Recommendations To Combat Counterfeiting / Piracy

o The Special Enforcement Cells should be established. The officers should qualified and experts in their respective skills. They must be properly trained to collect evidence, to detect crime and about the psychology of the criminals. They should have the authority independent to that of the Administrative Organ of the State so that there should not be any political pressure in execution of their duties.

o The industry and the enforcement agencies need to step up their efforts and must develop more innovative methods to combat counterfeiting. There is a need to develop advanced authentication technologies for counterfeit detection. There must be coordination amongst various enforcement agencies at the State level, National level and International Level.

o The officers of Special Enforcement Cells should be updated with the latest techniques being employed in other countries to detect counter counterfeiting; various departments such as the customs and police department should co-ordinate with these agencies so as to strengthen them in enforcement.

o The IPR training institutes should be set up to impart training to the Special Enforcement Authorities, Administrative Authorities and other Judicial Authorities.

o The legal framework for tackling counterfeiting are in place in India. India has a number of laws dealing with counterfeiting which are, inter alia, such as The Trademarks Act, 1999 Copyright Act, 1957, Indian Patents Act, 1970 Designs Act, The Drugs and Cosmetics Act, 1940, The Prevention of Food Adulteration Act, 1954, Consumer Protection Act, 1986 and recourse can also be taken to the Indian Penal Code. All have penal provisions and have made counterfeit a cognizable offence, however the same does not provide for a strong deterrent to the counterfeiters so more deterrence punishment should be imposed. There must be necessary amendment to the Trademarks Act 1999 to simply the procedure.

o The industry should understand the implications of counterfeiting-both legal and economic, to protect its own business interests in India and abroad.

o I recommend that the Industrial restrictions be imposed by government and by the trade organisations on the person found guilty of Counterfeiting. This would be better deterrence than that of the fine and imprisonment. The counterfeit manufacturer/persons should be black listed. No government or trade organisations should deal with such person. No banks and financial organisations should provide him funds for his business activity. The Organisation and such persons should be banned by the Trade Organisations and should be expunged from their membership.

o The industries should hire high quality professional services to enforce their IP rights (by bringing about raids, criminal prosecutions, etc). This perhaps will be the most effective way to tackle the problem of counterfeiting.

o By sharing information and intelligence it will become more difficult for counterfeiters and pirates to operate. This will spell in better protection of consumers; disruption of organized crime and the industry will stop losing staggering amount of revenue every year.

o The right holders should seek injunctive relief and pursue civil action against violators such as street vendors and retail outlets and actual infringer for recovery of damages to create deterrence over them.

o The enforcement of IPR is the ability of the right holder to protect his assets. An efficient system that provides effective protection through other enforcement mechanizations is necessary to make the IP rights meaningful.

 In India mostly disputes arising out of the IPR are tackled by Civil and Criminal Courts. There is need for establishment of the Fast Track Specialised Court handling each species of IPR separately. Recently Supreme Court of India has directly all courts to resolve IPR matters within 6 months. We all heartily welcome this initiative of Supreme Court.

There is also need to resort to other remedies before approaching the judicial authorities for enforcement of rights like Alternate Dispute Resolution systems.

The key element necessary for a successful approach to enforcement is to have a good dialogue and cooperation between right holders (industry) and enforcement authorities. In addition, the strategy must remain flexible and it must be continuously reviewed.

o Agreement: The counterfeit may also rise due to weak clauses in the agreements like the agreement may be silent on IPR issues or their may be no clauses to restrain the use of the trademarks, copyrights or other rights with express provisions. A sound agreement between the local distributors, manufacturers, joint venture partners and the IP holders minimises the risk of counterfeiting.

o Licensing Trademarks: To meet the demand of the market forces and to combat against the counterfeiters the IP holders/ original manufacturers should license their IP/trade marks to the other manufacturers in the territory to satisfy the market demand and to be competitive. Following precautions should be taken for licensing the trademarks rights:

-The terms of the license must be properly set to cover the Trademarks Rights of the owner. -The license should clearly define the exact rights which are being licensed. The license should establish the exact scope of the licensed products. -The license must contain sufficient quality control and approval mechanisms to ensure that the standards of the manufacture and sale of the licensed products are acceptable to the licensor. -Failure to include such provisions in licenses may result in loss of trademark rights and the trademarks may become vulnerable. -License agreements should also assign to either the licensee or the licensor the financial and legal responsibility for taking action against infringers and counterfeiters.- It is necessary to record a trademark license with local authorities to take action against products that infringe the licensed goods and may even lead to loss of trademark rights.

 

o Fast Track Court: The fast track special courts should be established to dispose of the matters of counterfeiting expeditiously. The special fast track courts should have their own experts to detect and analyse the offence and to lay out the evidence.

o Timely Measure: The right holder should take proper action against the Counterfeiter on immediately becoming aware of the infringement of the rights by the manufacturer. Failure to take appropriate action at the proper time may provide opportunity to the Counterfeiter to get organised and financial strengthens his base to defend the original manufacturer.

o Planning Proper Strategies For Enforcement Of Rights: As much as possible information must be collected about this problem. There must be pre and post assessment of enforcement. This is dependant on an effective investigation. Some of the key issues for consideration are:

• How widespread is the problem of counterfeiting in that market /country /elsewhere?

• Where is the manufacturing taking place?

• Is the product for export / import or produced only for the local market?

• How easy / difficult is it to manufacture the goods?

• What is objectionable –labelling? Embroidered marks?

• Where/how are the objectionable aspects applied to the goods? How do you differentiate the genuine from the counterfeit?

• What is the cost value of the product?

• How much of a genuine market is under threat (a vital criterion in order to assess the proportionality of any enforcement effort in terms of cost and management time)?

The consistence investigation must be carried out from the market sources. The investigation must be done internally by marketing personnel’s or externally by hiring detective agencies. Constant watch must be kept on the persons having business relationship or with whom the relations are terminated.

