India: Recourse Against Counterfeiting

Last Updated: 24 November 2017
Article by Pratistha Sinha

With the increase in innovation and creation, the range of counterfeit goods has expanded significantly leaving no industry impenetrable. While the damage to rights holders is obvious, counterfeit goods may also cause physical illness, injury or even death. As one would have thought, the US Federal Bureau of Investigation has named counterfeiting 'the crime of the 21st century'.[1]

Counterfeited goods are the replicas of the real product, usually produced with the intent to take unlawful advantage of the goodwill and stature of the real product. In common trade parlance, it is also known as piracy. It has grown considerably to a point where it has now become a widespread phenomenon with an impact on global economy. Since India has massive International boundaries with eight neighbouring countries, it makes the country vulnerable to counterfeited products. This is hindering India's economic development, especially when the nation is suffering a dearth of strategies against anti-counterfeiting.The law of the land provides a wide array of remedies against counterfeiting under various statutes,however, it does not provide a specific law on Counterfeiting. Few of the laws that provide anti-counterfeiting remedies are: The Trademarks Act 1999, The Copyright Act 1957, The Patents Act 1970, The Designs Act, The Geographical Indications Act 1999, The Customs Act, 1962, The Drugs and Cosmetics Act 1940, The Prevention of Food Adulteration Act 1954, The Consumer Protection Act 1986, The Indian Penal Code, The IT Act 2000.

LEGAL FRAMEWORK

India has no legislation dealing specifically with counterfeiting and piracy, but the legislators, through various statutes have provided statutory, civil, criminal and administrative remedies. However, Counterfeiting has been majorly dealt by Intellectual Property Law as it directly invokes the Intellectual Property Rights of the aggrieved. For instance, Trademark law necessitates appropriate action against passing off, which refers to theimitation of marks or goods in order to take advantage of the goodwill of the lawful owner as well as causes confusion among the consumers. Similarly, Copyright Law provides remedies against plagiarism,which is the act of appropriating the literary composition of another author.

Some of the remedies provided by the Indian legal system acting against counterfeiting have been briefly discussed below:

The TRADEMARKS ACT, 1999:  Trade Mark Act provides civil as well as criminal remedies against infringement of any trademark, whether registered or not. Although, the statute neither defines counterfeiting nor provides penalties against it, theterm can be categorised as what has been mentioned in the act as 'falsifying a trade mark' or 'falsely applying a trade mark'. The trade mark law provides administrative remedies, whereby the aggrieved can redress his grievance by seeking intervention from the Trademark Registry, which acts through the Registrar of Trademarks. The act also allows the owner of the trade mark to file a suit against infringement.[2] Further, the trademarks act empowers the court to grant ex-parte injunctions in appropriate cases in order to restraint the infringers from selling counterfeit goods and for discovery of documents or other related evidence. Further, the statute provides for civil relief including injunctions, rendition of accounts of profits and delivery up of infringing products for its destruction.[3]

The Trade Marks Act, 1999 provides penalty for applying false trademark and/or trade description, etc. with imprisonment up to three years and fine ranging from fifty thousand to two lakh rupees.[4]

THE COPYRIGHT ACT, 1957: The statute appears to have a very strict outlook towards infringers, considering that the Copyright law does not provide any requirement for registration.Section 55 of the Copyright Act, 2000 provides various civil remedies such as injunctions, damages and account of profits.

The statute gives right to the police officers to go ahead with the investigation by seizing all the infringing copies.[5] Further, the registrar of copyright has the power to investigate any alleged ship, dock or premise and order to confiscate them.[6]Section 63 of the Act provides for imprisonment up to three years and fine for indulging in activities of infringement.

THE PATENTS ACT, 1970: Under this statute, the patentee is granted a monopoly right in respect of an invention for a term of 20 years. Any violation necessitates the judiciary to intrude and secure such right. However, the patentee is required to institute a suit for seeking remedies, such as interlocutory/interim injunction, damages or account of profits and permanent injunction[7], all of which are recognized as civil remedies. The Patents Act does not provide criminal remedies. However, criminal liability arises where an article is wrongfully represented to be patented or secrecy requirements under the act are breached.

