Following the passage of the draft UAE Anti-Commercial Fraud Law through the Federal National Council (FNC) on 4 March 2014 (click here to view), further amendments have been made to key provisions of the draft Law as it progresses towards enactment.
Status of the law
Following the approval of the draft Law by the FNC, the next stage in the legislative process is for the draft Law to undergo further review at Ministerial level before it is signed into law by or on behalf of the UAE President, His Highness Sheikh Khalifa Bin Zayed Al Nahyan and published in the Official Gazette.
As part of the review of the draft Law at Ministerial level, amendments have been made to the draft Law which address some of the concerns raised by brand owners on earlier versions of the draft Law.
The latest version of the draft Law includes a number of important amendments. Comparing the current version with the first draft published in early 2013, there are several changes which will have an impact on brand owners and their ability to enforce their intellectual property rights in the UAE:
- Re-exportation of infringing goods: One of the major concerns with the previous version of the draft Law was that it empowered the enforcement authorities to require importers to return counterfeit goods to their country of origin. This provision was a serious concern to brand owners because, following the re-exportation of counterfeit goods, it can be difficult (or in many cases impossible) to trace the infringing goods (with the result that the goods end up back on the market instead of being seized and destroyed).
The latest version of the draft Law seeks to deal with this issue by distinguishing between Fraudulent and Corrupt Commodities (which may be re-exported) and Counterfeit Commodities (which must be destroyed in accordance with the Implementing Regulations, which are to be issued after the Law has been enacted). Accordingly, the question of whether or not a specific item should be re-exported or destroyed under the draft Law depends on whether it falls within the definition of a Fraudulent Commodity, a Corrupt Commodity or a Counterfeit Commodity.The definition of a Counterfeit Commodity is straightforward, in that it covers commodities “bearing without permission a trade mark which is identical or similar to the trade mark legally registered”.
However, the definitions of the different types of commodities used in the draft Law are not mutually exclusive. As a result, it is possible that goods which fall within the definition of Counterfeit Commodities may also fall within the definition of Fraudulent Commodities (which is defined to include goods which do not conform to the requirements of UAE law) and/or Corrupt Commodities (which is defined to include goods which are not fit to be used or which do not meet the technical specifications required by law). In order to avoid ambiguity, the draft Law could be amended further to state expressly that Counterfeit Commodities cannot be re-exported even if they also fall within the definition of Fraudulent or Corrupt Commodities. This could be achieved either by amending the definitions of Fraudulent and Corrupt Commodities to exclude Counterfeit Commodities or by amending the draft Law to clarify that Counterfeit Commodities (including Counterfeit Commodities which also constitute Fraudulent Commodities and/or Corrupt Commodities) must be destroyed in accordance with the Implementing Regulations.
- Similar trade marks: The definition of Counterfeit Commodities in the current version of the draft Law has been amended to include goods which bear a mark which is identical or similar to a registered trade mark. Previously the definition of Counterfeit Commodities was limited to goods which feature a mark which is identical to a registered trade mark.
The extension of the scope of Counterfeit Commodities is to be welcomed. However, even with this amendment, the draft Law is potentially narrower in scope than the Anti-Commercial Fraud Law and Implementing Regulations which are currently in force.
This is because the current Law seeks to protect against a variety of acts of unfair competition. Specifically, it enables action to be taken if traders do anything to cause confusion with competing trade marks, products or services (including lookalike products). It remains to be seen whether the draft Law (as amended to include both identical and similar trade marks) will allow action to be taken against lookalike products.
- Free zones: It is expressly stated in the current version of draft Law that the law shall apply to infringers operating within the UAE’s free zones. Such a provision would appear unnecessary given that UAE laws already apply automatically to the entirety of the country’s jurisdiction including its free zones (with the exception of the DIFC free zone). However, the enforcement of intellectual property rights within the UAE’s many free zones can often prove problematic. Accordingly, many brand owners will welcome the clarity that this provision brings.
- Counterfeit services: The scope of the draft Law has been extended to cover fraudulent activities in relation to the provision of goods and services. The UAE is very much a service-based economy and many of the trade marks developed by local businesses are used in relation to services rather than goods. Accordingly, this amendment should be well received by local brand owners.
There are other provisions of the draft Law which are also worth highlighting, including:
- Increased penalties: In certain limited cases, such as fraudulently dealing in pharmaceutical and food products, the draft Law provides that a fine of up to AED 1 million (approximately USD 270,000) may be imposed together with a two year imprisonment sentence.
However, concerns remain about the level of penalties which may be imposed on those caught dealing in counterfeit goods or services. Specifically, the punishment for dealing in counterfeit goods or services is a maximum fine of AED 100,000 (approximately USD 27,000) plus one year imprisonment, regardless of the scale of the fraudulent activity.
- Registered rights: Although the definition of Counterfeit Commodities has been amended to include goods which bear an identical or similar mark, it is still necessary for a registration to be held for the trade mark which is being copied.
This limitation is a step backwards compared with the position under the current Law. As indicated above, the current Law allows action to be taken if traders do anything to cause confusion with competing trade marks, products or services (which does not require the brand owner to hold a registration for its trade mark). It is hoped that the definition of Counterfeit Commodities will be extended before the draft Law is enacted to enable action to be taken against the infringement of both registered and unregistered trade marks.
- Disclosure of books and records: The draft Law obliges infringers to disclose to the authorities all information and documents relating to their dealings in fraudulent activities. The inclusion of this obligation may encourage the authorities not only to seize stocks of counterfeit goods, but also to obtain copies of information as to the source of the goods and the scale of the infringing activity.
- Cost of the destruction: Under the draft Law, the cost of destroying counterfeit goods is to be paid by the importer of the counterfeit goods. This is positive news for brand owners, in cases where the importer can be identified.
The next step is for the draft Law to be considered further at Ministerial level, with the possibility that additional changes may be introduced. After this, in order to be enacted, the draft Law will need to be signed into law by or on behalf of the UAE President, Sheikh Khalifa Bin Zayed Al Nahyan and published in the Official Gazette.