Procedures and strategies for anti-counterfeiting: India
This is an Insight article, written by a selected partner as part of WTR's co-published content. Read more on Insight
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. The act also recognises the right of an unregistered trademark owner to take action for passing off, even against a registered trademark, provided that the unregistered trademark owner is a prior user.
Legal framework
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. The act also recognises the right of an unregistered trademark owner 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 has now been harmonised with the Nice Classification and applicants are required to specify the Nice class.
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, films and sound recordings. Registration is not compulsory for the purpose of enforcing copyright, although it provides ex facie evidence of the particulars incorporated in the certificate. The Copyright Act provides statutory civil and criminal remedies against copyright infringement. Even possession of plates for making infringing copies is 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.
Patents Act 1970
The Patents Act pursuant to amendment in 2005 is harmonised with Article 27 of the Agreement on Trade-Related Aspects of Intellectual Property Rights, which deals with patentable subject matter. 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 three-pronged test of novelty, non-obviousness and industrial applicability.
Unless authorised by the patent owner, the following constitute infringement under the act:
- manufacturing patented products;
- using patented processes;
- offering to sell or selling patented products;
- using products directly created through the patented process for production or business purposes; and
- importing or exporting patented products or products that are created through patented processes.
A patent owner 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 manufacture the infringing goods and the closure of the manufacturing premises. Relief available to the patent owner is primarily of a civil nature. Criminal liability arises where an article is wrongfully represented to be patented or secrecy requirements under the act are breached.
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 two-dimensional (2D) 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 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 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.
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 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 prohibit the import of parallel-imported/grey-market goods per se. However, where such goods are valued far below their market prices, the revenue wing of Customs can suspend the goods for duty evasion and then revalue them and impose the correct duty.
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.
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 with or without 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 lawsuit, especially where counterfeiting is involved.
In addition to an ad interim injunction order, rights holders can obtain the following interim reliefs in civil actions:
- Anton Piller orders – the rights holder may seek 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.
The procedure for civil cases is governed by the Code of Civil Procedure 1908. In early 2016 a new civil procedure law came into effect which governs the procedure of commercial cases by establishing commercial courts in high courts; IP disputes come within its ambit. The most significant development under the new law has been the introduction of summary judgment in cases when one party can show that the other party has no real prospect of succeeding in the case. 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 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.
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.
Intermediary liability
The IT Act provides for liability of internet intermediaries. The definition of an ‘intermediary’ includes internet service providers (ISPs), hosts, search engines, online payment sites, online auction sites, online marketplaces and even cyber-cafes.
Intermediary liability is limited by certain exemptions established through compliance with due diligence requirements, including notice and takedown.
The Supreme Court has analysed the provisions for notice and takedown and ruled that any notice to an intermediary to take down any content must be pursuant to a court order. Therefore, 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. The Supreme Court further reasoned that such a requirement is necessary as it means that intermediaries need act only on legitimate requests; otherwise, they would be flooded with millions of takedown requests.
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.
Preventive measures/strategies
Choosing the best remedy
It is important for rights holders to decide on the kind(s) of enforcement action to be taken against the infringer in consultation with local counsel, depending on the desired results. The key factors to consider include:
- market impact;
- the extent and nature of the infringement;
- the ability to obtain damages from the infringer;
- ease of exit from the proceedings; and
- costs.
Rights holders should also analyse the facts to differentiate between actions depending on the desired results – whether to recover damages, create a good market impression or effect large volumes of seizures.
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.
Third-party monitoring
Most goods go through a series of third-party intermediaries in their supply chain. Pilferage during one or more such levels in the supply chain is seen as a major concern, especially in the case of counterfeit packaging. Therefore, in addition to strict non-disclosure and confidentiality agreements, periodic internal checks and surveillance must be in place.
Online strategies
Tackling online counterfeiting requires a sophisticated investigation strategy. Investigation of online counterfeiting requires a combination of online surveillance using high-tech tools and 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, ISPs and payment gateways.
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.
Anand and Anand
First Channel Building
Plot 17A, Sector 16A
Film City, Noida 201301 (UP)
India
Tel +91 120 405 9300
Fax +91 120 424 3056
