201811.14
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How India is helping brands combat counterfeiting

India is removing policy barriers to attract investment, while policy initiatives designed to improve IP rights enforcement look set to yield results. However, the availability of infringing, counterfeit and lookalike products is also on the rise.

To encourage IP rights holders to invest in the manufacture and distribution of their products in India, the government has taken steps to streamline enforcement procedures to assure brand owners that their rights are safeguarded. High litigation costs, inordinate delays and drawn-out procedures can prove a dampener for rights holders. With pressure to control costs while maintaining brand purity, businesses today are eager to explore alternative dispute resolution mechanisms (eg, arbitration, *Lok Adalat* (ie, the People’s Court) and conciliation and mediation). Mediation at both the pre and post-litigation stage is becoming particularly popular because it is informal and results in speedier resolution.

Addressing brand infringement issues

As the appetite for branded goods among the burgeoning Indian middle class increases, the availability of infringing, counterfeit and lookalike products is also on the rise. Brand owners are grappling with a variety of brand protection issues – some straightforward, some complex. For ease, they have been categorised as follows:

  • clear copying of brands – straightforward infringement with identical or similar marks used for the same goods;
  • lookalike products – the brand is not copied but the colour scheme, layout and essential elements of product packaging are;
  • use of a well-known mark on different goods – a well-known mark is copied for use in respect of completely different goods to take advantage of its goodwill and brand reputation;
  • use of a brand name as a corporate or trading name – use of a registered mark as part of a corporate or trading name to create a false impression and association with the registered mark; and
  • comparative advertising resulting in brand denigration.

In cases of straightforward copying of a brand, brand owners can seek civil or criminal remedies – both of which have their pros and cons. A strategic analysis of the scale of the problem is advisable. Further attempts to understanding the problem and to collate data from distribution chains can lead to a targeted approach and tailored solutions.

In cases of rampant infringement or counterfeiting that covers a wide area, criminal raids conducted by the police may be the preferred option. In instances of a single manufacturer engaged in infringing activities, civil action seeking an injunction followed by search and seizure through a court-appointed commissioner is recommended, as it can result in a settlement and the cessation of the infringing party’s activities. In cases involving deceptive similarity of a mark and packaging (Categories 2 and 3), civil suits for trademark infringement and passing off are a better route, as the law enforcement agencies responsible for criminal matters are less likely to be conversant with the nuances of IP law.

Further, due to a backlog of a cases and time-consuming trials, it is advisable to settle matters as soon as possible once an injunction has been issued and the infringing goods seized. One of the challenges in working with Indian courts has been the frequent delays and the time that it takes to conclude a case. The government has addressed this issue by establishing a commercial court.

Commercial courts

Commercial courts were established in January 2016 with the clear intention of expediting proceedings in order to provide a speedy resolution for rights holders. . Regarding recent amendments, suits or claims with a value exceeding Rs300,000 (approximately $4,500) can be filed before the commercial courts. Thus, the government has significantly reduced the value of commercial suits from the earlier high of Rs10 million in order to improve the ease of doing business. A further amendment entails mandatory pre-institution mediation where a suit does not contemplate urgent interim relief.

In order to expedite proceedings and swift justice, the act also considers that the piecemeal production of documents by various parties at different stages delays proceedings. Thus, the act requires the filing of all relevant documents at the time of filing the suit itself or at the time of filing the written statement. Procedures have also been laid down for the discovery and inspection of documents, as well as the admission and denial of documents to reduce trial time. Moreover, the act also sets a 120-day limit for filing a written statement, beyond which the right to file such a statement is closed and the court will not accept or record a delayed submission. In *Dr Reddy’s Laboratories Limited v Jibesh Kumar* (CS (COMM) 243/2017), the Delhi High Court refused to record the written statement filed by the defendants after the 120-day limit had expired.

