Category Archives: Counterfeiting

Recourse against Counterfeiting

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With the increase in innovation and creation, the range of counterfeit goods has expanded significantly leaving no industry impenetrable. While the damage to rights holders is obvious, counterfeit goods may also cause physical illness, injury or even death. As one would have thought, the US Federal Bureau of Investigation has named counterfeiting ‘the crime of the 21st century’.[1]

Counterfeited goods are the replicas of the real product, usually produced with the intent to take unlawful advantage of the goodwill and stature of the real product. In common trade parlance, it is also known as piracy. It has grown considerably to a point where it has now become a widespread phenomenon with an impact on global economy. Since India has massive International boundaries with eight neighbouring countries, it makes the country vulnerable to counterfeited products. This is hindering India’s economic development, especially when the nation is suffering a dearth of strategies against anti-counterfeiting.The law of the land provides a wide array of remedies against counterfeiting under various statutes,however, it does not provide a specific law on Counterfeiting. Few of the laws that provide anti-counterfeiting remedies are: The Trademarks Act 1999, The Copyright Act 1957, The Patents Act 1970, The Designs Act, The Geographical Indications Act 1999, The Customs Act, 1962, The Drugs and Cosmetics Act 1940, The Prevention of Food Adulteration Act 1954, The Consumer Protection Act 1986, The Indian Penal Code, The IT Act 2000.

LEGAL FRAMEWORK

India has no legislation dealing specifically with counterfeiting and piracy, but the legislators, through various statutes have provided statutory, civil, criminal and administrative remedies. However, Counterfeiting has been majorly dealt by Intellectual Property Law as it directly invokes the Intellectual Property Rights of the aggrieved. For instance, Trademark law necessitates appropriate action against passing off, which refers to theimitation of marks or goods in order to take advantage of the goodwill of the lawful owner as well as causes confusion among the consumers. Similarly, Copyright Law provides remedies against plagiarism,which is the act of appropriating the literary composition of another author.

Some of the remedies provided by the Indian legal system acting against counterfeiting have been briefly discussed below:

The TRADEMARKS ACT, 1999:  Trade Mark Act provides civil as well as criminal remedies against infringement of any trademark, whether registered or not. Although, the statute neither defines counterfeiting nor provides penalties against it, theterm can be categorised as what has been mentioned in the act as ‘falsifying a trade mark’ or ‘falsely applying a trade mark’. The trade mark law provides administrative remedies, whereby the aggrieved can redress his grievance by seeking intervention from the Trademark Registry, which acts through the Registrar of Trademarks. The act also allows the owner of the trade mark to file a suit against infringement.[2] Further, the trademarks act empowers the court to grant ex-parte injunctions in appropriate cases in order to restraint the infringers from selling counterfeit goods and for discovery of documents or other related evidence. Further, the statute provides for civil relief including injunctions, rendition of accounts of profits and delivery up of infringing products for its destruction.[3]

The Trade Marks Act, 1999 provides penalty for applying false trademark and/or trade description, etc. with imprisonment up to three years and fine ranging from fifty thousand to two lakh rupees.[4]

THE COPYRIGHT ACT, 1957: The statute appears to have a very strict outlook towards infringers, considering that the Copyright law does not provide any requirement for registration.Section 55 of the Copyright Act, 2000 provides various civil remedies such as injunctions, damages and account of profits.

The statute gives right to the police officers to go ahead with the investigation by seizing all the infringing copies.[5] Further, the registrar of copyright has the power to investigate any alleged ship, dock or premise and order to confiscate them.[6]Section 63 of the Act provides for imprisonment up to three years and fine for indulging in activities of infringement.

THE PATENTS ACT, 1970: Under this statute, the patentee is granted a monopoly right in respect of an invention for a term of 20 years. Any violation necessitates the judiciary to intrude and secure such right. However, the patentee is required to institute a suit for seeking remedies, such as interlocutory/interim injunction, damages or account of profits and permanent injunction[7], all of which are recognized as civil remedies. The Patents Act does not provide criminal remedies. However, criminal liability arises where an article is wrongfully represented to be patented or secrecy requirements under the act are breached.

