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Case Study on Fashion & Intellectual Property Rights. Globalisation: a New Opportunity for Counterfeiting? The Case of the Italian Fashion Industry By: Giammarco Brenelli, Competere

1. Introduction. Industrial property and increased well-being.

It is an unquestionable fact that intellectual property does not only regard the individual

creator, but also global growth, which is the result of the overall inventiveness of all

individuals.

This explains why, in the past, the market economy developed thanks to the technological

innovations connected to discoveries in all fields, which were channelled into the production

cycle1.

On the other hand, any right is defined and receives protection only within a legal system. In a

legal vacuum, in fact, authentic property does not exist.

Hence the corpus of positive laws which guarantee rights. Thus a system of rules governing

industrial rights have developed, starting from the Industrial Revolution and evolving in

parallel to its development, with regulations introduced by the State which recognises the

right of the person who has researched, studied, applied and promoted his/her invention

alone, at the same time establishing obligations and limits bearing on the subjects which

practise industrial activity in a system which guarantees, among others, industrial property2.

No one denies that scientific discoveries have been made also outside free states, but only a

system of rules and of the protection of property has favoured the application to industry, and

1 It is well known that Max Weber compares the modern model of capitalism to all the forms of capitalism that he defines as “pre-rational”, deriving from predation activities, from war and from the administration as such (see Weber M., Economy and Society, 1922 Wirtshattind. GeselleshattTubingen: Mohr-in Italian Economia e società, Milan, Ed. Comunità 1961, pp. 688 and 689). 2Commons-Legal Foundation of Capitalism New York 1938-Golbraith American Capitalism, Boston 1956; F. Caffè, Saggi sulla moderna economia del benessere, Turin, 1955; David H. Carey, The Social Mortgage of Intellectual Property, Acton Institute, Rome, 2007.

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this is, in the first place, by the recognition of profit as a natural right of the person who has

carried out the work of invention, research, study and application3.

2. The Industrial Revolution and Property Rights.

It must be borne in mind, in general, that not only property right exists within a system which

recognises it as such, but it is also given protection by coercive provisions which protect

against abuse.

From the territorial and geographical aspect, it must be remembered that, at the dawn of the

first industrial revolution, intellectual and industrial property rights were developed within a

context of provisions which were mainly national, during growth in trade extending beyond

national borders, to answer the need for standardised protection, by means of agreements

representing the bases of international law on “property”. This was necessary, on one hand, to

overcome the differences between legal systems and, on the other, to fill the legal vacuum of

those systems in which there was no regulation.

There are differences between the absolute rights guaranteed by the State: with regard to

material objects the right merely acknowledges the pre-juridical fact, but in the case of

industrial property the law describes, and therefore disciplines, the asset to be protected. In

practice, the actual asset protected is the invention, the industrial model, the company's

trademarks and distinctive signs and, ultimately, the competition between entrepreneurs, as

well as the guarantee for third parties who access the market as consumers4.

Industrial property law has thus progressively developed, becoming differentiated from the

other property rights and the other legal issues, since it deals with concepts that do not merely

regard regulations but which more strictly regard economic aspects and guarantees.

3 Locke, in two treatises on government (1690), states that one of the natural rights is that of “property”, deriving from one's own work, which must be protected by the State just as life, freedom and equality are protected. 4 Italian doctrine (Caffè, Ferrara, Ascarelli) divides intellectual creation into three categories:

a) Works of the intellect, the protection of copyright in literature, music, art and scientific works, b) Industrial inventions and industrial models, which result from activities which are opposed to

nature or which override nature to dominate it, or which imitate and improve on nature, c) The third category regards the nomenclature used, i.e. the creation of distinctive signs for

objects and subjects which are considered, independently, as intangible assets.

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This is because the exploitation of the intangible assets possessed and their application to

production lead to earnings for the individuals and to profit for the companies, which do not

specifically regard the traditional and static concept of private property.

3. Globalisation and counterfeiting.

The process of the internationalisation of trade disciplined by the international agreements,

developed at first among the national systems which, albeit differentiated, were similar in

ideological, and therefore regulatory, inspiration. Today much has changed, however, with the

advent of the so-called globalisation. This concept includes, at least as regards its effect on

international trade, the result of a generalised growth in GDP in areas formerly

underdeveloped, as well as a greater geographic extension of the international trade flows

which involve a great variety of products.