Conclusion:

In India the law is the best in the world but there is no proper enforcement and implementation. The framers of the Trademarks Act 1999 would have enacted the provision of Section 115 with the object that there should be no misuse of the law by the subordinate officers and so the person of higher rank than that of Dy.SP is authorised for conducting the search and seizure. They also made provision for obtaining of the Opinion from the designated officers of the Trademarks Registry before conducting the raid with regards to the holder of rights. The objective behind this may be that the complex problems involving the rights of the trademark owner to be decided by the expert Registrar before commencement of the criminal proceedings. It displeases me to state that the provisions of the law are misused to delay the process and thereby objective for which they are enacted are frustrated.

No industry sector is immune from attack by counterfeiters and no country is exempt from this type of criminal activity. – We should find ways to successfully combat it. Counterfeiting is an international challenge and demands the active participation from companies, organisation and trade associations, Local, National and international Law enforcement agencies and the governments around the world.

Disclaimer: The author assumes no responsibility for errors or omissions in this article. The opinions or views expressed in this article are the personal opinion of the author and are for information purpose only for the readers. No one is allowed to alter copy, store or redistribute this article without express notice to the author and consent of the author. The readers are request not to rely on the opinion so express by the author and should obtain legal advice from the qualified legal practitioners with regards to the subject matter. The author shall not be responsible for any act done by anyone relying upon the opinion expressed in this article.

Impediments in Criminal Enforcement of Trade Marks & Copyright:

• Cultural Diversity: MC being a heritage of multi linguistic and diverse communities with varied cultural differences – Most of the Court proceedings is conducted in local language which is difficult to understand, interpret and to represent the matter to the right holder seeking enforcement of his rights from distant territory. MC is a country having maximum number of languages which has their varied dialects that change from the region to region. The difference in the procedural language becomes hindrance for initiating action at the defendant place of business.

• Legal Impediments (Judiciary):

o Jurisdiction: No court inferior to that of Metropolitan Magistrate or Judicial Magistrate of First Class shall try offence under the Trade Marks Act 1999 as provided by Section 115(2).

o Enforcing Rights at Accused Place of Business: In most of the cases if the accuse is outside the jurisdiction of the Police Authorities, the complainant has to file complaint before the Police Officer in whose jurisdiction the Accused is situated. The right holder finds it difficult to represent or to interpret the facts of the case to the Court properly – especially in the passing off matters in respect of unregistered trademarks where the cause of the action arrises where the defendant usually resides or carry on the business.

o Abuse of process of Law: In most of the cases there is gross abuse of the process of law by the Advocates to delay the matter by filing Exemption Applications at the initial stages before the proceedings or by resorting to the remedy of Section 482 by invoking the provisions of the inherent powers of the High Court to quash the criminal proceedings by alleging that the proceeding are illegal and fraudulent against the principles of natural justice or by challenging the jurisdiction of the Court or by asserting illegality in the proceedings.

o Lack of awareness of provisions of the Act: The Judicial Authorities in remote area are sometimes unaware of the existence of Trademarks Act to protect the interest of the commercial community interest.

For Instance: Complainant was showing that it was a case of making use of false trademark, counterfeiting a trademark and selling goods with a counterfeit trademark. Complainant was mentioning in complaint under section 482 and 483, IPC. These sections were removed from the IPC after enactment of the Trade and Merchandise Mark Act 1958. It was held that it was not correct for the Magistrate to frame charge only under section 482, IPC Case was not covered by Sec 482 No charge having been framed for use and application of false trademark and selling goods with counterfeit mark fresh trial was ordered – Shameen Ahmed v. Mohal Lal, AIR 1967 ALL 346.

o Lack of expertise knowledge: In remote areas the frequency of IPR cases coming before Courts is too low so most of the courts are inexperienced or lacks expertise knowledge about the provisions of Act and latest developments having binding precedents of the Apex Court.

o Transfer of Magistrates: In many cases due to delay in expediting the process of trial long period of time lapses and the transfer of Magistrates may occur with further delay in trial.

• Administrative Impediments (Police Authorities):

o The Offences under Section 103 or 104 or 105 are cognizable under the provisions of the Section 105(3). Even then the Police Officers direct the Complainant to approach the Courts by giving excuses like they don’t have time; there is no cause of action; the offender’s premises beyond their jurisdiction and no action can be taken as the trademark is unregistered.

o Wrong interpretation: Provisions of the Trademark Act 1999 is wrongly interpreted especially Section 27(1) “No action for infringement of unregistered trademark” – which is usually interpreted to mean that “the Police Officer do not have to take an action for infringement of Unregistered Trademark” without referring to the other provisions of the Act like Section 29. Usually when the police authorities approach The Registrar of Trademarks to seek their opinion for further course of action the Registrar usual quote Section 27 without giving the proper interpretation of the provision of the Act or direction as to the course of action to be resorted.

o The Police Officers are not qualified for these type of commercial offences – Under the provisions of the old The Trade and Merchandise Marks Act 1958 the police sub inspector was authorised to conduct the raid and investigation in these matter as a result of which most of the offence were not detected and investigated properly and in many instances the accused are set free for lack of proper cognate evidence. To overcome this problem under the provision of new trademarks Act 1999 Dy.SP is appointed. The Police Officers are unaware of the principles and interpretation of the provisions of the Trademarks Act 1999. They are untrained, have no extra human resources, they are overburdened with the administrative and security work, there is no ex-officio initiative on their part as there is no appreciation for good work.

o The Police Authorities sometimes have to work under the political pressure in discharging their duties. The counterfeiters may use their political influence to pressurise the police authorities to delay the enforcement work or to create false evidence.

