Choosing the right anti-counterfeiting measures

As the copyright law affords only limited protection to artistic works, IP owners in India often choose to assert trademark rights in cases of counterfeiting. In contrast to a work protected by copyright, which enjoys protection for 60 years following the author’s death, a trademark registration may be renewed every 10 years for as long as the trademark owner wishes. This affords a degree of continuity to trademark owners.

In India, trademarks are protected under the common law of passing off and statutory law (ie, the Trademarks Act 1999). The act provides rights holders with both civil and criminal remedies against infringement and the false use or application of a trademark. In addition, the Customs Act 1962 provides for border control remedies, such as the seizure of infringing goods.

Civil remedies
The act provides, among other things, that a valid trademark registration gives the registered trademark owner the exclusive right to use the trademark in relation to the goods or services in respect of which it is registered and to obtain relief if that trademark is infringed.

In general, in India, a civil suit can be brought in the place where: 

• The defendant or one of the defendants resides, carries on business or personally works for gain.
• A cause of action arises, wholly or in part.

However, in case of trademark infringement, Section 134(2) of the act also allows a rights holder to file suit for trademark infringement where the registered trademark owner resides, carries on business or personally works for gain. This provision is analogous to Section 62(2) of the Copyright Act 1957.

Section 135 of the Trademarks Act gives the courts statutory power to grant ex parte relief in appropriate cases. The courts are empowered to grant ex parte injunctions against infringers to prevent them from selling counterfeit goods and ex parte orders for the discovery of documents and the preservation of infringing goods, documents or other related evidence, as well as to restrain the defendant from disposing of its assets in a manner which may affect the plaintiff’s ability to recover damages.

Criminal remedies
Section 103 of the Trademarks Act provides that the application of a false trademark or false trade description is punishable by up to three years’ imprisonment and a fine of up to Rs200,000 (approximately $5,000), while Section 104 sets down penalties for the sale of goods or the provision of services to which a false trademark or a false trade description is applied. Finally, Section 105 provides tougher penalties for second and subsequent convictions.

While the remedies granted under the act appear to mirror the strong protection granted to copyrighted works under the Copyright Act 1957, these remedies have been diluted by Section 115, which provides that prior to taking any action, police officers must seek an opinion from the registrar of trademarks on the facts of the case. This provision hampers effective and swift criminal enforcement campaigns.

Border measures against counterfeiting
The import and export of goods are regulated by Chapter VII (Sections 44 to 51) of the Customs Act. The provisions relating to goods in transit are contained in Chapter VIII (Sections 52 to 56).

The import of goods that infringe IP rights is prohibited by Notification 49/2007-Customs (NT) (May 8 2007), issued under Section 11 of the Customs Act. Section 11 empowers the central government to prohibit or restrict the import or export of goods for the purposes specified in the section by issuing notifications in the Official Gazette. The act empowers the government to prohibit the import or export of goods to protect patents, trademarks and copyrights (Section 11(2)(n)), and to prevent the contravention of any law that is in force (Section 11(2)(u)). Thus, Notification 49/2007 was issued to prohibit the import of goods infringing patents, trademarks, copyrights, geographical indications and designs. Notification 49/2007 prohibits the import of any goods that feature false trademarks, as specified in Section 102 of the act.

Recent cases
In Adobe Systems, Inc v Saxena (MANU/DE/1055/2009) the Delhi High Court held that the use of counterfeit and duplicate software by the defendants was illegal and violated Adobe Systems, Inc’s rights. It not only caused financial damage to the plaintiffs, but also constituted a deception to the public at large and resulted in a loss of revenue for the government. Therefore, Adobe was granted punitive and exemplary damages against the defendants.

In Microsoft Corporation v Kiran (2007 (35) PTC 748 (Del)) the Delhi High Court held that Microsoft Corporation enjoyed the exclusive right to use the registered trademark MICROSOFT. The defendants attempted to counterfeit Microsoft’s products and pass their goods off as those of the plaintiff. This not only caused Microsoft to lose profits, but also resulted in inferior products being made available to the public. The public were deceived by the defendant’s conduct, which made them believe that the marks used by the defendants were valid MICROSOFT marks.

In Hawkins Cookers Ltd v Kumar (2005 (30) PTC 375 (Del)) it was established that the defendants had sold pressure cooker parts in packaging bearing the HAWKINS mark. Therefore, it was established that the defendants had been marketing their product as that of the plaintiff. The court held that counterfeiting is a much graver version of the offence of trademark infringement or passing off. Therefore, it granted a permanent injunction against the defendants.

Damages
In Time Incorporated v Kiran (116 (2005) DLT 599) the court expressly recognised a third type of damages – punitive damages – in addition to compensatory and nominal damages. In discussing punitive damages, the court held that:

“The award of compensatory damages to a plaintiff is aimed at compensating him for the loss suffered by him, whereas punitive damages are aimed at deterring a wrong doer and the like minded from indulging in such unlawful activities.”

In Adobe Systems, Inc v Bhoominathan (2009 (39) PTC 658 (Del)), in regard to damages in counterfeiting cases, the Delhi High Court relied on Meters Ltd v Metropolitan Gas Meters Ltd ((1911) 28 RPC 157 (UK)) to hold that in the case of patent infringement, damages will be computed as follows: the number of infringing articles multiplied by the sum that would have had to be paid in order to make the manufacture of the articles lawful.

Anti-counterfeiting strategies
Any company whose products are at risk of counterfeiting should have proper policies and procedures in place to manage this threat. In order to formulate an effective anti-counterfeiting strategy, protect products and customers from the risks of counterfeiting and protect brand value, every company should use techniques which: 

• Make it difficult to counterfeit its products.
• Enable its products to be distinguished from counterfeit products.

Some measures which may be adopted in order to formulate an effective strategy against counterfeiting include the following.

Visible features
The use of overt features such as the shape, style and size of the packaging can enable a company to teach customers how to distinguish its products from those emanating from other sources. Furthermore, these same features may be used in order to make it difficult to make copies of the original product or packaging.

Hidden features
Covert features can enable a company to detect counterfeit products. This will help the regulatory authorities to distinguish counterfeits from original products, as covert features such as labels printed with invisible ink, radio frequency identification, holograms and watermarking are not easy to detect or copy without specialist knowledge or equipment.

Packaging and labelling
Wherever possible, labels and packaging materials should be designed to maximise the difficulty of copying in terms of both resemblance to the original and the cost of copying, as this can help to prevent or detect counterfeit products through non-compliance. Special features such as tamperproof seals may also be used to provide effective counterfeit protection, especially where these damage the container when the seal integrity is compromised.

Product design
It may not be possible to alter the design of every product; however, where possible, a company should include special design features in its products to make copying more difficult.

Supply and distribution chain management
This is the most important feature of an effective anti-counterfeiting strategy. A company should ensure that the suppliers from which it sources material do not supply to counterfeiters. In addition, damaged or rejected products should be disposed of in a proper manner and checks should be put in place to ensure that these products do not find their way back to the market.

Furthermore, where possible, a company should impose checks on its product distribution chain, such as making products available only from authorised shops.

Enforcement and detection
There is no set formula to detect counterfeiters as there are too many variables – for example, differences in customer bases, the distribution and supply chain, pricing and available resources. However, random checks should be carried out and, if the problem becomes or is likely to become acute, a proper strategy for investigation and enforcement should be drawn up and raids should be conducted at identified targets.

This article first appeared in World Trademark Review, published by The IP Media Group (www.worldtrademarkreview.com).