In this new phenomenon, there is a dizzying increase in the movement of people consequent

to the opening of areas that had formerly been closed (the countries of the communist block)

or where the migratory flow was far more difficult (the so-called "third world" countries), and

more recently in flows caused by flight from political and/or religious upheavals.

To this regard, it is very true that mass immigration is neither a new nor a recent phenomenon:

also between 1800 and the First World War there were important migratory flows; but it is

also true that in the last twenty years such flows have moved with greater speed and, above

all, that not only people move from one end of the earth to the other, but so do enormous

quantities of data, information and images and – what is more important – it all happens in

real time. All these factors together have caused the collapse of many borders between the

markets of the world, and this has led to the global production chain, to production de-

localisation, to strong differences in production costs, with increasingly less stable barriers and

the consequent fall of prices on the "global" market: no longer a regional, national or

continental market, but a single, undifferentiated space of trade and of production.

4. An emblematic case of globalisation: fashion.

One case that can be considered emblematic of the new global market and of its specific

effects on industrial property is the counterfeiting of designer products in the field of fashion.

This case is, in fact, typical of those consequent to the speed of the transmission of the images,

to the circulation of information and of lifestyles, which, stretching across the whole world,

standardise taste and the market.

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The case is interesting because fashion products regard a market with limited technological

content and they are the result of ideas, taste and symbols where, as will be seen, the name

that distinguishes the manufacturer and the object produced is extremely important.

But let us take a step back: fashion existed in the 1700s and in the 1800s, but already in the

first twenty years of the last century it mainly regarded female clothing and the members of a

certain “élite”, who sought exclusive made-to-measure luxury by which to distinguish their

own personalities and the fact that they belonged to the generally privileged classes.

However, from the second half of the 1900s, together with higher living standards, the

production of high fashion garments and accessories has taken on – progressively and at

exponential development rates – the real features of an industry5, with the creation of mass

produced articles launched by the fashion shows and by advertising which, always thanks to

the facility of communication, reach a globalised world, spreading tastes and styles that are

repeated in innumerable original and identical examples in all countries.

Experts of the phenomenon have observed that modern fashion represents a first expression

of uniform and standardised mass consumption, for which much of the responsibility is

delegated to the "label". This is often the element by which the consumer no longer stands out

but by which he/she identifies him/herself, symbolically adapting to models made attractive by

advertising and by the media, often regardless of the intrinsic value of the goods. Thus, the

consumer feels part of a class that is no longer subordinate to a privileged élite and claims

his/her own status, regardless of social standing, sex or race6.

Fashion anthropologists have coined the concept of "cultural authentication", according to

which original groups incorporate extraneous elements, adopting them as their own, so that

garments of different origins are incorporated into previous dress customs7.

The growth process of the sector is self-sustaining, as the masses progressively concentrate in

the urban areas where the consumer society advances more quickly and taste becomes

internationalised, favouring mass production.

The trademark, at times the object of enormous advertising investments which represent the

classic "barrier to entry" for the competitors, described by the economists, thus assumes an

importance at times greater than, or to a certain extent independent of, the product on which 5See Lipovetski G., The Empire of Fashion: Dressing Modern Democracy, 1987, L’empire de l’éphémère: la mode et son destin dans les sociétés modernes, Paris, Gullimard. 6 See, for example, the message of the advertising of Toscani for Benetton. 7J.B. Eicher, S.L. Evenson, H.A. Lutz, The visible self: global perspective of dress culture and society, 2008.

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it appears: often what the consumer uses or wears is firstly the label, and only secondly the

product.

Globalised fashion thus becomes a kind of new universal language common to many people

who mix "western fashion" with the diverse local costumes8, many ideological and political

barriers having fallen, and western fashion being circulated as a global model by cinema and

the Internet9.

4.1. Another aspect of globalisation: unstable borders and legal vacuums.

Mass production, the resulting contained costs, and de-localisation to several factories in the

world, has brought with it the so-called “poisoned fruit” connected to mass consumption: the

technologically innovative products or, as in the above-mentioned example, "designer"

products, are manufactured and offered everywhere in a universal geographic space, lending

themselves more easily to the production of replicas and imitations in every area, nation,

city10. However, parallel to the development of legal and illegal trade and competition, there

has been no accompanying development in the regulation of the trade agreements in this new

globalised world. Notwithstanding the efforts of the UN11, of the EU12 and of the various

