Introduction Counterfeiting is a global problem and India has not remained unaffected. Failure to enforce IP rights impacts on foreign investment and results in losses to rights holders in terms of reduced sales, lower profits, damage to brand value and reputation, and consumer distrust. With regard to health and safety, the risks posed to consumers by counterfeits hardly need elaborating. Meanwhile, losses to industry and consumers have a collateral effect on the government, including reduced tax revenue and increased expenditure on public welfare, insurance and health services, as well as job losses. The challenges include the following. Online counterfeiting The Internet has no borders, making it difficult to track down infringers unless this is tackled strategically. E-commerce is popular in India, and it is becoming increasingly easy to find counterfeit goods and pirated books and music online. E-commerce businesses are relatively easier to start, which helps illegal operators to flourish. The majority of such enterprises do not put the manufacturer or importer’s name on the products, making it easy for them to deny having sold them. Counterfeiting of parts and components Industrial sectors such as automotive, durables, electronic and electrical goods have seen unprecedented growth in recent years, supported by rising disposable incomes and gross domestic product growth. This has resulted in increased sophistication in the original equipment manufacturer (OEM) sector. Many of the players in this sector contribute to counterfeiting – either by being directly involved in manufacturing counterfeits or by providing access to manufacturing equipment. Counterfeiters are helped by the huge after-sale market, where duplicates can be easily passed off as originals because of their low cost and visual similarity. Additionally, the mixed sale of parallel imports and counterfeits makes it difficult to control the market and differentiate legal goods from illegal ones.
Fast-moving consumer goods Preventing counterfeiting in the fast-moving consumer goods (FMCG) sector is by its nature sensitive, because of the direct impact that such goods can have on public health and safety. Despite seeing high growth rates in last few years, the FMCG sector remains largely unorganised. Counterfeiters take advantage of this – as well as the availability of advanced packaging technology – to imitate original products and replace them with inferior substitutes. Moreover, counterfeiting is prevalent in this sector because it is relatively easy and requires little investment. However, the government has already taken many significant initiatives to address counterfeiting, piracy and smuggling. At the same time, many Indian courts have been willing to entertain IP-related issues on a proactive basis, enabling swift enforcement. Some major positives are worth mentioning: • Government initiatives to raise awareness have helped to inform consumers and trade bodies of the health and safety risks associated with counterfeits. • The legal framework is fairly well developed to tackle all forms of counterfeiting, along with support from the judicial system. • Special anti-counterfeiting cells have been established at various enforcement bodies, such as the police and Customs. However, despite these actions, rates of counterfeiting and piracy remain high. Nevertheless, the move is in the right direction and rights holders have succeeded in enforcing their IP rights in most cases. Legal framework The main statutes governing anticounterfeiting in India are as follows. Trademarks Act 1999 The Trademarks Act provides for the registration of trademarks by both Indian and foreign nationals. It expressly provides statutory remedies of a civil and criminal nature against the infringement of a registered trademark. Further, the act also recognises the right of an unregistered trademark holder to take action for passing off, even against a registered trademark, provided that the former is a prior user. Unconventional marks such as three-dimensional (3D) marks and sound marks are also protected by the act. The term of protection is 10 years from the date of application, renewable for further 10-year periods. Copyright Act 1957 According to the Copyright Act, copyright subsists in literary, dramatic, musical and artistic works, computer programs, cinematographic films and sound recordings. Although the act provides for registration, this is merely an enabling provision. Registration is not compulsory for the purpose of enforcing copyright, although it does provide ex facie evidence of the particulars incorporated in the certificate. The act