ABSTRACT
Brands are assets for commercial enterprises that perform the traditional function of trademarks. This includes the function of developing brand equity from the perspective of brand owners and facilitating consumers to identify a particular product through its brand which also conveys the essential qualities of a product along with source of its origin. The essential functions of brands are severely affected by the act of counterfeiting thereby compromising the interest of both brand owners and the consumers. The significance lies in the fact that consumers rely on these brands as it indicates the source of origin of goods or services and ensures its quality and safety standards. In most of the cases consumers often blindly trust the brands having goodwill irrespective of price and other factors of constraints. Some competitors have considered this as an opportunity to free ride on reputation of famous brands by producing cheap counterfeit products and to deceive consumers by charging them for original brands. Some of the cheap counterfeit products such as fake or inferior quality medicines, food products, and cosmetics, electrical or automobile parts cause serious health hazards. The National IPR Policy 2016 provides for review of counterfeiting activities and policy considerations to ensure the legal provisions are effectively enforced and implemented. But it’s a matter of concern considering the rising trend of counterfeiting activities in India. It is not only a threat to manufacturers or the consumers but also to the economy as a whole.
KEYWORDS: Brands, trademarks, counterfeiting, consumers
TRADEMARK COUNTERFEITING AS IP CRIME: INDIAN PERSPECTIVE
- INTRODUCTION:
Brands are the assets of commercial enterprises that perform the traditional function of trademarks. This includes the function of developing brand equity from the perspective of brand owners and facilitating consumers to identify a particular product through its brand which also conveys the essential qualities of a product along with source of its origin.[1] The essential functions of brands are severely affected by the act of counterfeiting thereby compromising the interest of both brand owners and the consumers.[2]
Counterfeiting is an act of fraudulent imitation of something to deceive the consumers regarding the source of origin of products. Trademark counterfeiting is an act of producing fake products of cheap or inferior quality which look identical or almost similar to the original product. It is one of the forms of trademark infringement where there is an unauthorized use of the trademark and deception is the motive. But the difference lies in the fact that counterfeiting is an exact imitation whereas trademark infringement is a broader concept which also includes confusingly similar marks. The idea is to copy the brand and to free ride on the reputation of the famous brands to earn profit through deception. In this case, the victims of counterfeiting are mostly the owners of famous brands who have goodwill and trust among certain class of consumers with respect to their brands. The counterfeiters are aware of the fact that consumers would be willing to buy such brands which are elite, luxurious and creates a sense of satisfaction and pride if in possession. This gives them an easy opportunity to target high end brands and make their duplicates of either same or low price depending on the market and consumer target.[3]
- COUNTERFEITING: MODE OF OPERATION
Most of these counterfeits are produced near the location of original goods manufacturing units where the counterfeiters are the workers, relatives or other persons associated with original manufacturing units and know the technical know-how. There are two important elements in the act of counterfeiting i.e. manufacturing and distribution.[4] Counterfeiters after producing the fake and counterfeit products, look for the suitable distribution channels that would facilitate them in penetrating the legitimate market and reaching high end retail shops. Usually, the distributors in this case are the dealers having less reputation who are easily reachable. In many cases these distributors are unable to reach the high end brand shops because these shops have their own distribution channel and trusted dealers and often do not entertain outsiders to ensure there is no supply of counterfeits in their shops. As a result the counterfeiters are left with no alternative but to sell those fake products in street shops, flea markets and these days even through online platforms which provide very lucrative and convenient opportunity to sell fake products without any risk of identification. In the online platform these fake products appear along the side of original products and it is often difficult to distinguish between the two.[5] This way the counterfeiters who had faced the difficulty of penetrating the legitimate markets physically are now able to do so virtually in a convenient manner.[6]
Counterfeiting can be understood from two of its forms, i.e deception based and non-deception based counterfeiting. Such classification is based from the consumer perspective.[7] If the consumers are deceived regarding the source of product and they are made to believe that they are purchasing an original product of good quality and reputation concerning the brand image then it is deception based counterfeiting. In this case the consumers are duped into buying cheap products at high cost almost equal to the original brands. This is often seen in both retail shops and online shopping platforms where food products, counterfeit bags, accessories, drugs & medicines and technology related products are sold. Mostly, this form of counterfeiting is dangerous and there is a high risk to consumer’s health and interest if counterfeit food products and fake medicines are produced. The other form of counterfeiting is non deception based. In this case the consumers are fully aware of the counterfeit and fake goods and knowingly purchase such products thereby increasing consumer demand for such activities in the market.[8] What is needed to be understood is the fact that such demand for non deception based counterfeiting is mostly seen in developing countries. Many people in countries like India cannot afford high end luxury brands unlike rich and high class people who usually constitute smaller part of population in India as compared to the lower and middle class families. In this case, if a substitute of high luxury brand is available at a cheaper cost, which is easily available and looks almost similar to the original brand, then consumers would be more than willing to purchase it and enjoy the sense of pride due to its possession. Such counterfeiting is usually not injurious to health or affects consumer interest as the consumers are aware of its constituents. The counterfeiters usually target accessories, clothing, footwear and technology related parts which have low or negligible chances of causing health injury.
