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WIPO ASIA SUB-REGIONAL WORKSHOP
ON THE USE OF INTELLECTUAL PROPERTY (IP)
BY SME SUPPORT INSTITUTIONS FOR THE PROMOTION OF
COMPETITIVENESS OF SME IN THE FOOD PROCESSING SECTOR
The World Intellectual Property Organization (WIPO)
in cooperation with
The Intellectual Property Organization of Pakistan (IPO-Pakistan)
in association with
The Small and Medium Enterprise Development Authority (SMEDA)
With the assistance of
The Japan Patent Office (JPO)
Lahore, June 5 and 6, 2007
GUARDING AGAINST SPURIOUS AND COUNTERFEIT
PRODUCTS THROUGH EFFECTIVE ENFORCEMENT
AMARJIT & ASSOCIATES
SUITE 404, LAW ARCADE
18 PUSA ROAD,NEW DELHI-110005
“I have seen lots of funny men,
Some rob you with a gun,
Some with a fountain pen.”
I think this beautiful line convey a lot which, in its wide ambit include the crimes related to Intellectual Property which directly undermines the stability of economy and can lead to considerable political, social and economic discord.
The American sociologist, Edwin Sutherland first coined the phrase “White Collar Criminality” as a crime committed by a person of respectability and high social status in the course of his occupation. The phrase “White Collar Criminality” has much wider ramifications and the subject I am dealing with today is only a small part thereof.
With the experience gained in the past, I can certainly piece together a definition of “White Collar Crime” to mean an illegal act or series of illegal acts or doing of legal act for achieving an illegal objective committed by any person by non-physical and/or non violent means and by deceit gain money or property wrongfully or to avoid payment of legal dues or retain money or property wrongfully or to obtain wrongful business to personal advantage.
Imitation is not the best form of flattery for the brand under attack. In fact, the more popular the brand, the more it gets copied. That is the reason why companies who advertise aggressively their brands are hit the most. The sales are not the only thing lost. More dangerous is the loss of creditability of the brand as counterfeiting can kill a brand and cripple the company’s distribution system.
The losses of the industry and the Government are the counterfeiters’ gain. Counterfeits are sold at the same price as the originals, but the production and marketing cost are usually less than a fourth of the real price. The use of cheap ingredients, zero expense on advertisement and minimal distribution costs enable the counterfeiters to recover his investment in three months. After that, it is cream. The drastically low cost is a pointer to the health and safety hazards that counterfeit products pose to the industry as well as to the Government.
Counterfeiters have made inroads into every segment of the industry including pharmaceutical, articles of food, auto parts, consumer goods, electric and electronic gadgets, music, films, software, construction material, furniture's, cosmetics, perfumes, wines, spirit, dress material and so on.
Counterfeiting and piracy is the most lucrative business, the world over.
Why Counterfeits Flourish? (i) Because many companies do not go after them; (ii) Because of lack enforcement; (iii) Because of tedious & long-winded court procedure; (iv) Because of lack of class action against counterfeiters (v) Because of fear of customer scare which could trigger shift to rival brands; (vi) Because of lack of customer awareness.
I need not dwell further into the reasons for the growth of such business, but would briefly like to comment upon the rules concerning the: a) existing legislative regulations, b) enforcement of legislative provisions and, c) what additional measures are required to be taken to combat the menace.
The expression ‘counterfeiting’ or ‘counterfeit’ is neither used nor defined in any of the Intellectual Property related legislations. It is an expression which is more widely used and accepted as a term to describe the acts of falsification and false application in relation to trade marks/trade names, Piracy is generally used in relation to musical works, cinematograph films, software etc.
The expression “counterfeit” is however, defined under Penal Code to mean a person who causes one thing to resemble another thing intending by means of that resemblance to practice deception or knowing it to be likely that deception will thereby be practiced. In explanation added to the said section, it is explained that identical imitation is not essential to counterfeiting. In explanation II added to said section, presumption of law is created as to the intention of such person to practice deception until the contrary is proved. This would mean that if a person causes one thing to resemble other, his intention to practice deception is presumed in law until proved to the contrary.
In the legislations relating to Intellectual Property Laws in India, The Trade Marks Act, 1999 and The Copyright Act, 1957 are the primary legislations, providing for criminal remedies for the offences relating to falsification, false application of trade marks/trade description and infringement of copyright. Geographical Indications have also been afforded statutory protection providing for criminal sections against false application of geographical indications. The provisions applicable to false trade marks are equally applicable to false Geographical Indications.
The offences of counterfeiting and piracy are cognizable and non-bailable offences under the Indian law. The police has power to register and investigate a case without any necessity to have authorization from the court. However, the power of the police to search and seizure, without warrant, the counterfeit goods or the block, machines, other instruments or things involved in committing the offences has been curtailed under the new Act and has been made subject to the opinion of the Registrars of trade marks. This mean that the opinion of the Registrar of Trade Marks on the facts involved in the offences is necessary if the search and seizure of counterfeit products is sought to be made by the police without warrant. In such a case the power to search and seize can be exercised by a police officer of a rank of Deputy Superintendent only. However if the search and seizure is authorized by the Magistrate by appropriate warrant, none of the above requirements apply. Neither the opinion of the Registrar nor the constrain of the search to be made by a senior police officer of the rank of Deputy Superintendent apply in such a situation.
