25 November 2014 Intellectual Property and International Business Seminar Business Priorities to Fight Counterfeits in Croatia Tracy Faustin ICC BASCAP 1

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Magnitude of the Global Problem The total global economic value of counterfeit and pirated products is estimated to reach $1.77 trillion by the end of International trade accounts for $360 billion and is expected to rise to $960 billion by Serious threat to consumer health and safety: fake medicines, counterfeit electrical goods, fraudulent foods etc. Damage to economy: loss in tax revenue, business income, and jobs. Link to organized crime networks 3

“Top 10” for an effective IP enforcement regime 1.Empower judicial authorities to issue injunctions against a party to desist from an infringement, including preventing their exportation. 2.Empower judicial authorities to order the infringer to pay damages adequate to compensate for the injury the right holder has suffered. 3.Empower right holders to request the customs authorities to suspend the release of goods suspected of infringing IPRs including goods in transit/transshipment as well as those in import or export procedures. 4

“Top 10” for an effective IP enforcement regime 4.Empower competent authorities to order the seizure, forfeiture or destruction of counterfeit goods. 5.Provide penalties that include imprisonment as well as monetary fines sufficiently high to provide a deterrent to future acts of infringement. 6.Empower customs authorities to act upon their own initiative (“ex- officio”) to suspend the release of suspected counterfeit goods, including goods admitted to, withdrawn from, or located in free trade zones. 5

7.Adopt procedures for the enforcement in the digital environment 8.Promote specialized skills training and expertise in IPR cases by law enforcement officials and Courts through the creation of specialized IP units within enforcement agencies. 9.Promote domestic coordination among, and facilitate joint actions by, the competent authorities responsible for the enforcement of IPRs 10.Promote international cooperation among the competent authorities responsible for the enforcement of IPRs. “Top 10” for an effective IP enforcement regime 6

Kenya Ukraine Turkey India Russia Country and regional initiatives 7

Reports include: 1.Value of IP for country’s growth and development 2.Overview of counterfeiting and piracy problem 3.Legislative and policy recommendations Looking for partners to expand list into Croatia ? 8

Counterfeiting and piracy has become a lucrative market for organized crime Some of the most notorious criminal organizations have been found to be actively involved in counterfeiting and piracy, including the Chinese Triads, Japanese Yakuza, Russian Mafia, and the Neapolitan Camorra. Several contributing factors: - profit vs. risk ratio - modest legal penalties - lax enforcement compared to other crimes - transnational nature of IP crime 9

UNICRI / BASCAP REPORT Confiscation of the Proceeds of IP Crime: A modern tool for deterring counterfeiting and piracy 10

How proceeds of crime (POC) legislation tackles IP crime 1.Deter criminality by affecting the balance of risk and reward. 2.Disrupt and prevent funding of further IP and other forms of crime. 3.Re-use the confiscated proceeds for IP crime prevention initiatives or social purposes. 11

UNICRI / BASCAP recommendations fall into three categories: 1.Legal framework to effectively implement POC legislation 2.Institutional framework to effectively administer POC legislation 3.International cooperation mechanisms POC Recommendations 12

Turning recommendations into action Generate greater awareness amongst Croatian policy makers of the value of the POC legislation as an effective additional punishment to IP criminals. Encourage and support the effort of the Croatian government to establish or enhance a solid POC legal framework. Enhance the capacity of law enforcement officers to investigate and confiscate the proceeds of IP crime. The POC report and full set of recommendations can be found on our website 13

BASCAP REPORT Controlling the Zone: Balancing facilitation and control to combat illicit trade in the world’s Free Trade Zones 14

Free Trade Zones Benefit Local Economies and Global Business Reduce barriers and facilitate global free trade Provide important economic stimulus/employment to national and local economies, and to the businesses that operate within their territories Play a critical role in the globalization of world economy  2008: Estimated 3000 FTZs in 135 countries, accounting for 68 million direct jobs and over US$500 billion of direct trade-related value.  Today: over FTZs! 15

The Criminal’s Tricks in FTZs Disguise origin - FTZs are used to launder shipments and documents, disguising their original point of manufacture or departure Distribute goods - Traffickers use FTZs as distribution points in the supply chain for counterfeit goods Process goods - Counterfeiters bring “unfinished” goods into an FTZ for “further manufacture” (e.g., repackaging, relabeling, counterfeit trademarks) and then ship the finished counterfeits to other countries Complete manufacture - Some fake goods are manufactured entirely within the FTZ 16

WCO Revised Kyoto Convention (RKC) “free zone” means a part of the territory of a Contracting Party where any goods introduced are generally regarded, insofar as import duties and taxes are concerned, as being outside the Customs territory. Legal Framework 17

Free Trade Zones and Customs Key Concepts: –FTZs are part of and inside the boundaries of the national territory, not independent states –Goods are considered in FTZ for Duties and Taxes only, not for other international obligations, laws and regulations –National Customs, as part of the worldwide community of Customs, has responsibilities for prevention of illicit trade and protection of legitimate trade inside the FTZs 18

FTZ Recommendations Ensure that national IPR legislation is applicable to all goods in the national territory, in all Customs regimes, including transit, in-transit, and free-zone regimes. Empower Customs with: –Jurisdiction over FTZs’ daily operations. –Ex-officio power to detain goods they suspect of infringing IPRs –Authority over goods in transit and free zones 19

FTZ Recommendations The FTZ report and full set of recommendations can be found on our website Ensure close cooperation between national Customs and the special authorities of FTZs to provide: –an interface between Customs Forms and business records of Zone Operators. –enforcement of anti-counterfeiting criminal and civil laws. 20

Consumer Awareness Campaign: Fakes Cost More, I Buy Real 21

Posters 22

Spanish - Mexico Partner: ICC Mexico 23

Swahili - Kenya Partner: Anti-Counterfeit Agency (ACA) 24

Albanian French Arabic Ukrainian Turkish Spanish

Croatian 26

For more information please visit: Jeffrey HardyWilliam Dobson DirectorDeputy Director Tracy Faustin Alexandra Iliopoulou Project Manager Policy & Legal Adviser THANK YOU ! MERCI ! HVALA ! 27