• Procedural Impediment:

o No Judicial Intervention: The Offences under Section 103, or 104, or 105 are cognizable so the Courts are reluctant to entertain the Private Complaint and direct the Complainant to the Police Authorities for registration of FIR and further investigation.

o Section 115(4): Additional procedure to be followed for Search and Seizure:

 Person Authorised: Any Police Officer not below the rank of Deputy Superintendent (Dy.SP) (in Mumbai Asst. Commissioner of Police (ACP)) or Of the equivalent grade. In most of the territories of MC Special Enforcement Cell’s are constituted to initiate action against the infringers. There is no co-operation from the Police Officers of the other states with these Special Enforcement Cells to initiate action against the infringers in their territory. The Enforcement Officers are designated amongst the existing Police Officers having no specialised knowledge, technique and skill to put the infringers beyond the bars.

Limitations:

• The Dy.SP is over burdened with the administrative work. They consider these offences as less serious.

• The Dy.SP is reluctant to personally conduct raid.

- The Search and Seizure may be allowed only if Dy.SP is satisfied that the offences under Section 103, 104 or 105  is being  or is likely to be, committed.

If the complainant approaches the Dy. SP, he advices to file criminal Complaint with the Judicial Magistrate First Class or with the Metropolitan Magistrate, as the case may be. – Reasons being not satisfied with the Complainants case or Accused is beyond his jurisdiction.

Simultaneous raids are refused: If the one of the premises to be raided is outside the jurisdictional limit, Raid (search and seizure) is simply refused and the Complainant is asked to file fresh Complaint with the jurisdictional Police Authority for the same cause of Action with repetition of the same procedure.

o Filing fresh complaint before the other Police Authority delays the enforcement.

o If the information is leaked, the infringers get opportunity to dispose of the infringed material and to destroy evidence.

o The Complainant has to wait for obtaining registrars opinion.

Even if the Raid is arranged on satisfaction of the Dy.SP the Police Authorities of the other jurisdictions are reluctant to co-operate with the Special Enforcement Officers.

o They delay the raid by offering reasons of unavailability of the backup resources for conducting Raid.

o It is mandatory for the Police Officer of Special Enforcement Cells to inform the Officer in charge of the Police Station of other jurisdiction before conducting the Raid. The likelihood of leakage of information increases as the Police Officer of the other jurisdiction may have hands with the infringers.

o Warrant: The Dy. SP can conduct the raid without warrant within his jurisdiction but the necessity of the Warrant may arise if the raid has to be conducted outside his jurisdiction – this again delays the enforcement till the time of getting the warrant. For obtaining warrant the place of business and name of the accused has to be mentioned in the application, so this disclosure is enough for the corrupt officer to misuse the power and information and frustrate the enforcement. In one of the case it was held that --- If the criminal complaint is made under section 103 and 104 of the Act against unknown persons and magistrate orders for police enquiry and general search warrant, when complainant was aware of petitioners business, is liable to be quashed and set aside under the inherent power of the High Court when exercisable on interlocutory orders. – Pramod Kumar Bhandari v. State and Ashok Bhandari (1997) IPLR 171 at 177 (Del).

o No Time limit for bringing the infringing goods before the Court: The Provision of section 115(5) provides that the Police Officer can search and seize without warrant the goods, die, block, machine, plate, other instruments or things involved in committing the offence, wherever found and all the articles so seized shall, as soon as practicable, (no maximum time limit is prescribed – yet another opportunity to delay) be produced before Court.

o No Availability of space for safe keeping of the infringing material and the goods so seized before they are brought to the Court and the matter of release of the goods is decided on priority. The Complainant is made to have the proper custody of the seized goods. In the event of it being damaged or destroyed the complainant is made liable for the same.

o No Proper valuation of the cost of infringing material and goods.

o Opinion From Registrar u/s.115(4): The opinion of the registrar of the trademarks has to be obtained before conducting search and seizure. It is mandatory for Police officer to obtain opinion. The opinion has to be obtained before conducting search or seizure. Opinion has to be obtained with regards to the facts (rights of the holder of the trademarks) involved in the offence.

• The Police officer has to disclose the facts of the case to the designated officer of the Trademarks Registry with regards to Complainant and the allegations of infringement against the accused.

• The opinion has to be obtained with regards to the existence of the trademarks right of the Complainant which supersedes that of the accused.

The Opinion is obtained with regards to the deception and confusing similarities of the trademarks of the Complainant and the Accused.

 The Police officer has to abide by the opinion so obtained.

o There is undue delay in getting the opinion although the Rules provide that the opinion has to be given within the period of 7 working days under Rule 110 of The Trade Marks Rules, 2002.

o There is no proper and fixed designated person to tender the Opinions on which the criminal action is to be based.

o The Designated Officer’s are saddled with the routine administrative work.

o Most of their time is wasted in attending the Court matter where they have to provide explanations to the court for the mistakes or the opinions given by the previously designated officers.

o The designated Officer are usually the Jr. Examiners of the Trademark Registry. They are inexperienced. They have no practical knowledge and expertise in the field. Some senior independent personnel with expertise knowledge should be deputed for giving the opinion. Preferably the person of the rank of the Deputy Registrar or Joint Registrar.

o The Opinion are ambiguous and confusing –

Opinions are not suggestive to take direct actions against the fraud. Opinion are not direct they are diplomatically given to avoid further trouble of attending the Courts by the designated officers.  Sometimes to shift the burden of the legal action on the Police Officers for their timely acts. Opinions are not clear and are usually wrongly interpreted – Specifically the provision of section 27 of the Trademarks Act 1999.  There is likelihood of leakage of information before Raid.

• Composite Offences: The question may arise as to who is the authorised person to take the cognizance of offence when the act of Counterfeiting infringes both the trademarks and Copyrights of the Complainants?

o According to Section 115 of Trademarks Act 1999 the Police Officer not below the rank of Dy.SP has to take the Cognizance and

o under the provision of Section 64 of the Copyright Act any police officer not below the rank of Sub-inspector is authorised to take cognizance and search and seizure.