- CRIMINALIZING COUNTERFEITING:
Counterfeiting is one of the Intellectual Property Crimes. The countries across the globe, specially the developed countries have taken strict measures to curb the menace of counterfeiting. Countries like USA and UK have amended their laws and enacted new provisions to bring more deterrence in this case as often civil remedies are not taken seriously and considered as cost of doing business by many counterfeiters. It is to be noted that counterfeiting is a serious offense as it not only causes economic loss to the original brand owners but also affects the economy of the country due to loss of revenues by way tax. In many cases, counterfeiting and the financial gain out if it, is used for other criminal activities such as terror funding, organized crimes, money laundering etc.
Under deception based counterfeiting where cheap quality products are sold using original brand name, there is a threat to the consumer health and interest, particularly in the cases of fraudulent imitation of food products and medicines. These products are sold in identical form at a cheaper price. Any negative outcome of consumption of such fake products may lead to severe health issues and side effects which can be life threatening in some cases. Use of such counterfeit products also causes tarnishment of trademarks and loss of consumer trust which is difficult to regain as it takes lot of time to build brand equity.[9]
- INDIAN LAW ON COUNTERFEITING:
In India, there is both civil[10] and criminal remedy for counterfeiting.[11] The Trademark Act, 1999 does not define counterfeiting but provide criminal remedies in the event of falsifying and falsely applying trademark[12]. Counterfeiting is also a criminal offense under Indian Penal Code 1960.
International organizations like the World Intellectual Property Organization (WIPO), the WCO and the International Criminal Police Organization (INTERPOL), along with the business community, are toiling hard multilaterally to determine new strategies to fight against counterfeiting. The Global Congress Steering Group comprised of the WCO, the WIPO, the INTERPOL, the International Chamber of Commerce (ICC), the International Trademark Association (INTA) and the International Security Management Association (ISMA) aims at highlighting the problem of counterfeiting, by bringing concerned parties together to develop a comprehensive strategy to tackle the problem at the national, regional and global levels.[13]
Like in many other developed countries, India does not have a separate legislation to address counterfeiting. However, there are statutory remedies, civil and criminal, embodied in various legislations, including the Trademarks Act of 1999, the Copyright Act, 1957, the Patents Act 1970, the Designs Act 2000, the Geographical Indications of Goods (Registration and Protection) Act 1999 and the Customs Act 1962. The Customs Act lays down provision to protect intellectual property rights against cross-border movement of counterfeit good.
In India the National IPR Policy 2016 serves as guiding document to assess, monitor and implement such rules and policies to control counterfeiting activities in various domains. It provides for strengthening the enforcement and adjudicatory mechanisms in India for combating IP issues. The Government drafted the Policy as an initiative to give importance to Intellectual Property Rights, protection, implementation and enforcement of rules.
CONCLUSION:
Considering the rampant increase in counterfeiting activities in Indian and across the globe, it is correctly recognized as IP crime by many countries and criminal remedies are available against such activities. Counterfeiting can be seen in many countries and now it has become a part of an international trade where there is frequent illegitimate export and import of counterfeit goods. In this case, how efficiently a criminal remedy is being enforced and how effectively border measures are executed in a developing country like India is a matter of question.
The enforcement mechanism in India is absolutely TRIPS compliant. There are both civil and criminal remedies available under Trademark law to curb the menace of counterfeiting. However, there is also increase in counterfeiting activities in India and almost no corner is left untouched which does not deal with counterfeits. This clearly indicates that demand for counterfeit goods is high in India considering from the consumer perspective. The effectiveness of criminal remedy in India is also a matter of question.
