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How Brands Can Navigate India’s IP Landscape

India can seem intimidating for brands, but with the right approach, there is nothing to fear, say Ranjan Narula and Rachna Bakru.

To attract investment from companies /intellectual property (IP) holders for manufacturing and distributing their products in India and to assure brand owners that their rights are safeguarded, the Indian government has taken several steps to streamline enforcement procedures. The setting up of the commercial courts to deal with IP disputes and, recently, the IP Division at the Delhi High Court are positive steps to expedite resolution and cut down on litigation costs.

IP holders in the past have voiced their concerns over delays and drawn-out procedures that can prove a dampener when making investment decisions. With pressure to control costs while maintaining brand purity, businesses today are eager to explore alternative dispute resolution mechanisms such as arbitration, Lok Adalat (the People’s Court), conciliation, and mediation.

Mediation at both the pre- and post-litigation stage is becoming particularly popular because it is informal and results in speedier resolution.

Addressing Brand Infringement Issues

As the appetite for branded goods among the burgeoning Indian middle-class increases, the availability of infringing, counterfeit, and lookalike products is also on the rise. Brand owners are grappling with various brand protection issues—some straightforward, some complex.

For ease, they have been categorized as follows:

  • Clear copying of brands—direct infringement with identical or similar marks used for the same goods;
  • Lookalike products—the brand is not copied, but the color scheme, layout, and essential elements of product packaging are;
  • Use of a well-known mark on different goods—a famous mark is copied for use on entirely different goods to take advantage of its goodwill and brand reputation;
  • Use of a brand name as a corporate or trading name— to create a false impression and association with the registered mark; and
  • Comparative advertising resulting in brand denigration.

In the digital space, the common issues faced by brand owners are: Sales of counterfeit and infringing goods through e-commerce portals, social commerce, trade portals, and auction sites;

  • Creation of false websites that include the use of domain names, trade names, color schemes/layout, and logos of well-known brands to run fraudulent schemes for collecting money from gullible consumers;
  • Meta-tagging by competitors and counterfeiters to divert Internet traffic to boost sales;
  • Use of brand names and other keywords by counterfeiters to siphon organic search traffic; and
  • Unauthorized use of digital images of the packaging and other proprietary material online to attract consumers.

Remedies

  1. In cases of straightforward copying of a brand where goods or services are offered online or available through brick-and-mortar stores, brand owners can seek civil or criminal remedies—both of which have pros and cons. A strategic analysis of the scale of the problem is advisable. Further attempts to understand the problem and collate data online and from distribution chains can lead to a targeted approach and tailored solutions.
  2. In cases of rampant infringement or counterfeiting that covers a wide area, criminal raids conducted by the police may be the preferred option. In instances of a single manufacturer engaged in infringing activities, it is recommended to take civil action seeking an injunction followed by search and seizure through a court-appointed commissioner, as it can result in a settlement and the cessation of the infringing party’s activities.
  3. In cases involving deceptive similarity of a mark and packaging, a better route is civil suits for trademark infringement and passing off, as the law enforcement agencies responsible for criminal matters are less likely to be conversant with the nuances of IP law.

One of the challenges in working with Indian courts has been the frequent delays and time it takes to conclude a case. The government has addressed this issue by establishing commercial courts to deal with IP disputes, and more recently, the Delhi High Court has set up an IP Division to have specialist courts/judges hear IP cases.

“The past five years have seen a dramatic rise in Internet penetration in India.”
Ranjan Narula (pictured) and Rachna Bakhru, RNA Technology and IP Attorneys

Commercial courts

  1. Commercial courts were established in January 2016 with the explicit intention of expediting proceedings to provide a speedy resolution for rights holders. IP disputes are classified as commercial disputes. Therefore, suits or claims with a value exceeding Rs300,000 (approximately US $4,500) can be filed before the commercial courts. A further amendment entails mandatory pre-institution mediation for suits that do not contemplate urgent interim relief.
  2. To expedite proceedings and swift justice, the act also considers that the piecemeal production of documents by various parties at various stages delays proceedings. Thus, itrequires the filing of all relevant documents at the time of filing the suit itself or at the time of filing the written statement (reply by the defendant). Moreover, the act also sets a 120-day limit for filing a written statement, beyond which the right to file such a statement is closed and the court will not accept or record a delayed submission. In Dr Reddy’s Laboratories Limited v. Jibesh Kumar (CS (COMM) 243/2017), the Delhi High Court refused to record the written statement filed by the defendants after the 120-day limit had expired.
  3. Procedures have also been laid down for the discovery and inspection of documents and the admission and denial of documents to reduce trial time.
  4. To speed up the examination of parties and recordal of evidence, the act provides that court-appointed commissioners may conduct trials, so that the proceedings are completed in a time-bound manner with no long adjournments. The examination of witnesses has resulted in expedited trials and matters being put up for final arguments.
  5. The act also includes a provision for seeking summary judgments. Any party can argue that the other side does not have a valid case and seek a summary judgment without a drawn-out trial. On hearing the parties and deciding whether they are satisfied, the court can pass appropriate orders in this regard. In Superon Schweisstechnik India Limited v. Modi Hitech India Ltd (CS (COMM) 750/2018), the Delhi High Court passed a summary judgment dismissing the suit filed by Superon Schweisstechnik, holding that the plaintiff did not have a valid case under the law of passing off and would not succeed even after a full-fledged trial. Similarly, in SAP SE v. Saraswati Technologies (CS (COMM) 1664/2016) – pursuant to the service of a summons and appearance of the defendants and being fully convinced of the blatantly infringing activities of the defendants – the Delhi High Court overturned the suit and awarded damages of Rs750,000 (approximately US $11,000) in favor of the plaintiff.

