the matter at hand

G.ST.T. owns a sole-trader business, which is engaged in the sales of clothes. The Bulgarian authorities seized counterfeit goods offered for sale in a commercial establishment rented by that trader. None of the injured legal persons has submitted an application for compensation against G. ST. T. or has sought to join a civil action to those proceedings.

The Rayonna prokuratura Burgas, TO Nesebar (Burgas District Public Prosecutor’s Office, Nesebar division, Bulgaria) took the view that G. ST. T. had thus used in the course of trade, without the consent of the holders of the exclusive rights, marks covered by those exclusive rights and that that activity had caused ‘significant harmful effects’, with the result that the person concerned was charged before the Rayonen sad – Nesebar (District Court, Nesebar, Bulgaria), which is the referring court, with the offence of aggravated trade mark infringement, as provided for in Article 172b(2) of the Bulgarian Criminal Code. The Bulgarian legislation contains provisions which define the same conduct both as a criminal offence and as an administrative offence. 

By its first and second questions, the referring court in essence asks whether Article 13 Enforcement DirectiveDirective 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights must be interpreted as precluding national legislation and case-law pursuant to which the extent of the harm suffered forms part of the constituent elements of the criminal offence of aggravated trade mark infringement. If this is answered in the negative, the referring court is uncertain whether a mechanism for determining harm based on a presumption is consistent with the standards laid down by that directive. (paragraph 25)

By its third and fourth questions, the referring court asked the ECJ whether imposing both a long term imprisonment and a heavy fine, together with confiscation and destruction of counterfeit goods would be compatible with the principle of proportionality under Art. 49(3) of the CharterCharter of Fundamental Rights of the European Union [2000/C 364/01]. (paragraph 47)

the judgment of the ecj

The ECJ rules that the first and second questions are inadmissible: “As the Enforcement DirectiveDirective 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights does not apply to national rules relating to criminal procedures and criminal penalties where intellectual property rights have been infringed, the interpretation of that directive sought by the referring court by its first and second questions is not necessary for the resolution of the dispute in the main proceedings, which is a purely criminal procedure.” (paragraph 32).

With regard to the third and fourth question the ECJ considers in respect of its jurisdiction that when Member States are discharging their obligations under the TRIPS Agreement, including the obligation to provide for criminal procedures and penalties to be applied at least in cases of wilful trademark counterfeiting or copyright piracy on a commercial scale, they must be considered to be implementing EU law, within the meaning of Article 51(1) of the CharterCharter of Fundamental Rights of the European Union [2000/C 364/01] and the ECJ has jurisdiction.

In respect of the substance of the third question, the ECJ first helds that under the principle of the legality of criminal offences and penalties, enshrined in Article 49(1) of the CharterCharter of Fundamental Rights of the European Union [2000/C 364/01], criminal law provisions must comply with requirements of accessibility and predictability as regards both the definition of the offence and the sentencing. This implies that legislation mus clearly define offences and the penalties which they attract.

According to the ECJ, Bulgarian law fulfils this criteria “Article 49(1) of the CharterCharter of Fundamental Rights of the European Union [2000/C 364/01] must be interpreted as meaning that the principle of the legality of criminal offences and penalties does not preclude national legislation which provides, where a trade mark is used in the course of trade without the consent of the holder of the exclusive right, that the same conduct may be categorized both as an administrative offence and as a criminal offence, without that legislation including criteria allowing a distinction to be drawn between, on the one hand, the administrative offence and, on the other, the criminal offence, the offence being described in similar, or identical, terms, in the criminal law and the law on trade marks.” (paragraph 59)

With regard to the fourth question the ECJ emphasizes that the national provisions at issue in the main proceedings is implementing Article 61 of the TRIPS Agreement, the severity of penalties must not be disproportionate to the offence. (paragraph 62). According to existing case-law, the punitive measures permitted under national legislation must not go beyond what is necessary in order to attain the objectives legitimately pursued by that legislation. Further, in the absence of EU Law in the field of the sanctions applicable, Member States have the power to determine the nature and level of the penalties. (paragraph 63/64). The Court further helds that the principle of proportionality requires that the individual circumstances of the particular case are taken into account in determining the penalty and fixing the amount of the fine.         

Thus, where the national legislation provides for the duplication of penalties of a criminal nature, such as the combination of financial penalties and custodial sentences, the competent authorities are under an obligation to ensure that the severity of all of the penalties imposed does not exceed the seriousness of the offence identified, failing which the principle of proportionality would not be observed.