Italy: Anti-counterfeiting: a rights holder's armoury
Contributed by IP Law Galli
Contrary to common belief, the legislative instruments available in Italy to combat IP infringement are relatively efficient and were further improved in 2010. The 2005 Code of Industrial Property brought together the principal laws relating to IP matters, particularly those concerning unregistered trademarks, trade secrets and appellations of origin as IP rights. Although these were already protected under Italian law, since being included in the code they have benefited from the special procedural rules for IP rights, with two exceptions:
- Copyright is covered by the separate Copyright Law; and
- The main criminal provisions are contained in the Criminal Code - these were largely amended and improved in 2009.
In 2006 the Code of Industrial Property and the Copyright Law were amended in order to implement the EU IP Rights Enforcement Directive (2004/48/EC), with a view to strengthening procedural instruments for the protection of rights holders.
Finally, in 2010 the code was extensively amended by Legislative Decree 131/2010, offering rights holders more effective protection against the newest and most insidious forms of counterfeiting and outlining a new balance between exclusivity and competition.
As an EU member state, Italy applies the relevant EU regulations (including those on border measures) and has implemented all of the European Union's IP directives, as well as the Agreement on Trade-Related Aspects of Intellectual Property Rights and the main international agreements in this area.
Border measures are regulated by the relevant EU regulations. Implementation is entrusted to the Customs Agency, which is a highly efficient body. The government has also reached agreements to coordinate operations with a number of countries from which counterfeit goods originate, in particular China.
The activity of the Customs Agency is supported by a multimedia database, FALSTAFF, which holds information on how to distinguish fake goods from genuine products. The database is updated directly by rights holders that request protection for their goods. In 2010 Law 55/2010 was passed, introducing new restrictive provisions on labelling and on the Italian origin of textile, shoe and leather products (for further details please see "New rules on designations of origin and 'made in Italy' designations"). However, this law is clearly inconsistent with the relevant EU rules and the Customs Agency does not enforce it at present.
Depending on various criteria, an infringement can be either a criminal or an administrative offence. Criminal offences are covered by Articles 473, 474 and 517(3) of the Criminal Code, which were improved by Law 99/2009. These provide for:
- between six months' and three years' imprisonment, plus a fine of between €2,500 and €25,000 for the infringement of registered marks;
- between one and four years' imprisonment, plus a fine of between €3,500 and €35,000 for the infringement of patents, designs or models; and
- up to two years' imprisonment plus a fine of up to €20,000 for the importation, possession for business purposes, sale or putting into circulation of goods that bear counterfeit or altered marks or distinctive signs, or otherwise violate other IP rights.
Law 99/2009 also introduced a specific aggravating circumstance: infringement committed in large quantities or in a continuous and organised fashion. Under Article 474(3) this factor may push the minimum sentence up to two years and the maximum up to six years. A prison term of up to two years, plus a fine of up to €20,000, was also introduced for infringements of denominations of origin on agricultural foodstuffs under Article 517(4).
Article 517 of the Criminal Code applies to unregistered marks. This provides that a person who sells or otherwise puts into circulation products which bear marks that may mislead the buyer as to the origin, provenance or quality of those products will be subject to a prison term of up to two years or a fine of up to €20,000.
Decree 135/2009 increased by one-third the penalties laid down by Article 517 with regard to "a sales indication which presents the product as entirely produced in Italy" in relation to goods which were not "completely produced in Italy", as opposed to products whose "design, planning, production and packaging were exclusively carried out in Italy". Likewise, an administrative penalty of between €10,000 and €250,000 was introduced for the "use of the trademark by the holder or licensee in such a way as to lead the consumer to believe that the product or good is of Italian origin", unless the foreign origin is indicated. However, these rules present problems of compatibility with EU law and Article 3 of the Constitution.