8 There are also variants to this, as in the case of Nike “customisation becomes available also for those who do not have large financial resources, but who nevertheless want to possess a unique article created in their own image and likeness” (Treccani, Encyclopaedia, Lessico del XXI secolo, 2013, p. 125). 9On the effects of globalisation on people's dress, tastes and habits, D. Crane, Fashion and its social agendas: class, gender and identity in clothing, 2000, It. trans. 2204; M. Maynard, Dress and globalisation, 2004; G.I. Kunz, M.B. Garner, Going global: the textile and apparel industry, 2007; J. Craik, Fashion: the key concepts, 2009, commented on in Appendice 2000, by Ragone, pp. 1006/1021, Eredità del 900. 10 Counterfeiting can be defined as: “The unauthorised representation of a registered trademark on products identical or similar to those for which the trademark is registered, in order to induce the buyer to believe that he/she is buying original products (2). Another definition, also contained in (EC) Regulation no. 1383/2003 (3), states that counterfeit goods are:

- Goods, including their packaging, on which a trade mark or a brand name has been affixed, identical to that validly registered for the same type of goods, or which cannot be distinguished in its essential aspects from the validly registered trade mark or brand name, and which therefore violates the rights of the holder of the mark in question.

- Any distinctive sign (including logos, labels, leaflets, etc.) also presented separately, which is found in the same situation as that described above.

- Packaging bearing counterfeit trademarks also presented separately, which are in the same situation as that above".

11 Always regarding the declaration of principles, it must be remembered that art. 27 of the Universal Declaration of Human Rights states that intellectual property rights are fundamental human rights for moral and material well-being, and so much so that creators and innovators must be protected against theft and counterfeit. 12 On the protection of industrial property rights and on the fight against counterfeiting, the EU has issued the following provisions: Regulation (EU) no. 608/2013 of the European Parliament and Council, of 12 June 2013 on the protection of intellectual property rights by the customs authorities, which abrogates Regulation (EC) no. 1383/2003 of the Council; Regulation (EU) no. 1151/2012 of the European Parliament and Council of 21 November 2012, on the quality standard systems of agricultural and food

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international agreements13 there is the risk, if not of a real “Far West” without rules, of an

illegal economic area both in the formerly excluded "third" countries, and in the already

industrialised countries where, for the above-mentioned features of the easy mobility of goods

and services, goods not originating from the holder of the trademark or patent can be found

on the market. And this is happening in a world in which many countries do not recognise

counterfeiting as a criminal offence, or where the forces of law and order do not give much

attention to the offence.

Thus there is a floating flow of trade in the world and in the web of counterfeit goods,

produced in violation of the industrial property rights and bearing false trademarks.

5. New pressures for global rules.

In the new era of globalisation, counterfeiting of all types and on all products is a threat to

innovation, with entirely new aspects and problems.

However, there are some signs of spontaneous market trends, as well as an increasingly

important political factor, which favours cooperation between countries.

Thus the first steps are being taken, at least on the declaration of principles, perhaps also in

connection with the signs of a first deceleration in the growth of some new economies.

In this sphere, there was a recent meeting in Seattle between the President of the Chinese

People's Republic, Xi Jinping, and the major representatives of the industrial, economic,

financial and technological world of the United States, during which Xi Jinping publicly

promised China's collaboration in guaranteeing the protection of industrial property rights and

greater information security, expressing his willingness to fight the violations.

The declaration of principle, which almost seems to restore the ideology of John Locke, albeit

in a certainly not ideological manner, is important, even if the time for the greater

effectiveness of common rules and for adequate tools to fight counterfeiting has only just

begun since, as was immediately pointed out by the American newspapers, the Chinese

President's speech was blacked-out on the Chinese media while, with regard to relations with

Europe and other countries, there has not even been a generic commitment.

products. For that matter, Italy, inspired by supra-national requests, has adopted the so-called Industrial Property Code, with Legislative Decree no. 30 of 10 February 2005. 13 Of the WIPO (the World Intellectual Property Organization) and of the WTO, which monitor the implementation of the TRIPS (Trade related aspects of intellectual property rights) agreement, as well as EC Regulation no. 1383 of 22.7.03.

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6. Counterfeiting and crime.