Under the existing law, any person affected by the acts of falsification of his trade mark can either give information about the commission of the offences, to an officer in charge of a police station having jurisdiction over the area where offence is committed. The police, on receipt of such information is empowered to register and investigate the case. However, if search or seizure of the counterfeit product is to be made the police officer, not below the rank of Deputy Superintendent is only empowered to take such action and that too after obtaining an opinion of the Registrar of trade marks. In most of the cases the rider on the powers of the police to search and seizure without warrant defeats the objective in view of the geographical, political and social conditions.
The best possible alternative available to the affected person is to file a private complaint directly with the concerned Magistrate and obtain directions for investigation of the case through the police and general search warrant to search any place where the offences are committed or suspected to be committed and to seize all such counterfeit products and the instruments, dies, blocks, machines used for the purpose of making such counterfeits.
The Magistrate, on receipt of a complaint, is empowered to either take cognizance of the offence and/or against the offender and proceed under Chapter XV of Code of Criminal Procedure to examine the complainant and the witnesses if any, with a view to determine if there are sufficient grounds for proceeding or it is a fit case to postpone the issue of process till the matter is inquired into or investigated to facilitate him in deciding whether or not there are sufficient grounds for proceeding.
The police officer directed to conduct an investigation or search for the incriminating material has to follow the procedure prescribed under the code of criminal procedure.
Chapter VII of Code of Criminal Procedure prescribes the procedure for the issuance of search warrants for the seizure and production of incriminating material. If such procedure is followed, the Registrar’s opinion is not required to be obtained for causing search and seizure of counterfeit products. Any police officer (even below the rank of Deputy Superintendent) gets empowered to investigate into the offences and to search and seize of counterfeit products.
The nature of offences covered under the Trade Marks Law can be classified broadly into the following categories:-
Under the Customs Act 1962, any goods which are imported or attempted to be imported or are brought within the Indian Customs waters for the purpose of being imported, contrary to prohibition imposed under the Customs Act or any other law for the time being in force, are liable to be confiscated. Any person who commits an act of commission or omission or acquires possession of or, in any way, is concerned with the carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing any goods which he knows or has reason to believe are liable to confiscation, is liable.
The review of above legislative provisions show that lawmakers have discharged their duty towards the society by providing enough teethes to law to check mate the counterfeit and pirates. In case proper care and caution is taken during the course of investigation search and seizure the counterfeiters will find it too hard to escape from the cluches of law.
Companies can guard their products against counterfeit and spurious copies in various ways. One of the basic methods used for protection is obtaining standard markings. Standard Markings like trademarks, copyrights, industrial designs and patents help in identifying a product. These also help in implementing the territorial rules applicable in a country for infringement of these rights. A company can approach the legal enforcement systems for protection against infringement.
One of the best methods a company can use is to make the consumer aware about the benefits of selecting a genuine product. If the company is able to create a market opinion about itself in such a manner that the consumers would be dissuaded from using a fake alternative, then counterfeiting can be restricted to an extent. A company must also protect its trademarks from becoming generic s. A prime example of this can be Xerox. The company often comes out with advertisements reminding the public that the term “Xerox” is a trademark and not a generic term. This is done mainly due to the fact that the strength of a brand can be lost due to generic use of a term and over the period of time, other individuals and companies encroach upon the trademark.
Another method that can be adopted is use of holograms. With the advancement in technology in printing, a person can get exact copies of trademarked products and their But a drawback of this method is that at times the holograms also end up being counterfeited.
Authorization numbers are also used in many products like softwares. Until an authorization code is entered into the product, the product is not usable. This is extensively used by companies involved in transactions over the internet. These codes can be provided at the time of sale or by registering with the company after the sale has been completed. An example of this can be the Microsoft Corporation’s new approach of not allowing a fake Windows operated computer to upgrade itself with the latest security features provided by it. Now even before downloading genuine Microsoft software from the internet, Microsoft validates if the computer is using a genuine copy of Windows through authorization codes embedded in the Windows software. This way, the consumers are dissuaded from using counterfeit Windows software.
Corporations also routinely use seals of authenticity. These are at times made part of the packaging and help in identifying a product’s genuineness.
Manufacturers also use a number of hidden markings on their products to identify their products from counterfeit ones. These markings are generally used for checking if a counterfeit product is being imported into the country. These hidden markings are made known to the enforcement agencies. As these are not generally known to the public, it is not easy for counterfeiters to copy them.
A novel method has been used by the jewellery industry. As a drastic increase was noticed by the manufacturers of jewels across the world, now almost all companies mark the jewels they manufacture with their name and other details. These can be seen only through a microscope and it is extremely expensive for others to copy.
