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Pooja Tripathi

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1.    INTRODUCTION

 

Counterfeiting is the passing off action of the genuine products to customers. Such products are sold under the famous establishing and manufacturing. This is nothing but the cheating consumer and running parallel operation. Intellectual Property Rights (IPRs) come in hand of passing off action. The statute governing IPRs recognizing such activity as an offence and provide for stringent punishment such as counterfeiting activity. Counterfeiting activity remind us the large scale of counterfeiting in currency. Reserve Bank of India with the help of the statutory provision catches such offenders and brings them to prosecution under the Panel provision.

  1. 2.    COUNTERFEITING : HOW IT IS DONE

 

Counterfeit products may include[i]

i)                    products with correct ingredients, but containing insufficient or erroneous   quantities of active ingredients, or expired active ingredients either to save cost or owing to poor quality control factors;

ii)                  wrong ingredients with possibly toxic elements and impurities and therefore directly harmful to patients;

iii)                without active ingredients or using similar class of cheaper ingredients to escape detection; 

iv)                produced by unhygienic manufacture, or lack of rigorous cleaning between production batches; or

v)                  products with false or misleading packaging.

The Standard of Weight and measure (packaged Commodities) Rules 1977 were enacted to regulates the use of correct weighing and measuring instruments in production, trade and commerce to ensure that exact weight, measure and number of any commodity is provided to any customer as contracted for. It also protects the consumers’ benefits by assuring compulsory declarations on packaged commodities. The Standards of Weights &Measures Act 1956 was the first Act which enacted based on metric system and international system of units recognized by OIML – International Organization of legal metrology in order to provide uniform standards of Weights & Measures.

The Rules have tried to make the manufacturer and traders to be responsible for producing and importing the commodities. Every package kept, offered for sale or sold, shall bear conspicuously on it, the name and complete address of the manufacturer, or where the manufacturer is not the packer, the name and address of the manufacturer and the packer and in case of imported packages, the name and address of the importer. The complete and clear address shall mean the postal address at which the registered office of the manufacturer is situated or the factory is situated so that a consumer can identify and locate the manufacturer or packer.

In case any products manufactured outside India but packed in India, the package shall also display the complete name and complete address of the packer or the importer in India. The name of the manufacturer or packer or importer shall be the actual corporate name, or if not incorporated, the name under which the business is conducted by such manufacturer or packer or importer in India. Also the rules further restrict the application of individual stickers or labels on the package for altering or making any declaration as may be required under the Rules.

COUNTERFEITING IN PHARMACEUTICAL INDUSTRY

At the moment the WHO definition reads as follows:

A counterfeit medicine is one which is deliberately and fraudulently mislabeled with respect to identity and/or source. Counterfeiting can apply to both branded and generic products and counterfeit products may include products with the correct ingredients or with the wrong ingredients, without active ingredients, with insufficient (inadequate quantities of) active ingredient(s) or with fake packaging.

A counterfeit drug or a counterfeit medicine is a medication or pharmaceutical product which is produced and sold with the intent to deceptively represent its origin, authenticity or effectiveness at least to some level. Some examples of types of counterfeit drugs include:

1 On the products’ labels the specified active ingredients has not been contained as such as it is declared.

2 The active ingredient which has shown on the labels is different from what is contained in the product itself.

3 Products which contain the correct strength of the specified active ingredients but whose source is different to the one declared.

4 Products which contain the specified active ingredients but in strengths different to those declared; they may also contain different or different quantities of impurities.

Counterfeit medicines are part of the broader phenomenon of substandard pharmaceuticals. Substandard medicines are those products which the composition and ingredients do not meet the correct scientific specifications and which are thus ineffective and causing dangerous to the patients. There are many reasons to make the substandard products may occur as a result of negligence, human error, insufficient human and financial resources or counterfeiting. The difference is that they are deliberately and fraudulently mislabeled with respect to identity and/or source. Counterfeiting can apply to both branded and generic products and counterfeit medicines may include products with the correct ingredients but fake packaging, with the wrong ingredients, without active ingredients or with insufficient active ingredients. A Spurious drug may or may not have ingredients with therapeutic use while Counterfeit drug may comply with quality standard while imitating popular brands.

