures at issue.”[xiv] Proving wilfulness sets a high bar for the offence, as noted by the Panel in China; Article 61 is the only provision which contains “wilful” as a qualifier, resonating with the earlier warning that the criminal law can be a “dangerous weapon”.[xv]
In China there was no element discussed in greater detailed than “on a commercial scale”. The United States application argued for a position in which any act with any commercial element was on a commercial scale. Essentially, reducing “scale” to one. This reasoning follows the US position on IP crime, whereby commercial effectively means for financial gain, meaning an infringer can be sent to prison for a single reproduction of copyrighted works.[xvi] Copyright infringement becomes a felony when committed for financial gain and meeting a minimum threshold of “at least 10 copies….which have a total retail value of more than $2,500”.[xvii] However, the Panel reject this reading, noting:
“the negotiators agreed in Article 61 to use the distinct phrase “on a commercial scale”. This indicates the word “scale” was a deliberate choice and must be given due interpretative weight.” [xviii]
As such, the Panel was determined to animate the term, giving life to “the shared view of the negotiators [regarding] the most blatant and egregious acts of infringement”.[xix] The Panel settled on “scale” meaning size with “commercial” a qualifier of size; with the qualification being subjectively benchmarked against usual commercial activity in the relevant market. Finally, the Panel linked the benchmarking exercise to profitability in the longer term; what could be thought of as an ‘impact on the market’ test. To summarise the findings of the Panel: commercial scale means something big, to be defined subjectively on a dispute-by-dispute basis. This test certainly lacks the clarity of the US advocated approach.
A Minimum Standard
It’s worth noting the four elements set out in Article 61, and the subsequent elaborations are only the required elements for the minimum standard for criminalisation. Any infringement not meeting all four elements need not be criminalised by any signatory. For example, wilful piracy need not be a crime if not conducted on a commercial scale. This is not to say TRIPS precludes more stringent criminal IP laws, Article 1 of the Agreement:
“Members may, but shall not be obliged to, implement in their law more extensive protection than is required by this Agreement…Members shall be free to determine the appropriate method of implementing the provisions of this Agreement within their own legal system and practice.”
And specifically in Article 61 for clarity:
“Members may provide for criminal procedures and penalties to be applied in other cases of infringement of intellectual property rights”.[xx]
In context, “other cases” can include both other forms of IP i.e. registered design rights or patents, or other infringing uses of trade marks i.e. infringing uses not typically defined as counterfeiting. Any of the four required elements can be altered in enacting national criminal law, as long as there are criminal penalties covering wilful trademark counterfeiting or copyright piracy on a commercial scale. Many countries do indeed choose to do so. As discussed, the US has a lower threshold of financial gain, and many jurisdictions choose to apply an intent standard lower than wilfulness. Infringing a registered design right in the UK can amount to a criminal offence,[xxi] clearly outside the “trademark counterfeiting” definition.[xxii] TRIPS obligates only a base level of protection, a framework, countries are free to deviate from the international norm as they please, so long as the minimum standard is enacted.
Applying the Article 61 framework as the basis for IP crime is not without criticism, as Johns asserts “to assume that piracy merely derives from legal doctrine is to get the history – and therefore politics, and much else besides – back to front”.[xxiii] The history and politics of TRIPS have been discussed in great detail elsewhere. Generally, criticisms of TRIPS pit the agreement as a victory for US, EU, Japan, and select other developed nations against the rest of the world. For now, TRIPS represents the international censorious norm on IP crime.
[i] TRIPS Article 61
[ii] Nils Christie, A Suitable Amount of Crime (London ; New York: Routledge, 2004).
[iii] Majid Yar, ‘The Rhetorics and Myths of Anti-Piracy Campaigns: Criminalization, Moral Pedagogy and Capitalist Property Relations in the Classroom’, New Media & Society 10, no. 4 (August 2008): 605–23, https://doi.org/10.1177/1461444807087911.
[iv] Christophe Geiger, ed., Criminal Enforcement of Intellectual Property: A Handbook of Contemporary Research, Research Handbooks in Intellectual Property (Cheltenham, UK ; Northampton, MA: Edward Elgar, 2012).
[v] Yar, ‘The Rhetorics and Myths of Anti-Piracy Campaigns’.
[vi] WTO, China – Measures Affecting the Protection and Enforcement of Intellectual Property Rights, No. DS362 (26 January 2009).
[vii] Adrian Johns, Piracy: The Intellectual Property Wars from Gutenberg to Gates (Chicago: The University of Chicago Press, 2009).
[ix] Peter Drahos and John Braithwaite, Information Feudalism: Who Owns the Knowledge Economy? (Abingdon: Earthscan, 2002).
[xi] WTO, China – Intellectual Property Rights.
[xii] Geiger, Criminal Enforcement of Intellectual Property.
[xiv] WTO, China – Intellectual Property Rights.
[xv] Geiger, Criminal Enforcement of Intellectual Property.
[xvi] 17 U.S. Code § 506(a)(1)(A)
[xvii] 18 U.S. Code § 2319
[xviii] WTO, China – Intellectual Property Rights.
[xx] TRIPS art 61
[xxii] CPDA reference registered design as criminal thing
[xxiii] Johns, Piracy.