updated 3/9/2004 3:25:55 PM ET 2004-03-09T20:25:55

The European Parliament passed a contentious directive on Tuesday to crack down on the piracy of products ranging from soccer shirts and video games to music downloaded over the Internet.

Using fast-track procedures, the European Union assembly, meeting in Strasbourg, France, voted 330 to 151 with 39 abstentions to pass the measure.

EU ministers were expected to sign off on the new rules against counterfeiting by the end of the week. Member EU governments would then have two years to write them into national law.

Under the bill, counterfeiters could face civil penalties, including seizure of property and bank accounts, if they were found guilty by national courts. Proposals for criminal sanctions were dropped from an earlier version.

Dutch Liberal Toine Manders said the EU legislation "struck a blow against the multibillion euro (dollar) counterfeiting industry," adding that piracy "harms creators and businesses."

The EU head office estimates piracy cost the bloc's legitimate economy some $9.9 billion a year between 1998 and 2001.

An amendment passed by the parliament said enforcement of the measures "need be applied only for breaches committed on a commercial scale," and should not apply to consumers "acting in good faith" who download music for their own use at home.

EU Consumer Affairs Commissioner David Byrne said safety, public security and jobs would be threatened if the EU assembly did not back the compromise bill brokered by EU governments and EU lawmakers this year.

Organized crime backs counterfiet products
The main backers of counterfeit products are organized crime posing a "genuine threat to public order," Byrne said. Police also believe terrorist groups are using pirated goods to finance their activities.

He also warned that piracy of consumer goods was costing "considerable amounts in lost taxation" for member states.

British Socialist Arlene McCarthy said piracy had reached "epidemic proportions," costing the British Treasury $2.8 billion in lost sales tax. She said it had also cost 4,000 British jobs.

The new legislation aims to create one set of rules for the entire EU, including the 10 nations that join on May 1. It would replace the patchwork of national laws across the EU, where in some countries counterfeiters are sent to jail while in others they walk free.

The rules will deal specifically with violations of copyrights and patents such as illegally copied DVDs, CDs and medicinal products like Viagra.

New rules limited to commercial fraud
EU governments will also have to take action to make sure authenticity trademarks are respected, allowing trade associations to take counterfeiters to court. Violators will also have to foot the bill for removing fake products from the market.

The proposal was watered down, taking out criminal penalties for piracy, something industry groups had called for. Also, plans to introduce specific fines — set at double the amount counterfeiters should have paid copyright holders — were changed to damages "proportionate and sufficiently deterrent."

The new rules will be limited to commercial fraud and would not target the private downloading of music or movies from the Internet.

However, consumer groups fear the legislation would do little to prevent companies from coming down hard on consumers who download music or software at home.

"The proposed directive would allow recording industry executives to privately invade the homes of file-sharers ... to gather evidence for civil prosecutions," said Robin Gross, head of IP Justice, a U.S.-based international civil rights group promoting fair intellectual rights laws.

McCarthy said that would not happen under the new rules. "Contrary to the hysteria, there is no questions of dawn raids on teenagers in their homes," she said.

The Washington-based Business Software Alliance, which represents giants such as Microsoft, Intel and Apple, recently called the legislation a "significant milestone ... to curtailing the growth of piracy."

However, the group was disappointed with the compromise that took out criminal penalties.

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