• Release of Seized Materials 115(5): The Opportunity is given to the Accused or any person interested to apply to the Court for restoration of the material so seized within 15 days and the Magistrate decides the fate of the seized infringing material before the commencement of trial on hearing the prosecution and the Applicant.

• No Deterrence Punishment: Though the Offences under the provisions of the Trademarks Act are Cognizable, Warrant triable, Non-Bailable and Non-Compoundable. The penal provisions of the Act are not deterrent as it should have been considering the mentality of the criminals.

o For the commission of the offence at first instance the punishment is imprisonment for minimum 6 months which may extend to 3 years and with fine of minimum Rs.50,000/-.which may extend to Rs.2,00,000/- as provided in Section 103 and 104.

o For the commission of the offence for second time the punishment is enhanced to imprisonment for the term of minimum 1 year and which may extend to 3 years with fine of minimum Rs.1,00,000/- which may extend to Rs.2,00,000/- as provided in Section 105.

o The punishment of the fine is negligible where the offender earns in Crores. Fine is no way deterrence to these type of commercial offences.

o The punishment or fine is imposed on conviction and on proving of the guilt. There is lapse of long period from the time of initiation of the Criminal Complaint till the time of conclusion of the trial. In most of the cases where the Complainant is the company if the authorised person prosecuting the Complaint switches over to other company, the matter is forgotten and not represented then it stands dismissed due to non attendance of the Complainant and the counterfeiters are discharged.

o In some of the cases the Offenders tries to compromise the matter out of the court as the matter is compoundable by submitting the undertaking to the Court with the consent of the Complainant. And where in respect of infringement of a trademark both the civil and criminal proceedings are launched and the parties arrive at a settlement in the civil proceedings, the criminal proceedings are quashed.” Kewal Krishan kumar v. khush Dil Kapoor (1999) PTC 31(P & H)

o The Act impliedly presumes the likelihood of commission of these offences most frequently even on the prior convictions. The Act has provided for enhance punishment for second and subsequent offence. It indicates as though Act has impliedly allowed second subsequent infringement of the trademarks with slight increase of punishment. The punishment should be increase to minimum of 7 years extending it to life imprisonment with regards to counterfeiting of Food, Drugs and other necessities which may have disastrous impact on the health of public.

o Till the time of conviction for offence the offender is free to deal and trade in the counterfeit products. He may delegate the work of counterfeiting to some other member of his lobby. He may abscond.

o “The Money is the might and prevails over the right”. The counterfeiters may use their Vitamin-M (Money) to tamper the evidence, to purchase the witnesses and to influence the prosecution. The fact of corruption in MC cannot be overlooked.

o During the pendency of trial their may arise situation where Magistrates may be transfer and it delays the trial.

• Mentality and Background of the Criminals:

o The act of Counterfeiting is Organised Crime. Its intentional act done to defraud. The persons engaged in these types of the activities form their lobby and are aware of the acts done by the others in their business circles. In most of the cases it is found that these illegal activities are done by the business partners or by some person from business relations like loan licensee who has complete knowledge of the business. Some of them get involved in these businesses due to discontinuation of business relations.

o The persons involved in this type of offences are normally business minded, greedy for money and are willing to go to the extreme limit for sake of earning money. Their motive is to earn rapid money with no efforts at all.

o They simply have to counterfeit a product and reap benefits of the hard earned goodwill and reputation enjoyed by the honest business house. These offences are done intentionally to encash profit with no efforts.

o They are aware of the consequences which may ensue due to their illegal acts. They engage decoy owner of the business so that they can get the benefit of the provisions of the section 114(1) of the Trademark Act provides that if the offence under this Act is committed by Company,

 the Company as well as every person in charge of, and responsible to, the company for the conduct of its business at the time of the commission of the offence shall be deemed to be guilty of the offence and shall be liable to be proceed against and punished accordingly;

Defence: No such person shall be liable to any punishment if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence. The bonafide Counterfeiter simply has to pay money to one person to bear the consequences of the offences by acting as the Manager of the firm or company and accepting the guilt. In this country there are many unemployed youths who may and are willing to undertake such tasks.

For Instance: This may serve as valid defence - the mere fact that the accused was present at the time of search of factory and recovery of articles there from is inconclusive in showing that he was responsible for the running of the factory or for the falsification of the trademark or for the use of the false labels. In the absence of cognate evidence the Court was justified in acquitting the accused – A. N. Deen v. Jacob, 1992 Cri L J 2089.

• Agency Work: In MC there are many small scale factories operating in remote areas where they run with shortage of work and have spare capacity of production. These factories are willing to undertake jobs of manufacturing the counterfeit product from the unknown Agents with no legal formalities and awareness of rights in the trademarks or copyrights. They execute the work on job work bases and are compensated for their processing work. When such innocent manufacturers are booked for commission of offence they have nothing to prove as there is no legal document to prove relationship with the absconding Agent or to say that they were unaware of the rights in the trademarks. The burden is on the manufacturer to prove that he acted without intention to defraud as provided in section 103 - “unless he proves that he acted without intend to defraud” and section 104(a) (b) and (c).

• Servants Exempted: The provision of Section 151(C) state nothing in Chapter XII be construed so as to render liable to any prosecution or punishment any servant of a master resident in India who in good faith acts in obedience to the instructions of such master, and on demand made by or on behalf of the prosecutor has given full information as to his master and as to the instructions which he has received from his master.