DESIGN ACT, 2000: Section 22 provides that anyone committing an act of piracy shall be liable to pay to the rights holder up to ₹ 50, 000 (approximately $1,000) per registered design. The rights holder may also seek interim relief and an injunction, provided that the right holder must prove that the alleged infringing act involves their design resulting in an economic loss.

GEOGRAPHICAL INDICATIONS ACT, 1999: The Geographical Indications of Goods (Registration & Protection) Act, 1999 provides for protection to all undertakings located in the area, which may use the geographical indication on specific goods that they produce. The act provides the right to the GI owners to obtain reliefs in  cases of infringement[8] and also provides for criminal remedies where the term of imprisonment varies from 6 months to 3 years and fine from ₹ 50,000 to ₹ 2 lacs.[9]

Since, the fundamental issue of this piece concerns the remedies for counterfeiting, the article briefly discusses the civil as well as criminal remedies for redressal of grievances. .

INDIAN PENAL CODE 1860: The Penal Code sets out punishments for cheating, counterfeiting and possession of instruments for making counterfeits etc. under chapter XII of the Act. The code’s provisions can be invoked in criminal actions, in addition to the provisions of specific statutes.

BORDER MEASURES: The first lines of defence against the cross-border movement of counterfeited/ pirated articles are the National Customs and Border protection. The Customs Act regulates the import and export of goods through provisions provided under section 44-51. Further, Sec 11 strengthens the IP enforcement as it empowers the government toenforce prohibition on the import and export of certain goods to protect Patents, Trade Marks and Copyrights[10] and gives power to the custom officials to confiscate goods imported or exported, unlawfully or illegally.[11]

The Government of India had notified the ‘Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007’ with a view to bolster the Customs Act and provide remedies to protect IPRs at borders. Thus, importing 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 such as trademarks, copyright, patents, designs and geographical indications to record their grievances with Customs officials for prompt seizure of counterfeit goods at the port itself.

CIVIL REMEDY V. CRIMINAL REMEDY

CRIMINAL REMEDY

IP rights are private rights that are mostly enforceable through civil litigation. However, the prevalence of counterfeiting, passing off and piracy along with the economic damage they cause has led to an increased importance of criminal sanctions. It can be observed that, only few statutes like Trademarks Act, the Copyright Act, and the Geographical Indications Act provide criminal remedies. The punishment varies from 6 months to 3 years of imprisonment and fine ranging from INR 50,000 to 200,000/-.

The statutes acknowledge this crime as cognizable wherein the police can take action and carry out search and seizure without court warrant.

Despite having a robust legal framework for anti-counterfeiting in liaison with Police, the mandate of the statute is debilitated by the lax attitude of Police. In addition, Criminal trials become excruciatingly lengthy resulting in heavy backlog of cases for the courts. This has resulted in low conviction rates, thereby reducing the efficacy of criminal remedy sought against the counterfeiters. To counter this, the courts have adopted the practice of plea bargaining, wherein the offender accepts his or her guilt in lieu of remission of imprisonment and in turn imposing on him, heavy cost payable to the aggrieved party thereby disposing the case in a favourable manner.

 

CIVIL REMEDIES

Civil remedies against counterfeiting mostly include injunctions, damages and/or rendition of accounts. The mandate civil remedy is to stop distribution, manufacturing, or retailing of the infringing product or gaining profits from using the pirated product of the rightful owner of the products.

