Counterfeiting in India: Laws and Remedies

December 11, 2017

In context of counterfeiting, Prada CEO, Patrizio Bertelli once said- we don’t want to be a brand that no one copies…..

Counterfeiting also referred to as the act of copying brands has all the more proliferated with technological advancement. The counterfeiting menace has extensively and deeply penetrated the markets worldwide, as a consequence of which luxurious brands like Prada and Gucci which could only be found in select exclusive showrooms can now be spotted in any random street shop of India. In essence Counterfeiting and piracy involves infringement of IPR (Intellectual Property Rights) in the nature of trademarks, patents and copyrights.

Counterfeiting has always been a convoluted concern for the Indian as well as Global economy. The Indian markets particularly the street shops are flooded with countless counterfeit goods, some spelling reebok as rebook and some Adidas as Addidas and owing to comparatively lower price of such goods, Indian customers are easily fascinated by them.  The USTR (United States Trade Representative) Report in 2015 issued a list of notorious market all over the world and India’s Tank Road and Sadar Bazar in New Delhi were recognized as notorious markets. The Report further stated that India ranked first in terms of number of nominated physical markets with an increase in reports of counterfeit apparel and footwear.  On account of extensive trade of counterfeit goods, even in 2016 India features in the priority watch list of USTR Special 301 Report.

Apart from adversely affecting the brands and the public in general, counterfeiting also has a perturbing effect on the economy. Studies also suggest that IPR infringements are an important source of income for organised criminal groups. These groups are also often engaged in other crimes, such as drug trafficking, excise fraud, human trafficking or money laundering[1].  Here it would be germane to delve into Indian Laws and precedents which prohibit counterfeiting and extend protection to brands against this illicit trade.

Remedies against Counterfeiting

The IP regulations in India i.e. Trademark Act, Copyright Act and Patent Act envisage provisions which prohibit counterfeiting.

Copyright Act, 1957– The Act confers power on the Police to seize infringed copies of copyrighted works. Section 63 of the Act provides for the offence of infringement of copyright or other rights conferred by the Copyright Act and Section 64 empowers the Police to seize infringing copies.

Trademark Act, 1999The Act nowhere mentions the term “counterfeit”, however the Act provides for civil remedies in the form of injunction, damages, delivery-up, anton pillar and john doe orders under Relief in suit for infringement under Section 135 of Trademark Act.

The Act also provides for criminal remedies. It enumerates provision in the event of falsifying or falsely applying for a trademark under Section 102 and 103 of the Act.

Border Protection Measures

Border protection measures or measures at the ports are very essential to ensure that counterfeit products are not being exported from India and not being imported to India.

Anti-Counterfeiting regulations under the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007

The IPR Rules, 2007 empowers the competent authority of Customs to seize counterfeit/ pirated goods or suspend the clearance of such goods at the port. The Rules additionally empowers the Custom Department to destroy goods infringing IPR.

Key highlights of the Rules:

  • The right holder has to send a notice for protection  of its IPR to the concerned authority for suspending the clearance of counterfeit goods
  • Ownership of valid IPR is a mandatory requisite for availing border protection under the above Rules
  • Under general circumstances within in a time period of 30 days the custom official registers the IP of the Right Holder
  • Upon registration and examination, the import of alleged counterfeit goods are prohibited under the Customs Act, 1962

The above regulations have been formulated by the Legislature to ensure IP protection of right holders and combat the decaying effect of counterfeiting in India. Apart from the statutory provisions, the judicial decisions and observations in context of prohibiting counterfeiting in India are worth mentioning.

Case Laws

Awarding Punitive damages

In cases involving unjust enrichment on account of sale of counterfeit goods, the Courts have granted punitive damages to the Plaintiff. One such recent case is Cartier International AG & Ors. V. Gaurav Bhatia( Jan, 2016), wherein the Plaintiff sought to restrain the Defendant from operating an e-commerce website www.digaaz.com which allegedly was offering counterfeit goods bearing registered trademarks of luxurious brands like Cartier, Panerai, Pasha etc. at heavily discounted prices.

In the case, anti-counterfeiting raids were conducted by the Chandigarh Cyber Cell which pursuant to investigation confirmed that the Defendant was offering for sale counterfeit goods on their e-commerce websites. The Court in view of established trademark infringement awarded punitive damages of INR 1 crore to the Plaintiff and opined that the purchasing public was bound to assume some sort of association or connection between the Defendant and Plaintiff’s product.

Similarly, in a case while awarding punitive damages the Court stated that in such cases of counterfeiting serious note had to be taken and counterfeiting can be curbed by passing appropriate orders of punitive damages including imposition of exemplary costs so that the defendant in future does not enjoy the benefit of counterfeiting well known trademarks/ trade dress. In this case, the defendant was manufacturing and selling counterfeit FMCG goods under the trademarks Fair & Lovely, Lux, Close- up, Sunsilk etc. [Hindustan Lever Ltd. & Anr. v. Satish Kumar (2012)]

Sale of Counterfeit goods online

The recent spurt in online shopping has also led to the sale of counterfeit goods online and there have been cases wherein such perpetrators have been recognized by the Court. It cannot be denied that the potentiality of harm on the internet is comparatively much higher and it’s very difficult to get hold of actual infringers. The potentiality of harm on the internet is much higher as compared to the physical world, due to obscurity and ubiquitous character of internet. The Cartier case (ibid) demonstrates the perilous outcome of sale of counterfeit goods online.

In a case the Delhi High Court made a categorical observation on potential harm of IP infringement on the internet and stated that “In an Internet service, a particular Internet site could be reached by anyone anywhere in the world who proposes to visit the said Internet site. With the advancement and progress in technology, services rendered in the Internet has also come to be recognised and accepted and are being given protection so as to protect such provider of service from passing off the services rendered by others as that of the plaintiff. As a matter of fact in a matter where services rendered through the domain name in the Internet, a very alert vigil is necessary and a strict view is to be taken for its easy access and reach by anyone from any corner of the globe.” [Yahoo! Inc. v Akash Arora & Ors. (1999)]

Counterfeiting can be ironically classified as a leech which is crippling the economy internally. The lacunae in legislations to specifically address the critical issue of counterfeiting coupled with inefficient enforcement infrastructures and lack of awareness among people who are easily fascinated by unexpectedly lower price of branded (fake) goods and balderdash of sellers augment the incidence of this illicit trade.

[1] 2017 Situation Report on Counterfeiting and Piracy in the European Union

About the Author

Shilpi Sharan

- Shilpi Sharan is the Editor at Vakilno1.com - an Advocate with extensive knowledge in myriad fields of Law. She has a flair of writing and has legal publications in national and international law magazines to her credit. She focuses on legal research and aims at raising public awareness of laws in India.