14 May
2019

Procedures and strategies for anti-counterfeiting: India

Anand and Anand

Legal framework

Trademarks Act 1999

The Trademarks Act is the principal legislation governing trademarks in India. The act provides both civil and criminal statutory remedies against the infringement of a registered trademark. The act also recognises the right of an unregistered trademark owner under common law to take action for passing off, even against a registered trademark, provided that the unregistered trademark owner is a prior user. Unconventional marks such as three-dimensional (3D) marks and sound marks are also protected.

The classification of goods and services specified under the Trademarks Act is harmonised with the Nice Classification.

The term of protection is 10 years from the date of application, renewable for further 10-year periods.

Copyright Act 1957

The Copyright Act governs the legal protection and enforcement of copyright in India. Copyright subsists in literary, dramatic, musical and artistic works, computer programs, films and sound recordings. In harmony with the Berne Convention, registration of copyright is not compulsory for the purpose of enforcing it, although a registration serves as ex facie evidence of the particulars incorporated in the registration certificate. The Copyright Act provides statutory civil and criminal remedies against copyright infringement. Possession of plates for making infringing copies is also a punishable offence.

The term of protection for literary, dramatic, musical and artistic works 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 films, photographs and sound recordings is 60 years from the beginning of the calendar year following the work’s publication.

Designs Act 2000

The subject matter of a design can include shapes, configurations, patterns, ornaments or compositions of lines or colours applied to any article in two-dimensional or 3D form, or both, by any industrial process. Protection is afforded only to those features in the finished article that appeal to or are judged solely by the eye.

The term of protection is 15 years in total: an initial 10 years, extendable by a single five-year period.

Remedies are of a civil nature only and no criminal liability is prescribed.

Geographical Indications Act 1999

The Geographical Indications Act protects distinctive signs or names that identify products that are typical to and located in a specific geographical area. However, protection is not granted to a single entity or enterprise, but rather to all undertakings located in the area, which may use the geographical indication on specific goods that they produce. The act provides for both civil and criminal remedies.

Indian Penal Code 1860

The Penal Code sets out punishments for cheating, counterfeiting and possession of instruments for making counterfeits, among other things. The code’s provisions can be invoked in criminal actions, in addition to the provisions of specific statutes.

Information Technology Act 2000

The IT 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 claimant both civil and criminal rights. In criminal cases, the offences are cognisable in nature and investigated by specialised IT and cybercrime teams. Civil remedies carry penalties of up to $170,000.

Punishable offences include:

  • concealing, destroying or altering any computer source code or network;
  • causing wrongful loss or damage to the public, or destroying, deleting or altering information in a computer resource or diminishing its value or utility;
  • publishing obscene information in electronic form; and
  • breaching confidentiality or privacy.

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.

INDRP

The .in Domain Name Dispute Resolution Policy (INDRP) provides the legal framework for resolution of a ‘.in’ domain (ie, the country code top-level domain for India). Any person aggrieved by registration of a ‘.in’ domain which is identical or confusingly similar to their name or trademark may file a complaint before the National Internet Exchange of India, which is the administrative body for entertaining complaints under the INDRP. The procedure is a quick and effective grievance-redressal mechanism against bad-faith registration of a domain name using the rights holder’s trademark. The proceedings are in the nature of arbitration and the domain registrant must submit to the proceedings upon a complaint.

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.

Food Safety and Standards Act 2006

The Food Safety and Standards Act empowers agencies to seize and confiscate sub-standard or misbranded goods. It also gives them the power to suspend the manufacturing licences of those engaged in such illegal and criminal activities.

Prevention of Money Laundering Act 2002

The Prevention of Money Laundering Act is the proceeds-of-crime legislation in India, which has been extended to certain IP laws – including those governing trademarks, copyright and geographical indications.

Border measures

The import 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 – including trademarks, copyright, patents, designs and geographical indications – to record their rights with Indian Customs for prompt seizure of counterfeit goods at the port. Import of branded goods will be notified to the respective rights holder and if the goods are found to be counterfeit, the goods will be seized and a heavy penalty will be imposed on all parties that facilitated the import. The seized counterfeit goods are ultimately destroyed under the rights holder’s supervision. Rights holders that are not registered with Customs but receive information of counterfeits being imported can also notify Customs and apply for registration within the prescribed timeframe. In certain cases, Customs has suspended counterfeit goods on the request of the rights holder even where the rights were not formally recorded with Customs, since under the Customs Act counterfeit goods are per se prohibited goods. This pro-rights holder provision is a highly effective way of curbing import of counterfeit goods into India.

Customs currently does not treat parallel-imported or grey-market goods as prohibited goods unless they are being smuggled or imported outside their original packaging. However, rights holders aggrieved by the import of grey-market goods may record their trademarks with Customs. Such goods may then be detained for duty evasion if they have been valued by the importer below the authorised market price in India. The revenue wing of Customs will revalue the goods and impose the correct duty, which will act as a deterrent for the parallel import, since the profit incentive will be lost.