A civil court may even grant ex-parte injunctions while the proceedings are on. Further, the courts have widened their scope in order to deal with a serious issue of counterfeiting and the jurisprudence under this subject is growing as the courts have introduced the following interim reliefs under civil remedies through various case laws:

  • Anton Pillar Order: which gives right to the right holder to visit the defendant’s premises along with thelocal commissioner appointed by the court, to search and seize the counterfeit goods. These goods are returned to the defendant with an undertaking that the goods will be safely preserved until further orders of the court. The court in the case of Microsoft Corporation v Jayesh &anr. 2014, passed the anton pillar order in order to adduce evidence supporting the case of counterfeiting. On the basis of the report of the Court commissioner, the court passed permanent injunction restraining the defendants from selling or distributing the counterfeited/pirated goods and delivery up of the counterfeiting goods. However, the court did not grant the damages to the plaintiff as no evidence of unlawful gain could be produce by the plaintiffs.
  • John Doe order: It is similar to Anton Pillar order, the only difference here is that the defendants are unknown/ or not known. Moreover, this action is taken when it is difficult to identify the counterfeiter or where the counterfeiter is operating out of temporary premises.[12]

Code of Civil Procedure 1908 governs the procedures adopted in the civil cases. Counterfeiting is a widespread commercial crime rather than a conventional one. The CPC has also established a commercial court in High Court, in 2016, which has the jurisdiction to deal with cases relating to ‘counterfeiting’.

The listed few civil remedies are not enough to compensate the loss suffered by the right holders, neither do they prevent future counterfeits and since,more often than not, people take the recourse to civil remedy, the court is putting its best efforts to expand the horizon of civil course in order to make it efficient enough to resolve the issue and provide justice to all the aggrieved. Therefore, the courts alsoaward punitive remedy in addition to damages and payment of the plaintiff’s counsel fee, on case to case basis with a view to deter recidivists andcompensate victims for an otherwise uncompensable loss.

In the case of Time Incorporated v. Lokesh Srivastava[13], the accused was awarded punitive damages of Rs. 5 lakhs in addition to compensatory damages of Rs. 5 lakhs for imitation of plaintiff’s Trademark. The Delhi High Court laid down their point of view that in cases of infringement of Trademarks, Copy rights, Patents etc., the courts must grant punitive damages in order to make the infringers realize that they would be liable to reimburse the aggrieved party and pay punitive damages as well, which may spell financial disaster for them.

CONCLUSION

The biggest problem in defying counterfeiting is the paucity of legal framework and the ever increasing degree of similarity between the genuine and counterfeited products. Therefore, in addition to the existingprovisions of civil andcriminal laws, it is incumbent upon the government to take up initiatives to educate people about the menace of counterfeiting and its repercussions. Methods like Capacity building programmes that educate officials and the general public to distinguish between a fake and real product can be facilitated by government and trade organisations to combat counterfeiting.

Taking recourse to criminal or civil remedies against counterfeiting depends upon the objective that the Plaintiff seeks to achieve, keeping in view the consequences of the counterfeiter’s act. The recourse to civil or criminal remedies provided by appropriate law for an act of counterfeiting should be construed on the basis of the magnitude of the act’s consequences. For instance, if an act of counterfeiting is awfully against public interest including,  public health and safety, the prevention of corruption and organized crime, tax and customs income, local and regional industries, foreign investment and investor confidence, international trade relations, etc., it must be criminalized and the right holder must seek criminal remedy to punish and deter counterfeiters, who do not respect law and strategically carry out their criminal activity designed toevade justice and endanger public health and safety. A criminal action can be an effective remedy to safeguard the interest of general public, especially when the issues of infringement and counterfeiting are growing epidemically.

Likewise, a civil recourse can be taken up where a defendant can be easily identified and is based in a specific established market. The advantage of a civil suit is that the courts can grant an interim injunction along with an Anton Piller order for search and seizure of counterfeit products.

India has a dynamic legal framework for combating counterfeiting and piracy; however, there are gaping holes in the area of enforcement. However, the slow court procedure and laxityon part of Police in matters of counterfeiting, severely handicap any recourse that an aggrieved might take up. Thus, it is utmost important that strong IP laws be supported by equally strong enforcement. The development and implementation of a carefully thought-out strategy will give the IP right holders the relief they desire and rightfully deserve.

About the Author :  Ms. Pratistha Sinha , Intern at Khurana and Khurana Advocates and IP Attorneys and can be reached at anirudh@khuranaandkhurana.com.

References:

[1]http://ficci.in/sector/5/add_Docs/WTR_36%20India%20CC.pdf

[2]Section 134(2), Trade Mark Act, 1999.

