By Shilpi Saurav Sharan and Prabhjot Kaur
Counterfeiting is a notoriety recognized globally as the manufacturing of articles or products in a manner in which they closely resemble the products of another. The resemblance of one product to another is often so striking, or even identical, that consumers are unable to identify genuine products from the counterfeit ones. According to the Organization for Economic Co-operation and Development’s Report titled “The Economic Impact of Counterfeiting”, counterfeiting is defined as “any manufacturing of a product which so closely imitates the appearance of the product of another to mislead a consumer that it is the product of another.”1 Counterfeiting of products is not limited to physical establishments; rather, has emerged as a threat in digital world as well. As the world is moving towards a digital revolution, e-commerce and social media platforms have become a go-to shopping arcade for many, thereby, spreading the counterfeiting virus in the global virtual space.
Needless to state, counterfeit goods affect not only the welfare of the consumer but also the economic state of a country. As per the Federation of Indian Chambers of Commerce & Industry (FICCI) report dated September 22, 2022, illicit trade in five key industries caused the Indian exchequer a tax loss of Rs 58,521 crore and also resulted in the loss of 1.6 million jobs. The report, titled ‘Illicit Markets: A Threat to Our National Interests’, elucidated that illicit market in the five industries, namely, mobile phones, household and personal goods, packaged foods, tobacco products, and alcoholic beverages accounted to Rs 2.6 trillion in 2019-202. This significant elevation in the number of losses is calculated to be a negative impact of E-retailing of products. As per the article from Hindu Business Line, more than 30 percent of the drugs sold online are fake, taking over a million lives each year3.
While the COVID-19 pandemic spread around, individuals were obligated to nest indoors having no choice but majorly resort to online purchases, unknowingly, making e-commerce a breeding ground for fake vendors. Owing to anonymity and multitude of listings on hourly basis, keeping a check on counterfeiters is highly challenging. This calls for robust measures for the security of the products and rights of the sellers and consumers. In our former articles, we have shed light on the unabated rising of counterfeit problems, which may be tackled only by the right holders who are diligent in keeping a track on the market activities so as to enforce their rights as soon as any illegal counterfeits are discovered4.
In Sirona Hygiene Private Limited v. Parulben Navnath Chothani Trading as Shiv Enterprise & Ors5 ., Justice Pratibha M. Singh of Hon’ble Delhi Court condemning the online sale of Counterfeit goods stated, “The sale of such counterfeit/knock-off products has become prolific on the internet and needs to be arrested in order to protect the owners of the trade marks as also the customers who purchase these products.”
Over the years, many have come up with solutions shedding light on anti-counterfeiting arrangements and mechanisms. With the help of computer technologies and big data, the Chinese e-commerce giant, Alibaba has rolled out a sophisticated system governed by technology, business practices and law, for detecting counterfeit products. Such includes fake product identification modelling, image recognition techniques, semantic recognition algorithms, product information databases, and real-time interception systems and data collaboration platforms, with an accuracy rate of 97.6%6. Likewise, in India e-commerce companies such as Flipkart and Snapdeal are diligent in catching fake products by use of algorithms detecting price gaps thereby comparing it with original prices.
On the similar lines, Amazon also launched its anti-counterfeiting tool, Project Zero that stands for zero tolerance for counterfeit goods7 thereby consisting of three separate measures for combating counterfeiting, namely, automatic protection which engages artificial intelligence software that aids in identification, blockage and removal of counterfeited goods, self-service counterfeit removal that allows genuine brand owners to remove counterfeit products directly and product serialization wherein Amazon provides unique serial numbers for each product in order to ensure authenticity of the same.
The Counterfeit detector
While the social-media and web platforms are on cutting edge of its battle against counterfeiting, numerous sought to rely on the Counterfeit detector or Anti-Counterfeit Solutions which consists of wide array of digital tools and mechanisms such as holograms, smart cards, biometric markers, data modelling identification, block chain applications, blacklisting and whitelisting, search engine de-indexing and many more8. Genuine proprietors utilize these innovations at diverse stages of the method and ensure that their products are not replicated. From selecting the level of security to distinctive sorts of verification of true items, brands ensure their esteem and property is safeguarded by these detectors, which now can be verified in a practicable way, that is, by one-click on mobile phone, thanks to the digital technology!
Additionally, a number of agreements have been signed by various countries to act against the practice of counterfeiting and upliftment of intellectual property. One such Agreement is the ‘Anti-Counterfeiting Trade Agreement’ signed on October 01, 2011 which was formulated to create new global intellectual property enforcement standards that go beyond current international law. The Agreement was initially signed by eight countries including United States of America, New Zealand, Australia, European Union and seven others, India not being a part of the same.
Keeping into consideration the dark world of counterfeiting, India has rolled out the National IPR Policy, to cut back counterfeiting and promote general awareness about intellectual property under which it has promoted Intellectual Property Rights Cells in various states to increase awareness wherein training programs are conducted for enforcement agencies, customs and judicial forums. The Parliamentary Standing Committee on Commerce presented a report on ‘Review of the Intellectual Property Rights Regime in India’ in the upper house of Rajya Sabha on July 23, 2021 shedding light on rising counterfeit and piracy activities as well as specific legislations to curb these illicit practices in India. The report highlighted that in order to curb piracy and counterfeiting, a stringent legislation through strong inter-departmental coordination must be implemented, together with an enhancement in the capacity of enforcement agencies, such as inclusive IPR cells in the state police. It was further recommended to establish a method to estimate revenue loss from sale and circulation of counterfeit products in the market. As far as products that are in the process of patent grant are concerned, it was recommended that such products should be labelled with a disclaimer ‘patent pending’ (patent applied, but not yet granted) to deter misuse and yield marketing benefits9.
