Status
Key amendments
Other provisions
Next steps


Following the Federal National Council's (FNC's) approval of the draft United Arab Emirates (UAE) Anti-commercial Fraud Law on March 4 2014, further amendments have been made to the draft law as it progresses towards enactment.

Status

Following the FNC's approval, the draft law must now undergo further review at the 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 ministerial-level review, amendments have been made to the draft law which address some of the concerns raised by brand owners in earlier versions.

Key amendments

Compared to the first draft, published in early 2013, the current version has several amendments that will affect brand owners and their ability to enforce their IP rights in the United Arab Emirates.

Re-export of infringing goods
One of the major concerns with the previous version of the draft law was that it empowered enforcement authorities to require importers to return counterfeit goods to the country of origin. This provision was a serious concern for brand owners because it can be difficult (or in many cases impossible) to trace infringing goods. Often, when goods cannot be traced, they 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). Accordingly, the question of whether a specific item should be re-exported or destroyed 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 commodity used in the draft law are not mutually exclusive. As a result, it is possible for goods that fall within the definition of 'counterfeit commodities' also to fall within the definition of 'fraudulent commodities' (which includes goods that do not meet the requirements of UAE law) or 'corrupt commodities' (which includes goods that are not fit for use or that do not meet the technical specifications required by law).

In order to avoid ambiguity, the draft law may 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 that also constitute fraudulent commodities or corrupt commodities – must be destroyed in accordance with the implementing regulations.

Similar trademarks
In the current version of the draft law, the definition of 'counterfeit commodities' includes goods which bear a mark that is identical or similar to a registered trademark. Previously, the definition was limited to goods that featured a mark which was identical to a registered trademark.

The extended 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 currently in force.

This is because the current law protects against a variety of acts of unfair competition. Specifically, it allows action to be taken if traders do anything to cause confusion with competing trademarks, products or services (including lookalike products). It remains to be seen whether the draft law (as amended to include both identical and similar trademarks) will allow action to be taken against lookalike products.

Free zones
The current version of the draft law expressly states that the law will apply to infringers operating within UAE 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 Dubai International Financial Centre free zone). However, the enforcement of IP rights within the many UAE free zones can often prove problematic. Accordingly, many brand owners will welcome the clarity that this provision brings.

Counterfeit services
The draft law's scope has been extended to cover fraudulent activities in relation to the provision of goods and services. The United Arab Emirates has a service-based economy and many of the trademarks developed by local businesses are used in relation to services, rather than goods. Accordingly, this amendment should be well received by local brand owners.

Other provisions

Other provisions of the draft law are also worth highlighting.

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 Dh1 million (approximately $270,000) may be imposed together with a two-year prison sentence. However, concerns remain about the level of penalties that 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 Dh100,000 (approximately $27,000) and one year's imprisonment, regardless of the scale of the fraudulent activity.

Registered rights
Although the definition of 'counterfeit commodities' has been amended to include goods that bear an identical or similar mark, a registration for the trademark that is being copied must still be held.

This limitation is a step backwards compared to the current law, which allows action to be taken if traders do anything to cause confusion with competing trademarks, products or services (which does not require the brand owner to hold a registration for its trademark). It is hoped that the definition of 'counterfeit commodities' will be extended before the draft law is enacted to allow action to be taken against infringement of both registered and unregistered trademarks.

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 importer of the counterfeit goods must pay the cost of destroying the goods. This is positive news for brand owners in cases where the importer can be identified.

Next steps

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 and published in the Official Gazette.

For further information on this topic please contact Rob Deans or Harriet Balloch at Clyde & Co by telephone (+971 4384 4000), fax (+971 4384 4004) or email (rob.deans@clydeco.ae or harriet.balloch@clydeco.ae). The Clyde & Co website can be accessed at www.clydeco.com.