According to Dr BR Jagashetty, Karnataka Drugs Controller Currently, there is no definition for counterfeit drugs as far as India is concerned. However, the Drugs & Cosmetics Act only carries definitions of spurious, misbranded and adulterated drugs under Section 17 for the domestic market and Section 9 for imports. However there is still the ambiguity on the definition of adulterated and spurious,

The market circle of counterfeit medicines has made the huge profitable business due to high demand and low production costs. The lack of the stringent legislation in many countries also encourages counterfeiters since there is no fear of being apprehended and prosecuted. When prices of medicines are high and price differentials between identical products exist there is a greater motivating for the consumer to seek medicines outside the normal supply system.

 

COPYRIGHT INFRINGEMENT ON SOFTWARE

 

Form of Piracy[ii]

 

Software piracy is defined as an act of unauthorized copying or loading or distribution of copyrighted software in violation of the end user of the end user license agreement. There are four forms of software piracy; end user piracy, counterfeiting, channel piracy, internet piracy.

–         End user piracy means an end user such as an organization, company, or educational institution uses entirely unlicensed software or software in excess of the licensed purchase.

–         Counterfeiting means it involves the making of the exact replicas of the CDs or DVDs of the original software along with holograms, trademarks, packaging, instruction manuals, and certificate of authenticity. The price of the counterfeit products mostly cheaper than the original one.

–         Channel piracy involves the sale of loose CDs or DVDs on which software program has been burnt. These CDs or DVDs are not lookalikes of the original software CDs; neither are they accompanied by an end user license agreement or a certificate of the authenticity. They are sold at a price which is considerably lower than the original software price.

–         Internet piracy the Internet is used as a means to sell, distribute and advertised unlicensed software programs. This can be done in a number of ways such as through bulletin boards, auction sites, peer to peer networks, blogs and other commercial website.

Counterfeiting includes producing the duplicates of the original CDs or DVDs of the original, along with holograms, trademarks, packaging, instruction manuals and certificates of authenticity. The counterfeit product can be bought by the consumers at a lower price than the original product itself. To give the clarification on what can be called as infringement; Section 51 of the Copyright Act contemplates the various acts that amount to infringement of copyright vested with the owner. Also Section 53 restricts the importation of copies which would infringe copyright.

INFRINGEMENT UNDER TRADEMARK LAW

 

If we look into the provisions under Indian Trademark Act, 1999, under Section 29 has provided the definition of the infringement, however, there is nowhere in the Act which has referred to the definition of the counterfeit. Nevertheless if we look into US Trademark Act, it has been mentioned the definition of both the infringement and counterfeit and from that we can come to know the difference between the “counterfeit” and “infringement”. All counterfeit marks are infringing.  Infringing marks also include a broader class of marks that are “confusingly similar” to genuine marks while counterfeit marks include marks that are “substantially indistinguishable” from a genuine mark, this definition contemplates only minor or trivial differences from the genuine mark.  The “confusingly similar” test for infringing marks contemplates wider differences.

Counterfeit goods has been defined that without authorization of the trademark right’s holder the products, packaging has been imitated which cannot be distinguished the essential feature of the goods itself from the genuine one. Counterfeit goods also include packaging materials, stickers, brochures and instructions even though these are presented separately from the goods themselves.

 

PATENT INFRINGEMENT

Under Patent law regime, a patentee has been conferred the exclusive right to make, distribute or sell the invention in India. An infringement would be happened when any of those rights are violated. A patentee may assign license all or some of these rights and it will not amount o infringement if the assignee or licensee exercise such patent rights. In case of a product patents rights of the patentee are infringed by anyone who makes or supplies that substance commercially. In case of a process patent, the use of such a method or process in India by anyone other than the patentee amounts to infringement.

To consider whether anyone other than the patentee has done which amounts to infringement or not would depend upon:

v  The extent of the monopoly right conferred by the patent which is interpreted from the specification and claims contained in the application of the patentee. Any action which falls outside the scope of the claims would not amount to infringement.

v  Whether he is infringing any of the monopoly rights in the patentee to make, or sell the invention.

