India: Counterfeiting And Infringement Of Trademarks: The Thin Line Of Difference Between The Laws

Last Updated: 30 January 2015

Article by Vaibhavi Pandey and Deblina Dey1

INTRODUCTION

Counterfeiting and Infringement are two phenomenon of the same genus but different species. Where Counterfeiting can be defined as the fraudulent imitation of something such as money, trademark etc, Infringement is the breach or violation, as of a law, regulation, or agreement. It is an encroachment, as of a right or privilege. In other words to counterfeit is to make a copy, usually with the intention to defraud or forge. Counterfeiting is the making of fraudulent copies of something valuable whereas Trademarks are infringed, not by exact marks, but by marks that are likely to confuse.2

DIFFERENCE BETWEEN COUNTERFEIT AND INFRINGEMENT

"Counterfeiting differs from trademark infringement in that it is narrower in scope and applies only to marks made to look identical to the actual registered mark."3 Trademark counterfeiting comes with potentially massive for willful infringement. The basic difference between the two can be summarized as below-

Counterfeiting Infringement
All counterfeit marks are infringing. All infringements are not counterfeits.
Counterfeit marks include marks that are "substantially indistinguishable" from a genuine mark, this definition contemplates only minor or trivial differences from the genuine mark. Infringing marks also include a broader class of marks that are "confusingly similar" to genuine marks. The "confusingly similar" test for infringing marks contemplates wider differences.

POSITION AROUND THE WORLD

The issues of counterfeiting and infringement have been increasing with a great pace since past few years and have attracted serious concerns of the law makers around the world towards themselves. One of the potentially efficient steps taken in this direction is the Anti-Counterfeiting Trade Agreement (ACTA) which is aimed to create new global (IP) enforcement standards that go beyond current international law and bring the topic to regional levels as well. Through ACTA, the US aims to hand over increased authority to enforcement agencies to act on their own initiative, to seize any goods that are related to infringement activities (including domain names), criminalize circumvention of digital security technologies, and address piracy on digital networks.4

ACTA was negotiated between 11 countries namely US, EU, Switzerland, Canada, Australia, New Zealand, Mexico, Singapore, Morocco, Japan, and South Korea. Eight out of the eleven negotiating countries signed the agreement in October 2011. The number of countries that were part of these negotiations is limited, but the agreement's provisions would have global consequences for digital freedoms. Once six nations ratify the agreement, its implementation will take effect. As of October 2012, it has only been ratified by Japan.5

POSITION IN USA

Infringement and Counterfeiting are the basic issues in the United States trademark law. It is predominantly governed by a federal statute, 15 U.S.C. S 1051, also known as the Lanham Act. Unlike the Indian Trademarks Act, the US Trademark Act defines both counterfeiting and infringement. United States Senate Bill S.3804, known as the Combating Online Infringement and Counterfeits Act (COICA) was a bill introduced by Senator Patrick Leahy (DVT) on September 20, 2010. It proposes amendments to Chapter 113 of Title 18 of the United States Code that would authorize the Attorney General to bring an in rem action against any domain name found "dedicated to infringing activities", as defined within the text of the bill. Upon bringing such an action, and obtaining an order for relief, the registrar of, or registry affiliated with, the infringing domain would be compelled to suspend operation of and lock the domain name.6

Apart form this, the states comprising of the United States also have their own independent legislations dealing with unfair competition. In most respects, state trademark and unfair competition law parallels federal trademark law. In some cases, punitive damages, which are permitted under the Lanham Act, can be awarded under state law. The Lanham Act classifies four types of trademark violations:

  1. Trademark infringement – Section 32 & 43(a)
  2. Trademark dilution – Section 43(c)
  3. Cybersquatting – Section 43(d)
  4. Civil counterfeiting – Section 34(d)

The different monetary damages available for these various Lanham Act claims are specified in Section 35(a) through (e). The Lanham Act is a civil statute, and no criminal charges can be brought under it. Actions for criminal counterfeiting are provided for by 18 U.S.C s 2320. As per the requirements of the Lanham Act, to claim rights under the Lanham Act-

  • The plaintiff must own at the minimum some valid rights over the trademark that may supersede the right of the defendant.
  • The trademark must be in continuous use in commerce in connection with the goods and services provided under the trademark.
  • The trademark is not abandoned
  • The trademark is inherently distinctive or has acquired distinctiveness.
  • The trademark is not a generic term.