[3] Section 135, Trade Mark Act, 1999

[4] Section 103, Trade Mark Act, 1999

[5]Section 64. Copyright Act, 1957

[6]Section 53. Copyright Act, 1957

[7] 104, Patent Act, 2000

[8] Section 20, Geographical Indication of Goods (Registration and Protection) Act, 1999

[9] Chapter VIII, Geographical Indication of Goods (Registration and Protection) Act, 1999

[10]sec 11 (2) (n), The Customs Act, 1962

[11]Section 111 and 113 of The Customs Act, 1962

[12]http://www.worldtrademarkreview.com/Intelligence/Anti-counterfeiting/2017/Country-chapters/India

[13]2005 (30) PTC 3 (Del.)

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Cartier International AG and Ors.  Vs.  Gaurav Bhatia and Ors.

Citation: 226 (2016) DLT 662

Introduction

As per a study conducted in 2016 by OECD (Organisation Economic Cooperation and Development) and the European Union’s Intellectual Property Office, India ranks amongst the top five exporters of counterfeit products. Inspite of the legislative authorities providing stringent anti-counterfeit laws that award both civil and criminal remedies to the wronged, there still exist rampant export of fake goods and parallel exports that have caused grave losses in terms of goodwill and revenue to number of companies in various industries.

In the present case, Plaintiff filed an injunctive suit against the Defendants who was the proprietor of several e-commerce websites that dealt in trading of international luxury products.

Parties

  1. Plaintiff No. 1, Cartier International A.G., is the proprietor of the trademark CARTIER since 1847. The trademark CARTIER has also been recognized as a well known mark under section 2(zg) of the Trademarks Act, 1999.
  1. Plaintiff No. 2, Officine Panerai AG, is the proprietor of the trademark PANERAI since 1860.
  1. Plaintiff No. 3, Richemont International S.A., is the proprietor of the trademarks VACHERON CONSTANTIN and JAEGER LECOULTRE. Plaintiff No. 3 has been engaged in manufacture and sale of watches under the trademark VACHERON CONSTANTIN since 1819 and under the trademark JAEGER LECOULTRE since 1903.
  1. The Plaintiffs are part of Richemont Group. Plaintiff Nos. 2 and 3 deal in watches and other horological and chronometric instruments while plaintiff No. 1 deals in jewellery, writing instruments and leather goods as well.
  1. Defendant No. 4 is a company trading under the name and style of Digaaz e-Commerce Pvt. Ltd. and that defendant Nos. 1 to 3 are the directors thereof.

Brief facts

  1. The defendants operate an e-commerce website http://www.digaaz.com, where they offer lifestyle and fashion products for sale. The defendants have been found to be offering for sale and supplying huge quantities of counterfeit products bearing trademarks and logos of various luxury brands including the plaintiffs on their website http://www.digaaz.com.
  1. Many customers have already been cheated by the defendants who have purchased large quantities of counterfeit products, including those bearing the plaintiffs’ trademarks. Subsequently, complaints were lodged in the Cyber Cell. The matter was still pending against them and was at the stage of filing charge sheet.
  1. The plaintiffs came to know in February, 2014 that the defendants were selling and supplying counterfeit products of various luxury brands including those of the plaintiffs on their website http://www.digaaz.com and issued cease and desist notices to them on 20th February, 2014, which were left unanswered.
  1. The volume of counterfeit goods sold by the defendants demonstrates that the defendants were seasoned infringers and counterfeiters with a regular supply of counterfeit goods. Many of the right holders of these brands had instituted proceedings against the defendants before this Court and have obtained orders restraining the defendants from selling counterfeit products bearing their respective trademarks and logos.
  1. The Chandigarh Cyber Cell’s investigation and raid confirm that the defendants were offering for sale of counterfeit products including those bearing the suit trademarks on the impugned websites http://www.digaaz.com, http://www.watchcartz.com and http://www.luxecart.com. The Cyber Cell also confirmed that the defendants procure the counterfeit products from New Delhi, Ludhiana and Chandigarh at throw away prices and sell these at exorbitant rates cheating both customers and brand owners and making enormous illegal profits in the process.
  1. On 8th October, 2014 defendant Nos.1 and 2 were arrested by the Cyber Cell and were remanded in judicial custody for 14 days. The matter is still pending against them and is at the stage of filing charge sheet.
  1. The plaintiffs ultimately filed the present suit seeking permanent injunction restraining infringement of trademark, passing off and damages.

