THE PRACTICE OF COUNTERFEITING IN INDIA
WHAT IS COUNTERFEIT?
As per the International Anticounterfeiting Coalition, the basic definition of Counterfeit goods is the manufacture or distribution of goods which are of inferior quality in someone else’s name without their due permission. The multitude of goods which can be counterfeited range from accessories, apparels, music, software and tech, medications and cigarettes, automobiles, consumer goods (especially fast moving consumer goods), toys and electronics. Such counterfeited goods invariably hamper the very repute and goodwill of any brand and produces plethora of economic and social consequences. The low pricing factor of the counterfeited good acts as the biggest contributor towards consumers buying such knockoffs or pass-offs products. Owing to the Indian market being dominated by several small and medium sized enterprises, the possibility of such counterfeited products being targeted in these local markets tends to be higher. The Organization for Economic Development (OECD) has advocated for the distinction between counterfeit, substandard and generic products which the people often seem to confuse and use these critical issues interchangeably.
At the very outset it is imperative to note that the concept of Counterfeit does not find itself mandated under the statute books but, is covered through various legislations under the Intellectual Property Laws, Indian Penal Code, Customs Act and certain other sector specific legislations.
Trademarks Act 1999
The act defines infringement as an unauthorised use which might lead to deceiving or confusing the citizens and provides for certain civil and criminal remedies for protecting infringement against the marks. Furthermore, the act also provides for penalty against falsifying and falsely applying trademarks of a proprietor to goods or services without the assent of the proprietor. The act also deals with the precarious issue of Passing off wherein persons mispresent someone else’s goods or services as their own, which resultantly leads to damage towards the goodwill of the original trademark owner. As seen in Samsung Electronics Company Limited & Anr. v Mr. Akilesh Tiwari & Ors.
Customs Act 1962
The definition of goods as per the legislation states the goods put in circulation within or outside India without the consent of the rights holders of the Intellectual property or any of its authorised agent. As seen in Gillette Company LLC v Pushpa NX and Ors. and Commissioner of Customs
Indian Penal Code 1860
The Indian Penal Code has extensively encompassed the aspect of counterfeiting and delves into multiples issues of counterfeiting arising in coins, currency notes, property mark, device mark etc. On similar lines, the statute defines Counterfeiting as, when a person does something which causes resemblance with another thing, intending and knowing that the same will lead to deception.
Consumer Protection E-commerce rules 2020
The government has notified the E-Commerce rules in July which has put a robust approach towards misleading sellers and false representation carried out by sellers in the online market sphere.
HOW DO BRANDS AVOID COUNTERFEITS?
Counterfeit goods pose a serious threat over the established repute and goodwill of any brand and with the perennial transition of the E-commerce market, such instances of counterfeiting have arisen in manifold ways. The influx of small and medium scale sellers on the online market sphere are leading to multiple instances of counterfeit which blemishes the brand name. Such practices on the online marketplace are mostly found with luxury products as the symbolic value of the brand is duplicated which makes it easier to deceive the consumers. At the very outset, it must be noted that awareness and information symmetry amidst consumers will play a big part towards the drive for limiting the incessant practice of counterfeiting.
However, in order to mitigate these consequences, it is imperative for the brands to take certain necessary steps:
FICCI Brand Protection Committee
This committee has been formulated under the aegis of Federation of Indian Chambers of Commerce and Industry (FICCI) which is a community consisting of government authorities, industry & trade associations, individual companies and other organizations including consumer protection groups. These members are proactively cooperating and working towards mitigating the practice of counterfeiting in India by following the community stakeholder approach. The committee takes direct action against the illegal manufacturers and sellers indulging in the practice of counterfeiting. Being members of such committees will help the brands in resolving the menace of counterfeiting and safeguard their intellectual property.
Informative Visual Guides of their products
Awareness and information pertaining to the original product of the seller will be the key contributor towards mitigating the counterfeiting menace. Imparting the right amount of education by extensive and elaborated guides of the products will help the consumers in making the distinction between the original and the counterfeit products. Additionally, the brands can also start off with the first step of registering their intellectual property and subsequently removing harmful sites in relation to their brand and have a cogent and strong media presence.
