SALE OF COUNTERFEIT GOODS

Submitted By: Submitted To:

Shubh Dixit (1245) Mr. Bipin Kumar

Third Semester Faculty of Law

B.A. LL.B.

NATIONAL LAW UNIVERSITY, JODHPUR

SUMMER SESSION

(JULY-NOVEMBER 2015)
 SALE OF COUNTERFEIT GOODS

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 ACKNOWLEDGEMENT

On the completion of this project I find that there are many persons to whom I
would like to express my gratitude, since without their help and co-operation
the success of this educative endeavour would not have been possible.

I welcome this opportunity to express my sincere gratitude to my teacher and

guide Mr. Bipin Kumar, Faculty of Law, who has been a constant source of
encouragement and guidance throughout the course of this work.

I am grateful to the IT Staff for providing all necessary facilities for carrying
out this work. Thanks are also due to all members of the Library staff for their
help and assistance at all times.

I am also grateful to all my friends and colleagues for being helpful in their
differences and for their constant support.

Shubh Dixit

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 CONTENTS

ACKNOWLEDGEMENT ......................................................................................................... 3

INTRODUCTION ..................................................................................................................... 5

WHAT ARE COUNTERFEIT GOODS? .................................................................................. 6

MERCHANTABLE QUALITY ................................................................................................ 8

LAWS TO PROTECT COUNTERFEITING ............................................................................ 9

Trademarks Act 1999 ........................................................................................................... 10

The Copyright Act 1957 ...................................................................................................... 10

Customs Act 1962 ................................................................................................................ 11

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 INTRODUCTION

Counterfeit goods are a menace in the market. They are a menace because they not only fool

the customer to buy goods that will not be upto the mark, but also reduce the goodwill of the

company. In its very basic sense, counterfeit goods are an infringement of trademark or

copyright of a company.

Many legislations have been passed over the years to control the supply of counterfeit goods.

They sure have curbed it to some extent, but completely wiping them is not so easy. People,

who cannot afford genuine goods, tend to satisfy themselves with counterfeit goods. This is

particularly dangerous when it comes to counterfeit medicines and food products.

Rapid advances in technology and liberalisation of the Indian economy has created an ideal

market for people trying to misuse existing brand values that have been cultivated and

nurtured over a period of time. Counterfeiting is a serious crime. The law punishes

counterfeiters and those who purchase counterfeit goods (with fines and legal actions).

Counterfeiting is often associated with money laundering and exploitation of child labour.

The first and foremost thing is know what is counterfeit.

The answer is counterfeit is an imitation which is a fake made usually with the intent to

deceptively represent its content or origins, thus increasing sales appeal due to the reputation

of the imitated product. The word counterfeit most frequently describes forgeries of currency

or documents, but can also describe clothing, software, pharmaceuticals, watches, or more

recently, cars and motorcycles, especially when this results in patent infringement or

trademark infringement.

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 WHAT ARE COUNTERFEIT GOODS?

Section 28 of the Indian Penal Code, 1860 defines counterfeit as “A person is said to

"counterfeit" who causes one thing to resemble another thing, intending by means of that

resemblance to practice deception, or knowing. it to be likely that deception will thereby be

practiced.”1 For a thing to be termed as counterfeit there should be some sort of resemblance

sufficient to cause deception. If there is no such resemblance, it cannot be said to be a

counterfeit.

The International Trademark Association defines counterfeiting as “Counterfeiting is the

practice of manufacturing, importing/exporting, distributing, selling or otherwise dealing in

goods, often of inferior quality, under a trademark that is identical to or substantially

indistinguishable from a registered trademark, without the approval or oversight of the

registered trademark owner. Counterfeits are most commonly called “fake goods” or

“knock-offs.” Many well-known and successful brands, spanning various industries, are

victims of counterfeiting.”2

Counterfeiting is different from traditional trademark infringement or passing off, which

involves, inter alia, the selling of products under confusingly similar trademarks or service

marks (as opposed to identical or substantially indistinguishable trademarks or service

marks).3

Counterfeit goods include fake designer clothes, bags, accessories and perfumes as well as

pirate DVDs, CDs and computer games.

1
Section 28, Indian Penal Code, 1860
2
http://www.inta.org/TrademarkBasics/FactSheets/Pages/Counterfeiting.aspx, last visited on 2 October 2015
3
Ibid

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United States law under 18 U.S.C. § 2320 defines counterfeit as

“i) used in connection with trafficking in any goods, services, labels, patches, stickers,

wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags,

documentation, or packaging of any type or nature;

(ii) identical with, or substantially indistinguishable from, a mark registered on the principal

register in the United States Patent and Trademark Office and in use, whether or not the

defendant knew such mark was so registered;

(iii) applied to or used in connection with the goods or services for which the mark is

registered with the United States Patent and Trademark Office, or is applied to or consists of

a label, patch, sticker, wrapper, badge, emblem, medallion, charm, box, container, can, case,

hangtag, documentation, or packaging of any type or nature that is designed, marketed, or

otherwise intended to be used on or in connection with the goods or services for which the

mark is registered in the United States Patent and Trademark Office; and

(iv) likely to cause confusion, to cause mistake, or to deceive.”