 

  1. 3.    REMEDIES AVAILABLE UNDER INTELLECTUAL PROPERTY RIGHTs

 

Remedies available to Copyright

 

CIVIL ACTION: When some person has evidence to prove that his copyright has been infringed, he can bring a civil action against person responsible for such infringement, for compensation and other remedies. Under Section 55 the remedies can be damages to compensate the loss due to infringement or/and injunction prohibiting person infringing from continuing to infringe the copyright.

CRIMINAL ACTION: Some infringements are criminal offences also. As far as computer software is concerned, it is an offence in many countries to make an infringing copy to sell and also to advertise the supply of such programme. Section 64 empowers the police to seize all counterfeit software copies, while Section 63 provides for imprisonment of up to three years and fines of up to Rs200, 000 in case of infringement or abatement. Hence people indulging in software privacy are available for both civil and criminal actions[iii].

Also Section 11 of the Customs Act empowers the customs officials to prohibit the importation and exportation of goods in order to protect copyrights and trademarks. In addition, a new customs recordal system has been introduced through the Intellectual Property Rights (Imported Goods) Enforcement Rules 2007 to strengthen border enforcement with the objective of preventing the entry of counterfeit goods into the country.

 

Remedies available to trademark

The Trademarks Act provides remedies not only for the infringement of a registered trademark but also gives remedy of passing off to protect against infringement of an unregistered trademark. Section 27(2) recognizes the common law remedy of passing off against any person dealing in counterfeit goods. Section 29 mentions the definition of infringement of a registered trademark which includes unauthorized use by a person of a mark which because of its identity or similarity with the registered trademark and use in respect of identical or similar goods is likely to cause confusion on the part public or which is likely to have an association with the registered trademark. Section 135 provides for civil remedies in case of either infringement or passing off. These remedies include injunction, damages, delivery up and rendition of accounts.

Under Trademark Act, 1999 has defined counterfeiting in terms of “falsification” and “false application” of a trademark. According to Section 102 of the Act, “a person shall be deemed to falsify the trademark who either makes that trademark or a deceptive similar mark, or falsifies any genuine trademark, by alteration, addition, effacement or otherwise”. Similarly false application of trademark on goods or packages containing goods, other than genuine goods and including use of any package bearing the said trademark for packing, filling or wrapping, spurious goods. Section 103 provides for criminal remedies such as imprisonment of up to three years and fines of up to Rs200, 000 (around $5,000) in case of counterfeiting. Counterfeit in India is cognizable offence. The occurrence or likelihood of occurrence of an offence can be directly reported to a police officer not below the rank of Deputy Superintendent or to the Intellectual Property Cells of police in cities like Delhi, Mumbai, Kolkata, and Bangalore[iv].

 

Remedies available to Patent

Under the Indian Patent Act, the right of the patentee has been protected. If the monopoly rights of the patentee are violated, his rights are secured by the Act through judicial intervention. The patentee has to institute a suit for infringement. The relief’s which may be awarded in such a suit are Interlocutory/ interim injunction, Damages or account of profits, Permanent injunction.

Section 104 of the Act provides that a suit for infringement shall not be instituted in any court inferior to a District Court having jurisdiction to try the suit. In appropriate cases where the High Court has original jurisdiction to try the suit, the suit shall be instituted in the High Court when an action for infringement has been instituted in a District Court and the defendants make a counter claim for revocation of the patents, the suit is transferred to the High Court for decision because High Court has the jurisdiction to try cases of revocation. Section 104A provides for burden of proof in case of suits concerning infringement. The procedure followed in conducting a suit for infringement is governed by the provisions of code of civil procedure[v].

Only the person who has a right in the patent can institute a suit for infringement. The following persons are entitled to sue:-

(1) The patentee.

(2) The exclusive licensee if the license is registered.

(3) A compulsory licensee when the patentee refuses or neglects to institute proceedings.

(4) A licensee other than the above two licensees can bring an action for infringement upon the terms of the contract between the licensor and licensee.