• Slight Dis-similarities of Artistic Work: The raid is sometimes refused because of slight dissimilarities in the artistic work where the matter comprises of composite offences of infringement of the trademarks and copyright. The Police Officers fails to understand the basic principles of interpretation of trademarks law held by the Courts.

o It is the settle law that the material similarities are to be considered and not the dissimilarities to arrive at the conclusion that the marks are confusingly and deceptively similar which the Police Officers fail to understand. They only consider the dissimilarities and refuse to take action.

o The two marks are to be compared as whole for determining the confusing and deceptive similarities.

o There must be a similarity that an unwary customer may not be able distinguish one from the other
especially when sees the one without the other having before him (Giridharilal v Emperor AIR 1936 Pat 579 –Criminal Revision (Sec 482 of IPC )

o The proper test for determining whether the mark used by the accused is a counterfeit trade mark is to consider whether an ordinary unwary purchaser would be deceived (Ashwini Kumar v Emperor AIR 1930 Cal 72 DB )

o The word ‘infringement’ has not been defined in the Trade Marks Act. But infringement means the use of a Trade Mark by a person who is not the Registered Proprietor or the Registered User of the mark and the mark in question is identical with or deceptively similar to the registered trade mark. (Indo Parma Pharmaceutical Works Ltd. v. Citadel Fine Pharmaceutical Ltd. AIR 1998 MAD 347)

o The main element to be considered is the probability of deception (Vikas Manufacturing Co. vs. Bhoraj Manufacturing Co. AIR 1980 P&H 127).

o Type of infringement: The question whether use of a trade mark by the defendant constitutes infringement of registered trade may be determined by  whether the defendants trade mark is identical with the Plaintiff ’s trade mark; whether the trade mark of the defendant contains or consists of the whole or any essential or leading features of the Plaintiff ’s mark combined with other matter; and  whether the mark of the defendant is identical with any of them in Plaintiff ’s mark (Tata Oil Mills Co. Ltd vs. Wipro Ltd.AIR 1986 DEL 346)

o The decision of the apex court in R.G. Anand v M/S Delux Films where the Court observed: “Where the same idea is being developed in a different manner, it is manifest that the source being common, similarities are bound to occur. In such a case, the Courts should determine whether or not the similarities are on fundamental or substantial aspects of the mode of expression adopted in the copyrighted work with some variations here and here. In other words, in order to be actionable the copy must be a substantial and material one which at once leads to the conclusion that the defendant is guilty of the act of piracy”.

• Lack of Awareness of Rights amongst the Business Community: No efforts is done by the business community to protect their rights by proper registrations as per the statutory provisions.

• There is lack of awareness of the existence of the law in remote villages where the business is conducted in traditional way.

• There no statutory protection sought to protect the rights so there exist no the question of enforcing the rights. The rights are not sought and not enforced.

• Defences: The Complainant has to prove his case. ONUS of establishing criminal liability of the accused is on the prosecution

o Defences available to the accused are –

• Denial of allegation of infringement made by prosecution

• Acted without intent of defraud.

• Section 112 – Exemption of persons employed in ordinary course of business. This is good as far as the employees are concerned. But what about the Decoy owners who may then turn their plea that the real owner is out of the territory or is NRI.

• Section 113 –

a) Adjournment of proceedings for 3 months where accuse satisfies the Court by prima-facie plea that the trademarks registration of the Complainant is not valid. This provision may only be used to make false allegation to delay the proceeding or to flew away from the jurisdiction of the court.

b) The Accuse then files rectification petition for the Complainant trademark before the Appellate Board within 3 month and on submitting the proof of such application the Court then stay the proceeding before it till the disposal of such petition. Yet another way to have time. The Accused may file rectification petition on false and baseless grounds. The time limit should be specified within which such rectification petition has to be decided specially by the constitution of the special
bench of the Appellate Board.

c) This provision of Section 113 (c) further provides that if the accused fails to make application for rectification within period of 3 month it will be presumed that the registration is valid and the matter will be preceded. It may so even happen that the Accused may delay the proceedings by misrepresenting the Court by false pleadings and challenging the validity of the Complainants
trademark.

• Section 114 – if offence is committed by company – defence for the person responsible for conduct of the business is that he had no knowledge of the commission of the offence or that he exercised all due diligence to prevent the commission of the offence or that the offence was committed with out his consent or connivance.

• Cost of Proceedings: The criminal remedy is usually resorted if some prompt action needs to be initiated to prevent the commission of the offence. When the goods are likely to be distributed, destroyed or damaged or is likely to be exported. The Complainant has to resort to civil suit for recovery of damages or for accounts for profit and to restrain the accused by perpetual order of injunction of the court.

• Information as to commission of offence: Any Officers whose duty is to take part in enforcement shall not be compelled to tell when he got the information of commission of the offence. This provision may be abused by the officer to delay the investigation or to take cognizance of the offence under the provisions of the Act.

Effects of Counterfeiting / Piracy:

• Increase of Market Share: The actual market share of the original product increase with no profit as the market is captured by placement of the counterfeit product. In other words counterfeit product occupies the place of the original product. The additional demand and the market area of the original product is covered by the counterfeit product. Sometimes even drives the original product out of market area creating artificial barriers through trade channels.
• Creating: Entry Barrier for Original Product in market: The counterfeit product is sold occupying the actual demand of the original product. The market is flooded with cheap counterfeit products and artificial shortage of demand is created by creating price competition with the original product. 
• Loss of Revenue to government: Increase in counterfeiting activities results in free moment of the counterfeit products in market avoiding the tax levies. Most of the goods manufactured are unaccounted and without obtaining licenses. The government looses huge amount of the revenue by way of excise and sales tax.
• Reduction of Sales: The existence of the counterfeit product in the market causes reduction of the sales of the original products there by causing loss of revenue to the government.
• Reduction of Profit: The profit on the sale of the original is reduced due to poor sales involving heavy expenditure on advertising, sales promotion, research and on litigating with the counterfeiters.
  
• No efforts for product improvement: As most of the market share is eaten up by the counterfeiters the original manufacturers earn no profit to be invested on the additional product improvement and research. Even if he incurs expenditure the counterfeiter imitates the product and reaps the benefits of the research with no cost or may some times create substandard product if they are unable to develop the product to match with the original product.
  