So the main ingredients of counterfeiting are:

1. Causing one thing to resemble another thing

2. Intending by means of such resemblance to practice deception, or

3. Knowing it to be likely that deception will thereby be practiced.

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 MERCHANTABLE QUALITY

In India, sale of commercial goods is governed by the Sale of Goods Act, 1930 which was

carved out of the Indian Contract Act, 1872. Section 16 of the Sale of Goods Act talks about

implied conditions as to the fitness and quality of the goods. Sub-section 2 talks about

merchantable quality. Goods that are bought by the buyer relying on the seller’s skill and

judgment need to be of a specific standard. The Sale of Goods Act does not define

‘merchantable quality’.

It has been held that merchantable can only mean ‘commercially saleable’.4 If there are more

than one quality of goods, then the one that answers the description then, only that quality is

merchantable quality.5

A good that was a counterfeit and the buyer relies on the seller’s judgment, and the seller,

knowingly misleads the buyer by telling him that the goods are original, then the seller can be

held liable under this section.

In India, metro cities like Delhi are the hub of counterfeit goods. Grey markets like Gaffar

Market sell counterfeit electronics that are never of merchantable quality. China is the biggest

source of counterfeit goods in Asia and piracy rate in China is more than 90 per cent. As

much as 30 per cent of the counterfeit products worldwide is being made in China. China

spurious goods are sold all over the world including India counterfeit goods is easily

accessible in Indian market. Countries like Singapore and Hong Kong which are regarded as

shoppers paradise are also den for counterfeited goods brands like Louis Vuitton are most

effected also electronic appliance are the one which are targeted the most.

4
Polluck and Mulla, “Sale of Goods Act” 7th edition, Lexis Nexis Butteworth (Published at Nagpur), pg 181
5
Ibid pg 182

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 LAWS TO PROTECT COUNTERFEITING

India has numerous laws in place to check counterfeiting of goods and their subsequent sale.

Counterfeit goods are not only of poor quality, they also bring a bad name to the authentic

brand owner. Talking about monetary losses, A FICCI survey has estimated the loss of

revenue to the Indian exchequer by way of taxes to be roughly around Rs 1,000 crore a year.

Few laws passed by legislature to curb counterfeiting are-

 Trademarks Act 1999

 Copyright Act 1957

 Patents Act 1970

 Geographical Indications Act 1999

 Drugs and Cosmetics Act 1940

 Prevention of Food Adulteration Act 1954

 Consumer Protection Act 1986

 Indian Penal Code

 IT Act 2000

The punishment for counterfeiting should be both compensatory and punitive. compensatory

to provide for the damages and punitive to deter wrong-doers , to emphasis that breach of

intellectual property rights was a wrong not only to the plaintiff, but also society at large and

the consumers who suffer on account of that deception and to underscore that it is difficult for

the plaintiff to prove the actual damages suffered by him considering that infringers do not

maintain appropriate accounts of their transactions as they know that the same are

objectionable and unlawful. in one such landmark case, the Delhi High Court, in the Time

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Inc. vs. Lokesh Srivastava6 awarded "punitive and exemplary damages," in addition to

compensatory damages, for flagrant infringement of trademarks and copyrights.

Lets look at the laws briefly.

Trademarks Act 1999

 Provides remedies for infringement and passing off in relation to both registered and

unregistered rights. This widens the scope of infringement and makes counterfeiting

and piracy cognizable offences.

 Section 29 defines “infringement” as unauthorized use that is likely to cause

confusion on the part of the public.

 Section 135 provides for civil relief, including injunctions, damages, rendition of

account of profits and delivery up of infringing labels and marks for destruction or

erasure.

 Section 102 defines the offence of falsifying a mark and applying a false mark

 Section 103 sets out penalties, including imprisonment for up to three years and fines

of up to Rs2,00,000.7

The Copyright Act 1957

 Copyright owner can bring an infringement action where it has sufficient evidence to

prove it has been aggrieved.

 Section 55 provides for various remedies, including injunctions, damages and account

of profits

 Section 64 empowers police officers – not below the rank of a sub-inspector – to seize

all copies of infringing works and plates used in their creation.

6
[2006]131CompCas198(Delhi)
7
http://ipr.icegate.gov.in/IPR/index.jsp (last visited- 2nd October 2015)

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  Section 53 authorises the registrar of copyrights to prevent the import of infringing

copies, and to enter any ship dock or premises where such infringing copies are

alleged to be found and order their confiscation.

 Section 63 provides for punishment of up to three years‟ imprisonment and fines of

up to Rs200,000.8

Customs Act 1962

 Defines Goods made, reproduced, put into circulation or otherwise used in breach of

IP laws within or outside India, without the consent of the rights holder or its duly

authorized agent.

 Automated Recordation and Targeting of IPR Protection (ARTS)

 Use of Information Technology and Communication tools to share information9

The most common problem is that manufacturers of genuine branded products are unable to

obtain timely relief as the identity of the defendant is not easily ascertainable. This problem

has been overcome by the grant of what are known as "John Doe" orders. These orders

operate against infringing goods which may be seized wherever they are located and would

operate against any potential defendant who is subsequently identified as the

counterfeiter/infringer and the court order is served on him. One such `John Doe' order was

granted by the Delhi High Court in Taj Television Limited vs Rajan Mondal.10

8
Ibid
9
Ibid
10
FSR 2003 (407)

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 CONCLUSION

The tide in India is turning against counterfeiters and infringers. Until now they were

undeterred, given the inability of genuine branded product manufacturers to cause them

financial damage, and the slow judicial redress. All this is now changing as a result of

progressive judicial pronouncements and legislative amendments. And with numerous

judgments given against the counterfeiters by supreme court of India and various high courts

it can be easily concluded that India is waging a war against the people who are into the

business of counterfeit.

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 BIBLIOGRAPHY

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