India: Intellectual Property Crime

Last Updated: 7 January 2005

Authored by Sudhir Ravindran & S.A. Chenthil Kumaran

Increasingly, the global economy is dependent upon the creation and distribution of intellectual property (IP) to drive economic growth.1 However markets are plagued by fakes be it stamps, watches, cigarettes, cosmetics, pharmaceuticals, FMCG products, auto components, software, music, films etc resulting in significant loss to companies, corresponding evasion of tax duties and violation of the rights of the consumer. Studies by industry associations bear this out, the CII Alliance2 estimates that the FMCG sector loses approximately 15% of its revenue to counterfeit goods with several top brands losing up to 30% of their business due to IP crime. The nature of the crime, its size, diversity and scope has hindered the task of coordinating a dynamic response. Lack of consumer awareness and advancement of technology are the major factors which encourage counterfeiting which is further fuelled by lax enforcement laws which make things easy for counterfeiter. The continuity of socioeconomic growth and industrial competitiveness depends upon high level of IP protection and enforcement3 raising profound concerns of the rapidly growing piracy of IP rights and production of counterfeit goods.

IP Crime

IP crime is more generally known as counterfeiting and piracy. Counterfeiting is, wilful trade mark infringement, while piracy involves, wilful copyright infringement. These are very similar and often overlapping crimes. IP crime is not a new phenomenon but due to globalisation and advances in technology counterfeiting and piracy has become big business.4

Overview Of Problems

During recent years the scope and scale of the problem has grown at a rate previously unknown. The counterfeit traders with whom most people come into contact are small-scale operators or street vendors. However, such vendors are only the front end of much wider and more sophisticated networks. Although the term "organized crime" should be used with caution in describing the counterfeiting industry, Interpol states that "extensive evidence is now available which demonstrates that organized criminals and terrorists are heavily involved in planning and committing intellectual property related crimes."5

Further, online piracy is facilitated by increases in transmission speeds, since faster connections enable users to send and download larger files (such as software programs) more quickly. Without strong online copyright laws and enforcement of those laws, online piracy via spam, auction sites and P2P systems will continue to grow alongside increases in Internet usage.6

There are 4 main factors contributing to the growth of IP crime7:

  • Widespread availability of technology
  • Increased globalization of world trade; it is easier to manufacture in one geographic location and distribute elsewhere. The result of more open borders and more trade is that it is also easier for counterfeits to flow across borders.
  • Legal penalties are low; if they exist at all.
  • The influence of organized crime.

Counterfeiting and piracy have emerged as clear and serious threats to business, consumers and government. Counterfeiting is obviously a breach of consumer affairs, health, trade, and employment law. It is the negation of all the major legislation protecting individuals.8 Without coordinated action and policy to clamp down on the criminals and to dissuade consumers by bringing about increased awareness, a cycle of economic destabilization occurs with control slipping to the criminals.

Costs to the right holder

Industries which find themselves in direct competition with counterfeiters suffer a direct loss in sales. Indeed, some markets are even dominated by counterfeiters, creating barriers of entry for the producers of the genuine product. Some would argue that the buyers of the fakes would not have bought the genuine item but that is a very narrow argument and can only apply to a small segment of luxury goods. Many counterfeit products today are of higher quality and compete directly with the genuine items. In addition, consumers who are deceived into believing that they bought a genuine article when it was in fact a fake, blame the manufacturer of the genuine product when it fails, creating a loss of goodwill. Even cheaper and obvious copies that are bought in good faith represent a serious threat to the company that wants its brands associated with quality and exclusivity. Beside direct losses of sales and goodwill, one should not forget the expenditure involved in protecting and enforcing intellectual property rights. The right owner becomes involved in costly investigations and litigation when combating counterfeiters and may also have to spend further sums on product protection. The budget for anti-counterfeiting is rarely well defined within an organization, but spans across several departments such as marketing, human resources, product development and legal departments.9

Legal Protection:

A counterfeit product can infringe any, or all, of the main intellectual property rights, namely trade marks, patents, designs and copyrights. Counterfeiting predominately deals with trade marks whereas copyright infringements are referred to as piracy. Generally patents alone are not usually referred to as counterfeits or as piracy.

The difference between these rights should be understood. Both patents and copyrights are monopolies, granted by law. A trade mark is not a monopoly. The proprietors of patents and copyrights can grant a license to others without conveying any real interest. A license in these situations is defined as a purchased right to act without the threat of suit by the Right’s owner. The registration of all IP rights is a complex issue and companies that try to save money by not registering their rights run a great risk, even though they may feel that their products are not worthy of this protection. No matter how small the company, or the product, if it is successful then someone will imitate it. It is not a legal requirement to register trade marks but, to gain full benefit of the various courses of action available, it is strongly recommended.

While the necessary legal protection may exist, it can be said that consumer demand drives counterfeiting, which in turn harms numerous industries. Rising global overcapacity for the manufacture of discs is also key factor behind the spread of disc piracy, affecting music, film and computer software.10 There can be no doubt that product counterfeiting is a serious and damaging economic crime11.