Issue

Whether Plaintiffs are entitled for permanent injunction against Defendants as prayed for?

Applicable laws/rule

Trade Marks Act, 1999

Section 135- Reliefs in suits for infringement or for passing off include temporary and permanent injunction on court‘s terms and at the option of the plaintiff, either damages or an account of profits, together with or without any order for the delivery-up of the infringing labels and marks for destruction or erasure.

Decision of the Court

  1. While holding that there is a prima facie case of infringement, the court delved into the issue of damages and punitive damages.
  1. In terms of Section 135 of the Trade Marks Act, 1999, the plaintiffs in the instant suit opted for damages and the computation thereof was accepted by the court.
  1. The Court held that defendants have deliberately stayed away from the present proceedings with the result that an enquiry into their accounts for determination of damages could not take place. The Hon‘ble Court observed that allowing such conduct would give arise to situation where defendant who appears in Court and submits its account books would be liable for damages, while party who chooses to stay away from proceedings would escape the liability on account of failure of the availability of books of account.
  1. The Hon‘ble Court observed that this Court has in previous instances granted exemplary and punitive damages and referred to the case of Time Incorporated v. Lokesh Srivastava & Anr., (citation) where Justice R.C. Chopra observed that “time has come when the Courts dealing in actions for infringement of trademarks, copyrights, patents etc., should not only grant compensatory damages but also award punitive damages with a view to discourage and dishearten law breakers who indulge in violation with impunity out of lust for money, so that they realise that in case they are caught, they would be liable not only to reimburse the aggrieved party but would be liable to pay punitive damages also, which may spell financial disaster for them.”
  1. The Hon‘ble Court further referred to the case of Microsoft Corporation v. Rajendra Pawar & Anr.,2008 (36) PTC 697 (Del.) in which it was stated that: “Perhaps it has now become a trend of sorts, especially in matters pertaining to passing off, for the defending party to evade court proceedings in a systematic attempt to jettison the relief sought by the plaintiff. Such flagrancy of the Defendant’s conduct is strictly deprecatory, and those who recklessly indulge in such shenanigans must do so at their peril, for it is now an inherited wisdom that evasion of court proceedings does not de facto tantamount to escape from liability. Judicial process has its own way of bringing to tasks such erring parties whilst at the same time ensuring that the aggrieved party who has knocked the doors of the court in anticipation of justice is afforded with adequate relief, both in law and in equity. It is here that the concept of awarding punitive damages comes into perspective.
  1. In light of the above approaches of concurrent Benches, the Court in Cartier passed a decree of permanent injunction against the Defendant and proceeded to order the Defendants to furnish books of accounts to the Plaintiffs to compute exact damages. The Hon‘ble Court finally ordered punitive damages of Rs. 1 crore to be paid to the Plaintiffs, along with the costs.

Conclusion

This Judgment was much appreciated for the high punitive damages that were ordered. This judgment poses as a strong precedent for trademark infringement and anti-counterfeit cases. On analysing the judgment, it can be concluded that the following factors among other things were taken into consideration while granting punitive damages to the Plaintiffs: the Defendants’ absence in the proceeding, thus implying their complete dismissal and total disregard for the rule of law; the fraudulent techniques implemented by the Defendants to attract affluent consumers who would have otherwise been the Plaintiffs’ consumers and, blatant trademark infringement and sale of counterfeit products.

 

About the Author:  Nadine Kolliyi, Legal Intern at Khurana & Khurana, Advocates and IP Attorneys and Amruta Mahuli, Legal Associate at Khurana & Khurana, Advocates and IP Attorneys who can be reached at mumbai@khuranaandkhurana.com.