India: IP CRIME: "Rising Threats To Intellectual Property Rights"

INTRODUCTION

In today's era, Indian economy relies upon the Intellectual property (IP) to drive economic growth at a fast pace. Every company is now understanding the need of IP, R&D is being taken recourse to extensively, foreign brands are entering the market and high rate of FDI is being witnessed in the Sector. In spite of the undeniable benefits, Indian economy is facing a serious problem which one is seriously taking note of, a problem which is slowly hampering the root of the country's economy. Taking examples from every day life of which we are all aware viz. fake watches, stamps, cigarettes, cosmetics, pharmaceuticals, FMCG products, auto components, software, music, movies etc which is resulting in significant loss to companies & their rightful owners corresponding evasion of tax duties and violation of the rights of the consumer. This article mainly emphasized on IP crime issues and the related factors contributing to the growth of IP crime and India's view on IP crime .

SOCIO-ECONOMIC IMPACT OF IP CRIME

World Health Organisation (WHO) states that approximately 10 per cent of all pharmaceutical drugs in the world are counterfeit, rising to 60 per cent in certain poor and developing nations.1 According to a report the daily sale of particular brand of Scotch whisky is greater than its monthly worldwide sales. It can only be possible if the real bottles have counterfeit liquor in them which makes the sale at a very alarming rate. Due to this reason the empty bottles of this particular brand have a major resale value of 250 rupees each (approximately 4 US dollars)2. Some of the following impacts of IP crime are as follows :

  • Heavy loss to the industry because of pirated and counterfeit goods.
  • Major loss of taxes to the government.
  • The real owners and creators of IP from different countries and technology are not remunerated.
  • The real loss to the consumer as he gets poor value for money or may be feel cheated when suffer from this IP crime.
  • Due to this IP crime , the overall growth of the industry lacks behind and results in severe loss to business or IP related investment coming into the country.

Nowadays, markets are full of counterfeit products with every person using counterfeit products and that has resulted in a flood of spurious products into the market for example viz . brand names, logo, trademarks depicting on apparels which are easily available on streets or in local markets in India clearly shows a wide example of IP CRIME. According to the recent studies by Industry association i.e The Confederation of Indian Industry (CII) 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.3 Deputy M.D., Tata Tea informed that 65% of total tea sold, is sold as loose tea, which has some form or other of tampering done to it, Food grade color is added to husk and this mixed with loose tea. Some tea bags are even rebagged. A G.M, Legal Affairs HUL, explained how "Fair and Lovely" became "Flair and Lovely" and spawned another 123 copies of this popular product. He opined that destruction of spurious stocks has not solved the menace; only vigilant consumer could tackle this problem. PepsiCo expert while sharing his concern informed that lakhs of bottles of Pepsi are counterfeited. Either spurious drinks are rebottled in authentic Pepsi bottles or the drinks are sold under the similar sounding names. "In a case study in Rajasthan he announced there were 65 factories selling over 40 spurious brands.4

The nature of the crime, its size, diversity and scope has hindered the task of coordinating a dynamic response. The mere lack of consumer awareness and high advancement of technology are the major factors which encourage counterfeiting problems which is further fuelled by tax enforcement laws which make things easy for counterfeiter. The continuity of socio-economic growth and industrial competitiveness depends upon high level of IP protection and enforcement raising profound concerns of the rapidly growing piracy of IP rights and production of counterfeit goods.

IP CRIME- WHAT IS IP CRIME, ITS COMPLICATIONS & FACTORS AFFECTING?

Ideally, IP crime is synonymous with Piracy and Counterfeiting acts. As counterfeiting is willful trademark infringement, whereas piracy involves, willful copyright infringement. In respect of terms they are very much similar and overlapping crimes. On the other hand IP crime is not a new phenomenon but due to advance globalization around us and future technology the counterfeiting and piracy has become big business in India and around countries.5 During recent years the future and scale of the issue has grown at a very high rate. In india the counterfeit traders with whom most people come into contact are small-scale operators or street vendors. However, such vendors are only the small & front face of much wider and more sophisticated networks which indulge in vast IP crimes. Extensive evidence is now available which demonstrates that organized criminals and terrorists are heavily involved in planning and committing intellectual property related crimes. A very vast network is now working with an international links in our country who not only kills the IP but also enlarge the crime network in the country. On the other hand if one talks about online piracy which is facilitated by increases in transmission speeds, faster connections enable users to send and download larger files (such as software programs) more quickly for example online download of songs & movies from torrents website and pk songs before their release in to the market. 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 usage6.