(5) Assignee, he can sue only after the application for registration of the assignment in his favour has been filed. If a patent is assigned after the commencement of action, the assignee is to be joined as a co-plaintiff. An assignee cannot sue for infringement which occurred prior to assignment.

A suit for infringement can be instituted only after the patent has been sealed. When a specification has been accepted and published i.e., during the period when opposition has been called and is being decided, the applicants cannot institute a suit for infringement. However the damages maintained due to the infringement, committed during the period i.e., between the date of publication of acceptance of complete specification and the date of grant may be claimed in another suit; a separate suit for damages but not suit for infringement. Also a suit can be instituted during the term of even after the expiry of the term even when the term of the patent has expired and infringement occurred during the term of such patent, In case a patent had lapsed and was subsequently restored, committed between the date on which the patent ceased to have effect and the date of publication of application for restoration. When a patent was obtained wrongfully by a person and later granted to the true and first Inventor, no suit for infringement can be instituted for any infringement occurring before the period of such grant to the true and first inventor. Court will issue the notice to the defendant (infringer) so there is no need as such for a person who institutes as such to give the notice to the infringer. Moreover the period a limitation for instituting a suit for patent infringement is three years from the date of infringement.

 

  1. 4.    INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHT WITH THE CUSTOMS ACT, 1962 AND PROCEDURE UNDER INTELLECTUAL PROPERTY RIGHTS (IMPORTED GOODS) ENFORCEMENT RULE, 2007

 

Customs Act, 1962 prohibits import of goods that infringe intellectual property. Section 11 of the Act empowers the Central Government, for the purposes specified in subsection 11(2), to prohibit import or export of goods of any description by issuing a notification. Section 11(2) (n) read with Section 11(1) of the Act empowers the Central Government to prohibit import or export of goods for the protection of patents, trademarks and copyrights. Section 11(2) (u) covers prohibition for the prevention of the contravention of any law for the time being in force. Section 111 and 113 of the Act empowers the Customs to confiscate improperly imported and exported goods respectively.

There have been attempts in the past by the Central Government to issue notifications under Section 11 of the Act and prohibit import of goods that infringe intellectual property. The Central Government issued a notification in 1960 prohibiting export – through sea and land – of goods that attract Section 78 and 117 of the Trade Marks Act, 1968. Another notification was issued in 1964 which prohibited goods bearing false trade mark, false trade description and goods passing off a trademark.

On May 8, 2007, the Central Government vide Notification No. 49/2007-Customs (N.T.), prohibited the import of the following goods, subject to conditions and procedures as specified in the Intellectual Property Rights (Imported Goods) Enforcement Rules,2007, namely[vi]:-

  1. goods having applied thereto a false trade mark as specified in Section 102 of the Trade Marks Act, 1999;
  2. goods having applied thereto a false trade description within the meaning of clause (i) of sub-section (1) of Section 2 of the Trade Marks Act, 1999;
  3. goods made or produced beyond the limits of India and intended for sale, and having applied thereto a design in which copyright exists under the Designs Act, 2000;
  4. the product made or produced beyond the limits of India and intended for sale for which a patent is in force under the Patents Act,1970;
  5. the product obtained directly by the process made or produced beyond the limits of India and intended for sale, where patent for such process is in force under the Patents Act 1970;
  6. goods having applied thereto a false Geographical Indication within the meaning of Section 38 of Geographical Indications of Goods (Registration and Protection) Act, 1999;
  7. goods which are prohibited to be imported by issuance of an order issued by Registrar of Copyrights under Section 53 of the Copyright Act,1957.

 

The Central Government also notified ‘Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007’ on the same date. The rules were notified with a view to strengthen the statutory and executive guidelines provided for the protection of intellectual property rights at the borders.

Under the rules, an intellectual property right holder may give notice in writing to the Commissioner of Customs or any Customs officer authorized in this behalf by the Commissioner, requesting for suspension of clearance of goods suspected to be infringing intellectual property rights. Such notice shall be given in the format prescribed in the Annexure to the Rules and all the information required in the notice should be furnished within 15 days.

