Criminal law and intelligence-led investigations: preventive tools against IP crime?

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The 2015 Situation Report on Counterfeiting in the European Union, prepared by Europol and the Office for Harmonisation in the Internal Market, provides an alarming account of the tactics used by criminal organisations to avoid detection.

The 2015 Situation Report on Counterfeiting in the European Union, prepared by Europol and the Office for Harmonisation in the Internal Market, provides an alarming account of the tactics used by criminal organisations to avoid detection.

The report confirms the growing trend of sending unbranded/raw materials separately from labels and packaging in order to bypass customs checks and assembling final counterfeit products as near as possible to the point of sale. Perhaps more worryingly, another tactic illustrates the extreme inventiveness with which criminal organisations are avoiding detection. According to the report, the Camorra had been importing sub-standard electrical equipment into Naples for some time. Before selling the equipment, the labels were replaced with those of known brands. However, when the authorities began to seize those products on the basis of rights infringement, the Camorra registered its own trademark and applied it to the same equipment. When it was seized, the equipment was found to be fully legitimate and subsequently released for sale. Here is a paradoxical situation in which a criminal organisation whose business has been interrupted by the enforcement of trademark laws relies on those very laws as a means to restart its illegal activities. One could go even further and imagine the Camorra, or any other criminal organisation, first ensuring customs clearance thanks to the registration of its own trademark and subsequently replacing such trademark with that of a well-known brand.

The effects of these new criminal tactics are amplified in borderless zones such as Schengen. Once goods have crossed a Schengen border, they can easily circulate within the territory of all member countries. Increasingly, the classic tactic whereby counterfeit goods are manufactured in one place and then exported abroad using creative techniques to conceal them from customs inspections is no longer the only one being utilised by criminal organisations.

Need to adjust law enforcement response?

The changing counterfeiting landscape raises important questions:

  • What are the consequences of these tendencies?
  • Do they pose new challenges to law enforcement?
  • Are countries’ criminal laws equipped with the necessary legal tools to ensure successful prosecutions before the final goods are assembled (ie, prior to completion of the counterfeiting offence)?

Let us start with a simplified version of the classic scenario. First, a product arrives at Customs. Based on a random check, the application of risk-assessment criteria or intelligence tips, it appears to be counterfeit. As a result, it is provisionally detained. The brand owner is alerted. After examination, the brand owner confirms the violation of its IP rights and takes further steps. Depending on the applicable legal framework, these may involve the destruction of the goods under certain conditions, steps to obtain civil remedies (eg, compensation or injunctions) or pursuit of the case through criminal proceedings.

A different scenario arises when Customs finds unbranded goods or goods which bear a legitimate trademark, but are in fact only a ‘cover’ to avoid detection. Unless the arrival of such goods coincides with solid information showing that they are in fact destined to be used to complete a counterfeiting operation, little or nothing can be done: no violation of IP rights can be argued to have occurred at this stage. This shows how important it has become for national security agencies, the law enforcement community and the private sector to produce reliable and globally coordinated intelligence. The goal is to shed light on the scope and dynamics of those preparatory acts – particularly when they are aimed at the manufacture and sale of goods which pose serious health or safety risks.

Intelligence-driven investigations

Relying on intelligence-driven investigations is less straightforward than it may appear. First of all, not only must information be gathered from heterogeneous sources, but a whole spectrum of data must be analysed and cross-checked to reveal patterns and tendencies. The task is notoriously resource intensive. The difficulties are increased by the need to ensure smooth and rapid information exchange – not only among domestic agencies, but also internationally. Ultimately, the issue comes down to the political willingness and priority attached to the fight against IP crime in relation to other forms of crime. Continued emphasis by international agencies such as the United Nations, INTERPOL and the European Union on the links between IP crime and other heinous crimes (including human trafficking and terrorism) might eventually encourage policymakers and the law enforcement community at large to invest more resources in intelligence-driven investigations in the IP area.

Second, from the perspective of criminal proceedings, the use of intelligence as admissible evidence in trials is far from automatically granted. This is a longstanding and tricky issue, widely discussed in relation to counter-terrorism. In the IP domain, an additional problem is posed by the fact that a large amount of intelligence is created not by public institutions (eg, national security agencies), but by private-sector investigators and analysts. Various countries adopt the restrictive approach of limiting the use of such intelligence to ‘investigative tips’. Other countries have simply not addressed the problem. The issue is part of a bigger debate about the role that the private sector could or should play in IP-related criminal proceedings. While the establishment of private-public partnerships in the enforcement of IP rights is universally accepted as a key ingredient in anti-counterfeiting efforts, the discussion has not (yet) sufficiently covered the concrete conditions and constraints of such partnerships from a legal and institutional perspective.

INTERPOL has used high-level international events attended by a mix of public and private stakeholders, such as the IP Crime Conference (Hanoi, September 23-25 2014), as platforms to encourage open discussion on these issues.

In this context, INTERPOL has discussed the feasibility of carrying out a study on how certain countries (belonging to different legal systems and geographical areas) view the interplay between the private and the public sectors in this domain. This study could be based on critical assessments obtained from both private companies and public investigators, with the aim of:

  • identifying differences and commonalities (ie, trends) across a number of target countries; and
  • assessing whether all or some features could be viewed as best practices, possibly providing a source of inspiration for countries that have not (yet) analysed this matter.