On the other hand, although there is now majority consent on the fact that property

protection promotes greater common well-being and is a factor of the development of

enterprises, it is necessary to start from the agreements which already exist, such as the UN

agreement of 15 December 2000 signed in Palermo, regarding the infiltration of organised

crime into the production and trading of counterfeit goods, which has transformed an activity,

often carried out at artisan level, into nothing less than an illegal industrial system. As

mentioned above, the expansion of opportunities, deriving from globalisation, favours both

the legal and illegal activities of craftsmen, of workshops and of dealers spread throughout the

world, whose activities are now sucked into the orbit of criminal organisations which gradually

risk prevailing in the counterfeit chain with further serious consequences on the international

community14. Thus, it is more than ever wrong today to consider the phenomenon as “micro

crime” or to qualify it, as some judges do every now and then, as “minor crime”.

To be increasingly effective, the contrasting measures promoted by the above-mentioned

organisations require the updating and extension of the international agreements on

counterfeiting, with the commitment of the authorities to eliminate the legislative gaps which

allow for the establishment of workshops in more tolerant countries and distribution through

hauliers and shipping agents who are sometimes fully aware but willing to turn a blind eye,

and who produce regular invoices and transport documents.

At present, in the advanced economies, the role of the customs authorities which attempt to

block the transit of counterfeit goods has been reinforced in all ways15. The EU, for example,

has issued important harmonisation directives to reinforce the protection of the customs

agencies against goods which breach industrial property rights16.

14 Economic crime or entrepreneurial crime is qualified as illicit behaviour adopted by subjects who operate within a legitimate organisation, normally a company, in consistency with the aims of that organisation (see Schrager L.S., Short J.F., Toward a sociology of organizational crime in “Social problems”, 1977). A second type of definition to which the criminology manuals often explicitly or implicitly refer, includes under the label of "economic crime" any offence carried out with purposes of an economic nature, moving the barycentre of the analysis from the criminals to their objective functions. Lastly, another type of definition refers to the methods by which economic crimes are committed: illicit behaviour which has significant similarities in its management to normal, entirely legal, economic activities (Kitch, The theory of economic crime, Enciclopedia of Crime and Justice, London,, 1983). 15 The Italian Customs Agency has created FALSTAFF (the Fully Automated Logical SysTem Against Forgery and Fraud) which is a multi-media data bank of authentic products, with a huge collection of images and technical features to facilitate recognition. 16 The possibility of preventive control required of customs agencies by private subjects who have suspicions.

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The large profits of the criminal organisations and the consequent low costs lead to further

expansion of counterfeiting in the world according to various indicators and statistics, and so

much so as to require the reinforcement and coordination of police activities with data banks

and the exchange of information, as well as stronger and more effective legislation, which, for

example, can allow for the criminalisation of counterfeiting also in countries where it is not yet

considered a crime.

According to the OECD17, the business turnover of counterfeit goods was estimated in 2009 at

between 7% and 9% of the total, while the increase in the trend between 1994 and 2011 was

estimated at 1,850%. This has led to a decrease in employment in the world of about 270

thousand jobs, of which 125 thousand are in the European Union alone. The World Bank

estimates the value of counterfeiting at 350 billion dollars.

In Italy, according to the CENSIS18, the value of the illegal sales of counterfeit goods in 2012

was estimated at more than Euro 6.5 billion, and the sectors which suffered most are the

clothing and accessories sector, the CD, DVD and software sector, and the foodstuffs sector.

The counterfeiting of industrial and fashion products is rooted to a great extent in Italian

crime, while the violation of trademarks and of the Made-in-Italy mark in the food sector19

comes from abroad20 and is spread throughout the world, with serious risks also for health21

(and the health risk is obviously even greater in the case of counterfeit pharmaceuticals

produced in Asia to the detriment of the USA and EU companies).

7. The case of Italy: the protection of the Criminal Code.

In the Italian economy, which has gone through the international crisis with many weaknesses,

a central role is still held by the SME (Small and Medium Enterprises) – which still represent

the second largest manufacturing sector of Europe, second only to the food sector – and by

luxury craftsmanship goods and the fashion system which has developed amazingly in recent

17 See Report “The economic impact of counterfeiting and piracy”, Organisation for Economic Cooperation and Development, OECD, 2007. 18See Ministry of Economic Development, General Directorate for the fight against counterfeiting, La contraffazione: dimensioni, caratteristiche ed approfondimenti, Censis, 2014 Report, La parola ai giovani e al territorio. 19 Since the food industry in Europe is the leading sector for sales, there are difficulties on the coordination of labelling as regards the origin of all products. 20 Adulterated wine with Italian names, pasta with Italian geographic names ... Italian sounding names for salamis, tomatoes, oil and cheeses. 21 According to the Italian Agricultural Organisation (Coldiretti), counterfeit Made in Italy food products cost the sector about Euro 60 billion. Outside Italy, three Italian type food products out of four are counterfeit.