There are definitely no "major" or "minor" counterfeits. Counterfeiting is a serious offence on a level with trafficking in weapons or drugs.12 It is vital that the public understands that fake- products carry with them a real safety hazard not just the prospect of disappointing performance.13 Because no industry sector is immune from attack by counterfeiters and no country is exempt from this type of criminal activity.14 Finding ways to successfully combat it is an international challenge, and demands the participation not only of companies, but also members of the world’s law enforcement agencies, and governments around the world. Each of these groups has a critical role to play if this challenge is to be met.15

Indian Perspective

India continues to remain on the priority watch list of the US Trade Representative, meaning that India is perceived as not providing adequate intellectual property rights protection or enforcement of laws protecting IPR. However the admitted experience of IP crime in India is lower than in Asia-Pacific region and globally and is contrary to general perception of the relative incidence of IP crime in India.16 While India does not have a separate legislation to address counterfeiting as in the US, it offers statutory remedies, both civil and criminal17 which are embodied in the new Trademarks Act of 1999, The Copyright Act, 1957, The Patents Act 1970, The Designs Act 2000, The Geographical Indications of Goods (Registration and Protection) Act 1999, Custom & Border measures are provided in The Customs Act, 1962 which one can access through various IP statutes.

India has made important changes to its IP laws and more are in the pipeline, including changes in IP and Customs laws to implement border control measures as required by the TRIPs Agreement. India has signed Customs Mutual Assistance Agreement with most of its major trade partners including EU & USA. These treaties establish formal guidelines and allow officials to share intelligence and investigative data relating to IP violations In addition, in the last five years the Indian courts have taken a more pragmatic approach to counterfeiting. Lobbying by various brand owners ' associations , and more education programmes have resulted in increased awareness and a greater understanding of IP issues among law enforcement authorities. 18

While crimes such as drug dealing and trafficking are viewed with great concern, the general perception in India of IP crime is that it is a "victimless crime". Consumers in the India still appear to be relatively unconcerned because of a divergence of public perception and the lack of understanding about the effects of IP crime. Recently there have been stronger signals with lengthier sentencing and higher penalties for those convicted of counterfeiting and piracy. However, mixed messages are still conveyed and lower penalties are more common than those imposed for more high profile criminal activities.

Footnotes

1 The fight against piracy and counterfeiting of intellectual property: Prepared by the Commission on Intellectual Property of ICC, Paris and submitted to the 35th ICC World Congress, Marrakesh, 7 June 2004.

2 In order to strengthen further the enforcement of IPR in a focused manner, an Alliance in the name of CII Alliance for Anti- Counterfeiting/Piracy was formed with the leadership and initiatives of Indian industry and right holders who are affected by the counterfeiting/piracy menace in 2004.

3 The CII Alliance for Anti Counterfeiting/Piracy, Confederation of Indian Industry. www.ciionline.org

4 COUNTER OFFENSIVE: An IP Crime Strategy, a DTI service of the United Kingdom Patent Office DDU/93/IPID/7-04.

5 Counterfeiting and Organized Crime: INTA Counterfeiting Special Report September 2004, www.inta.org.

6 PIRACY STUDY: First Annual BSA and IDC Global Software Piracy Study, July 04. Business Software Alliance, www.bsa.org.

7 Surpa iv

8 COUNTERFEITING & ORGANISED CRIME, Union des Fabricants Pour La Protection International De La Propriete Industrielle Et Artistique 2003.

9 The Economic Impact of Counterfeiting, Organisation for Economic Co-operation and Development, 1998.

10 Commercial Piracy Report, The recording industry International Federation of the Phonographic Industry (IFPI), July 2004, www.ifpi.org.

11 Product Counterfeiting - protecting your good name, Paul Carratu, Group Managing Director CARRATU INTERNATIONAL, www.carratu.com.

12 D. Nazat, "The counterfeiting of toys", International Criminal Police Review, No. 464, 1997.

13 A practical guide for European Engineering Companies, Orgalime Guide Combating Counterfeiting with the support of the European Commission, October 2001.

14 "COUNTERFEITING AND THEFT OF TANGIBLE INTELLECTUAL PROPERTY: CHALLENGES AND SOLUTIONS" Written Testimony of Timothy P. Trainer, President International Anti Counterfeiting Coalition, Inc. (IACC) Before the United States Senate Committee on the Judiciary Washington, D.C. March 23, 2004. www.iacc.org

15 The Global Threat of Software Piracy, by Annmarie Levins, International Criminal Police Review, Official Publication of The International Criminal Police Organization, ICPR 476-477/1999. www.interpol.int

16 Global Economic Crime Survey: India, PricewaterhouseCoopers 2003. www.pwc.com.

17 How to tackle counterfeiting in India, Ranjan Narula & Taj Kunwar Paul Rouse & Co International, Managing Intellectual Property, Euromoney Institutional Investor plc, February 2004.

18 Supra xvii

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions