Nicolas Gutierrez
IP Advisor - India IP SME Helpdesk
One in three adults in India has, knowingly or unknowingly, fallen victims to fake products bought online. This makes counterfeiting the fastest growing crime in the last few years in India[1]. This situation is by no means exceptional and the presence of counterfeits has taken on a worldwide dimension as a result of the globalization and the ease of movement of goods and services affecting all countries. Concretely, it is estimated to represent 2,5% of global trade[2], costing up to twelve trillion of euros each year to the Indian economy.
This global phenomenon undermines the positive effects generated by the intellectual property mechanisms created to foster creation and innovation. The protection afforded by IP rights ensure that creative and innovative labour are rewarded and that investment in new and more efficient products is encouraged. This in turn stimulates the creation of jobs in today’s knowledge-based economy. The reduction of business and government’s income, the harm to consumers and to the environment (through lack of compliance with health and safety standards) and the stifling of investment in innovation are all problems that could be avoided through effective control of counterfeiting.
To prevent the aforementioned trade in counterfeits, Customs Authorities play an active and crucial role. Concretely, Customs Authorities are active to the border in order to ensure that illegal or counterfeit products are not imported to India. In fact, cooperation between customs and IP right-holders helps identify goods suspected of infringement, and consequently protect IPRs.
The power of Indian Customs to prevent the importation of counterfeits
India is signatory to the WTO Agreement on TRIPS (Treaty on the Trade-Related aspects of Intellectual Property Rights). This international agreement requires, among other this, that measures be taken to provide protection against the cross-border commerce of IP-infringing goods. Section 11 of the Customs Act of 1962 prohibits the import or export of goods that violate patent, trade marks, copyrights, designs and geographical indications. Also, the Notification 51/2010-Cus prohibits the import of goods intended for sale or use in India that are in violation of specified provisions of the IP statutes. For the Section 111 of the Customs Act, such imported goods are liable for confiscation.
Fulfilling these requirements, Indian Customs have various means of action to protect IPRs and fight against the importation of counterfeits in. SMEs should therefore be aware of the existing mechanisms in India to manage as best as possible the risks created by counterfeiting of their IPRs at the border.
Under the 1962 Act, Customs Authorities have the power, on their own initiative, to seize goods or suspend the clearance for imported goods at the border if they have reasons to believe that the goods are of an illegal nature because they are infringing IP Rights. While customs may act ex officio (that is to say, of their own accord, without any external input or intervention), they more generally intervene at the bequest of IP right-holders who have realised that infringing products were being imported to India.
Registering IP rights with Indian Customs
The Central Board of Indirect Taxes and Customs (CBIC) is the governmental institution in charge of, among other things, the administration of all matters relating to customs and border control.
It is important to keep in mind that in order to launch an action with Customs to stop the import of infringing products within India, the relevant IP rights must be registered with Customs. This is in addition to the “normal” registration with the Indian IP Office (The Office of the Controller General of Patents, Designs & Trade Marks) which grants the IP right in the first place in the case of patents, trade marks, geographical indications and design rights. The Indian Customs IPR Recordation Portal (IPR ICeR) allows the IP right-holders to register their IP Rights with the Customs Authorities. This registry is not open to all IP Rights: while trade mark, copyright, design rights and geographical indications can be registered with customs, patents cannot.
Concerning the requirements of the registration, the rights holder will need to create a unique id and a password on the Recordation Portal, fill the online forms and upload the relevant documents, including a copy of the registration certificate of the relevant IP right (or other proof of ownership, especially in the case of copyright which may not be registered), a digital image of genuine goods to be protected, if applicable also a picture of infringing goods. IP holders may also include a statement highlighting the distinguishable features of the genuine goods, i.e. elements by which Customs agents may recognise fakes of a particular product. Each IP right must be registered separately: this means that if a company has both a design right and a trade mark which protect a protect, both should be registered separately.
Within working days of receiving the application, the IP rights will be registered in a database available to the Customs authorities at all ports of entry into India, and will remain on the database for a period of maximum 5 years. After this period and if the IP right is still valid, a new registration has to be carried out.
The cost for the registration of an IP rights with Indian customs amounts to 2000 Rupees, or roughly €25. However, at the time of registering the IP right with Customs, a Bond must submit a bond to cover possible expenses incurred by Customs at the time of seizure of goods at the border.