Counterfeiting is becoming a menace as the laws to tackle it are weak and fragile and if any culprit gets caught in such case then, he gets released on some small penalty that facilitates further the commission of more such offences as the punishment levelled therein is not really a deterrent. Their are definitely no "major" or "minor" counterfeits. Counterfeiting is a serious offence on a plane level with trafficking in weapons or drugs.7 In India counterfeiting and piracy have emerged as clear and serious threats to business, consumers and union of India. It is obviously a breach of consumer affairs, health, trade, and employment law.8

In India judiciary is not equipped to deal with the cases on a speedy basis. In certain industries there are thousands of cases registered in various courts of India but due to a massive backlog they are just gathering dust. Moreover some cases are not even been heard by the courts. On the other hand serious shortage of experienced lawyers in the country affects the IP crime and those having knowledge ask for such high demand which can only be afforded by big companies. Lack of knowledge and awareness is also the main concern for the growth of IP crime in India.

Today industries who are direct competitors with counterfeiters suffer a direct loss in sales. There are also places in country which are more dominated by counterfeiters mafia, creating barriers of entry for the producers of the genuine product. Many counterfeit products today are of higher quality and compete directly with the genuine items for example, DVD's, Software, mobile accessories. In addition, consumers who are believed that they bought a genuine article when it was in fact a fake, finally blame the manufacturer of the genuine product when it fails, creating a loss of brand name and good will of that company. Sometimes cheaper and obvious products that are bought in good faith represent a serious threat to the company that wants its brands associated with quality and exclusivity for example counterfeit audio CD's have very bad quality of music which make impact in the customer's mind that the original song was like this only. Keeping aside the direct loss of huge sales and goodwill, one should not forget the expenditure involved in protecting and enforcing intellectual property rights. The right owner have to pay a lot money to make the product and if the the counterfeit occurs right owner involved in costly investigations and litigation and may also have to spend further sums on product protection. The amount not only related to specific department or litigation and investigation but spans across several departments such as marketing, human resources, product development and legal departments.9 A single counterfeit product can infringe any or all, of the main intellectual property rights, viz. trademarks, patents, designs and copyrights.

INDIA'S EYE ON IP CRIME

India is the biggest market for the counterfeit mafia. These mafia holds a very strong base in the country. India globally is perceived as country that doesn't provide adequate IPR protection or enforcement of laws to protect IPR. However if we visualize the international report the admitted experience of IP crime in India is lower than in Asia-Pacific region and globally.10 As according to the US, India does not have a separate legislation to address counterfeiting cases, it offers statutory remedies, both civil and criminal11 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. In recent fiscal years, the government has made vibrant changes to their IP laws and more amendments are awaiting in the anvil, including change in IP and Customs laws to implement border control measures as required by the TRIPs Agreement. In the protection realm of the IP Sector, India has signed Customs Mutual Assistance Agreement with most of its major trade partners including European Union & US which helps in establishing formal guidelines which allow officials to share intelligence and investigative data relating to IP violations. Considering the judicial side, in the last five years the Indian courts have taken a more stronger approach to counterfeiting cases. Fair judgments are being given by the courts which helps in making amendments in IP laws. Lobbying by various brand owners, associations and well defined law firms have resulted in increased awareness and a greater understanding of IP issues among law enforcement authorities.12

CONCLUSION

It is now believed that as the IP crime graph is increasing day by day in India, this rapid unchecked growth needs to be regulated. More number of new reforms are to be made and awareness programmes are to be organized. Being a organized crime this would go to a new heights where counterfeit mafia are working at a very strong base. More steps are to be taken in 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. India has already been prompt in taking remedial measures like Customs Mutual Assistance Agreement, Trademark Amendment Act , Copyright Amendment and it is hoped that the culmination of all the said factors together heralds in a new era of IP Control and Regulation.

Footnotes

1. Retrieved from http://onlinelibrary.wiley.com/doi/10.1111/ j.1758-5899.2010.00023.x/pdf on 17th May, 2014

2. Ibid

3. 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.

4. CII study report on Anti-Counterfeit Packaging Technologies A strategic need for the Indian industry

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

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

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

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. Global Economic Crime Survey: India, Pricewaterhouse Coopers 2003. www.pwc.com.

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

12. Supra at 12

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