• Increase in product liability: The consumers who are deceived by purchase of the fake article for the genuine one blame the manufacturer of the genuine product when it fails, creating a loss of goodwill and product liability to the Original manufacturer.
  
• Maintenance of Standard and Quality: The counterfeiters manufacture the product for the sake of earning profits they may not comply with the norms and regulations to maintain the standard and quality of the product. This may create vulnerable situation for the reputation of the original manufacturer.
  
• Loss of Goodwill: The goodwill of the Original manufacturer may be lost due to existence of the substandard quality of the counterfeit products which may cause harm or loss to the immediate customers.
  
• Reduction of Brand loyalty: If the products are found to be defective and of the substandard quality. The original manufacturer may loose the market credit, loyalty and trust of actual and his actual and potential customers.
  
• Diminishing Brand Value: The counterfeit products may diminish the brand value in the market due to loss of sales, customers, trade channels and reputation of the corporate entity.
  
• Undervaluation of IP: The brand and the trademarks are valued based on its estimated average potential sale and the market coverage and reputation. The counterfeit product reduces sale, customers, reputation and standing of the product in the market and thereby its valuation as IP assets.
  
• Failure as Assets: The trademark/brand may loose its value to be recognised as assets for acquiring financial funds by securitising it, due to loss of goodwill, market standing and its potential value.
  
• Dilution of Brand: If no timely legal actions are initiated against the counterfeiters the original trademark may loose it distinctiveness and its identity as an indication of trade connection of the original manufacturer thereby becoming generic and vulnerable.
  
• Increase of Market Competitions: The concentration of the counterfeit product not only increases competition to the original brand but also to the competing other brands in the market that are forced to reduced their prices in conformity with that of the counterfeit products.
  
• Benefits the Competitor: The Competitor may be benefited if there is reduction of the sale of the original products indirectly. The customers may switch on to the other similar products of the competitors which has good market standing and provides assurance of quality.
  
• Increase in Legal Cost: The legal cost to fight against the counterfeiters may increase due to increase in the number of the counterfeiters. The original manufacturer may be sometimes held liable for the adverse consequences which may ensue due to the use of the substandard counterfeit product by the customer for no fault.
  
• Treats to Multinationals: The multinationals may feel hesitant to invest or launch products due to threat of Counterfeiting. It may drive away the foreign investment from MC.
  
• Financially Strengthens the Counterfeiter to defend himself against the action brought by the Right holder.
  
• Rise in Corruption: The Counterfeiters offers bribe to the government officers to secure their ill gains and inculcate the habit of asking for brief for the act or omission and there by corrupts the officers. The officers become so use to it that they simply refuse to work if no bribe is tendered.
  

Reasons For Rise In Counterfeit / Piracy Industry

**MC - Manufacturing Country.

o Liberalisation and Globalisation: One of the major reasons being promotion of small scale industry and liberalisation of policies for trade and industry for growth of economy as a whole without countercheck of the activities they are engaged in. The licenses are issued by the government but there is no effective check system to see if the conditions of the licenses are duly complied with.

• No Business Opportunities: India has liberalised it polices for setting up and promotion of industries by providing various infrastructural facilities but has failed to generate business opportunities. As a result of which there is voluminous increase in industrial zones and establishment with no work. So the Indian industry has to depend upon the job work of the developing nations which do not have infrastructural facilities.

• No Restrictions and Countercheck: Certain manufacturing companies (MC) (Pharmaceuticals, Cosmetics, Packaged Food etc) were allowed to flourish to its extreme limits with no restrictions/licensing as it was expected that there would be end of Transition Period of the TRIPS agreement.

• Outsourcing: The cost of production being low, multinationals manufacture their goods in MC to cut down their production cost and market their products to the European, American and African Countries to earn more profits. MC have become major source for conversion of goods on job-work basis. As a result of which the goods manufactured in MC are acquiring goodwill in the international market especially in African market. Knowing this fact, some unscrupulous manufacturers have started indulging in direct export of the counterfeit products to their counterpart in international markets to earn quick money.

• Globalisation of trade due to increase in mass communication: Due to globalisation and foreign investment in MC, foreign brands starting pouring into MC. It has generated new opportunities to the counterfeiters to manufacture the foreign brands at low price.

•  The Consumers have no proper product knowledge about the foreign brands.
  

•  There is tendency among the middle class people to buy the branded goods at the cheapest price, especially foreign brands.
  

•  It is easy for the counterfeiters to copy foreign brands.
  

• Lack of information about the product to the distributors, retailers and the consumer.
  

• Due to the rise in demand of the foreign product and shortage of the supply for the same.
  

•  The price of the original foreign brand is high. So the Counterfeit also fetch good price with high profit margin.
  

• Lack of Proper Marketing Strategies: “consumer demand drives counterfeiting”.
  

•  Lack of information about the export market amongst the manufacturers of the foreign brands. The foreign company have no direct relationship with the various channels of trade for distribution of their goods. So proper detection of the counterfeiters is not possible.
  

• No initiative by the foreign companies to enforce their rights.
  

Lack of Political Will to tackle the problem: In MC there is lack of political will to combat the counterfeiting industry as the most of the political parties are operated by the funds of these business communities. Till date no one of the political parties has arrived at the agenda to fight against the illegal act of counterfeiting. The attempt was made to introduce bill seeking capital punishment for the manufacture and sale of spurious or misbranded food and drugs, there is no outcome till then.

• Corruption: The Counterfeiters offers bribes to the government officers to get their illegal work done like for obtaining various licenses, permissions and approvals or product registrations. The government officers issues licenses for the sake of money without noticing the fact that they are playing with the life of public in general.

