Procedures and strategies for anti-counterfeiting: Philippines
The Philippines IP Office (IPOPHIL) has vigorously pursued many programmes aimed at providing adequate and efficient ways to enforce trademark rights. It has also taken many initiatives to pursue legal reforms to create stronger IP rights and to build a regime that values and respects intellectual property. IPOPHIL has worked with other government agencies and organisations to facilitate the exchange of information and to find cost-effective methods of enforcing IP rights.
The Philippines IP Office (IPOPHIL) has vigorously pursued many programmes aimed at providing adequate and efficient ways to enforce trademark rights. It has also taken many initiatives to pursue legal reforms to create stronger IP rights and to build a regime that values and respects intellectual property. IPOPHIL has worked with other government agencies and organisations to facilitate the exchange of information and to find cost-effective methods of enforcing IP rights. It has regularly engaged in activities aimed at building the judiciary’s and public prosecutors’ capacity to deal expeditiously with IP cases.
In general, the success of these government initiatives has been welcomed by stakeholders and international observers. In 2014 the Philippines was removed from the Office of the US Trade Representative’s Special 301 List and it has remained off the watch list for three years now.
In July 2015 a European Commission report on the protection and enforcement of IP rights in third countries noted that the Philippines has taken significant steps to improve its IP rights enforcement environment. In particular, the report singled out:
- the passage of a law that introduced important amendments to the IP Code;
- the introduction of landlord liability for the use of leased premises in the sale of infringing goods;
- the granting of the IP enforcement function to IPOPHIL; and
- the inclusion of IP Code violations as unlawful acts under the Anti-money Laundering Act.
Despite the legislative reforms and IPOPHIL’s proactive role in trademark enforcement, many challenges remain. Delays in the courts’ resolution of cases and the high cost of conducting raids and storing seized merchandise are some of the factors that discourage trademark owners from pursuing cases to their conclusion. The fight against the growing threat of online counterfeiting may be aided by new legislation. Further, stakeholders are waiting for the courts to render good decisions that can guide litigants on nuanced issues regarding the liability and responsibility of different participants in online counterfeiting. Finally, the IP Code needs further amendment to increase penalties in order for convictions to effectively serve as a deterrent to future violations.
The IP Code (Republic Act 8293), which came into force in 1998, is the main legislation governing intellectual property. Among other things, it:
- defines a ‘trademark’;
- provides for a system of trademark registration;
- establishes specific rights for trademark owners and registrants;
- provides a mechanism for enforcement of trademark rights; and
- specifies the reliefs and penalties for trademark infringement, unfair competition and other IP rights violations.
Republic Act 10372, which was adopted in 2013, amended the IP Code. This law is significant for trademark enforcement because it gave enforcement and visitorial powers to IPOPHIL. It also created the IP Rights Enforcement Office (IEO), which receives and evaluates complaints for violations of IP rights and makes appropriate recommendations to be implemented with the help of other government agencies (eg, the Philippine National Police, the National Bureau of Investigation, the Bureau of Customs and the Optical Media Board). The IEO also assists in the enforcement of orders, writs and processes issued by the IPOPHIL Bureau of Legal Affairs and the Office of the Director General.
The E-commerce Act (Republic Act 8792), which took effect in June 2000, includes a provision (Section 33) which penalises ‘piracy’ – that is, the unauthorised copying, reproduction, dissemination, distribution, import, use, removal, alteration, substitution, modification, storage, uploading, downloading, communication, making available to the public or broadcasting of protected material, electronic signatures or copyrighted works, including legally protected sound recordings, phonographs or informational material on protected works, through the use of telecommunications networks (eg, the Internet).
The Tariff and Customs Code (Republic Act 1937), as aided by Customs Administrative Order 6-2002, ensures that imported infringing goods do not enter the Philippine market.
In the context of trademark enforcement litigation, anti-counterfeiting actions may be pursued criminally, civilly and administratively. The IP Code specifies the causes of action as trademark infringement, unfair competition and the broader term ‘IP rights violation’. In the case of trademark infringement, the mark must be registered. If a trademark application is pending or no application has yet been filed, the cause of action is unfair competition.
To address the sophisticated ways in which imported counterfeit merchandise eludes enforcement agents, the Philippine authorities have been actively helping brand owners by intercepting infringing goods at the border.
Availing of border control measures to stop the import and entry into the market of counterfeit merchandise typically starts with the trademark owner recording the trademark and the relevant products. The trademark owner or its agent must record the mark and the goods on which the registered trademark is used.
Recordation entails the completion of simple government forms, the payment of fees and the deposit of samples of the products with the Bureau of Customs. The fee is Ps2,000 per product, although the total amount per applicant cannot exceed Ps20,000. The recordation will be valid for two years from the date of recording, renewable every two years thereafter.
