Dealing with piracy and counterfeiting in India (sponsored discussion)
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Dealing with piracy and counterfeiting in India (sponsored discussion)

Pravin Anand and Binny Kalra of Anand and Anand in New Delhi discuss how to approach counterfeiting problems in India and the advantages and disadvantages of criminal and civil enforcement

How does a company know that its brand is being pirated or infringed?

Pravin Anand (PA): There are two concepts here. The first can be termed as “lead generation” while the second is “investigation”. Invariably, the staff or marketing department of a company will spot infringing goods and report it to top management or to the appropriate department. This would typically constitute a lead. Sometimes, companies have investigators or their attorneys who look out for leads and this function is a ­“spotting” function.

Thereafter, you need to have adequate information to bring an action such as the source of the goods, which includes finding out things such as the location of factories and warehouses and of course the persons responsible for the wrong. In a relatively simple case this may involve searches at the office of the Registrar of Companies or some trademark searches to locate the details of partners or the proprietor or looking at websites.

However, in a complex case, a deeper investigation may be required involving tax documents, bank accounts and other such information. The investigator may also need to discover the entire chain of distribution, from the manufacturer to the assembler to the packaging and printing providers, wholesaler details and finally the retailers. Different players may perform these service functions and it may be important to hit each one in the distribution chain or else, like a blood vessel, stopping an element at one end would simply divert the other elements in the chain to alternate sources.

A good investigation, kept confidential until actual seizure of goods, is at the heart of a successful anti-counterfeiting campaign.

What other information must the investigator find?

Binny Kalra (BK): The investigator must acquire samples of the infringing products and additionally must try and find out the assets of the infringer so that damages can be recovered. Finding out the assets of the infringer is an important element in the profile of the opposite party which helps in determining the strategy for enforcement.

It is also important to have specific information on where the goods are stored so that an Anton Piller Order (an order to search a location and seize evidence without warning to the searched party) can be successfully executed.

Similarly, other information can be very important, including but not limited to:

  • •  The days of the week when the market is closed,

  • •  The political links of the owner of the infringing entity, if any,

  • •  Associations that are active in the market concerned that might raise a protest,

  • •  Other law suits that the infringer is involved in and a history of the kind of defenses raised in those law suits,

  • •  Exports and e-commerce related information,

  • •  Details of bank accounts to try and freeze through a Mareva injunction.

These are just some of the information that an investigator should try to obtain. As said earlier, a good investigation can make or break an action.

Does India have good investigators and are they allowed to go the whole hog such as with surveillance and tapping of phones?

PA: This is a delicate issue as investigators have to be carefully selected not only based on their competence but also on ethical considerations. They must have an impeccable ethical record as they may be required to give affidavits in Court and may even be subjected to cross-examination.

It is important to find out the operatives that are employed by the investigative agency, as the owner may not be himself involved in the investigation and may delegate the investigation to operators who may not himself be able to match the same high level of the owner. It is also quite common for operators to leave one investigative agency and join hands with competitor agencies, which could spell disaster particularly if a campaign is ongoing. To overcome this difficulty, an interview with the operators and a look at their contracts will provide a reasonable level of comfort and at least to an extent ensure that the action of some operators does not tarnish the reputation of the proprietor.

Once you have leads and therefore a target or a person who is infringing the company’s brands and you have investigated the person reasonably well, what’s next?

BK: You must then decide whether you wish to take legal action. This is a particularly important decision point in a campaign.

It may be that a simple cease and desist letter could take care of the problem as the wrongdoer may be a small party indulging in infringement on a very small scale.

On the other hand, it may be possible to bring a civil action or file a criminal complaint or, in the case of import of goods, approach the Customs for the seizure of goods.

Cease and desist letters may appear very attractive to companies looking for low-cost solutions. However, they may result in a loss of surprise, which is the soul of anti-counterfeiting activities. If you caution the opponent, he may file a caveat, which is a petition to the Court preventing the plaintiff from seeking an ex parte order. He may also file a counter suit for groundless threats in his own jurisdiction, thereby depriving the plaintiff from instituting the action in the plaintiff’s preferred jurisdiction. In some cases, he may backdate documents or at least claim prior use of the marks. Even if he is not able to prove this later, these claims may prevent ex parte orders against him. Further, he may hide goods so that an Anton Piller Order, when executed, will not result in positive recovery.

Thus, a cease and desist letter may also do a lot of harm.

When do you file a criminal action as opposed to a civil action?

BK: There are advantages and disadvantages to both the criminal and the civil route and this must be carefully weighed considering the facts of a particular case. Thus, where the counterfeiting is of such a nature that a distinction between the original and the counterfeit is difficult to establish, a criminal action can be the right action as the machinery of the State is particularly effective in locating sources from which the goods originate.