Rights holders often raise grievances that the rules do not provide for suspension of export of counterfeit goods. However, the parent Customs Act prohibits even their export; thus, an aggrieved party can apply to Customs to suspend the export. The difference in the case of exports is that the rights holder must provide advance information on such exports to Customs.

Criminal prosecution

Criminal remedies are provided under the Trademarks Act, the Copyright Act, the Geographical Indications Act and the IT Act. Offences under the Trademarks Act, Copyright Act and Geographical Indications Act are punishable by six months’ to three years’ imprisonment and a Rs50,000 to Rs200,000 ($765 to $3,060) fine. However, the court may reduce these penalties in recognition of special circumstances. Provision is made for increased minimum penalties on second or subsequent commission of an offence. The Code of Criminal Procedure 1973 governs the procedure applicable to criminal cases. Pursuant to the extension of the proceeds-of-crime law to IP matters, assets of entities undertaking transactions while falsely using another party’s intellectual property may be seized by the authorities along with arrest.

Under these laws, offences are cognisable in nature, which means that the police can take action and conduct search and seizure without a court warrant.

Charges may be brought against an officer of a company who is responsible for its management if he or she had knowledge of commission of the offence.

Although under the Copyright Act registration of the work is not mandatory for enforcement, the police insist on seeing a registration certificate, as that helps them to ascertain that the complaint is by a genuine person. The police have recently been taking action even without registration if the complainant or author can produce other proof of ownership over the work.

In case of offences under the Trademarks Act, the police seek the opinion of the registrar of trademarks before initiating action, which sometimes delays the proceedings. A discussion between stakeholders is underway to find a plausible solution to this problem.

Rights holders are increasingly instigating criminal enforcement actions, especially to target large-scale manufacturers or where infringers continue with their acts despite civil action.

Effective criminal enforcement in India requires ongoing liaison with the police and a proactive approach both before and after filing the action. It is imperative that once a criminal action has been initiated, the rights holder must follow it up through counsel or representatives so that the proceedings are adequately concluded with favourable orders.

Criminal trials are lengthy and time consuming. As a result, 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 have embraced this procedure, as it facilitates early disposal of cases with favourable orders.

Civil enforcement

All of the IP statutes provide for civil remedies in the form of injunctions and damages or rendition of accounts. A civil action is initiated by filing a lawsuit before the district court or high court having territorial jurisdiction. Indian courts are well versed in the IP laws and even grant ex parte injunctions at the admission of a lawsuit, especially where counterfeiting is involved.

Rights holders can obtain the following interim reliefs in civil actions:

  • Anton Piller orders – the rights holder may seek ex parte appointment of court commissioners to visit the defendant’s premises in order to find and seize counterfeit goods. The goods are returned to the defendant with an undertaking that the goods will be safely preserved until further orders of the court.
  • John Doe orders – this is an extraordinary order through which the court can appoint court commissioners and authorise them to enter, search and execute seizures in the premises of any named or unnamed defendants. This kind of action is most effective where it is difficult to identify each and every counterfeiter or where the counterfeiter is operating out of temporary premises.
  • Mareva injunctions – in specific cases, an injunction may be granted against the infringers to freeze their assets until further court orders.

The procedure for civil cases is governed by the Code of Civil Procedure 1908. Under the new system for commercial cases, which includes IP cases, commercial courts have been established in certain jurisdictions in India. A civil suit before a commercial court has the provisions for summary judgment. As per recent trends, courts have increasingly been resorting to summary judgment of IP cases. Anti-counterfeit lawsuits, by their inherent nature, are perhaps the best cases in which to invoke summary proceedings – especially in successful Anton Piller cases. Under the system, the case can be decided without oral evidence immediately after service of notice on the defendant, thereby significantly reducing the timeframe of the case.

The dishonest registration of a domain name comprising an identical or confusingly similar trademark is also actionable and a rights holder can seek an injunction for the interim and permanent transfer of the domain name in a civil lawsuit.

The courts have recognised the need to put in place deterrents against counterfeiting, which is often resorted to as an easy money-making exercise; they have thus granted punitive damages in most large-scale counterfeit cases with delivery up of infringing goods for destruction.

Mediation is also recommended by the Indian courts in most IP disputes where the infringers agree to suffer a decree. An added benefit of mediation is that it entitles the plaintiff to a full refund of the government court fees submitted for the institution of the case.

Anti-counterfeiting online

The e-commerce boom in India has resulted in an explosion of online retailers selling counterfeit goods which are portrayed as original but with heavy discounts. E-businesses are relatively easy to start, which helps illegal operators to flourish. Most such enterprises do not put the manufacturer’s or importer’s name on the product, making it easy to deny its sale in case of action. Crucially, these businesses operate as foreign incorporated companies which do not name any individuals, making enforcement even more challenging.

No distinction is made between online and offline counterfeiting and no law is in place to deal specifically with online counterfeiting. However, the IT Act specifically provides for liability of internet intermediaries.

Online strategies

Tackling online counterfeiting requires a sophisticated investigation strategy. Investigation of online counterfeiting requires a combination of online surveillance using high-tech tools, personal visits and physical analysis of the products.

