India’s Stand On Counterfeit Goods

Counterfeiting is a practice prevailing since time immemorial. The act of finding cheaper alternatives/dupes to luxury goods has increased in demand, especially in a country like India where most of the general public fall in the middle-class sector with a high consumption for brand and brand value.

The word “Counterfeit” is derived from the French words “contre” meaning “counter or against”, and “faire”, meaning “to make”. Hence, counterfeit means “to make in imitation”. Counterfeit, in legal terms, means imitation of a trademarked good bearing lower quality than the original with the intention to deceive. Black’s Law Dictionary defines Counterfeiting as an act of producing or selling an item that looks like a reproduction of a trademark in order to deceive a consumer into thinking that they are buying the original trademark goods[1].

Counterfeit goods are often so closely similar to the original trademarked goods that differentiating between the two will be tricky or the difference goes unnoticed by the naked eye. Taking this as an advantage, the manufacturers of the counterfeit goods deceive the naïve consumers into buying these goods.

Counterfeit as provided under various provisions

Counterfeit is not defined in the Trademark Act, 1999.

As per Section 28 of the Indian Penal Code, a person is said to “counterfeit” when he produces/makes something that resembles an already existing thing with an intention to deceive or knows it to likely cause deception. Explanation 1 of the section implies that an exact imitation is not essential for counterfeiting. Explanation 2 of the section implies that where a person creates a good that resembles another in such a manner that a person might be deceived, it is presumed that the person creating such imitation intended the deception, until proven otherwise.

Trade-Related Aspects of Intellectual Property Rights (TRIPS) defines “Counterfeit” as any goods or packaging, without authorization bears or uses a trademark identical to an existing valid trademark with respect to such goods, or which is so similar that it cannot be distinguished from such trademark and therefore infringes the rights of the rightful owner of such trademark under the law of the country of importation[2].

All counterfeits are infringements but all infringements are not counterfeits

There is a substantive difference between counterfeit and infringement. A registered trade mark is infringed, as under section 29(1) of the Trademark Act, 1999 by a person who is not the proprietor or is not authorised by a proprietor, when he uses a mark identical or deceptively similar to the trademark of the proprietor. Counterfeit, on the other side, is said to have been made when there is an imitation of the original goods in order to provide goods of cheaper quality, to deceive the consumers and to harm the goodwill of the original Trademark owner.

A Trademark infringement is usually a civil wrong and the punishment for the same is provided in the Trademark Act, 1999. Counterfeit is a criminal offence and the punishment is provided in the Indian Penal Code.

The burden of proof in case of Trademark infringement lies on the plaintiff to prove that the defendant has used the Trademark unauthorised. Whereas, in counterfeit, the mere existence of an identical imitation is a proof enough.

India’s position in regards to counterfeits

Indian economy is deeply impacted by the advent of counterfeit goods. A study by the FICCI CASCADE titled ‘Invisible Enemy: Impact of Smuggling on Indian Economy and Employment’[3] for the year 2017-2018, shows that there is a loss of INR 1,05,381 Crore in seven manufacturing sectors and a loss of INR 39,239 crore to the government due to illicit markets. The total employment loss in the economy is about 16.36 Lakh.

Another FICCI report titled ‘Illicit trade: Fueling Terror Financing and Organized Crime’[4], expects the global loss of employment due to counterfeit to rise to 4.2 to 5.4 million jobs in 2022, an approximate increase of 110 per cent since 2013.

Provisions to combat counterfeit

From section 28 of the Indian Penal Code, it can be inferred that the main requirements for counterfeit are:

  1. Resemblance- Section 28, when applied to goods, it can be states that a good is a counterfeit when it resembles the original good. As provided in explanation 1 of the section, it is not necessary that the imitation be exactly like the original, a substantive similarity is enough. In K Hasim v. State of Tamil Nadu[5], the Supreme Court observed that section 28 of the Indian Penal Code does not mandate an exact replica of the original good for it to constitute a counterfeit.
  2. Intention- Mens rea is an important aspect to determine whether the good is a counterfeit. The person imitating the good must have an intention to deceive. If the imitation is not exact, it is the duty of the prosecution to prove the intention for deception. Whereas, if the imitation is exact, it is presumed that there was an intention to deceive unless it is proved otherwise.

Section 476 of the Indian Penal Code provides for a punishment of imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.

Counterfeiting can also be considered an act of cheating under section 415 of Indian Penal Code. Any person who cheats shall be liable to imprisonment of either description for a term which may extend to one year, or with fine, or with both as given under section 417 of the Indian Penal Code.

Important Case Laws

In the case of Cadbury India Ltd. and Ors. v. Neeraj Food Products[6], the court held that in regards to counterfeiting, the concept of deceptive similarity does not arise since the goods are copies of the original. Thus, only proof of the existence of such goods is enough to constitute counterfeit.

In Montblanc Simplo Gmbh v. Gaurav Bhatia & Ors[7], the Delhi High Court ordered a permanent injunction and damages against the defendants for counterfeiting plaintiff’s trademark “MONTBLANC” for writing instruments.

In Nike Innovate C.V v. Ashok Kumar[8], the Saket District Court held that the defendants were involved in the production of counterfeit goods under the plaintiff’s trademark and hence ordered permanent injunction and damages. The court further opined that an aggrieved party, in case of counterfeit can seek for damages, destruction of the counterfeit goods, injunction and accounts of profits.

Conclusion

With the world shifting digital, and the far reaching nature of the internet and the anonymity it offers, makes trading especially counterfeit goods easier. The current legal system does not promise to offer a wholesome solution to the newly prevailing problems. A stricter outlook towards the problem must be sought since these goods not only bring a loss to the original manufacturer but also the government as there is less tax collected.

Author: Anusha Ravi, a student of Ramaiah Institute of Legal Studies in case of any queries please contact/write back to us via email chhavi@khuranaandkhurana.com or at Khurana & Khurana, Advocates and IP Attorney.

References:

[1] Bryan A. Garner (ed), Black’s Law Dictionary (9th edition, West, 2009) [402-403]

[2] Substantial elements of counterfeiting and piracy https://www.wipo.int/edocs/mdocs/aspac/en/wipo_ipr_tyo_17/wipo_ipr_tyo_17_t11.pdf

[3] ‘Invisible Enemy: Impact of Smuggling on Indian Economy and Employment’ https://ficci.in/spdocument/23132/Invisible-Enemy-MASCRADE-2019.pdf

[4] ‘Illicit trade: Fueling Terror Financing and Organized Crime’ https://ficci.in/spdocument/20962/Illicit-trade-Terror_Final_10_09_2017.pdf

[5] K Hasim V. State of Tamil Nadu Criminal Appeal No.185 of 2004 (With Crl. A.No.187 of 2004) Decided On, 17 November 2004.

[6]  Cadbury India Limited And Ors. v. Neeraj Food Products, 142 (2007) DLT 724.

[7] Montblanc Simplo Gmbh v. Gaurav Bhatia & Ors CS(OS) 2563/2013 & I.A.2360/2014 decided on 4 January, 2017.

[8] Nike Innovate C.V v. Ashok Kumar, TM No. 23/17 (2017).

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