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decades, known throughout the world for its designer labels – such as Dolce&Gabbana, Gucci,

Armani and many others22 – which fight against counterfeiting in the various Italian courts.

Some time ago the Italian legal system introduced measures to protect industrial property

against counterfeiting and the abuse of industrial property titles (trademarks, patents,

distinctive signs, industrial models) and, at the same time, it also maintained that know-how,

even if not patented, was worthy of protection against unfair appropriation and parasitical

exploitation.

The protection has always been of two kinds: on one hand, the protection of the civil code,

guaranteed by institutions of substantive and procedural law that have developed over the

years (most recently with the introduction of specialised sections, instituted at the Ordinary

Courts, which function rather well); on the other hand, the protection of the criminal code,

featuring criminal punishment as well as economic measures in favour of the injured party, in

addition to investigation tools typical of criminal inquiries (interception, seizure, preventive

custody, etc.).

The scope of the protection of the civil code as such and the description of its typical

instruments and its concrete effectiveness are not the subject of this paper, since they have

already been examined in the publication "IPRI 2014" of last year.

Without pretensions to either complete coverage or an academic style, in view of the context

of this paper, it is nevertheless worth mentioning the provisions of the criminal code for the

protection of industrial property (without considering the sphere of intellectual property in the

strict sense) which, after the 2009 reform introduced by the Italian Parliament, is now

particularly effective and has relevant potential (although not always adequately exploited by

the Public Prosecutors and the Courts). This regards both the typically repressive and

preventive aspects which are features of criminal law, and the possibility of indemnity for the

injured subject, which can accompany and be associated with the sanctions imposed.

For companies which own trademarks, patents and know-how, the lawyers who assist them in

lawsuits as the injured parties can file complaints and civil action within the sphere of the

criminal trial, with the collaboration of the Public Prosecutor and the Criminal Investigation

Police, aimed at obtaining precautionary and conservative measures.

8. "Classic" cases of industrial property protection. Arts. 473 and 474 of the Criminal Code.

22 The Association of Fashion Designers and Entrepreneurs, called the "Camera Nazionale della Moda Italiana", has been active in Milan for 56 years.

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Against behaviour which is prejudicial to industrial property, Italian law has introduced

provisions into the criminal code in the section on public trust:

a) Art. 473 of the criminal code punishes those who counterfeit or alter national or

foreign trademarks or distinctive signs of industrial products and those who use such

trademarks or distinctive signs without complicity in the fraud. In addition, the

provision punishes the counterfeiting or alteration of patents, drawings or industrial

models.

b) Article 474 of the criminal code, however, punishes the introduction into the country,

the holding for sale, the marketing and the placing in circulation of industrial products

with national or foreign trademarks or other distinctive signs that are false.

8.1. The assets protected.

The law requires the counterfeit, as a necessary condition, to regard industrial property titles

protected by national laws, European regulations and international agreements on the

protection of industrial (or intellectual) property. Therefore, the registration of trademarks,

patents, distinctive signs, drawings and industrial models is an opportunity for stronger

protection, which combines the protection of the civil code – which does not always perforce

require registration – with that of the criminal code.

With regard to another aspect, the protection is "wide range" and regards Italian and foreign

property titles, sanctioning the entire "chain" of the counterfeiting, from production to sale,

without ignoring the preparatory or intermediate steps, such as, for example, the simple

detention of counterfeit products or placing them in circulation. The area covered by the

criminal code is complete and the range of goods protected is vast, regarding not only

trademarks and patents but also drawings and industrial models.

In what is now consolidated judicial practice, in addition to the charge of the aforesaid

offences, the "dealers" in counterfeit goods (and not only the manufacturers) are also charged

with the crime of receiving (art. 648 of the criminal code), with more serious consequences for

the culprits.

9. The 2009 reform: reinforced protection.

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The 2009 reform23 introduced important innovations, since it was not limited to increasing the

severity of the sanctions, but it introduced new offences, with consequently more effective

repression of crime, regarding various aspects.

9.1. Aggravating circumstances.

A first innovation regards the provision of art. 474 ter of the civil code, which contemplates an

increase in the sentence (up to six years of imprisonment), when the behaviour adopted for

counterfeiting – from the production and the commercial viewpoint – is committed

systematically or through the preparation of means and of organisational activities. This

regards what was stated in the introduction: falsification and undue exploitation of industrial

property titles are no longer an occasional and "individual" phenomenon, but they have now

taken on the nature of a real criminal industry, which causes great damage to the life of

citizens, polluting the legal economy and damaging the rightful owners.