Customs will treat the recordation as a continuing complaint and will entitle the trademark owner to receive a notice of any alert or hold order that it issues for suspected counterfeit goods. After issuance of the alert or hold order, Customs will physically examine the goods. With the cooperation and assistance of the trademark owner’s designated agent, a determination will be made as to whether the goods are counterfeit. If they are, Customs will then issue a warrant of seizure and detention, a copy of which will be served on the importer or consignee. The importer or consignee will be given an opportunity to contest the warrant of seizure and detention. If the warrant is not contested or Customs ultimately determines that the imported goods are counterfeit, a decree of forfeiture will be issued, declaring that the goods are forfeited in favour of the government.
Once the imported goods are forfeited, the trademark owner may file a request with the disposal unit of Customs for destruction of the counterfeit items. The request must be accompanied by a proposed destruction plan. The trademark owner pays for destruction costs and expenses.
Trademark owners that do not register their trademarks and goods with Customs may still avail of the aforementioned remedies by submitting a request to the district collector targeting a specific shipment of suspected counterfeit products. This request will not be considered as a continuing complaint, but Customs will assist in the investigation and may ultimately forfeit the imported goods if they are found to be counterfeit.
Customs can commence an investigation of shipments on its own initiative when it suspects that the importer has misrepresented the nature and value of the goods (often to avoid paying the correct import duties and taxes); typically, importers of counterfeit products purposely mispresent their value. In such cases, Customs can seize and forfeit the counterfeit products based on violations of the Tariff and Customs Code on its own volition and without any trademark-related investigation.
The IP Code provides for three offences in which criminal penalties may be imposed:
- trademark infringement;
- unfair competition; and
- use of false designations of origin or false descriptions or representations.
In all three cases, the rights holder need not prove the defendant’s intent to commit the crime. However, if the evidence shows that the defendant intended to mislead the public or defraud the complainant, damages may be doubled at the court’s discretion.
If enforcement is pursued through criminal proceedings, the trademark owner – through a duly appointed agent or attorney – must first submit a written complaint to a law enforcement agency (eg, the National Bureau of Investigation or the Philippine National Police), which will then conduct an independent investigation of the facts supporting the complaint. Once these facts are ascertained, the enforcement agent will apply to court for a search warrant. On finding probable cause, the court will issue a search warrant and a raid will follow no later than 10 days thereafter.
During a raid, the enforcement agents can seize counterfeit products found in the place described in the warrant. Seized products are placed in the official custody of the court and deposited in a bonded warehouse, which will be paid for by the trademark owner.
Within 60 days of the raid, the enforcement agents – in coordination with the trademark owner’s lawyer or agent – must file a criminal complaint with the public prosecutor’s office. The prosecutor then conducts preliminary investigation proceedings in which the police agents, trademark owner, alleged offender and their respective witnesses file affidavits and other evidence. On conclusion of the preliminary investigation, the public prosecutor will issue a resolution either dismissing the complaint or recommending the filing of criminal information in court.
After the filing of criminal information, the court will issue a warrant of arrest. The accused offender will be arrested and may post bail. Arraignment follows, after which the court will conduct a trial to determine the accused offender’s guilt.
Independent of the civil and administrative penalties imposed by law, a criminal penalty of imprisonment for two to five years and a fine of Ps50,000 to Ps200,000 will be imposed on any person found guilty of committing any of the aforementioned acts.
The trademark owner often participates in the civil aspects of the criminal action if it is claiming damages. Otherwise, it may recover damages in a separate civil action for infringement or unfair competition.
Apart from criminal proceedings, a trademark owner may pursue a civil complaint for infringement or unfair competition. The complaint will ask for an injunction, a damages award and the confiscation and destruction of counterfeit goods.
It is possible to apply ex parte for a writ of search and seizure to impound documents and articles in pending and intended civil actions in order to prevent infringement and preserve relevant evidence. The plaintiff will be required to post a bond.
A preliminary injunction may also be requested by filing with the complaint a verified application for the issuance of a preliminary injunction or temporary restraining order. The court will conduct a trial at which both parties are present. The plaintiff must prove grave and irreparable damage arising from the defendant’s continued commission of the acts complained of. The court requires the posting of a bond before it can issue a preliminary injunction or temporary restraining order.
The amount of damages is the reasonable profit that the plaintiff would have made had the defendant not infringed its rights or the profit that the defendant actually made from the infringement. If damages cannot be ascertained with reasonable certainty, the court may award a reasonable percentage based on the defendant’s gross sales in connection with infringement of the plaintiff’s IP rights. Where actual intent to mislead the public or defraud the plaintiff is evidenced, damages may be doubled at the court’s discretion.
The court may also impound the counterfeit products, sales invoices and sales records.