As long as such manufacturing and distribution channel of counterfeits do not cause any substantial loss to the original brand owner and does not affect consumer’s health, such illegitimate activities can be considered to be operated but in a closely monitored and controlled manner. However, any illegal activity where profit is earned by causing wrongful loss to others cannot be justified on mere such notions. There is a need to analyze the anti-counterfeiting laws and enforcement aspects in India to understand the gaps and flaws in this area.
[1] Lionel Bently, Jennifer Davis And Jane C. Ginsburg, Trade Marks and Brands: An Interdisciplinary Critique, (Cambridge University Press, 2008), Vol.1, pg 80.
[2] Ibid
[3] Sean Lavin, Tracey Klees, Daye Lee, Scott Mah, Caroline Marshall & Ellen Watlington, Intellectual Property Crimes, 56 AM. CRIM. L. REV. 1101 (2019).
[4] Daniel C. K. Chow, Alibaba, Amazon, and Counterfeiting in the Age of the Internet, 40 NW. J. INT’L L. & BUS. 157 (2020).
[5] Ibid
[6] Deven R. Desai, From Trademarks to Brands, 64 FLA. L. REV. 981 (2012).
[7] Bob Youill, How to Stop Counterfeiting at the Source, 234 MANAGING INTELL PROP. 26 (2013).
[8] Supra note 4
[9] Supra note 1; A trademark is tarnished when an infringing mark portrays the infringed mark in a negative light- usually in the context of sex, drugs, crime, etc. It can also happen if the infringer is offering low quality goods. The thought is that a tarnishing use of a mark threatens to destroy the commercial value of the mark because people will associate the lack of quality of the infringer’s goods with the plaintiff’s unrelated goods, or because the infringer’s use reduces the trademark’s reputation as a wholesome identifier of the owner’s products or services.
[10] Sec 135 provides for civil relief, including injunctions, damages, rendition of account of profits and delivery up of infringing labels and marks for destruction or erasure
[11] Section 29 of The Trademarks Act, 1999
[12] Section 102 of Trade Mark Act, 1999: (1) A person shall be deemed to falsify a trade mark who, either— (a) without the assent of the proprietor of the trade mark makes that trade mark or a deceptively similar mark: or (b) falsifies any genuine trade mark, whether by alteration, addition, effacement or otherwise. (2) A person shall be deemed to falsely apply to goods or services a trade mark who, without the assent of the proprietor of the trade mark– (a) applies such trade mark or a deceptively similar mark to goods or services or any package containing goods. (b) uses any package bearing a mark which is identical with or deceptively similar to the trade mark of such proprietor, for the purpose of packing, filling or wrapping therein any goods other than the genuine goods of the proprietor of the trade mark. (3) Any trade mark falsified as mentioned in sub-section (1) or falsely applied as mentioned in sub-section (2) is in this Act referred to as a false trade mark (4) In any prosecution for falsifying a trade mark or falsely applying a trade mark to goods or services the burden of proving the assent of the proprietor shall lie on the accused
Sec 103 of Trade Mark Act,1999: Any person who— (a) falsifies any trade mark; or (b) falsely applies to goods or services any trade mark: or (c) makes, disposes of, or has in his possession any die, block, machine, plate or other instrument for the purpose of falsifying or of being used for falsifying a trade mark or (d) applies any false trade description to goods or services or (e) applies to any goods to which an indication of the country or place in which they were made or produced or the name and address of the manufacturer or person for whom the goods are manufactured is required to be applied under section 139, a false indication of such country, place, name or address: or (f) tampers with, alters or effaces an indication of origin which has been applied to any goods to which it is required to be applied under section 139 or (g) causes any of the things above mentioned in this section to be done. shall, unless he proves that he acted, without intent to defraud, be punishable with imprisonment for a term which shall not be less than six months but which may extend to three years and with fine which shall not be less than fifty thousand rupees
[13] Simi T B, Combating Counterfeit Goods Compromising Development?, CUTS CENTRE FOR INTERNATIONAL TRADE, ECONOMICS & ENVIRONMENT.2009 https://www.academia.edu/3633529/Strategies_to_counter_spurious_products_with_reference_to_FMCG_in_Rural_market?auto=download