With regard to the practical effects, in addition to the harsher sentences, the charge of

aggravating circumstances also has relevant effects on the inquiries and on the procedures,

since it allows for telephone bugging and for the suspects to be remanded in custody

(obviously in the case of the conditions specified by the code of criminal procedure).

9.2 The mitigating circumstance of collaboration.

On the other hand, a mitigating circumstance has been introduced, which can significantly

reduce the sentence, for culprits who collaborate in contrasting the crimes of counterfeiting

and in the acquisition of decisive elements for the reconstruction of the facts and for the

identification of the persons responsible and of the means used for the crimes or for obtaining

the profits.

It is a typical legal "reward", well known in other sectors of criminal law24, following the United

States example, which favours collaboration on the part of those who, being in a criminal

context dedicated to counterfeiting, can give valuable information to the investigators.

9.3. Association and the jurisdiction of the District Public Prosecutor.

Always in pursuit of contrasting the industrial dimension of counterfeiting and in view of the

now obvious role of organised crime, which is also cross-border, the legislature has ruled that

23 See Law no. 99 of 23 July 2009. 24 The reference is to the law regarding informers, in which this circumstance is often applied.

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the so-called District Public Prosecutor's Office is responsible for the inquiries, to guarantee

better investigative coordination, using skills and means normally available to the same25.

9.4. Undercover operations.

The new dimension assumed by counterfeiting and the need to establish effective

investigation tools, has led to the need of undercover operations, with the consequent

exemption from punishment for the police officers who carry out such operations.

The reform contains an echo of the anti-Mafia legislation, since it takes into account the fact

that counterfeiting has become an area of interest for organised crime.

10. New tools to protect loyalty in trade. Seizures and confiscations.

The seizure of counterfeit objects, in criminal proceedings for the above-mentioned crimes, is

an ordinary measure, aimed at satisfying concurrent requirements: on one hand, to obtain

proof, because the trademark, patent etc. can be demonstrated as counterfeit only if

verifications are carried out on the material evidence (often delegated to specialised subjects);

on the other hand, as a preventive and punitive measure since, if it is found in the proceedings

that the object is illegal, it is subtracted from the accused and definitively excluded from the

market by being confiscated and destroyed.

Seizure and successive confiscation are in themselves an aim pursued by the injured subject,

without forgetting that daily judicial experience suggests indispensable cooperation between

the same and the investigators, from the initial precautionary stage. This is to prevent the

release from seizure – with the consequent, and often definitive, dispersion on the market of

the counterfeit products – often due to the incomplete evaluation of the elements concerning

the ownership of the industrial property, the possibility of confusing/overprinting the

trademark or patent and, more in general, the existence of the conditions for the protection

offered by the criminal code.

Furthermore, seizures are particularly effective in order to prevent the repetition of the illegal

behaviour, when they regard not only the final counterfeit products, but also the tools by

which they are produced. Today, this need is answered by art. 474 bis of the criminal code,

which has introduced the special case of (obligatory) confiscation of the “things that were

used, or which were intended to be used, to commit the crime and of the things that are the

25 These offices, in fact, deal mostly with investigations into criminal groups which commit crimes such as drug trafficking, money laundering and other types of very serious crime.

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object, the product, the price or the profit of the crime”. The wording of the law does not

regard only the material object of the crime26 but it also includes all the instrumental objects

of the illegal enterprise, such as machinery, motor vehicles, premises, etc.

Always to implement the protection, the legislature has introduced two additional provisions:

- Confiscation of the “equivalent” of the profit of the crime when said profit cannot directly

be found. The measure – which in this case regards assets and has a punishing effect,

subtracting from the accused the proceeds of the illegal activity – may regard any asset

owned by the accused, regardless of whether it is connected to the criminal activity.

- The extension of confiscation to the goods falling within the said categories27, which

belong to third parties that are extraneous to the perpetration of the crime. In this case,

confiscation cannot be avoided by the owner of the asset who demonstrates that the

illegal use or the criminal provenance of the same could not have been foreseen. This is

an effective tool against formal objections and legal shields created by the counterfeiters

to avoid confiscation by using persons who are only formally extraneous to the crime but

who are in fact accomplices. The provision also represents protection against the

negligence of third parties who, by making available to those who operate illegally the

objects necessary for counterfeiting, now risk relevant economic consequences28.