Such notice should be registered or rejected within 30 working days of the date of receipt of the notice or date of expiry of extended 15 days period provided for furnishing information required to be filed with the notice. In case the notice is registered, the minimum validity period shall be one year unless the noticee or right holder requests for a shorter period for customs assistance or action. The grant of registration of the notice is subject to following measures[vii]:

v  Customs Department can ex-officio suspends the clearance of the alleged counterfeit goods or on notice if the department has prima-facie evidence or reasonable grounds to believe the goods to be counterfeit. 

v  Customs Department is under duty to inform the right holder immediately about suspension of clearance of goods with the reasons for such suspension.

v  Goods suspended of clearance, is to be released, on 

  • Notice  within 10 days (extendable further with 10 days), when the right holder fails to join proceedings
  • Department’s own initiative within 5 days, when the right holder fails to give notice or fails to fulfill the obligation of executing bond.

v  Period of suspension of release of perishable goods is 3 days. 

v  Department is authorized to seize and confiscate the goods infringing intellectual property rights where it has reasons to believe that the goods are infringing intellectual property and thus liable to be confiscated under the Customs Act.

v  Customs is under duty, upon request by the importer, to provide the name and address of the right-holder and other relevant information relating to the goods suspended from clearance.

v  The right holder is under an obligation to provide customs authorities with the necessary information enabling them to identify infringing goods. The Custom authorities then seek information from the importer, of the person by whom the goods are consigned to India and the address of the person whom the goods are sent in India as well as ask him to produce documents relating to the goods. 

v  Right holder is authorized to examine the suspended goods and to provide samples for examination and analysis to determine whether the goods infringe intellectual property rights.

v  Customs department is to provide, upon request by the right holder, name and address of the importer and other relevant information relating to the goods suspended from clearance.

If the Deputy/Assistant Commissioner of Customs has a reason to believe that the imported goods are suspected to be goods infringing intellectual property rights, Custom Authorities can suspend clearance of suspected goods. Thereafter, the Deputy/Assistant Commissioner of Customs shall immediately inform the importer and the right holder of the suspension of clearance of the goods and shall also mention the reasons for such suspension. However the suspension goods can be released if the right holders fail to join the proceedings within a period of ten working days (extendable by another 10 days) from the date of suspension of clearance. In case the clearance of goods was suspended on Customs own initiative, such goods shall be released within five working days from the date of suspension of clearance, if the right holder fails to give notice or fails to execute the bond. In case of perishable goods, the period of suspension of release is three working days, extendable by another four days.

In case the Deputy/Assistant Commissioner of Customs determines that the goods detained or seized have infringed intellectual property rights, and have been confiscated under section 111 (d) of the Customs Act, 1962, he shall destroy such goods under official supervision or dispose them outside the normal channels of commerce after obtaining ‘no objection’ or concurrence of the right holder. The right holder can raise objection on the mode of disposal within 20 working days (extendable by another 20 days) after having been informed so.

  1. 5.    CONCLUSION

 

The counterfeiting products have affected not only on the loss of the right holder/owner in the market but also the economics of the nation. The Government should develop the regulation and enforcement to control such counterfeit commodities extensively spread out to the market. So for that the strict measures and stringent action to eradicate the counterfeit products is very significance. In addition not only the strict measure taken by the authority to eliminate such counterfeiting products is necessary but also the cooperation from the right holders or owners of such products is important to stop spreading and eliminate such counterfeit products both internal and external markets.


[i] G. Swaminath, Faking it – I The Menace of Counterfeit Drugs, Indian Journal of Psychiatry, Volume 50(4), Oct–Dec 2008.

[ii] www.WorldTrademarkReview.com

[iii] Dr. Firdos T. Shroff, Intellectual Property Rights (IPRs) – A Gateway to Corporate Globalisation, SEBI and Corporate Law, Vol. 89, 2009.

[iv] Ramesh Babu and Abhai Pandey, Better For Brands to Work Together, India IP Focus, 2008.

[v] Article on Patent Infringement Law in India by K.R. Singh.

[vi] Article by Jayant Kumar, India: Enforcement of Intellectual Property Rights through Customs, 2 June 2009.

[vii] INDIA IPR CUSTOM & BORDER PROTECTION, Altacit Global, 2008.


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