Online Marketplaces and Counterfeiting in India

by Shwetabh Raj, IP Manager EBTC 

Background

Online marketplaces and E-Commerce in India have seen a phenomenal rise in recent times. This comes on the shoulders of digital development in India wherein the technological advancements have transfigured the traditional techniques of doing business into the digital space by introducing e-commerce platforms. With the combined forces of technology, competitive price offerings, exciting deals and fast delivery, e-commerce platforms have created new types of buying experiences for consumers. Consequently, India has experienced a tremendous growth in online marketplaces developed both internationally or domestically.[1]

However, with the rise of e-commerce platforms, the menace of counterfeiting has increased manifold. The problem of counterfeiting not only affects the brand-value or goodwill of a brand, but also puts the well-being of the consumer at risk through the sale and unknowing purchase of sub-standard products.

Modus Operandi of Counterfeiters

Before the advent of online marketplaces, most counterfeiters used to operate in clandestine manner in limited areas or town. As the result of the growth of e-commerce platforms, counterfeiters have adapted accordingly: this sudden growth has enabled them to sell sub-standard and counterfeit products online to a much larger consumer-base across India under the pretence of selling genuine products of well-known brands. According to a survey conducted by the social media platform LocalCircles, 38% of consumers claimed that they had purchased counterfeit product from an online retailer in the previous years. The most commonly mentioned marketplaces names in this survey were Snapdeal (12% of consumers said they had bought counterfeits from this platform in the previous year), Amazon (11%) and Flipkart (6%).[2]  

Apart from operating through e-commerce websites to sell counterfeits, fraudsters also create fake websites which look and feel like an established brand-website which consumers are familiar with. These fake websites are used by the counterfeiters to trick consumers into paying for products which will never arrive. Furthermore, this specific type of website creates a major opportunity for the hacking of credit card details through fake payment gateways.

Counterfeiters in India also often operate through multiple online stores on the same e-commerce platform to disguise the size of operation. Through this method, if one store is removed because it has been found guilty of selling counterfeits, the business can continue through other stores on the same platform.

Dealing with the challenges

Taking action against counterfeits being sold on platforms

The online marketplaces themselves are in best position to stop these counterfeiters as they have direct relationship with the sellers through the registration requirements to sell on these platforms. This in principle provides them with access to information useful to determine their true identity. If the platform owner has exact details, the same can be transferred to brand owners and enforcement agencies, to ensure necessary action in the form of civil or criminal action can be taken.

Generally, e-commerce websites are willing to work with the brand owners to take down the counterfeit products being sold on their website. Most of the e-commerce platforms, especially the bigger ones, have gone a step further and have issued guidelines and specific procedures to prevent the sale of counterfeit products, lookalike products or illegally manufactured products, allowing IP holders to report infringing goods sold on the platform. This is the case for Amazon, but also Flipkart and Snapdeal.

In the absence of such systems, the immediate reponse to the discovery of infringing products sold on an e-commerce platform is to issue an immediate take down notice to the e-commerce websites whenever they identify that their intellectual property rights have been infringed by a third party through the sale of counterfeit products. It considered a more proactive approach and is extremely useful in a country like India where intellectual property enforcement is not seen as a priority. As part of the take down notice supporting documents should be included, such as:

A) Proof of identity: The brand owner is required to submit the incorporation certificate relating to the formation of the company or corporation.

B) Proof of IP ownership: In order to challenge the infringement on the e-commerce platforms, the brand owner needs to establish proof of the IP ownership in the form of trademark, copyright or industrial design certificate.

C) Webpage Link: Along with establishing the proof of the IP ownership, the brand owners need to provide the links to the web pages of the infringing listing and details of the listing which the brand owners require to be removed.

Technical measures to secure genuine goods along the supply chain

Another solution which EU SMEs can explore is blockchain technology. It is a highly secure digital record of information analogous to a ledger. It is an emerging technology which is being used by multinational companies like Coca Cola and Unilever to secure the authenticity of products in the supply chain. Counterfeiters usually try to pass off fake products as original product which becomes a challenge for the brand owner to identify. Thus, blockchain technology helps the brand owners in identifying fake goods which might be introduced in the supply chain to be later sold on e-commerce platforms, as all the transactions are logged on the digital ledger. Blockchain also supports law enforcement in tracing the leak in the supply chain.

E-Commerce giants like Amazon recently launched an initiative called project zero wherein the brands apply a unique code on every unit they manufacture, allowing amazon to scan and confirm the authenticity of every one of those products purchased in Amazon’s stores. This method helped Amazon in detecting and stopping the counterfeit product before it reaches the customer.

Conclusion

Online counterfeiting can impact any company and it may result in loss of goodwill, compromise in the supply chain, legal liability and many more. Nevertheless, EU SMEs whose IP rights may be infringed through the sale of counterfeits on e-commerce platforms in India can take specific steps to protect their interests:

• Brand owners should integrate anti-counterfeiting in their IP strategy and should focus on innovating and developing technologies like artificial intelligence and blockchain to proactively prevent infringement within the marketplace. Machine learning and deep learning methods can help the EU SMEs in identifying counterfeits on e-commerce websites. Data scientist designed machine learning algorithms detect smallest of details and can help brand owners to spot presence of counterfeits of their brand on e-commerce websites which are usually not visible to the naked eye.
• EU SMEs must also explore anti-counterfeiting tools offered by e-commerce companies. For example, Amazon brand registry program which helps brands and amazon to protect against trademark infringement while selling their products on the Amazon marketplace.
• Regular market checks should be conducted in order to identify the place from where the counterfeiting is originating. These market surveys are usually conducted by specialist firms hired by IP holders for this very purpose.
• EU SMEs can organise capacity building programs for law enforcement authorities like customs so that they are aware about the infringement issue which the brand is suffering from and enable them to take suo moto action in case of potential infringement.

[1] https://absjournal.abs.edu.in/abs-Journal-volume-6-issue-2-december-201…

[2] https://www.moneylife.in/article/38-percentage-consumers-received-count…