Criminal action

In recent years, several states in India have established specialized departments, including the IP Cell within the police, which combats the sale and distribution of counterfeit goods. Police personnel specially trained in IP matters have made such raids more systematic and streamlined and more effective. Criminal raids leading to the arrest of infringers deliver a strong message to the market. Nevertheless, initiating criminal action through the police brings several challenges:

  • Information leakage resulting in the removal of the infringing or counterfeit goods;
  • Slow prosecution at the magistrate court due to the backlog of cases, with no special preference given to IP cases;
  • Police personnel not trained to tackle cybercrime or to track online sales of counterfeit goods; and
  • Limited priority is given to IP cases due to the police’s natural preoccupation with crimes against human life and property.

Notwithstanding these challenges, a criminal action is a good option if a brand owner’s objective in conducting raids is to seize the goods and create a stir in the market to deter other traders.

Customs

The Customs Recordation System under the IP Rights (Imported Goods) Enforcement Rules 2007 is an effective remedy for rights holders. The recordation procedure is simple and provides an effective interface for brand owners to work with Customs in targeting, intercepting, and detaining consignments of infringing goods imported into India.

Once the IP is registered and Customs uncovers any goods which it has reasonable grounds to believe infringe the rights holder’s IP, it will suspend clearance of the imported goods. Customs must inform the rights holder or authorized representative within 10 days of seizure, asking them to confirm whether the consignment is genuine or counterfeit.

Customs will release the goods if the rights holder fails to join the proceedings within the stipulated time (i.e., five days or two days in the case of perishable goods) and fulfills its obligation in determining that suspended goods infringe its IP.l

“The Customs Recordation System under the IP Rights (Imported Goods) Enforcement Rules 2007 is an effective remedy for rights holders.”
Ranjan Narula and Rachna Bakhru (pictured), RNA Technology and IP Attorneys

Brand owners are finding the process effective for stopping counterfeit goods at the border. To make this even more effective, they are advised to engage with Customs to increase awareness of the counterfeit goods circulating in the domestic market and imported from overseas and invest time and effort in improving Customs officers’ ability to identify and detain infringing goods.

Online Enforcement

The past five years have seen a dramatic rise in Internet penetration in India. It is estimated that India already has 650 million Internet users and is well on the way to reaching one billion users by 2025. The reach of the Internet and the ease with which it allows counterfeit goods to be displayed and accessed by consumers throughout the country requires rapid action.

The debate on the role and liability of intermediaries has intensified, given that enforcement online is notoriously difficult, as infringers can conceal their identity through the provision of incomplete information or because they are in a different country. Proponents of free speech argue that regulation of the Internet by holding intermediaries liable for users’ online activity is a form of censorship by proxy that imperils free expression and innovation.

At the same time, brand owners argue that e-commerce portals must have stringent due diligence requirements to keep online markets free of counterfeit goods. In India, the situation is even more complex as the government’s investment policy does not allow for foreign direct investment in multi-brand retail. Thus, most e-commerce players (e.g., Amazon, Flipkart, and Snapdeal) run “marketplace” models, offering retailers space to sell their wares and acting as intermediaries for all goods offered on a portal.

Therefore, they can invoke safe harbor provisions under the Information Technology Act to avoid liability for selling counterfeit goods. However, they must take down the infringing or counterfeit products on the notification. Brand owners have started to work closely with major e-tailers to keep the online space free from counterfeits and infringement. Further, many e-tailers have launched programs to create a safe online market space.

With a population of more than 1 billion—65 percent of whom are under age 35—India offers exciting opportunities to brand owners looking to invest in the country. It also offers a great many challenges. As India removes policy barriers to attract investment, initiatives designed to improve IP rights enforcement will yield results.

Top tips for tackling online brand infringement

  • Strengthen your IP portfolio: obtain statutory protection for your brands and regularly audit your portfolio.
  • Register with popular social media sites such as Facebook, LinkedIn, and Twitter, creating dedicated pages and usernames for your brands to preclude others from doing so.
  • Register key domain names and establish a clear policy on domain name protection (including generic top-level domains) and third-party use of similar domain names.
  • Establish a monitoring program to track online misuse of your IP rights.
  • Establish a cease-and-desist notice program to safeguard your brands and IP, supported by rigorous follow-up.
  • Use the takedown procedures established by Internet service providers, websites, and social media sites to remove infringing content.
  • Conduct market and online investigations following leads presented by your monitoring program to take appropriate action against habitual or key infringers from time to time.

Ranjan Narula is managing partner at RNA, Technology and IP Attorneys. He can be contacted at rnarula@rnaip.com

Rachna Bakhru is a partner at RNA, Technology and IP Attorneys. She can be contacted at rbakhru@rnaip.com

Video courtesy of Envato Elements / GHProductions

Monday, May 2, 2022

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