To speed up the examination of parties and recordal of evidence, the act provides that trials may be conducted by court-appointed commissioners, so that the proceedings are completed in a time-bound manner with no long adjournments.. Examining witnesses in this way has resulted in expedited trials and matters being put up for final arguments.

The act also includes provision for seeking summary judgments. Any party argue that the other side does not have a valid case and seek a summary judgment without going through a drawn-out trial. On hearing the parties and deciding whether satisfied, the court can pass appropriate orders in this regard. In *Superon Schweisstechnik India Limited v Modi Hitech India Ltd* (CS (COMM) 750/2018), the Delhi High Court passed a summary judgment dismissing the suit filed by Superon Schweisstechnik, holding that the plaintiff did not have a valid case under the law of passing off and would not succeed even after a full-fledged trial. Similarly, in *SAP SE v Saraswati Technologies* (CS (COMM) 1664/2016) – pursuant to the service of a summons and appearance of the defendants and being fully convinced of the blatantly infringing activities of the defendants – the Delhi High Court overturned the suit and awarded damages of Rs750,000 (approximately $11,000) in favour of the plaintiff.

Criminal action

In recent years several states have established specialised departments, including the IP Cell within the police, which combats the sale and distribution of counterfeit goods. Police personnel specially trained in IP matters have made such raids more systematic and streamlined and therefore more effective. Criminal raids leading to the arrest of infringers delivers a strong message to the market. Nevertheless, initiating criminal action through the police brings a number of challenges:

  • information leakage resulting in the removal of the infringing or counterfeit goods;
  • slow prosecution at the magistrate court’s due to the backlog of cases, with no special preference given to IP cases;
  • police personnel not trained to tackle cybercrime or to track online sales of counterfeit goods; and
  • limited priority given to IP cases due to the police’s natural preoccupation with crimes against human life and property.

Notwithstanding these challenges, if a brand owner’s objective in conducting raids is to seize the goods and create a stir in the market to deter other traders, then criminal action is a good option.

Customs

The Customs Recordation System under the IP Rights (Imported Goods) Enforcement Rules 2007 is an effective remedy for rights holders. The procedure of recordation is simple and provides an effective interface for brand owners to work with Customs in targeting, intercepting and detaining consignments of infringing goods imported into India. Once the intellectual property is registered and Customs uncovers any goods in respect of which it has reasonable grounds to believe infringe the rights holder’s intellectual property, it will suspend clearance of the imported goods. Customs must inform the rights holder or authorised representative within 10 days of seizure, asking them to confirm whether the consignment is genuine or counterfeit. If the rights holder fails to join the proceedings within the stipulated time (ie, five days or two days in the case of perishable goods) and fulfils its obligation in determining that suspended goods infringe its intellectual property, Customs will release the goods. Brand owners are finding the process effective for stopping counterfeit goods at the border. To make this even more effective, they are advised to engage with Customs to increase awareness of the counterfeit goods in circulation in the domestic market and imported from overseas, as well as to invest time and effort in improving customs officers’ ability to identify and detain infringing goods.

Online enforcement

The past five years have seen a dramatic rise in internet penetration in India. It is estimated that India already has 300 million internet users and is well on the way to reaching 500 million users by the end of. 2018. The reach of the Internet and the ease with which it allows counterfeit goods to be displayed and accessed by consumers throughout the country requires rapid action. As most online e-tailers (eg, Amazon, Flipkart and Shop clues) operate a marketplace business model, they can invoke safe harbour provisions under the Information Technology Act to avoid liability for selling counterfeit goods. However, they must take down the infringing or counterfeit products on notification. Brand owners have started to work closely with major e-tailers to keep the online space free from counterfeits and infringement. Further, many e-tailers have launched programmes to create a safe online market space.

With a population of more than 1 billion – 65% of which is under the age of 35 – India offers exciting opportunities to brand owners looking to invest. It also offers a great many challenges. As India removes policy barriers to attract investment, policy initiatives designed to improve IP rights enforcement will start to yield results.