• Perception of Crime: The society in general considers these commercial crimes to be of low grade, harmless and of less serious nature. In MC the commercial crime is considered to be of less serious nature in the society. So the enforcement agencies concentrate more on other criminal offences which are considered to be of more important by the society.

• Media Coverage: The mass media gives no coverage to these types of offences so they exist unheard and unknown. The common man is left ignorant about existence of such type of illegal activities.

• Trade Organisation: There is no active involvement of Trade Originations to fight against the counterfeiters. They can assimilate together to fight against government to claim their rights but they hesitate to initiate actions against each others or to check the activities of the member of their organisation. How can they blame the Government for the effective enforcement of their right when they are themself not vigilant?

• Detection of the Counterfeiter is problem: As the counterfeit product is made exactly as same as that of the real one detection of the counterfeit product and the counterfeiter becomes difficult. Mostly the fake name of the marketer of the product is mentioned so it becomes difficult to trace the origin of the goods and the actual manufacturer of the goods. The goods are manufactured without obtaining licenses or are obtained with false name. In country like MC where there is no harmonised system of licensing it is practically difficult to trace the counterfeiter.

• Job-work: In most of the cases the manufacturer is required to obtain the license for the manufacture of the products. So the name of the manufacturer appears on the product, leaving aside the person who has ordered for the goods to be manufactured on loan license basis. The person who places order never comes into picture. If at all any legal action arrises the innocent manufacturer who has done the act on job work has to suffer.

• Batch wise production: Mostly the counterfeiting is done batch wise so that as soon as the batch is released in the market no production of the same product is done by the manufacturer till it exists in market. Meantime other similar category of the product is selected for manufacture of counterfeit products so there remains no trace of the goods being manufactured unless someone admits it.

• Organised Crime. The counterfeiters have their own lobby and channels of trade which facilitates the distribution of these fake goods undetected.

o High Profitability: drives to illegal act: The profit margin over the counterfeit product is high as there is no additional cost involved in marketing, advertising and on research of the product which is borne by the original manufacturer. The cost of the counterfeit product is negligible and fetch good price as that of the original. The high margins of profit motivate the counterfeiters to indulge in these illegal activities overlooking the punishment and fines for such offences.

o No Accountability for sale: There is no accountability for the sale of the products across the counters so the sale of counterfeit products goes undetected. Every product sold must be made accountable by issue of memos or by use of bar codes, especially in case of medicinal products. The customers most oftenly are not issued memos, they must insist on the memos or rather the issuance of the memos with the name and address of the customers must be made mandatory so that check system is maintained on the sale of the goods.

o Lack Of Harmonised System: MC is country of diversity, in MC there are Central Acts and State Acts. The Constitution has empowered the States to decide over some issues and to frame its own policies. As a result of which there is lack of harmonised system and co-ordination of the policies of States. This benefits the counterfeiters who can obtain the licenses from two different states for the same product. If at all they are caught in one state they may continue to manufacture the products from some other states. There is harmonised system for registration of the trade marks. So why there can’t be harmonised system for registration of licenses? This may help to detect and control the crime and effective enforcement or rights in countries like MC.

o Fear Of Damage To Goodwill: Most of the legal actions are ignored due to fear of damage to reputation of the goodwill of the corporate or the brands. The companies are unaware of the extent of existent of product counterfeiting. Even those who know tend to avoid publicity for fear of adverse implications, particularly effect on brand image.

o Lack of Consumer Awareness and Advancement of Technology: There is lack of market information to the customers about the existence of the counterfeit products. Moreover due to advancement of the technology counterfeiting has become very easy and effortless tasks to the counterfeiters.

o Illiteracy: Mostly it is found that these activities mature due to innocence, ignorance and illiteracy of the consumers. The consumer is unaware and is unable to distinguish between the original and the fake ones. The majority of the MC population lives in Villages where the literacy rate is low. The Counterfeiters makes their base in these territories to market or to dump their products.

o Changes in purchasing habits of Consumers: Due to the evolution of the modern methods of marketing of the products through Internet and telemarketing. The Counterfeit products find direct entry in the households.

o Constant survey requires huge funds: The Government of any country cannot afford to deploy
their resources for continuos detection and enforcement which require huge funds that can be utilized for some developmental activity.

Jointly Owned Trade Marks – its use and misuse

Section 24: Jointly Owned trade marks under ---- The Trade Marks Act, 1999

(1)   Save as provided in sub-section (2), nothing in this Act shall authorise the registration of two or more persons who use a trade mark independently, or propose so to use it, as joint proprietors thereof.

(2)   Where the relations between two or more persons interested in a trade mark are such that no one of them is entitled as between himself and the other or others of them to use it except---

a.     On behalf of both or all of them; or

b.     In relation to an article or service with which both or all of them are connected in the course of trade,

those persons may be registered as joint proprietors of the trade mark, and this Act shall have effect in relation to any rights to the use of the trade mark vested in those persons as if those rights had been vested in a single person.

Interpretation:

This section corresponds with Section 24 of The Trade And Merchandise Marks Act, 1958 which provides that two or more persons may be registered as joint proprietors of a trade mark.

Sub-section (1) prohibits in express terms that “noting in this Act shall authorise the registration of two or more persons who use a trademark independently, or propose so to use it, as joint proprietors thereof.

The sub-section (2) (a) applies in the cases where the persons are entitled to use the marks as partner’s and on behalf of all the partners. The Sub-clause (a) covers the cases of co-partnership and sub-clause (b) covers the cases of joint adventure which is not a partnership. However it is very difficult to assess the situations and facts falling with the preview of sub-section 2(b).

  

1. In chain stores where the same articles pass from the manufacturers to the consumers through different sources, such intermediary may consider/engage himself in a joint venture and show that the goods upon which the mark is to be placed are to pass through all of them and as such they have common interest due to which the quality control will remain intact.
   