Articles 171 and following of the Copyright Law provide for criminal penalties for copyright infringement; this includes not only copying and plagiarism, but also the removal of technical protection measures. According to the Supreme Criminal Court's recent case law, trademark infringement under Articles 473 and 474 of the Criminal Code also includes post-sale confusion.(1) Furthermore, in all cases of infringement that do not give rise to confusion, Article 517(3) of the code (which replaced Article 127 of the Code of Industrial Property) may apply, potentially imposing a prison term of up to two years and a fine of up to €20,000.
The Supreme Court also ruled that in the case of products that bear infringing marks, the more severe penalty provided under Article 648 of the Criminal Code must also be applied, even if the defendant was merely handling the goods.(2) The introduction of administrative measures has further strengthened trademark protection. In particular, Article 146 of the Code of Industrial Property, as amended in 2010, allows the administrative authorities to seize counterfeit goods and destroy them within three months of the seizure in the case of "evident infringement of registered marks, designs and models or systematic and wilful counterfeiting of IP rights" (defined as 'acts of piracy').
In the case of infringement, police investigations, undercover operations and seizure measures are available. These must be confirmed by a court and may be subject to re-examination. If criminal organisations are running the counterfeiting operation, the more severe penalties under Articles 416 and following of the Criminal Code also apply. In this case (and as foreseen in Article 474(3) of the code), more invasive forms of investigation may be adopted, including monitoring telephone calls. In all cases the rights holder can work with the court during the investigation. The best results are often obtained by using civil and criminal procedures concurrently.
The civil courts' efficiency in IP matters is due in part to their readiness to:
- grant urgent measures (ie, injunctions, seizures and orders for the withdrawal of goods from the market); and
- order the judicial investigation of evidence (ie, description orders, normally granted ex parte, and the taking of testimony from the legal representative of the infringer).(3)
New procedural rules aimed at enhancing protection of IP rights were introduced by Legislative Decree 131/2010. The guidelines were designed to provide an easier way to obtain injunctive relief from infringers, simplify procedures and provide effective and rapid protection in patent matters (potentially even an interim assessment of non-infringement).
Under Article 131 of the Code of Industrial Property, urgent measures should be granted in any case of imminent violation of the right or risk of repetition thereof, even if the violation has been going on for some time.(4)
In 2003 specialised IP divisions were created within 12 existing courts. These divisions have exclusive competence to decide civil actions relating to trademarks, patents, copyright and unfair competition linked to these rights. Urgent measures are typically examined and granted quickly - normally within a few days where trademarks and designs are concerned (such measures often being granted ex parte) and within a few months for patents, where a court expert is usually appointed. An injunction is usually accompanied by a fine for each violation, which is paid to the rights holder. Violating an injunction order renders the offender liable to a prison term of up to three years or a fine under Article 388 of the Criminal Code.
Urgent measures, including protective measures, are granted by individual judges who are appointed by the president of the competent specialised division. They may be subject to appeal before a panel of three judges of the same division. The panel, which does not include the first judge, normally issues a decision within one to two months.
Article 132 of the Code of Industrial Property, as amended in 2010, expressly stated that the injunctive relief (including fixation of a fine and withdrawal of the infringing goods from the market) granted in urgent proceedings may become final, unless a party starts proceedings on the merits. Therefore, proceedings on the merits are necessary only when asking the court to order the infringer to:
- pay compensation and surrender any profits made from the infringement;
- pay for the ruling's publication in newspapers or magazines; and
- hand over the infringing goods to the rights holder or arrange for their destruction at its own expense.
Extra-judicial agreements based on the results of preliminary proceedings are often reached as well, based on the infringer accepting the court order and paying a sum agreed by the parties.
The accounts of the alleged infringer are often seized, which facilitates the calculation of any compensation to be paid. Following the implementation of the EU IP Rights Enforcement Directive, the holder of an infringed right may receive a sum which corresponds either to the infringer's profits or to its own lost profits, whichever is greater. Compensation for any further damage, such as expenses incurred as a result of responding to the infringement or damage to image, may also be added to the amount. Compensation for damage caused to the rights holder's image is often calculated as a fraction of the advertising expenses incurred by the rights holder or the cost of an advertising campaign to mitigate the negative impact of the infringement on the public.