Enforcement against infringement and counterfeiting is extremely crucial. If effective enforcement is not present, the manufacture of counterfeit and spurious products would continue. This will not only harm the manufacturers of the original products but also the consumers of the counterfeit products. A simple example that can explain this is manufacturing of counterfeit and spurious drugs. There is a large market all over the world for pharmaceuticals and there is a known presence of spurious drugs in the markets. These spurious drugs would eventually end up making a person’s health worse rather than making it better.
If a company does not protect its intellectual property, it can end up losing it over a period of time. Simply, if the company protects its intellectual property and makes the costs high for the counterfeiter, the counterfeiter would be dissuaded from making illegal copies of the product. Counterfeiting is profitable only till the time the margins in cost of manufacture and cost of sale are high. This margin can be brought down by using various methods that can be used for assuring genuineness of a product.
The manufacturers need to be aware of even the slightest form of infringement and counterfeiting. A regular investigative mechanism can be established internally which understand the markets well and can uncover all forms of infringement. The companies need to monitor the markets and now even the internet for presence of counterfeit goods. While earlier counterfeit goods used to be sold in markets and on the streets, now they are also being sold over the internet through various auction websites. This has made the work of the enforcement agencies tougher as the manufacturer of the counterfeit goods might be based in another country. The problems of extra-territoriality of jurisdiction come up as well.
The legal systems of all countries differ in the enforcement mechanism to a certain extent but there are some common principles followed in almost all the countries. A party can file a civil lawsuit, a criminal lawsuit or can even get relief through administrative measures.
In a civil lawsuit, a manufacturer can ask for an interim injunction, an Anton Piller order or a Mareva Injunction. Through an interim injunction, a court can order an infringing party to stop manufacturing the product till the time the question of infringement is decided on by it. This is an effective remedy as through this order the manufacturer can ensure an immediate stop to the manufacture of the counterfeit products. An Anton Piller Order is given so that the manufacturer along with the enforcement agencies can raid the premises of the infringing party and collect the evidence of the infringement first hand. A Mareva Injunction can also be passed by the court through which the assets of the infringing party can be freezed. Due to this order the counterfeiter would be unable to transact in his assets and thus, the assets can be used by the court to pay the manufacturer the damages or account of profit. A permanent injunction is given by the court when the infringement has been proved.
A manufacturer can also negotiate for entering into a licensing agreement with the infringing party. A mutual agreement can be reached between the two parties through which the owner of the intellectual property can generate revenue by licensing the property.
Through a civil suit a manufacturer can ask for account of profit or damages. The court can grant either of them to the manufacturer whose products have been infringed. Another remedy that can be adopted by the court is use of corrective advertising. Though the manufacturer has a major role to play in the advertising plan, the courts also have their say. Through corrective advertising the company can clarify if any doubts exist in the minds of the consumers. The court can order the infringing party to pay for such advertising.
Criminal measures are also available against counterfeiting. The penalties differ from country to country. In India, for infringement of a copyright the penalty is imprisonment for a period of six months to three years and a fine of INR fifty thousand to two hundred thousand. The penalty increases for subsequent convictions. In Japan, the infringement can lead to imprisonment of up to five years and fine of 5 million Yen. Distribution of copies with a false name can lead to imprisonment for 1 year and fine of 1 million Yen. Against a body corporate, the fine increases up to 150 million Yen.
There are certain administrative measures as well that can be adopted. The most prominent among these is the method of border seizures. The manufacturer can approach the administrative authorities and alert them of the importation of counterfeit goods. The goods can be seized directly at the borders where they are entering into the country and can be used as evidence.
The present laws of most countries can be very effective if used in the right manner. The acquisition of intellectual property rights is of little value of the rights cannot be enforced properly. The laws are of no use unless the enforcement mechanisms practically apply them stringently. The enforcement machinery in the country needs to be vigilant at all times and when there is a slight violation of the intellectual property rights and presence of counterfeit goods is seen in the market, immediate action must be taken. Action must be taken against the counterfeiters at the first instance possible. The manufacturers also need to be aware of the infringement of their intellectual property. The information that is gathered by the investigative arm of the company must be passed on to the enforcement agencies and the action should be taken by them both. There is utmost need of cooperation between the two parties as without that any form of enforcement of the laws would not be possible.
I would like to suggest few tips, which are based on my practical experience of actions against counterfeiters at the police level and prosecution, for the benefit of those who intend to enforce their rights.
In addition to what is required to be done, there are certain suggestions points which must be kept in mind for a successful action, like -
While conducting search: -
Please ensure that during search, members of your team: -
After having conducted search, please do the following: -
I am confident that if proper precautions are taken at appropriate stages of initiation of process, investigation, search, prosecution and trial, no person engaged in the counterfeiting can go scot free and the menace of piracy can be curbed with strong hands.
Copyright Amarjit Singh, Amarjit & Associates. All Rights Reserved. Any unauthorised reproduction is strictly prohibited.
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