provides that copyright subsists in any material form in which ideas are translated. It does not lie in the idea itself, but rather in how it is expressed (eg, once an idea is written down, the writing becomes the subject matter of copyright). Even a catalogue of items manufactured by a manufacturer can be protected by copyright, as can decorations or an artistic work on a carton or container. In the case of literary, dramatic, musical and artistic works, the term of protection is the life of the author plus 60 years from the beginning of the calendar year following the author’s death. The term of protection for cinematographic films, photographs and sound recordings is 60 years from the beginning of the calendar year following the work’s publication. Patents (Amendment) Act 2005 Before the 2005 amendment to the Patents Act, the Indian patent regime granted mostly process patents, with product patents granted only rarely. However, once India became a signatory to the Trade-Related Aspects of Intellectual Property (TRIPs) Agreement, it became obliged to provide product patents for all types of invention. The 2005 Patents Act thus complies with Article 27 of TRIPs, which deals with patentable subject matter in member countries. Under the act, a patent shall be available for any invention – whether a product or process – in any field of technology, provided that it satisfies the threepronged test of novelty, non-obviousness and industrial applicability. Unless authorised by the rights holder, the following constitute infringement under the act: • manufacturing patented products; • using patented processes; • offering to sell or selling patented products; • using products directly acquired by the patented process for production or business purposes; or • importing or exporting patented products or products that are acquired through patented processes. A patentee can sue for patent infringement and seek an injunction, damages or an account of profits. The court can also order the seizure, forfeiture or destruction of materials and equipment used to create the infringing goods and the closure of the manufacturing premises. Designs Act 2000 The Designs Act provides that the subject matter of a design can include shapes, configurations, patterns, ornaments or compositions of lines or colours applied to any article in 2D or 3D forms, or both, by any industrial process. Protection is accorded only to those features in the finished article that appeal to or are judged solely by the eye. The term of protection is for a total of 15 years: an initial 10 years, extendable by a single five-year period. Geographical Indications Act 1999 The Geographical Indications Act protects distinctive signs or names that identify products typical to and located in a specified geographical area. However, protection is not granted to a single entity or enterprise, but rather to all undertakings located in the specified area, which are allowed to use the geographical indication on specified goods that they produce. The act provides for both civil and criminal remedies. Indian Penal Code 1860 The primary penal law of India also sets out punishments for cheating, counterfeiting and possession of instruments for making counterfeits, among others. The code’s provisions can be invoked in criminal actions, in addition to the specific provisions of special statutes. Additionally, there are sector-specific statutes that apply to counterfeiting activities in the respective sector. Information Technology Act 2000 The Information Technology Act seeks to curb illegal infringing activities conducted through the use of computer systems and technology. The act’s provisions are extremely stringent and give the complainant both civil and criminal rights. In criminal cases, the offences are cognisable in nature and investigated by specialised IT and cybercrime cells. Civil remedies carry penalties of up to $200,000. Offences punishable under the act include: • concealing, destroying or altering any computer source code or network; • causing wrongful loss or damage to the public, or destroying, deleting or altering any information residing in a computer resource or diminishing its value or utility; • publishing obscene information in electronic form; and • breaching confidentiality or privacy. An important provision establishes liability for internet intermediaries, such as internet service providers, web hosting providers and payment gateways in appropriate cases. Various measures are being taken by the Indian government with a view to combating online counterfeiting, especially by setting up cybercrime cells to investigate and prosecute offenders.
