Procedures and strategies for anti-counterfeiting: Philippines
The Intellectual Property Office of the Philippines (IPOPHIL) continues to be at the forefront of activities geared towards providing adequate, reliable and effective protection and enforcement of IP rights.
The Intellectual Property Office of the Philippines (IPOPHIL) continues to be at the forefront of activities geared towards providing adequate, reliable and effective protection and enforcement of IP rights. Its National Committee on IP Rights (NCIPR) provides full support to such programmes. The NCIPR is an interagency body created to formulate and implement plans and policies to strengthen the protection and enforcement of IP rights in the Philippines. It is composed of 12 members, with representatives of the Department of Trade and Industry and IPOPHIL as chair and vice chair, respectively. The NCIPR has been actively engaged in many enforcement-related activities.
Following the 2016 presidential elections, new heads in some of the NCIPR member agencies were appointed, resulting in the movement of enforcement personnel and changes in representations in enforcement meetings. However, the fight against counterfeiting and piracy was sustained. Counterfeit and pirated goods worth Ps6.52 billion ($130.9 million) were seized in 2016 through the collective efforts of the NCIPR members. This amount represented a more than 300% increase over the value from enforcement operations in 2015 (approximately Ps2 billion, or $42.4 million).
In 2017 the preliminary value of counterfeit and pirated goods seized by the NCIPR stood at Ps4.19 billion ($83.7 million).
Based on the data submitted by the Philippine National Police (PNP) and Bureau of Customs National Bureau of Investigation (NBI) in 2016, a total of 508 search warrants and one warrant of seizure and detention were implemented. The Optical Media Board conducted 2,580 inspections in 2016. Out of the operations conducted, the NBI arrested 16 persons and filed 108 cases while the PNP arrested 55 persons and filed 89 cases.
Regarding online piracy, through the coordinated efforts of IPOPHIL, the rights holder and the PNP anti-cybercrime group, a suspected administrator of two websites was arrested. Two complaints were filed by the Motion Picture Association involving the websites buhaypirata.net and rainiertamayo.com.
Consultations, seminars and workshops were conducted by IPOPHIL and the other members of the NCIPR, including:
- a consultative meeting on IP enforcement;
- a consultation with IP stakeholders;
- a roundtable discussion on IP enforcement;
- a workshop on IP enforcement and a product identification seminar;
- a UK-IPOPHIL enforcement workshop entitled “Dealing with Physical Goods to Digital Crimes”;
- a study visit on IP enforcement for Vietnamese delegates;
- a high-level roundtable discussion on IP enforcement;
- a national workshop on counterfeiting, piracy and border measures; and
- a Japan Tobacco International product knowledge-sharing seminar.
There are now 69 special commercial courts specially designated to handle IP cases. The Department of Justice has also designated prosecutors to handle IP cases, including city and provincial prosecutors. This setup brings focus and specialisation in handling IP cases, and facilitates the application of the Rules of Procedure for IP Rights Cases, which was promulgated by the Supreme Court in October 2011.
Fifteen convictions have been reported since the promulgation of the rules of procedure, indicating that the reforms and initiatives started by the government are now generating positive results.
The government also continued its regular training programmes for justices, judges, prosecutors and investigators; the training has now reached the provinces and benefited more stakeholders. In partnership with the US Agency for International Development, the American Bar Association Rule of Law Initiative and the US Patent and Trademark Office, IPOPHIL and the Philippines Judicial Academy conducted focused group discussion with justices of the court of appeals stationed in Metropolitan Manila, the Visayas and Mindanao. US judges participated in roundtable discussions on issues and concerns regarding IP enforcement on two occasions. IP investigation and prosecution training was also carried out for prosecutors and investigators. The continuous prosecutorial capacity building greatly contributed to the high disposal rate of the Department of Justice in 2016, which was at 93.21%.
In 2017 the number of IP cases filed before the special commercial courts continued to increase on the previous three years.
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 PNP, the NBI, 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 authorities have been actively helping brand owners by intercepting infringing goods at the border.
Availing of border control measures 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 is made as to whether the goods are counterfeit. If they are, Customs will 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 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 NBI or the PNP), 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
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Salcedo Village, Makati City 1227
Tel +632 889 6197
Mila Federis is managing partner of Federis & Associates Law Offices, a boutique law firm. She has over 20 years’ experience in legal practice, representing clients from a vast range of industries. Ms Federis leads the firm’s litigation team, and has been ranked by Law Business Research in its Who’s Who Legal Trademarks 2017. She is an active member of many professional organisations, and a regular contributor to the International Trademark Association’s Country Guides, Opposition Guides, Enforcement Guide, Madrid Practitioner’s Guide and Anti-counterfeiting in Asia and the Pacific Rim.