Once the IP rights have been registered, infringing goods can be detained in one of two cases:
- Through notification by the IP right holder that infringing goods are likely going to be imported through a specific point of entry.
- Ex officio, i.e. by Customs agents without who will then notify the IP right holder.
Customs may also stop suspected infringing goods at the border without where the IP owner has not registered their IP right. In this case, the IP owner has 5 days to complete registration as described above, otherwise customs will release the seized goods.
Once suspected counterfeits have been seized at import in India
More specifically, this registration ensures a prompt seizure of counterfeit goods. Import of branded goods will be notified to the respective rights holder. If the goods are found to be counterfeit, they will be seized and a penalty will be imposed. The seized goods will be destroyed under the rights holder’s supervision. Consequently, this tool is very useful to protect and monitor the risk of infringement.
If Customs agents seize suspected infringing goods, the IP owner is notified. He/she then has 5 days to join the proceedings, including activating the aforementioned bond. Customs will send pictures and details of the seized goods for inspection by the IP owner or his agent. Said inspection must be carried out within 10 days (3 days when the seized goods are perishable, aka food).
Following inspection, suspected goods which are found to be counterfeits or otherwise infringing on IP rights are confiscated by Customs, the importer having the right to appeal the decision. In case no appeal is filed or it is rejected, Customs must see to the destruction of the imported goods, however samples may be requested by the IP owner for reference. This is particularly important: if an EU SME knows of infringing products having been imported, samples of these goods should be collected and safeguarded to help determine the types of counterfeits which can be found on the market, in India and elsewhere.
Finally, it is important to note that all costs related to the detention and destruction of infringing goods must be borne by the IP owner. Criminal actions may also be taken against the importer, leading to fines or possibly imprisonment
Counterfeit goods exported from India
Indian Customs only act against goods which are imported into India: they do not have the legal competence to seize goods which are being exported from the country. Against these types of counterfeits, traditional enforcement actions must be taken either directly within the territory of India before they are brought to the ports for export, or at the border of the countries in which they are being imported.
Under Directive Nº 608/2013 on Customs enforcement of IP Rights at EU borders, there are ways in which European Customs can act against the import of counterfeit to protect IP rights: either directly, or on following a claim by an IP right holder.
- Firstly, Customs services may decide to act directly if they have reasonable grounds to suspect that specific goods are counterfeit and/or infringing on IP rights.
- Secondly, rights holders can apply to Customs services to check consignments of goods by submitting an Application for Action (APA: valid during one year and can be renewed). More precisely concerning this registration, its enables rights holders to apply for customs action against goods suspecting of infringing IPRs. But before doing that, the SMEs must obtain an Economic Operators Registration and Identification Number (EORI). It is mandatory for the filing, the modification and the extension of APA. This number is useful to exchange information with customs administration.
Moreover, it must be highlight that there are two specificities in EU in comparison with India:
- First of all, patents, as all other IPRs, can be subject to registration at Customs services in order to protect them of infringement. The application must contain the proof of validity of these rights.
- All EU member states are member of the Customs Union, which means that common tariff of custom duties is being used on imports outside the EU and no customs duties between the EU countries is applicated. The national customs services work together: the action against the import of counterfeit goods therefore need to take place at the outside border of the European Union.
Take-away
In the light of the above, some best practices to protect against the risk and transborder commercialisation of counterfeits can be highlighted:
- Register you IP rights with Indian Customs in order to have a direct link with the Customs Authorities and be alerted of a potential infringement
- IPR enforcement can be expensive: budget for this. For example, destruction of imported counterfeits seized at the border will be at the cost of the IPR holder.
- Alert the authorities as soon as possible in case you have a suspicion your IPRs are being infringed in order to have in place sanctions and measures against counterfeiters taken swiftly. This applies not only to infringements within a specific market, but also to the international trade of counterfeits at border.
- Monitor the market: use online anti-counterfeiting technology or solutions to geolocate and systematically look for illegal operators attempting to sell false products
- Make it easier for consumers to identify counterfeits: simple tools such as product serial numbers are useful in this regard.
[1] According to the report “The State of Counterfeiting in India in 2021” by the Authentication Solution Providers’ Association (ASPA)
[2] According to EUIPO’s “Global Trade in Fakes” 2021 Report
Details
- Publication date
- 19 October 2022