Using Artificial Intelligence and Technology
With the advent of technology, the brands should use the overt software available which necessitate the required product information and brand ownership details. The Smart Consumer App by the Department of Consumer Affairs is one such instance of the same. Furthermore, the brands must proactively make the best use of social media which will help in catering to the distinction between fake and original products. On similar lines, requisite tracking and tracing mechanisms through Blockchain which will help in restricting illegitimate ads and promotion of fake products must be used by the brands.
Safety and Standardisation measures
The brands must equip their products with the necessary standardisation as per the governmental regulations which help in providing authenticity and credibility towards the products of the brand. Hall-marking, ISI marking, barcodes and serial numbers are some instances of affording more protection towards the goods and services of the brands.
Traditional Techniques by Luxury Brands
The boost in the online market sphere has seen multiple instances of knock-offs for luxury brands which is clearly affects these brands long standing prestigious repute and class. In order to tackle this paradox, these brands should aggressively focus on products which require traditional craftsmanship, handmade components and heritage techniques which will make it costlier and difficult to counterfeit the same.
ROLE OF CUSTOMS IN COUNTERFEITING GOODS
The Custom department plays a significant role in curbing this menace of counterfeiting. On 8 May 2007 the Government issued the Intellectual Property Rights (Imported Goods) Enforcement Rules 2007 which mandates the import of infringed goods into India. This step came as a huge relief for the Indian scenario as the rules affords greater protection and safeguard to the registered Intellectual property holders.
The rules define “goods infringing intellectual property rights” as any goods which are reproduced into circulation without permission of the rights holder which would ultimately breach the rights of the Intellectual Property rights holder. Furthermore, the rules also provide the rights holder to register its goods with the Customs department which would ultimately mean that on the import of such infringed goods, they will be deemed to be prohibitive per se. On similar lines, the Customs department subsequent to the registration by the IP holder can deny the custom clearance certificate for such infringed goods. Additionally, the Customs department can also revalue the infringed goods and impose the correct value of custom duty if such goods were imported to be sold below the authorised market price in India. Thus creating a deterrence for the parallel importer and the purpose of selling it at lower market price is taken away and the profit incentive as well, which will cater to monitoring the issues of parallel imports and the grey-market goods. The Customs department also can detain the infringed goods and pass on the same to the right holder for destroying the counterfeit products.
In lieu of the above-mentioned steps taken by the Customs department, the department of revenue under the aegis of Ministry of Finance has created the Indian Customs IPR Recordation Portal. The Indian customs department strictly follows a “zero-tolerance policy” towards IPR violations and counterfeiting and this portal aims at providing a platform for the IP right holder to access the records and transactions with the customs department w.r.t the registered goods of these holders.
THE ROAD AHEAD
With the unprecedented times owing to the current COVID-19 pandemic, there is an influx of misinformation being spread with relation to fake products and counterfeit goods. One such instance is the opening of the black market for medical equipment such as face masks and hand sanitizers. During such times, it is quintessential for the consumers to practice self-awareness and the brands to lay out detailed information about their products in order to mitigate the issue of increasing counterfeit goods during the lockdown. However, the concerns do not stop here, as per the recent report by the Committee Against Smuggling and Counterfeiting Activities (FICCI CASCADE) under the aegis of FICCI, the global economic value of counterfeit and pirate products has already reached US $1.5 trillion in 2015 itself. The FICCI CASCADE must proactively continue to bring forth a robust mechanism in collaboration with the Police, Custom and excise authorities and providing the latter with a real-life data on counterfeiting.
In order to curb the increasing rate of counterfeit practice, it is imperative to adopt a multi stakeholder response in the nature of legislative, technical, professional and social steps. The first step towards the same would be to make counterfeiting an universal cognizable offence, additionally, in lieu of the same set up special courts in order to deal with the issues of restorative justice towards victims of counterfeiting, collect and store electronic data and increase legal literacy and consumer awareness by including social action groups into the drive.
A customer centric awareness program is the need of the hour to be carried out by the local police, customs department, excise officials and the brands themselves which will make the consumers more aware of pertinent issues of Grey markets and the impact caused from the trade of counterfeit goods.