In a civil action, the defendant may simply deny having indulged in the activity. And, in case there was no recovery upon the execution of an Anton Piller Order, the action might fail for want of evidence linking the goods with the infringer. The other advantage of criminal actions is the high degree of deterrence which is generated when a uniformed officer like a policeman visits the premises of the infringer; it has a bone chilling effect.

So when is a civil action the preferred response?

PA: Where the defendant’s name is either disclosed on the goods or on a website or advertisement and it is clear from the surrounding circumstances that the goods do originate from the defendant, the civil action may be a preferred route. A few reasons for this are:

  • • Unlike the criminal action, there is no independent agency like the police involved and the chances of corruption or influence of some other kind are therefore minimal;

  • • In a civil action, you can get an injunction and also compensatory and punitive damages, while neither of these are possible in a criminal action.

  • • If settled, the exit in a civil case is easy. since a criminal action is a case brought by the State, settlement between the affected parties may still not result in the termination of the action;

  • • Civil actions can also be filed at the High Court level. There are five High Courts in India that have original jurisdiction, including the Delhi High Court which has a very large portion of IP cases (nearly 70%). In a civil case, a High Court order is very valuable, while in a criminal matter which is heard by a magistrate, the order is not so valuable. The High Court process is wholly transparent because the order is reported, put on the internet for the public to view and for bloggers and other media personnel to comment on; and

  • • In a civil action, you will invariably terminate the proceedings with a decree of permanent injunction and/or damages while in a criminal action, the rate of conviction is so low that the action often fails or terminates with plea bargaining.

Can the civil action really be the sole basis for fighting counterfeiting?

PA: If you follow the 80:20 rule, then most of the actions, about 80%, would be civil in nature and filed at a centralized court against defendants all over the country to form a kind of hub and spoke arrangement. There would be some criminal actions and some Customs and domain name cases that will fill up the remaining 20%.

How soon must you approach the Court after identifying a target?

BK: Speed is a very important element in ensuring success in an infringement action. Companies must try and approach the Court within a few weeks of obtaining the information about the infringement. Speed helps in two ways: first, delays in approaching the Court sometimes reduce the chances of obtaining an ex–parte injunction. Second, if the information about the infringer obtained through the investigation is old, it is possible that by the time the Court passes an order, the infringer has changed his location or supplier and thus a raid action may not be successful.

How do you ensure that you get deterrence through your actions?

PA: This is an extremely important aspect of enforcement. Not only must you stop the wrong but you must also create enough tremors in the trade to scare other potential infringers. This fear can either be through the arrest of persons in a criminal action or through immediate raids in a civil action in what are popularly known as Anton Piller orders.

Under these orders, Court appointed commissioner enters the premises of the defendant on day one and takes custody of the infringing goods, packs them and leaves them on trust with the defendant. This means that the goods cannot be released into the commercial stream and would continue to block the defendant’s valuable business premises. In addition, there would be an injunction restraining the defendants from manufacturing and selling infringing goods.

While the Anton Piller Order is definitely a source of fear, it can be made even stronger by having a police officer present along with the commissioner appointed by the Court when entering the premises. In this way, you get best of both the worlds- the flexibility of a civil action with the uniformed police officer and the fear that is generated in a criminal action. At the next level, you have the ability to expedite a trial and move it along quickly, perhaps in six months to one year. If the defendant fails to appear, the matter would proceed ex parte while if he appears, evidence can be concluded before a retired judge in a very short time.

The next level of “pain” for the defendant will be a decree with an award of damages which the defendant will have to shell out.

So the Anton Piller Order and the expedited trial and the award of damages create fear but how real is this?

BK: There are over 200 cases ever since 2005 where the Delhi High Court alone has awarded damages. The range is Rs 100,000 to Rs. 5,000,000 ($1,600 to $79,300) while the average is Rs. 500,000. If the plaintiff makes the effort to prove damages then the award will of course be higher but if he does not file an affidavit of damages, Courts have the tendency to grand damages between Rs. 300,000 to Rs. 500,000.

What ensures that the defendants comply with these orders of the Court?

PA: India has a very strong contempt law. If someone violates the order of injunction, he may be sentenced to civil imprisonment up to six months and his property can be attached to ensure compliance. Recently, in the Foundry case, the Delhi High Court, in a contempt case where the defendant had obstructed the process of a court commission, passed an order by which the business premises of the defendant were sealed after throwing out their 450 employees. Furthermore, the Court refused to set aside the order until the defendant had settled the case with the plaintiff. This is the extent to which Courts are willing to go for compliance of their orders.

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