The said recommendations were evaluated by the Department for Promotion of Industry and Internal Trade and after taking the recommendations on record, DPIIT exclaimed that various initiatives to curb piracy and counterfeiting activities are undertaken through ‘Cell for IPR Promotion and Management (CIPAM)’ such as Anti-Piracy and Anti-Counterfeiting campaigns to raise awareness in respect of the malpractices conducted by business owners in order to aid general public in forming a distinction between genuine and fake products. The Department in association with FICCI also launched IPR Enforcement Toolkit for Police, which aids the police to deal with crimes and malpractices related to Intellectual property, both in trademark and copyright domains., Additionally, Ministry of Home Affairs issued an advisory for all State Police Academies directing them to include information and remedies against crimes in the Intellectual Property domain in their training curriculum10.
The brand proprietors and companies are becoming mindful of the falsifying products which are driving to decay of their Intellectual Property and brand esteem. The issue has found an arrangement within the Anti-Counterfeit solutions, be that as it may, the legitimate assurance is equally and adequately needed.
The occurrences of counterfeit increased on an average from year to year by 20% from 2018 to 2020 with Pharmaceuticals, Tobacco, FMCG Packaged Products, Currency and Liquor being the most affected divisions and they constitute more than 84 percent of the total counterfeit incident reported11. In conjunction with Anti- Counterfeit arrangements, it is vital to supply lawful security to Intellectual properties associated with these sectors.
The Consumer Protection Act, 201912 , define “spurious goods” as closely associated with previous definitions of Counterfeit goods as “such goods which are falsely claimed to be genuine.” The Consumer Protection Act, 2019 prescribes punishment for manufacturing for sale or for storing or selling or distributing or importing spurious goods under Section 91.
Rule 5 of The Consumer Protection (E-Commerce) Rules, 2020, provides that “every marketplace e-commerce entity shall require the sellers through an undertaking to ensure that descriptions, images, and other content pertaining to goods or services on their platform is accurate and corresponds directly with the appearance, nature, quality, purpose and other general features of such good or service in a clear and accessible manner, displayed prominently to its users at the appropriate place on its platform”13
Section 79 of Information Technology Act, 2000, comes as a rescue to genuine intermediaries which states that an intermediary shall be protected and shall not be held liable for third-party content on its platform provided that the said intermediary observed ‘due diligence’ as prescribed by the Central Government. This immunity to intermediaries is termed as the ‘Safe Harbour’ Principle.14
The Delhi High Court in Christian Louboutin Sas versus Nakul Bajaj, CS(COMM) 344/2018)15 held that the intermediary should not knowingly host information which is contrary to the Information Technology (Intermediaries Guidelines) Rules, 2011. When an e-commerce website is conspiring, abetting, aiding or inducing, or contributing to selling counterfeit products, it could be said to cross the line from being an intermediary to an active participant. In such a case, the website would be liable for infringement in view of its active participation. If any intermediary initiates transmission, selects the receiver of the transmission or selects the information contained in the transmission, it may lose exemption which it is entitled to.
Counterfeiting is defined and penalized under the Indian Penal Code, 186016 . Section 28 of the Indian Penal Code states “A person is said to “counterfeit” who causes one thing to resemble another thing, intending by means of that resemblance to practise deception, or knowing it to be likely that deception will thereby be practised.” Punishments relating to counterfeiting of coins, government stamps and articles of national interest are elaborated under Chapter XII, whereas, counterfeiting of marks comes under the ambit of Chapter XVIII of the Indian Penal Code, 1860.
Additionally, the Drugs and Cosmetics Act and the Food Safety and Standards Act, also gives a significant contribution in preventing counterfeit products, especially in respect of pharmaceutical and food products, thereby, empowering officers and enforcement agencies to seize false imitations of branded goods as well as to take away manufacturing licenses of those involved in such activities. Similarly, import of infringing goods is prohibited under Chapter XIV of the Customs Act 196217 and Section 6 of the Intellectual Property Rights (Imported Goods) Enforcement Rules 200718 . Registered holders of trademarks also have the rights to register their trademarks with custom offices with an intent to put a stop on import/ export of counterfeited products.
Prima facie, counterfeiting is a sort of intellectual property infringement in which the owner’s rights are abused. The Trade Marks Act, 199919 does not explicitly characterize counterfeit in connection to trade marks, however, Section 29 of the Act states that “A registered trade mark is infringed by a person who, not being a registered proprietor or a person using by way of permitted use, uses in the course of trade, a mark which is identical with, or deceptively similar to, the trade mark concerning goods or services in respect of which the trade mark is registered and in such a manner as to render the use of the trade.”
Punishment for use of false trademarks, filing false trademark applications, untrue trade depictions and selling merchandise or services carrying false trademarks or trade depictions have been elaborately mentioned under Section 102-107 of the Trade Marks Act, 1999.
With the increasing reliance on e-commerce and the rise in incidents of counterfeiting in digital environment, a diverse range of statutes that indirectly provide a remedy for counterfeiting is proving to be insufficient. In the present scenario of uncertainty, e-commerce has become an aide and enemy at the same time. There is a need for change in reforms and to bring about a consolidated law that directly aims at redressing the menace called ‘Counterfeiting’. Although the practice of counterfeiting is addressed in the Indian Penal Code, 1860, Consumer Protection Act, 2019, and Trademarks Act, 1999, there needs to be an introduction of a new law that provides for cogent solutions to battle against counterfeiting in the digital world. Additionally, e-commerce platforms must make use of the futuristic technologies and sign up for counterfeit detectors and other mechanisms that help in detection of counterfeiters, thereby, benefitting both the proprietors and the consumers.
5. CS(COMM) 260/2022
15. CS (COMM) 344/2018