Using criminal law before damage is done

In order to be used effectively in criminal proceedings, intelligence-led investigations must be able to support specific criminal charges. This raises the question of whether and which criminal charges are available in the IP domain at the preparatory stages of a counterfeiting operation. Is it possible or appropriate to employ criminal law against IP infringements in an anticipatory manner? In other words, can the full potential of criminal law be used as a preventive rather than a reactive tool?

Let us look first at what the relevant international instruments provide. Under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), the definition of ‘trademark counterfeit goods’ appears rather narrow. Articles 51 and 61 oblige signatory states to criminalise trademark counterfeiting of goods, including packaging, only when it is committed on a commercial scale. Conduct concerning items other than goods or packaging or committed on a lower scale than commercial can be criminalised; however, there is no obligation in this respect.

While TRIPs cannot be used as an incentive to encourage countries to adopt a preventive approach to the criminalisation of trademark offences, other sector-specific treaties point in this direction. For example, the Council of Europe Convention on the Counterfeiting of Medical Products and Similar Crimes Involving Threats to Public Health (Medicrime Convention) sets forth a wide range of trafficking conduct relating not only to counterfeit medical products, but also to “active substances, excipients, parts, materials and accessories” (Articles 5 and 6). Another example is the Protocol to Eliminate Illicit Trade in Tobacco Products (Tobacco Protocol). Its Article 14(1)(c)(i) requires that parties establish as unlawful conduct, among others, “any… form of illicit manufacture of tobacco, tobacco products or manufacturing equipment, or tobacco packaging bearing false fiscal stamps, unique identification markings, or any other required markings or labels”. While both the Medicrime Convention and the Tobacco Protocol recognise the importance of expanding the scope of counterfeit offences beyond actions involving the finished products, neither is yet in force.

Most domestic laws consider counterfeiting offences to be consummated offences, which can be prosecuted only when the fake trademark has been affixed to the finished product. Only certain countries criminalise conduct related to the application of counterfeit marks on labels (and other forms of packaging) as an autonomous offence. In this regard, the US Trademark Counterfeiting Act (18 USC, Section 2320(a)) appears particularly broad in scope by referring to “traffic in labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags documentation, or packaging of any other type or nature”, thus demonstrating the intention to catch all possible objects connected – although not (yet) affixed – to counterfeit goods.

What about those countries which cannot avail themselves of broad definitions of counterfeiting offences? Some might use charges relating to ‘attempts’ or ‘conspiracies’ aimed at counterfeiting. Another possibility would be to consider general charges of ‘preparations’ with the objective of committing an offence. In a number of jurisdictions, preparations can be prosecuted as autonomous/inchoate offences, regardless of whether the target offence is eventually committed. At the international level, the possibility of criminalising attempted offences and aiding and abetting is envisaged in the Anti-counterfeiting Trade Agreement, the Medicrime Convention and the Tobacco Protocol. However, as noted above, these three instruments are not in force.

An objective difficulty with attempts and preparations is that in many countries, these are crimes only when the punishment for the offence in question reaches a certain threshold – which is not always the case for IP-related offences. Further, the application of criminal laws in the sense described above may be legally barred, or the prosecutorial authorities may not deem it appropriate to intervene before the counterfeit offence is complete (eg, because the applicable penalties for preparatory acts or attempts are too light). In such cases it will be necessary to wait until the counterfeiting operation is complete. This will allow prosecutors to apply the full spectrum of criminal penalties available for the consummated IP-related offence. In such scenario, a valuable role can be played by ‘controlled deliveries’ – a special investigative technique originally used in the context of drug trafficking offences which has been employed successfully in other areas. Several international treaties, such as the United Nations Convention against Transnational Organised Crime, encourage the use of this technique in the framework of international cooperation efforts to dismantle criminal organisations. Under the convention, ‘controlled deliveries’ are defined as “the technique of allowing illicit or suspect consignments to pass out of, through or into the territory of one or more States, with the knowledge and under the supervision of their competent authorities, with a view to the investigation of an offence and the identification of persons involved in the commission of the offence” (Article 2(i)).

A new role for IP offices?

Finally, one might ask whether IP offices could have a role in detecting and reporting cases where they suspect that bogus trademark registration applications have been filed. In theory, justification for this expansion of duties might be found in the role assigned to most IP offices in broadly supporting law enforcement action. In practice, it might be unfeasible, as it would involve empowering IP offices with new competences and the ability to access information kept by law enforcement authorities concerning the identity of criminal organisations and individuals.

Could it be feasible, as an alternative solution, for IP offices to communicate the applications they receive to the competent law enforcement authorities in order to obtain clearance from them? To some, a similar procedure may appear too cumbersome and further delay the time within which brand owners can expect an application decision. Certainly, there would be many counterarguments; but would they be insurmountable? If the current trends are as alarming as they appear to be and are confirmed over the next few years, proposing innovative approaches and forms of collaborative action between IP offices and law enforcement is everyone’s duty. 

The views contained in this article are those of the author only and do not necessarily reflect those of INTERPOL


INTERPOL General Secretariat

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Stefano Betti
Senior counsel
[email protected]

Stefano Betti is senior counsel at the Office of Legal Affairs, INTERPOL. He coordinates legal activities in the area of illicit trade and counterfeiting. Before joining INTERPOL, he worked for the United Nations Office on Drugs and Crime, providing legal advisory services to governments on counter-terrorism, the prevention of organised crime and anti-corruption. Previously, he collaborated with the United Nations Interregional Crime and Justice Research Institute and the European Parliament on different projects relating to crime prevention and criminal justice.

Mr Betti has a law degree from the University of Milan, Italy, with specialisation in international criminal law, and a master’s from the London School of Economics, United Kingdom.

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