In recent years the Indian economy has opened up and grown dramatically. As a result, India’s prominence in the global economy has increased significantly, sparking huge interest from foreign investors. In almost all industry sectors, multinational companies are now doing business in India. As a result, India’s intellectual property (IP) laws and enforcement regime are being thrown into the spotlight and subjected to scrutiny for their adequacy and compliance with established global standards.
This article focuses on the IP environment in India, and aims to provide IP owners with a practical insight into the various IP laws and enforcement options that exist.
IP Legislative Framework
To honour its obligations under various international treaties and agreements, India has made several prominent changes to its IP laws and its customs laws, including the introduction of border control measures. IP owners now have a variety of remedies (both civil and criminal) at their disposal.
Trade Marks Act 1999 (the 1999 Act)
This legislation is compliant with the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) and contains important provisions that can be used by trade mark owners to combat infringement. It provides broader protection for well-known marks than before and has widened the scope of infringement.
Civil remedies
Trade mark owners can file civil suits against infringers and obtain injunction orders on the grounds of trade mark infringement and passing-off. Practically speaking, if a trade mark owner is able to obtain an interlocutory injunction at an early stage of the proceedings, they will be able to quickly put an end to the infringer’s activities. Trade mark owners will be pleased to note that the civil courts (especially the High Courts) have become more aware of the damage (economic or otherwise) that infringers cause to industry and end consumers. These courts now regularly appoint local commissioners to carry out searches or seizures at the infringer’s premises, and confiscate infringing goods, machines, dyes and plates. Further, to help assess the damages suffered by trade mark owners, the courts also make orders for inspection of the infringers’ accounts to determine production quantities and distribution channels.
Criminal remedies
Trade mark owners also have the option of filing criminal cases against infringers for offences such as the falsification of a trade mark and related acts (eg the application of a false description to goods or services). These offences are punishable by imprisonment and fines. Powers have been given to the police to raid infringers’ premises and seize infringing goods. However, the police are required to consult the Trade Marks Registry (TMR) before carrying out the search and possible seizure. Considering the frequency with which infringers change their location, this requirement has been criticised by brand owners as an unnecessary formality that delays action. Brand owners also frequently complain about the need to manage and incentivise the police who do not treat IP crimes as serious crimes. They also complain that, because they are already over-burdened by cases involving crimes such as murder and theft, the criminal courts do not give IP crimes high priority or treat them sufficiently seriously.
Copyright Act 1957 (the 1957 Act)
The amended 1957 Act greatly enhances the rights of copyright holders and provides stricter punishment for infringement. The 1957 Act empowers police officers (of certain rank) to seize, without warrant, copies of infringing works and the plates used in their production. The 1957 Act also empowers the Copyright Registrar and appropriate authorities to prevent the importation of infringing copies into India, and to enter any ship, dock or premises where such copies are suspected to be found. Further, the 1957 Act defines infringement as a criminal offence, punishable by imprisonment and fine.
Interestingly, trade mark owners have tried to use the copyright legislation to better protect their label or device marks against infringers. As explained above, under the 1999 Act, the police are required to consult with the TMR before carrying out any raids on alleged infringers. However, no such requirement exists under the 1957 Act. Trade mark owners have, therefore, approached the police under the 1957 Act instead (stating that the label or device copied by the infringer is protected by copyright as an artistic work) and requested that raids are carried out without the need for consultation with the TMR. However, the police have, in practice, refused to comply in the absence of proof of a copyright registration in respect of the label. Therefore, this approach has not conferred any benefit on trade mark owners.
Patents Act 1970 (the 1970 Act)
Post-2005 India’s patent laws became fully TRIPS compliant, which meant that product patents were now available in India. Civil relief for patent infringement includes injunctions and an award of damages.
The 2005 amendments to the 1970 Act sparked an increase in litigation between Indian generic manufacturers and multinational research companies. At stake is the US$9bn Indian pharmaceutical industry which, apparently, has grown at a rate of 7% (compound annual) for the past six years. Exports have been a major growth driver, as some of the bigger Indian generic manufacturers have targeted the overseas markets of Africa, the Middle East, and Latin America. In litigation against the big multinational players, the local generic manufacturers have sharpened the debate by arguing that providing cheaper life-saving drugs is in the global public interest. As this argument has been raised in several pending patent infringement cases, we should see over the next few months how the Indian courts deal with the competing interests involved.
Designs Act 2000 (the 2000 Act)
Design law gained prominence in India with the evolution of textile technology. It is now relevant to a wide range of products and industries. IP owners can register industrial designs (provided they are new or original) under the 2000 Act and enjoy protection for the registered design for a period of ten years. Owners of registered designs can prevent the unauthorised manufacture, sale or importation of infringing articles. Infringement actions are filed with the appropriate District or High Court. Available civil relief includes injunctions and either an account of profits or an award of damages.
The overlap in the subject matter of copyright and design protection has caused some ambiguity, which has led to a series of litigation cases. Typically, while deciding these cases, the courts have examined the IP owner’s original intention, to determine whether or not the artistic work in question was intended to be applied industrially.