DESIGN ACT, 2000: Section 22 provides that anyone committing an act of piracy shall be liable to pay to the rights holder up to ₹ 50, 000 (approximately $1,000) per registered design. The rights holder may also seek interim relief and an injunction, provided that the right holder must prove that the alleged infringing act involves their design resulting in an economic loss.

GEOGRAPHICAL INDICATIONS ACT, 1999: The Geographical Indications of Goods (Registration & Protection) Act, 1999 provides for protection to all undertakings located in the area, which may use the geographical indication on specific goods that they produce. The act provides the right to the GI owners to obtain reliefs in  cases of infringement[8] and also provides for criminal remedies where the term of imprisonment varies from 6 months to 3 years and fine from ₹ 50,000 to ₹ 2 lacs.[9]

Since, the fundamental issue of this piece concerns the remedies for counterfeiting, the article briefly discusses the civil as well as criminal remedies for redressal of grievances. .

INDIAN PENAL CODE 1860: The Penal Code sets out punishments for cheating, counterfeiting and possession of instruments for making counterfeits etc. under chapter XII of the Act. The code's provisions can be invoked in criminal actions, in addition to the provisions of specific statutes.

BORDER MEASURES: The first lines of defence against the cross-border movement of counterfeited/ pirated articles are the National Customs and Border protection. The Customs Act regulates the import and export of goods through provisions provided under section 44-51. Further, Sec 11 strengthens the IP enforcement as it empowers the government toenforce prohibition on the import and export of certain goods to protect Patents, Trade Marks and Copyrights[10] and gives power to the custom officials to confiscate goods imported or exported, unlawfully or illegally.[11]

The Government of India had notified the 'Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007' with a view to bolster the Customs Act and provide remedies to protect IPRs at borders. Thus, importing of infringing goods is prohibited under the Customs Act 1962, read with the Intellectual Property Rights (Imported Goods) Enforcement Rules 2007.

The law allows holders of specific IP rights such as trademarks, copyright, patents, designs and geographical indications to record their grievances with Customs officials for prompt seizure of counterfeit goods at the port itself.

CIVIL REMEDY V. CRIMINAL REMEDY

CRIMINAL REMEDY

IP rights are private rights that are mostly enforceable through civil litigation. However, the prevalence of counterfeiting, passing off and piracy along with the economic damage they cause has led to an increased importance of criminal sanctions. It can be observed that, only few statutes like Trademarks Act, the Copyright Act, and the Geographical Indications Act provide criminal remedies. The punishment varies from 6 months to 3 years of imprisonment and fine ranging from INR 50,000 to 200,000/-.

The statutes acknowledge this crime as cognizable wherein the police can take action and carry out search and seizure without court warrant.

Despite having a robust legal framework for anti-counterfeiting in liaison with Police, the mandate of the statute is debilitated by the lax attitude of Police. In addition, Criminal trials become excruciatingly lengthy resulting in heavy backlog of cases for the courts. This has resulted in low conviction rates, thereby reducing the efficacy of criminal remedy sought against the counterfeiters. To counter this, the courts have adopted the practice of plea bargaining, wherein the offender accepts his or her guilt in lieu of remission of imprisonment and in turn imposing on him, heavy cost payable to the aggrieved party thereby disposing the case in a favourable manner.

CIVIL REMEDIES

Civil remedies against counterfeiting mostly include injunctions, damages and/or rendition of accounts. The mandate civil remedy is to stop distribution, manufacturing, or retailing of the infringing product or gaining profits from using the pirated product of the rightful owner of the products.

A civil court may even grant ex-parte injunctions while the proceedings are on. Further, the courts have widened their scope in order to deal with a serious issue of counterfeiting and the jurisprudence under this subject is growing as the courts have introduced the following interim reliefs under civil remedies through various case laws:

  • Anton Pillar Order: which gives right to the right holder to visit the defendant's premises along with thelocal commissioner appointed by the court, to search and seize the counterfeit goods. These goods are returned to the defendant with an undertaking that the goods will be safely preserved until further orders of the court. The court in the case of Microsoft Corporation v Jayesh &anr. 2014, passed the anton pillar order in order to adduce evidence supporting the case of counterfeiting. On the basis of the report of the Court commissioner, the court passed permanent injunction restraining the defendants from selling or distributing the counterfeited/pirated goods and delivery up of the counterfeiting goods. However, the court did not grant the damages to the plaintiff as no evidence of unlawful gain could be produce by the plaintiffs.
  • John Doe order: It is similar to Anton Pillar order, the only difference here is that the defendants are unknown/ or not known. Moreover, this action is taken when it is difficult to identify the counterfeiter or where the counterfeiter is operating out of temporary premises.[12]

Code of Civil Procedure 1908 governs the procedures adopted in the civil cases. Counterfeiting is a widespread commercial crime rather than a conventional one. The CPC has also established a commercial court in High Court, in 2016, which has the jurisdiction to deal with cases relating to 'counterfeiting'.