Drugs and Cosmetics Act 1940 The Drugs and Cosmetics Act stipulates procedures to counter ‘adulterated’, ‘spurious’ or ‘misbranded’ drugs and their export from India. It empowers certain government agencies not only to inspect, but also to seize and confiscate any product that is found to be adulterated, spurious or misbranded. Prevention of Food Adulteration Act 1954 The Prevention of Food Adulteration Act empowers agencies to seize and confiscate adulterated or misbranded goods. It also gives them the power to suspend the manufacturing licences of those engaged in such illegal and criminal activities. Enforcement routes Civil enforcement All of the aforesaid acts provide for civil remedies to the rights holder, which can file a suit for injunction, damages, rendition of accounts and litigation costs. The Indian courts are well versed in the IP laws and grant ex parte injunctions especially in counterfeiting cases. In civil actions, the courts tend to be pro-rights holder, provided that the rights are legal, valid and subsisting. The following can be obtained in civil actions: • injunction order – courts grant injunctions in favour of rights holders, restraining other parties from dealing in any manner with goods that infringe the plaintiff’s rights. • Anton Piller order – in addition to an injunction order, the court may appoint a court commissioner to visit the defendant’s premises to search and seize the counterfeit goods and make an inventory of the same. The seized goods are returned to the defendant(s) with an undertaking that they shall not tamper them and must produce them before the court. • John Doe order – this is an extraordinary order giving the court commissioner every power to enter, search and seize any premises of a counterfeiter which is not even party to the lawsuit. This kind of action is most effective in taking action against counterfeiting where it is difficult to identify each and every counterfeiter. Criminal prosecution Criminal remedies are provided under the Trademarks Act, the Copyright Act, the Geographical Indications Act and the Information Technology Act. Under these pieces of legislation, offences are cognisable in nature, which means that the police can search and seize without a court warrant. Offences are punishable by imprisonment or a fine, or both. The Trademarks Act and the Copyright Act set out specific provisions for increased penalties in terms of imprisonment and fine on second or subsequent commission of offence. The Code of Criminal Procedure applies during a trial. Since a criminal trial is a lengthy and time-consuming process, the courts have adopted the practice of plea bargaining, whereby the offender accepts his or her guilt and the court convicts him or her by imposing heavy costs payable to the rights holder, but with no imprisonment. Most rights holders appreciate and have adopted this procedure, as it facilitates early disposal of cases with favourable orders. Border enforcement measures The import of infringing goods is prohibited under the Customs Act 1962. In 2007 the government used Sections 11 and 156 of the act to enact the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007, with a view to strengthening the statutory and executive guidelines for IP protection at the borders. The rules permit holders of specific IP rights – including trademarks, copyright, patents, designs and geographical indications – to record their rights with the customs authorities. These are empowered to prohibit the import of counterfeit goods and impose a heavy penalty on anyone that facilitated the import. The counterfeit goods are finally destroyed under the rights holder’s supervision. This is the most effective way of curbing the import of counterfeit goods. Preventive measures/strategies Use of local counsel and investigators Effective investigation strategies can help to identify the sellers of pirated and counterfeit products, which can be then targeted with cease and desist letters, caution notices, brand awareness campaigns, criminal complaints, lawsuits for injunction and damages, keeping in mind the extent of the infringement, the nature of the products and cost constraints. Effective use of technology The use of preventive technology – such as radio frequency identification systems, microscopic tags, bar coding, licence databases, unique country codes or holograms and seals of authenticity – can prevent the proliferation of counterfeit and pirated products. The drug controller general of India has proposed an amendment to the Drugs and Cosmetics Act, mandating that every drug manufactured in the country should have a unique identifier code and 2D bar code on the packaging, whereby authenticity can be verified by a text message. Third-party monitoring Rights holders that engage distributors, original equipment manufacturers, licensees and other third parties in India should have strict nondisclosure and confidentiality agreements in place, which clearly spell out the scope of use of their intellectual property by such third parties. Further, periodic internal checks and audits – especially online – should be conducted to ensure compliance with these agreements. Role of government anti-counterfeiting agencies The government is become increasingly proactive in preventing counterfeiting activities. Rights holders are encouraged to conduct training and awareness programmes for various government officials, such as the police and Customs, to help them better understand the nuances of such actions. Further, the courts’ readiness to issue orders against government agencies involved in enforcement has made them more vigilant and active about entertaining complaints from rights holders and taking swift and decisive action against counterfeiters. For instance, Customs has put in place a system to analyse data from customs offices and proactively identify smuggled consignments. International collaboration programmes India is a member of major international groups and bodies such as the Financial Action Task Force, the Asia Pacific Group, the Eurasian Group and the International Criminal Police Organisation (INTERPOL). India’s Central Bureau of Investigation has included intellectual property as one of the modules in its conference and INTERPOL have been co-hosting training seminars on fighting illicit international trade which have received active support from trade bodies and industry representatives. WTR