A trademark owner may also file an administrative complaint with the Bureau of Legal Affairs (BLA), one of the bureaux of IPOPHIL. To avail of this option, the total amount of damages claimed must be at least Ps200,000. Preliminary injunctions and temporary restraining orders are also available in this type of action.
The BLA will try the case in adversarial proceedings in which all parties may present their respective evidence. The rules of IPOPHIL proceedings will apply and the Rules of Court will also have supplementary application.
Preliminary attachment and preliminary injunctions are available in administrative actions. A party can apply for preliminary attachment on commencement of the action or at any time before the entry of judgment. The application for a preliminary injunction may be filed any time before the decision is issued. Both remedies require the posting of a bond.
Available administrative penalties include:
- cease and desist orders;
- condemnation and seizure of infringing products;
- fines of Ps5,000 to Ps150,000 and an additional fine of up to Ps1,000 for each day of continuing violation;
- cancellation or withholding of any permit, licence or registration granted by or being secured from IPOPHIL;
- censure; and
- other analogous penalties.
Decisions of the BLA may be appealed to the director general of IPOPHIL. The director general’s decision may be appealed to the Court of Appeals and finally to the Supreme Court.
Other enforcement options
In 2013 a law was passed giving enforcement and visitorial powers to IPOPHIL and creating the IEO. The IEO investigates IP rights violations and is empowered to issue a warning to the offender that it comply with the IP Code. Through its visitorial powers, the IEO can investigate the offender’s business premises. If justified, the IEO may file an administrative complaint with local government units, agencies or tribunals, or may refer the matter to law enforcement agencies that can further investigate the matter and build up a criminal case against the offender.
Online sales of counterfeit merchandise are increasing at an alarming rate. Popular websites that provide cheap platforms for sellers to offer fraudulent goods are playing a large part in the rise of online counterfeiting.
The appropriation of registered trademarks as domain names by unrelated third parties is also on the rise. This offence falls under the Cybercrime Prevention Act 2012, which defines ‘cybersquatting’ as the acquisition in bad faith of a domain name to profit, mislead, destroy reputation or prevent others from registering the domain name if it is:
- identical or confusingly similar to a registered trademark;
- identical or similar to the personal name of a person other than the registrant; or
- acquired without the relevant IP rights.
Trademark enforcement in online counterfeiting can generally be undertaken through the IP Code provisions on trademark infringement, unfair competition and IP rights violation, or the relevant provisions of the Cybercrime Prevention Act.
The complaint may be lodged against the sellers that posted the counterfeit products online or the owners of the websites or platforms used by these sellers. Both parties may be named as defendants in the complaint. The owners of online shopping platforms are often inclined to withhold from the public the true identities of online sellers; this makes it difficult to identify and name the sellers in enforcement actions. Under existing laws, the website owners can be held liable as principals by indispensable cooperation and can be named as defendants in enforcement actions.
In a cybersquatting scenario – where information is accessible through a simple WHOIS search – the recurring problem is the proliferation of dummy registrations. New legislation may be necessary to provide the much-needed push for trademark registries to take more responsibility in ensuring that the information which domain name registrants provide them is verified through an effective authentication system. Maintenance of accurate and quality WHOIS data that is fully accessible to the public is a critical element in combating counterfeiting in the Philippines.
One key to effective trademark protection in the Philippines is to secure rights on all fronts and as soon as possible. Trademark owners should register their marks with the Bureau of Trademarks without delay. Registration allows the owner to enjoy the benefits of the prima facie presumption of validity of ownership and related rights. This can be a strategic advantage when litigating ownership disputes. Registration also reduces the likelihood of a third party cybersquatting on the trademark.
Another effective measure is registration of the trademark and relevant products with Customs. Registration must be followed by proactive coordination with the IP Unit of Customs, which can help to police against the import of counterfeit products. In particular, improving and maintaining the exchange of information between the trademark owner and Customs facilitates timely interception of imported counterfeit products.
Trademark owners can further facilitate effective policing of the local market by engaging reliable and experienced local investigators. Proactive police work with these agents expedites intelligence gathering, which is essential to initiating enforcement actions.
Apart from human resource-based measures, trademark owners may use technology to better educate consumers and police enforcement agents on how to easily identify genuine products. This may include security labels, bar codes and three-dimensional holograms. Trademark owners should also actively participate in seminars and public consultations with police enforcement agents, border authorities, prosecutors and judges in order to raise awareness of the unique challenges and issues relevant to trademark enforcement in the Philippines.
Federis & Associates Law Offices
Suites 2004 & 2005
88 Corporate Centre
Valero corner Sedeño Streets
Salcedo Village, Makati City 1227
Tel +632 889 6197
Fax +632 889 6132