Following the money – easy to say, hard to do

By EDRi · June 29, 2016

On 21 June, the European Commission organised an event about its “follow the money” approach to combating counterfeit goods. In the event, the first of a series of memoranda of understanding between the Commission and private sector actors was presented. The Commission has gone at great lengths to involve all stakeholders, including civil society, in this development. This effort at inclusiveness must be applauded.

However, the “follow the money” approach is deeply troublesome from a fundamental rights’ perspective.

At its core the “follow the money” approach consists of demanding private actors, who are indirectly involved in the trade of allegedly counterfeited goods, to police their customers and business partners in order to prevent/punish intellectual property right (IPR) infringements.

There are four aspects to this approach:

  1. Getting the online marketplaces to police their merchants;
  2. Getting the advertising platforms not to procure advertising space on websites that (allegedly) are involved in trading in counterfeited goods;
  3. Getting payment processors to boycott online merchants that (allegedly) offer counterfeited goods;
  4. Getting the logistics providers to intercept counterfeited goods.

As an example, let’s imagine an entrepreneurial activist who would like to make a statement about human and labour rights in Qatar and International Federation of Association Football’s (FIFA’s) engagement with the Qatari regime. To do this, the activist wants to sell online t-shirts that parody FIFA’s trademarks and statements on the football World Championship that is to be held in Qatar. After ordering a shipping container full of t-shirts produced in South-East Asia, this perfectly legal exercise in free speech may be chilled by:

  • Any operator in the logistics chain of the shipping container intercepting it;
  • The online marketplace through which the activist sells the merchandise taking down the online shop and having his or her personal details shared with the FIFA trademark rights holders;
  • The merchant being excluded from mainstream payment systems by payment processors;
  • The fulfilment of orders being disrupted by logistics providers intercepting the goods;
  • Websites promoting the t-shirts being cut-off from advertising revenues or being de-listed by Google Search.

European Digital Rights (EDRi) has always been clear on private enforcement of IPR: restrictions on fundamental rights must respect due process, impartiality, transparency, the right to appeal and proportionality.

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The “follow the money” approach leaves the judgement to private actors that are already indicating that they are keen on offloading the complex decision-making related to detecting IPR infringements to computer algorithms. This is not about the obvious cases of IPR infringement, for example counterfeit foodstuffs or pharmaceuticals (with the additional dangers to public health). It’s about the cases where exceptions to IPR may apply, or where they are overruled by fundamental rights such as the right of freedom of expression. Especially in a landscape in which copyright and its exceptions are nowhere near harmonised across the European Union Member States, and questions related to copyright and freedom of expression that often are not even obvious to the judiciary, it’s likely to create even more confusion to call on private actors to take decisions.

Even if one disagrees that these memoranda of understanding are fundamentally unfit for their purpose, there are still lots of unclarity surrounding them. For example, the memoranda talk about “commercial scale”, without defining what that means. The experience from the IPR Enforcement Directive (IPRED) indicates that across the Member States there are very different ideas on what “commercial scale” means. The text also calls for “notice and take-down” procedures, without mentioning the need for counter-notice procedures, or the possibility of abusive or mistaken take-down notices, and their possible effects on the freedom of speech. Lastly the memoranda require the sharing of personal data beyond the purpose for which they have been provided, and without a clear legal basis.

In short, the only positive thing about the “follow the money” approach is that it should set the standard for the European Commission in terms of stakeholder engagement and transparency. It should otherwise be abandoned and forgotten as soon as possible. One of the European Commission’s duties is to safeguard the fundamental freedoms, not to create private arrangements that effectively deprive European citizens of them.

Memorandum of Understanding (21.06.2016)

EDRi: “Voluntary enforcement” vs legal restrictions – what rules apply? (11.12.2012)

IVIR: Study of fundamental rights limitations for online enforcement through self-regulation

(Contribution by Walter van Holst, EDRi-member Vrijschrift, The Netherlands)