From a substantive perspective, IP protection is very rigorous. In particular, well-known marks are normally protected against any use in trade of an identical or similar sign, even where there is no likelihood of confusion. Recent key decisions in this area include:
- the Court of Naples' decision of September 19 2008, which protected the trademark CHAMPION against parasitical linkage;
- the Court of Milan's decision of January 16 2009, which upheld preliminary decisions protecting the trademark BULGARI against use of 'Bulgari' as the professional name of a pornographic actress; and
- the Court of Milan's decision of October 20 2009, which protected the colour red as the non-registered trademark of Ferrari against its use for products connected to Formula 1, including clothing.
In all of these cases, public perception was key, in line with EU decisions.
In patent matters, preventive measures can also be obtained on the basis of a national or European patent application. In the case of a European application, a translation of the claims must be filed with the Italian Patent and Trademark Office.
The judge always appoints an expert to ascertain validity and infringement, as expressly laid down by Article 132 of the Code of Industrial Property (as amended) and even at the appeal stage.(5) The expert's conclusions often form the basis of the ruling. However, it is not uncommon for judges to deviate from the expert's opinion(6) or to appoint a new expert or panel of experts, especially on appeal.
Among other things, Legislative Decree 131/2010 also clarified two points in relation to patents:
- In patent invalidity actions it is sufficient to summon the person or entity that is indicated as the rights holder in the public register. It is unnecessary to summon the inventors who assigned the right - this rule also applies to pending proceedings under Article 120 of the Code of Industrial Property; and
- If the owner of a patent is unsure whether it is being infringed, it may ask the court to appoint an expert for a swift technical assessment about the validity and the infringement; this assessment can then be used in a further legal action or to reach a settlement more rapidly.(7)
Design protection through copyright law has been available since the implementation of the EU Community Design Directive (98/71/EC) – including with regard to works created before the directive was implemented. The new Article 239 of the Code of Industrial Property, as fully reworded in 2010, acknowledges the remarks of the EU advocate general in Case C-168/09 that all copy products manufactured in Italy after April 19 2006 (and those imported after April 19 2001) may be treated as counterfeit.
Strategies for enforcing IP rights online include searching and monitoring the Internet and adopting graduated responses according to the danger of the potential violation. Responses include:
- monitoring the content of the unlawful website and searching for information on its owner;
- seeking confidential contact with the infringer to resolve the conflict amicably or obtain evidence of bad faith;
- sending cease and desist letters; and
- initiating legal actions or bringing arbitration proceedings under the Uniform Domain Name Dispute Resolution Policy (which, however, does not apply to domain names in the country-code top-level domain '.it').
The courts have held internet service providers liable when they were aware of the presence of suspicious material, but refrained from removing it or from taking other action.(8)
In a case involving illegal downloads of copyrighted works through a peer-to-peer website, the Criminal Division of the Supreme Court held that the website's owner was liable because it had supplied, through a search engine or through indexed lists, the information (provided by some users) that was essential for other users to download the works.(9)
The relative ease with which description orders may be obtained can be helpful in cross-border strategies for protecting IP rights, as they help to determine the international ramifications of an infringement. Specialised investigation agencies may also be helpful in gathering information undercover. The courts consider that intentional cooperation between the licensee of a mark and a competitor of the mark owner in breach of the agreement between the mark owner and the licensee constitutes unfair competition. Breach of confidentiality is prohibited under the Code of Industrial Property and entitles the lawful rights holder to preventive and discovery measures, such as seizure and description orders. An appropriately drafted confidentiality agreement will thus be of great help in persuading a judge to grant preventive measures against the breaching party.
The newly appointed National Anti-infringement Council is ensuring the continuity of the measures undertaken by the former High Commissioner for the fight against infringement. Private associations (eg, Centromarca and Indicam) likewise play a significant role.