Customs Act 1962 (the 1962 Act) and border measures
India overhauled its customs laws and border protection measures by introducing the Intellectual Property Rights (Imported Goods) Enforcement Rules 2007 (the Rules). Under the Rules, IP owners can register their rights (in patents, designs, trade marks, geographical indications and copyright work) with customs authorities across 36 Indian ports. These ports can be covered by the IP owner under a single recordal application. Once the IP owners’ rights are registered, the authorities are empowered to confiscate or suspend clearance to import allegedly infringing goods. Recent seizures made by customs authorities, and the subsequent destruction of infringing goods, suggest that this procedure is proving to be a potent weapon in IP owners’ fight against infringers, particularly those based in China, Hong Kong and Thailand and importing goods into India. To enhance the effectiveness of this legislation, the government has also directed customs authorities to develop specialised IP rights (IPR) cells across various Indian ports.
What is the best option for IP owners?
IP owners continue to debate the most effective means of combating infringement and counterfeiting in India. Unlike China, which has well-established administrative remedies, India continues to rely heavily on civil or criminal actions to combat infringement. Obviously, there are advantages and disadvantages in both civil (through the courts) and criminal actions (through the police or the Magistrates’ Court). While devising a strategy, IP owners also need to consider the specific problems they are likely to encounter in the Indian market.
Battling small, but resilient counterfeiters
In countries like China, IP owners usually find large factories producing infringing products. However, in India, they are more likely to find small and medium-sized infringers who, although individually insignificant, collectively make a big impact. At times, IP owners are reluctant to take action against these infringers on the basis that the low-production volumes are not significantly impacting sales. However, our experience shows that an early strike not only helps prevent small players from becoming organised, but also deters new players from entering the field.
Counterfeiting in India varies from sophisticated operations that target overseas markets to small re-filling operations. Typically, re-filling operations involve a chain where ‘rag pickers’ bring in used bottles that are produced by the original manufacturer. The printing of fresh labels is outsourced, and in an overnight operation the used bottles are re-filled and sold in the market as fresh products. Rising consumerism and an increasing appetite for branded goods among the Indian middle-class combine to provide a ready market for counterfeit products in India. It is now common, in fact, to find markets developing for a specific type of counterfeit product. Operators in these markets have strong associations that work together to oppose raids, using organised mobs to create mayhem and confusion that allow the counterfeit goods to be removed without trace. Counterfeiters often have their own informer network, which enables them to receive tip-offs about possible raids.
In this scenario, the role of investigators in helping IP owners combat counterfeiting has become very important. IP owners should investigate all links in the counterfeiting chain to devise a practical strategy and determine the most effective enforcement option (civil or criminal).
Are criminal actions more effective against counterfeiters?
Often, IP owners are tempted to opt for criminal action first. Perhaps they feel that criminal action, which involves the police, will act as a strong deterrent against further infringement. However, in India they quickly discover that the criminal route entails some practical difficulties. Liaising with the police can be a cumbersome exercise as they are often accused of being slow and lacking IP knowledge. There are even suggestions of corruption in the administrative system. IP owners also discover that they have less control over criminal proceedings, partly because of slow prosecution (criminal courts are overburdened with cases) and partly because criminal prosecution is essentially driven by the state as opposed to the IP owners themselves. In view of this, IP owners are frequently prompted to seek civil relief instead.
Choice dictated by the IP owner’s objective
Practically speaking, the choice of action ought to be dictated by the IP owner’s underlying objective. If, for example, the IP owner perceives a market-level problem and desires to carry out multiple raids, criminal action may be the better route to take. On the other hand, if the IP owner wishes to pursue specific targets (eg a manufacturing unit or big wholesaler or importer), civil action may be preferable. As previously discussed in this article, civil courts commonly appoint commissioners to carry out search and seizure at the infringer’s premises, as well as an inspection of the infringer’s accounts. Often, because the civil courts provide police assistance for implementing these searches, seizures and inspections, a civil action may have the same deterrent effect as a criminal action.
What about costs and damages?
In connection with civil actions, IP owners will be concerned to know whether or not they are likely to be awarded damages and costs. Until recently, the concept of civil courts awarding costs and damages in IP disputes was not fully developed. This meant that civil action was of little or no deterrent value. IP owners and civil courts also faced a problem in quantifying damages, because infringers typically would not maintain proper records of their transactions for various reasons, such as tax evasion. Further, the process of determining damages on the basis of actual or potential loss suffered by the rights holder was cumbersome, so IP owners generally preferred to relinquish their claim.
However, increasingly, the civil courts are recognising the need to impose financial penalties in the form of damages to discourage law breakers from violating the IP rights of holders. Thus, the damages being awarded by the civil courts are not only compensatory in nature, but also punitive. By way of illustration: in an action brought by the publisher of Time magazine, the court awarded approximately US$11,000 as punitive damages. In another action, brought by Microsoft, the court awarded approximately US$43,800 damages. Although this trend is encouraging, IP owners would argue that going forward there is a need for the courts not only to award heavy punitive damages, but also to simplify the process of recovery of damages from the counterfeiter or pirate.
Conclusion
As in any other developing country, working with the law enforcement authorities and courts in India can be challenging. However, the IP enforcement environment has been greatly improved in recent years. As long as IP owners are clear about their objectives and have an appropriate strategy in place, it should be possible to achieve the desired results.
By Darshan Ramamurthy, consultant, and Ranjan Narula, consultant, Rouse.
E-mail: dramamurthy@iprights.com; rnarula@iprights.com.
