In a win for legitimate brand owners, businesses in the UAE dealing with counterfeit products now face far greater penalties. The maximum penalty for involvement in counterfeiting is now AED 1 million (approx. US$275,000) for pharmaceutical and food products and AED 250,000 (approx. US$68,000) for other products, up from AED 10,000 (approx. US$2,700). Penalties can be doubled in case of repeat violations. This long awaited increase in penalties is introduced by a new Federal Law on Combatting Commercial Fraud which repeals the existing law of 1979 on combatting fraud in commercial transactions.
The UAE's new law to combat counterfeiting (and other commercial fraud) means that businesses must only deal with genuine items. Failing to do so will not only expose those businesses to possible fines, but also to other penalties, including closure of their business or withdrawal of their trade licence. To benefit from the deterrent nature of this new law, brand owners need to ensure that their trademarks are registered in the UAE.
The key features of the new law can be summarised as follows:
- It is an offence to import, export, re-export, manufacture, sell, display, possess with the intention to sell, store, rent, market or deal with Counterfeit Products. It is also an offence to promote Counterfeit Products
- A "Counterfeit Product" is a product that bears, without consent, an identical or similar trademark to a registered trademark. This means that the scope of protection under this law is only relevant to trademarks which are registered
- Penalties include jail (up to two years), fines (up to AED 1 million), closure of premises and withdrawal of trade licences. The toughest penalties are reserved for counterfeiters of pharmaceutical and food products and repeat offenders. Penalties may even be doubled for the latter. This increase in penalties is a considerable and long awaited development
- Expenses incurred by the authorities in the process of disposing of Counterfeit Products will be borne by the importer
- A centralised authority (the Higher Committee), at a federal level, will lead on combatting counterfeiting and oversee the implementation of the law. However, it is not envisaged that this authority will receive complaints nor does the new law envisage a single complaint procedure
- A mechanism for settlement of violations is introduced for Counterfeit Products other than pharmaceutical and food products. However, it is unclear whether brand owners will have any role to play in this mechanism
- Businesses dealing with Counterfeit Products are required to provide the relevant authorities with all documents and information in relation to their services. This is a positive development as it will enable other members of the supply chain to be identified. However, it is unclear whether this information will be shared with brand owners
- This alert focuses on combatting counterfeiting. The UAE's new law is, however, aimed at combatting commercial fraud generally. This includes dealing with adulterated or corrupt goods and announcing fake or unreal prizes or discounts
Overall, the new law is a positive step towards the UAE adopting global standards in the detection and enforcement of trademark infringements.