Lastly – and the provision is practically unique in Italian law – art. 474 bis of the criminal code

rules that confiscation is ordered “without prejudice to the rights of the injured person to be

refunded or compensated for the damages”. In practice, even if there are assets that can be

confiscated (obviously including available cash), the legislature wishes to guarantee that they

are used firstly to indemnify the injured parties.

11. Other relevant cases: 517 and 517-quater of the Criminal Code.

To complete the protection against title encroachment or the parasitic exploitation of

industrial property titles, the legislature wishes to punish also the sale or the placing in

circulation of industrial products which, although not perfectly replicating the distinctive signs,

recall them in a manner which can mislead the buyer regarding the provenance or the quality

26 For clarity, the garment with the counterfeit label or the application produced by copying a registered patent 27 Or what is used to commit the crime and what represents the object, the product, the profit or the price of the crime. 28 One can consider, for example, the possibility of confiscating i) the rented premises where the machinery is installed for the manufacture of the counterfeit products, ii) the premises where said products are marketed, iii) the vehicles used to transport the goods, etc.….

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of the product. They are, for example, the reproduction of unregistered distinctive signs, the

use of strong similarities, imperfect imitations, etc. The choice of Italian law is to sanction, also

criminally, behaviour which, although not representing pure counterfeiting, can mislead the

consumer and harm the legitimate holder of the industrial property rights, by a parasitic link to

distinctive signs of others.

For its importance in the Italian context, featuring a strong vocation for agriculture and food, it

is worth recalling art. 517 quater of the criminal code, which punishes the counterfeiting or

alteration, as well as the sale or the placing in circulation, of geographic indications or

dominations of origin of agricultural and food products.

12. The protection of company know-how.

Article 623 of the criminal code protects secrets against subjects inside the company

(consultants and workers), who disclose or use information obtained thanks to their position,

for their own or others' profit.

The article protects industrial secrets, understood as the know-how and the organisational

skills required to construct, govern and maintain an industrial establishment, recognising

protection beyond the object of the patent (also because what is patented is obviously not

secret) and protecting all information in general which is intended to remain secret, providing

it is not available to the general public and is the result of an independent intellectual effort.

Scientific knowledge (know-why) and technical knowledge (know-how) have very high research

costs, but once produced they can be "reproduced" at a low cost, without giving rise to

scarcity, as happens with other factors of the economy (labour, raw materials, capital).

The provision thus protects the entrepreneur who has created or increased his company’s

competitive capacity by fostering research in industrial innovation, with the investment of

considerable financial and human resources.

In fact, although the product is a material object, it must not be forgotten that it is the result of

an "intangible" performance on the part of the company, represented by its capacity to

incorporate science and knowledge, as clearly illustrated in the case study reported in the note

below29.

29 An interesting case in 2014, heard before the Court of Monza, in which certain workers and consultants of the Italian factory of a Swedish multinational appropriated a sophisticated computer programme, applied to a product for the automotive industry, the result of decades of studies and

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13. The application of the new tools against crime, the counterfeiters' "tricks" and the role

of the injured party.

The practical application of industrial criminal law in Italy allows for the introduction of certain

case studies which show, in the field, the positive effects of the new measures, and a few

"tricks" used by the illegal operators (whether they are counterfeiters or know-how thieves),

subject to continuous change in the globalised situation of which, as mentioned above,

transnational crime is an expression of one of its negative aspects.

13.1. Partial reproductions and evocative marks.

It is not rare for counterfeiters, in the attempt to elude the criminal law, to resort to the use of

trademarks or wordings which are similar to the original trademarks or wordings but which

contain slight modifications, inserted to speciously claim the original and distinctive nature of

the sign. In other cases they take avail of similarities or of elements which emphasise a certain

origin.

There are examples that have become famous: from the co-called “Italian Sounding” names

which, with the use of names very similar to the original, recall products well known for their

geographic provenance and for the high quality associated with that provenance (e.g.

Parmesan instead of the famous Parmigiano Reggiano cheese); to those consisting of the

replacement of one letter of famous figurative brand names (D&C instead of D&G for

Dolce&Gabbana); and to the use of trademarks in merchandise sectors other than those in

which they have been registered.