2. It is not necessary for an applicant to show that the mark was devised by him in order to entitle him to be registered as a joint proprietor with a person who had adopted and used that mark.
   

Cases:

(1)   Power Control Appliances v. Sumeet Machines Pvt. Ltd. 1994 AIR SCW 2760; (1994) 2 SCJ 644: 1994 (2) SSC 448 --It is settled principle of law relating to trademark that there can be one mark, one source and one proprietor. It cannot have two origins. Therefore when the defendant had proclaimed himself as a rival of the plaintiff and as owner, it is not permissible in law. It cannot be used in rivalry and in competition with each other. (it – jointly owned trademarks)

(2)   In re Palmolive [(1932) 49 RPC 269, 278] – it was said that before a mark can be registered in the joint names of a manufacturer and a merchant or selector on the ground that they are engaged in a joint adventure, it must be shown that all the goods upon which the mark is to be placed are to pass through the hands of both the parties. For examples, if the joint proprietors were sharing the profits, all of them would be connected in the course of trade with the trade mark.

(3)   Elliot Optical Company Ltd.’s [Application (1952) 69 RPC 169] – in Case where the several years have passed and the goods were manufactured and sold under the mark partly by the applicants direct to some consumers and partly by the opponent’s, it was held that joint grant was rightly refused.

(4)   Naanmlooze Klene & Co., [appln., (1923) 40 RPC 103] – the foreign company made an application to register a mark in respect of food stuffs and food ingredients. The application was opposed by the company’s sole agent on the ground that the mark was suggested by him and the company was instructed to manufacture goods under the mark solely for him. Held: the fact indicated a joint venture and the mark should be registered in joint names.

(5)   Jones TM (1886) 53 LT (NS)1: Rights of the parties on termination of joint venture --by the very nature of the condition imposed under section 24, the termination of the joint venture would imply that none of them will be entitled to use the mark independently or to remain as joint proprietors. It has been held that when a manufacturer, shipping agent and importer have adopted a combination indicative of the interest of each, no one of them could claim to be entitled exclusively as against the others to that design, when the adventure is put an end to.

(6)   Gudakhu Star & Label Trade Mark [1990 PTC 216]; Addanki Narayanappa v. Bhaskara Krishnappa [AIR 1966 SC 1300: (1966) 1 SCWR 934]  -- Partnership firm is not legal entity and therefore the names of all the partners must appear in the application, making them joint applicants. As per the provisions of the Indian Partnerships Act, 1932 partners use the mark on behalf of one another of an artistic label. But when he allows the label to be used as a trade mark of the firm, the trade mark becomes the property of the firm. The registration in respect of the jointly owned trademarks is granted by the Registrar on submission of proof of relevant agreements specifying the joint adventure. It is possible for the Registrar to impose suitable conditions while granting the application.

On cessation of the joint venture, the parties will have to have independent marks to distinguish their own trade and business, if any. The new trade marks will have to be sufficiently distinct and different from the mark used by them earlier during the existence of the joint venture arrangement to obviate any confusion or deception in the minds of the public. In other words, on the termination of joint venture no one party is entitled to register the mark in his own name but the joint registered proprietor can assign the mark.

The parties may bring to the notice of the Registrar the termination of the arrangement, so as to enable him to rectify the register in respect of the registered trade mark under section 57 of the Act.

(7)   Ramappa v. Monapa [AIR 1957 Mad: ILR (1957) Mad 206] – the Madras High Court has held that where the application for rectification of the Registrar was made on the basis that the registration of the mark was obtained by fraud, and it is found that the allegations are correct, the court must direct the entry to be expunged from the register and the order of joint registration should be annulled.

Appropriate office for making an Application for Registration:

Rule 4 (a) (iii) – in the case of jointly registered proprietors, the principal place of business in India of the proprietor whose name is entered first in the register as having such place of business in India at such date is situate;

On scrutiny of the above provision, I imagine as to “WHY any exclusive retailer / dealer / franchisee can’t make joint claim for ownership or claim territorial use of the trade mark / trade name since they are connected in the course of the trade, trading goods exclusively for one manufacturer, there is common venture, they spend substantial  amount on local advertisements; they spends considerable time and efforts in marketing and popularizing the trade mark”.  

However usually there are restrictive covenants in the agreement which binds the exclusive dealers retailers/chain stores/franchisees.

What would happen if there are no agreement with the dealers/retailers or no restrictive covenant? Their claim will succeed? ………

What would be the first step to challenge ownership of the trade mark?
Obviously, challenging the registration of the trade mark by filing rectification petition before the Registrar of Trade Mark to claim territorial exclusive use based on reputation.

What would such claimant do if the original registered proprietor issues notice or files suit for infringement?
1 --- If only notice is issued by Registered Proprietor -- First, Civil Suit will be filed for relief of injuction against the proprietor for groundless threat of legal prosecution u/s 142 and then rectification petition will be filed challenging the validity of Registration to claim joint ownership.
2 -- If suit is filed -- The infringement claim may be contested on ground that there is no infringement (as of now held by several courts in India) in selling the lawfully acquired goods.

Prevention is better than cure! -- Brand / trade marks owners should ensure that appropriate agreement are entered with dealers/stockiest for use of mark or simply authorise the use of trade mark by licensing so that the license can be withdrawn at any point of dispute or for violations of the terms of use or if there is any such claim. In India, use of trade mark under license (permitted use) amounts to use made by original proprietor u/s. 48(2) of the Trade Mark Act 1999, registered proprietor of trade mark should use this provision in restrictive sense to claim use made by dealer/licensee so as to restrict them from claiming right over the trade mark based on reputation, goodwill and use of the mark.

The above issue may be faced by multinationals and retail ventures companies who may compete with the local dealers and try to overshadow them or control dealers volumes by booking them under infringement provisions since the owners will not be in position to do much in other way due to the existance of Competition Law.