UNITED KINGDOM

As per the laws of United Kingdom, Infringement and counterfeiting are covered both under the civil law and the criminal law. As a general principle, the offence of counterfeiting is dealt with under the criminal law whereas the offence of infringement is covered under the civil law. Infringement is a legal term for an act that means breaking a law. IP rights are infringed when a product, creation or invention protected by IP laws are exploited, copied or otherwise used without having the proper authorization, permission or allowance from the person who owns those rights or their representative.7 Counterfeiting can be defined as the manufacture, importation, distribution and sale of products which falsely carry the trade mark of a genuine brand without permission and for gain or loss to another.8

Usually under the UK law Criminal IP offences are also known as IP crime or counterfeiting. For example possession of an infringing copy of a work protected by copyright in the course of your business may be a criminal offence under section 107 (1)(c) of the Copyright, Designs and Patents Act 1988. Infringement of trade marks can be criminal offences, as well as being actionable in civil law. A range of criminal provisions are set out in the relevant Acts, and other offences such as those under the Fraud Act 2006 may also be applied. These criminal offences are most often associated with organized crime groups who are dealing for profit in fake branded goods or pirated products. However, these offences can also occur in legitimate business, for example if an employee uses the workplace to produce and/or sell quantities of fake DVDs or branded goods to colleagues or outside the office.9

The UK law imposes a penalty of up to £50,000with a sentence of up to 10 years for the potential offenders of counterfeiting and infringement. As well as the legal risks, infringement of IP rights may also prove to be vulnerable to threats from computer viruses and malware. All IP right infringements are actionable in the civil courts by the person who owns the rights. Counterfeiting are the criminal offences of IP rights infringement - also known collectively as IP crime.10

POSITION IN INDIA

If we look into the provisions under Indian Trademark Act, 1999, the definition of Infringement is defined under Section 29; however, the Act nowhere refers to the definition of the term counterfeit. Infringing marks also include a broader class of marks that are "confusingly similar" to genuine marks while counterfeit marks include marks that are "substantially indistinguishable" from a genuine mark, this definition contemplates only minor or trivial differences from the genuine mark. The "confusingly similar" test for infringing marks contemplates wider differences. The phenomenon of Counterfeiting of goods can be defined as where the packaging of a trademark has been imitated without the authorization of the actual trademark rights holder, and the imitation of packaging is of such a nature which cannot distinguish the essential feature of the goods itself from the genuine one. Counterfeit goods also include packaging materials, stickers, brochures and instructions even though these are presented separately from the goods themselves.11

Further, Infringement and counterfeiting claims require proof of likelihood of consumer confusion, while dilution and counterfeiting claims do not require such proof. The mere existence of counterfeited goods is sufficient for the Plaintiff to initiate actions against the defendant whereas in cases of infringement the onus of proving the likelihood of confusion and deception is on the plaintiff. The situation was made further clear by the Hon'ble Supreme court in the case of S.M. Dyechem Ltd. Vs Cadbury (India) Ltd [(2000) 5 SCC 573]. The Court held that "a plaintiff in a suit on basis of infringement has to provide not only that his trademark is infringed by a person who is not a registered proprietor of the mark or a registered user thereof but that the said person is using a mark in the course of his trade, which is identical with or deceptively similar to the trademark of the plaintiff, in such a manner as to render the use of the mark likely to be mistaken as the registered trademark."

CONCLUSION

The basic difference among the two lies in the type of legal remedies available. A trademark owner can seek an ex parte seizure order from a court in the case of counterfeits. For a merely infringing mark, a trademark owner can pursue an injunction, which is granted only after notice to the defendant and a hearing. As per the Indian law, counterfeiting is a cognizable offence prescribed under section 476 of the Indian Penal Code whereas in case of infringement the remedies are of civil nature. From the above discussion we may see that the two concepts infringement and counterfeiting are closely related to each other and both possess a great threat to the IP assets of individuals and entities.

Footnotes

1. 4th year student, B.A.LL.B. (Hons.), UPES Dehradun

2. www.thefreedictionary.com

3. David Quam, Chapter 1, Trademark Counterfeiting, p. 1-4.5

4. www.eff.org

5. www.eff.org

6. S. 3804: Combating Online Infringement and Counterfeits Act".

7. www.ipo.gov.uk

8. www.ipo.gov.uk

9. www.ipo.gov.uk

10. www.ipo.gov.uk

11. www.legalindia.in

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