In all these cases, which have in common the intention of misleading the consumer, as well as

the parasitic link to the fame of another's trademark, the criminal provisions, specifically

articles 517 and 517 quater of the criminal code, allow for protection against highly insidious

behaviour also for the legitimate holders of industrial property rights.

developments. They had resigned from the company and had founded a "shield" company in France, with a branch in Italy, which then marketed the said product throughout the world, in direct competition with the abandoned company. It is important to know that the Swedish multinational had, at a certain moment, bought the Italian company, precisely for the value of its know-how, which could not be obtained quickly even by making large investments and the efforts of its research centres. The multinational therefore accused its former collaborators of subtracting and using the industrial secret and the police seized computers and documents from the collaborators' homes, from which they obtained proof that the core of the innovation had been copied, diluted into apparently unequivocal and different files, as was then ascertained during the trial. This led to the accused being sentenced and to the maintenance of correct competition on the market, with the profit being recognised to the holder of the invention.

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13.2. The counterfeiting of designer labels.

This also happens in the packaging of perfumes, belts and handbags which bear the original

trademark, with the ambiguous addition, often in a scarcely visible manner or on a removable

label, of the wording "counterfeit", to then invoke the harmlessness of the counterfeiting. In

these cases, Italian case law, also thanks to the role of the injured parties, rejects the argument

of the inoffensiveness of the falsification and recognises it as a crime.

13.3. The fragmentation of the counterfeiting: successive assembly.

In many cases brought before Italian courts, counterfeiting has taken place in a successive

assembly stage: the original trademark is printed on small goods that are of little value, easy to

transport and easy to hide (such as buttons, pins, buckles, labels), which are produced and

shipped separately and only applied later on the finished product. Italian law also gives

protection against this behaviour (punishing both those who produce the small products, and

those who assemble them, as well as those who market the end product).

13.4. Seizure from warehouses, workshops and sales points.

The repression of the single seller of counterfeit products is rarely a solution: the seller is often

an immigrant, and an illegal immigrant at that, who does not even know who the

manufacturer is. Criminal investigation, however, represents the only chance of interrupting

the chain, to track down the origin of the production and to apply the preventive and

conservative measures, described more specifically in paragraph 10, which have a deterrent

effect which is often greater than imprisonment.

Daily experience teaches that, precisely thanks to the new legal provisions, it is possible to take

effective action by "defusing" the criminal strategies – represented by fictitious names, by the

exploitation of negligent complaisance (the renting of premises on the part of owners aware of

the illegal activity carried out within the same), by the creation of back-dated restrictions on

assets30 – aimed at eluding seizure.

That said, the injured parties have a decisive role – and also a concrete economic interest, in

view of the possibility of requesting and obtaining the enforced sale of the goods seized in

30On the possibility of overcoming the "trick" consisting of the creation of a restriction on an asset, a recent pronunciation of the Supreme Court rules that “seizure in criminal cases can be ordered also on assets used as collateral (as in the case of mortgaged property, for example) since there is no legal incompatibility between the seizure (and the successive confiscation) and the credit rights of the third party guaranteed by the collateral” (Supreme Court, Criminal Section II, pronouncement of 12.02.2014 deposited on 05.03.2014).

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order to recover the sums assigned by the Court – in encouraging the application of the new

precautionary instruments, still little used by Public Prosecutors and by the Financial Police.

13.5. Compensation for the injured parties as a condition for avoiding incarceration.

When the penalties applied by the Judge are contained within the limits for obtaining a

suspended sentence, this may depend on effective compensation in favour of the inured party.

Obviously, in such cases, it is in the counterfeiter's interest to refund the holder of the

industrial property right and, in correlation, it is in the interests of the injured party to bring a

civil action in the criminal proceedings, claiming compensation.

14. Conclusions

In conclusion, it is to be hoped that Governments and International Organisations may become

more aware of the fact that the fight against counterfeiting is a priority and that a certain

persistent tendency to underestimate the seriousness of the phenomenon must cease.

This is not only because the protection of industrial property has always been, and still is, a

factor for the well-being of citizens throughout the world, but because the immense trading in

counterfeit objects is now managed by criminal organisations, who use it as a method for

investing funds originating from other illegal activities and which can change the market rules

and influence the economy and politics.

It is therefore necessary to analyse the phenomenon, and to continuously obtain more

information both on the less evident manifestations – for example, in the sectors of

technological, pharmaceutical and software innovation – and on those that are more obvious

also to the general public, such as in the fashion sector, which remains a field of more

immediate experimentation for new laws and instruments in the general fight against this

phenomenon.