Online business networks comprise a chain of stakeholders and rights holders must identify the most effective targets along the chain, including importers, website owners, domain hosts, internet service providers (ISPs) and payment gateways.

Intermediary liability

The IT Act provides for liability of internet intermediaries. The definition of an ‘intermediary’ includes ISPs, hosts, search engines, online payment sites, online auction sites, online marketplaces and even cyber-cafes.

Intermediary liability is limited by certain exemptions, as long as the intermediary complies with due diligence requirements under law.

As per a leading Supreme Court ruling, a rights holder seeking to take down online counterfeiting must approach the competent court, name the intermediary as defendant and seek specific directions against it.

Indian courts have also been proactive in granting John Doe orders against ISPs and hosts to block access to websites providing downloads of pirated movies before their official release.

With the increase of counterfeiting online, especially through marketplaces, Indian courts have been faced with several opportunities of analysing the legal regulations concerning intermediary liability. Lately, the courts have been stricter to intermediaries, enhancing the due diligence requirements that an intermediary conducting business in India ought to follow.

Cybersecurity and brand protection

A recent trend has been observed which has raised overlapping issues of cybersecurity with brand protection. The modus operandi of such entities is to gain access to the computer systems of foreign individuals and plant fake malware popups. The popups mention a helpline number to resolve the issue. However, the helpline is the entity installing the fake popups and not a genuine number. Once a user calls the number, the call receiver from the entity, while impersonating a representative or branch of the concerned software company, will, under the pretext of offering solutions to the problem, ask the caller to transfer an amount of money to the service. The transaction is made to look genuine as the popup will be taken down, making the user believe that it was a genuine virus.

Various brand owners which have been impersonated in this manner have lodged police raids, which have revealed huge fake transactions in their names and led to arrests of a large number of culprits.

Preventive measures/strategies

Use of local counsel and investigators

To a large extent, the effectiveness of an anti-counterfeiting action can depend on the prior investigation. However, rights holders often make the mistake of relying solely on the investigators for both the investigation and the following legal action, without even consulting lawyers. While the initial role of the investigator is crucial for proper target identification, legal action should always be initiated with the involvement of local lawyers specialised in IP litigation. This is important to ensure the best conclusion to the proceedings, since an investigator’s interest usually ends once a raid is conducted, while the case before the courts continues and may result in adverse orders against the rights holder if not properly pursued.

Effective use of anti-counterfeiting features

The use of preventative technology (eg, radio frequency identification, microscopic tags, barcoding, licence databases, unique identity codes or holograms and seals of authenticity) can prevent the proliferation of counterfeit and pirated products. With the increasing sophistication of counterfeiting, use of multiple features is recommended; this also helps in establishing infringement before courts and authorities, since most counterfeits still fail to comply with all the features.

Role of government agencies

Counterfeiting is increasingly gaining the attention of government agencies as a serious threat of national importance. The government recently took a major positive step in this regard by formulating a national IP rights policy and establishing a dedicated cell for IP rights promotion and management for efficient administration and implementation of the policy. The cell has been extremely active, having undertaken wide-ranging actions towards achieving the objectives of the policy within only a few months of its establishment. The cell has also been conducting IP rights awareness and training programmes for enforcement wings such as the police, Customs and judicial academies, in collaboration with rights holders and legal practitioners; this has helped to more effectively equip and educate enforcement wings to combat IP violations.

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 Interpol. India’s Central Bureau of Investigation has included intellectual property as one of the modules in its conference and Interpol has co-hosted training seminars on fighting illicit international trade which received active support from trade bodies and industry representatives. Various public and private organisations in India have also collaborated with organisations such as the International Trademark Association and the International Chamber of Commerce’s Business Action to Stop Counterfeiting and Piracy to highlight the importance of anti-counterfeiting and to facilitate its effective enforcement.

Anand and Anand

First Channel Building

Plot 17A, Sector 16A, Film City

Noida 201301

India

Tel +91 120 405 9300

Fax +91 120 424 3056

Web http://www.anandandanand.com

Saif Khan

Partner

[email protected]

Saif Khan is a partner with Anand and Anand in the litigation department, where he heads the enforcement team. Previously, he worked for British Petroleum (on the rolls of Castrol India Ltd) for nearly two years as manager of legal trademark operations. Mr Khan also practised as litigation counsel for four years and has extensive experience of conducting enforcement actions, customs and border recordals and anti-piracy and anti-counterfeiting actions (criminal and civil). He has experience of working, coordinating and liaising with law enforcement agencies to ensure focused solutions for IP infringement. Mr Khan regularly appears in contentious matters before various courts throughout India. He also heads the white collar crime practice of the firm and has been involved in various contentious criminal cases.

Shobhit Agrawal

Managing associate

[email protected]

Shobhit Agrawal is a managing associate in the Anand and Anand litigation team. He completed his BSc and LLB (hons) from Gujarat National Law University and enrolled as an advocate in 2010. Since then, he has worked extensively with clients for the protection and enforcement of their IP rights, including brand protection, software piracy and other anti-counterfeiting measures. Mr Agrawal regularly represents clients in contentious matters before various courts in India and has wide experience in conducting civil and criminal enforcement actions.