The listed few civil remedies are not enough to compensate the loss suffered by the right holders, neither do they prevent future counterfeits and since,more often than not, people take the recourse to civil remedy, the court is putting its best efforts to expand the horizon of civil course in order to make it efficient enough to resolve the issue and provide justice to all the aggrieved. Therefore, the courts alsoaward punitive remedy in addition to damages and payment of the plaintiff's counsel fee, on case to case basis with a view to deter recidivists andcompensate victims for an otherwise uncompensable loss.

In the case of Time Incorporated v. Lokesh Srivastava[13], the accused was awarded punitive damages of Rs. 5 lakhs in addition to compensatory damages of Rs. 5 lakhs for imitation of plaintiff's Trademark. The Delhi High Court laid down their point of view that in cases of infringement of Trademarks, Copy rights, Patents etc., the courts must grant punitive damages in order to make the infringers realize that they would be liable to reimburse the aggrieved party and pay punitive damages as well, which may spell financial disaster for them.

CONCLUSION

The biggest problem in defying counterfeiting is the paucity of legal framework and the ever increasing degree of similarity between the genuine and counterfeited products. Therefore, in addition to the existingprovisions of civil andcriminal laws, it is incumbent upon the government to take up initiatives to educate people about the menace of counterfeiting and its repercussions. Methods like Capacity building programmes that educate officials and the general public to distinguish between a fake and real product can be facilitated by government and trade organisations to combat counterfeiting.

Taking recourse to criminal or civil remedies against counterfeiting depends upon the objective that the Plaintiff seeks to achieve, keeping in view the consequences of the counterfeiter's act. The recourse to civil or criminal remedies provided by appropriate law for an act of counterfeiting should be construed on the basis of the magnitude of the act's consequences. For instance, if an act of counterfeiting is awfully against public interest including,  public health and safety, the prevention of corruption and organized crime, tax and customs income, local and regional industries, foreign investment and investor confidence, international trade relations, etc., it must be criminalized and the right holder must seek criminal remedy to punish and deter counterfeiters, who do not respect law and strategically carry out their criminal activity designed toevade justice and endanger public health and safety. A criminal action can be an effective remedy to safeguard the interest of general public, especially when the issues of infringement and counterfeiting are growing epidemically.

Likewise, a civil recourse can be taken up where a defendant can be easily identified and is based in a specific established market. The advantage of a civil suit is that the courts can grant an interim injunction along with an Anton Piller order for search and seizure of counterfeit products.

India has a dynamic legal framework for combating counterfeiting and piracy; however, there are gaping holes in the area of enforcement. However, the slow court procedure and laxityon part of Police in matters of counterfeiting, severely handicap any recourse that an aggrieved might take up. Thus, it is utmost important that strong IP laws be supported by equally strong enforcement. The development and implementation of a carefully thought-out strategy will give the IP right holders the relief they desire and rightfully deserve.

Footnotes

[1]http://ficci.in/sector/5/add_Docs/WTR_36%20India%20CC.pdf

[2]Section 134(2), Trade Mark Act, 1999.

[3] Section 135, Trade Mark Act, 1999

[4] Section 103, Trade Mark Act, 1999

[5]Section 64. Copyright Act, 1957

[6]Section 53. Copyright Act, 1957

[7] 104, Patent Act, 2000

[8] Section 20, Geographical Indication of Goods (Registration and Protection) Act, 1999

[9] Chapter VIII, Geographical Indication of Goods (Registration and Protection) Act, 1999

[10]sec 11 (2) (n), The Customs Act, 1962

[11]Section 111 and 113 of The Customs Act, 1962

[12] http://www.worldtrademarkreview.com/Intelligence/Anti-counterfeiting/2017/Country-chapters/India

[13]2005 (30) PTC 3 (Del.)

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.

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