United IPR

Practical Implications of Enforcement of IPR Rules, 2007

(Speech deleverd by Mr. Shravan Kumar Bansal during round table conference on Border Measures Regulations & IP, organized by Indian Group of INTA - ACEC, on February 20, 2009 in New Delhi)

Efficient and well organized intellectual property system rests on the pillars of appropriate legislations, strict enforcement mechanism and cognizant judicial system. Effective IPR border control mechanisms helps in deterrence of cross border transit of counterfeit goods and in balance of interests of right holders. Customs administration plays a vital role in combating counterfeiting and piracy. USA has adequate provision under Lanham Act, 1946, Tariff Act, 1930 and Copyright Act to protect rights of IP owners and it effectively prevents parallel imports from entering into the country. Counterfeit copies of trademarks that are recorded with Customs are seized and forfeiture proceedings are initiated. Enforcement mechanism to curb counterfeiting of other developed continents viz., Europe, Australia is no less effective. Customs regulations in China ban the import or export of counterfeit goods. Even custom board has extended in countries like Taiwan, Estonia have considered IPR protection as a core element in their national policy and have established tight knit border control network.

Need for Custom Rules in India

Fast Growing Indian Economy:

The fast growing economy of the country has made the government to realize the need to curb counterfeiting and to put in place efficient enforcement systems to strengthen the investment climate, to protect the national creativity and to facilitate the growth of innovative companies.

Unique Geographical Position of India:

The unique geographical position and vast extent of India with accessibility from 3 different directions and with 32 ports makes the country susceptible to import or export of counterfeit goods from borders. This exceptional condition casts a duty on the custom officials to act more rationally and in a duty bound manner. Government has taken a number of measures to strengthen the enforcement of intellectual property laws particularly at borders.

Courts had to devise new rules and rely on foreign precedents:

Indian courts had to devise new rules or take assistance of foreign precedents in dealing with peculiar aspects of Intellectual property not precisely mentioned under statutory provisions. Courts dealing with the provisions and aspects of intellectual property laws now have become more sensitive to IP issues and interpret laws with pragmatic approach with a view to place efficient IPR environment in the country. The courts are now opening a new chapter by imposing responsibility on custom officials to prevent, control and prohibit the import of such goods which violates the proprietary concern of the person having registered trademark.

Justice Pradeep Nandrajog of Delhi High Court in year 2005 in Cisaco Technologies vs. Shrikanth 2005 (31) PTC 538 (Del.) strongly noted that there was no reason why statutory authorities should not prohibit import of such products, import whereof would result or abets the violation of the proprietary interest of a person in a trademark/trade name and accordingly issued directions to the Collector of Customs to notify at all ports that no consignment, other than that of plaintiff who was vendor of product under the trademark 'CISCO'.

Dealing with the issue of parallel import in the case of Samsung Electronics Company Limited and Another vs. G. Choudhary and Another, 2006 (33) PTC 425 (Del.) Justice Vikramajit Sen restrained defendants from importing or exporting or dealing in grey market of plaintiff’s products under the trademark SAMSUNG".

Highlights of IPR (Imported Goods) Enforcement Rules, 2007

Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007

The Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007, based on the model legislation drafted by the Geneva-based World Customs Organisation and notified by the Government in May, 2007, is a step in the direction to deal with counterfeit and pirated goods at cross borders. Such notification was a requisite in India to add strength to existing Customs provisions and for better IPR protection on borders. IPR Rules, 2007 empowers the Deputy/Assistant Commissioner of Customs to be the competent authority to seize counterfeit or pirated goods or suspend the clearance of the goods. Customs Department has been given the right to destroy confiscated goods infringing intellectual property rights. Customs Authorities now play active role and take action on their own initiative in cases involving counterfeiting and piracy. Some of the other highlights of the Rules are as follows:

The Right holder has to send notice to the Custom’s Commissioner requesting him to suspend the clearance of goods infringing his IP rights.
Custom shall inform the right holder within 30 days whether his notice is registered or rejected.
After registration minimum validity period of assistance to right holder is 1 year.
Right holder has to execute bond with surety and security undertaking liability of protection of the importer, consignee and the owner of the goods and also for bearing the costs towards destruction, demurrage and detention charges.
Upon registration and examination, import of alleged counterfeit goods is prohibited under Customs Act, 1962.
Customs Department based on notice of the right holder or suo moto may take initiative to suspend clearance of counterfeit goods.
Detention of such impounded goods is not to be beyond a total period of 20 days (in two phases of 10 days each).
Period of suspension to release the perishable goods is 3 days.
Commissioner of Customs has the power to seize counterfeit goods that are liable for confiscation under section 111(d) of the Customs Act, 1962.
Customs Department upon right holder’s/importer’s request has to provide information to them as regards the name and address to the importer or right holder respectively.
Counterfeit Goods that are detained, seized and confiscated are destroyed or disposed by the Customs Department after obtaining ‘no objection’ certificate by the right holder.
Custom offices are not liable when act in good faith in failure to detect counterfeit goods or when advertently releasing such goods.
Rules does not apply to non-commercial goods contained in personal baggage or to goods sent in small consignments intended to personal use of the importer.

Effects after Enforcement of IPR Rules, 2007

Recordial of IP has started after enforcement of Enforcement Rules, 2007. Customs now provides for exclusive website for filing of online applications. Particulars of IP registration and other general information could be entered online from the comfort of office or home. On the basis of such recordial, customs department has been successful in making various seizures. After seizure, the Enforcement Rules have also given the power of adjudication on related matter.

Equipped with the powers of adjudication provided by the Rules, 2007 customs department for the first time in July 2008 ordered absolute confiscation of counterfeit goods. Importer M/s. Womens World Jewels Pvt. Ltd., and M/s. Impac Enterprises imported consignment containing cosmetics, gift items etc., bearing registered trademarks ‘Nivea’, ‘Dove’, ‘Sunsilk’ and ‘L’Oreal’. Commissioner of Customs noting that the act of importing into India and/or market these goods in India without having any authorization from the manufacturers, amounted to infringement of rights of right holders and thus prohibited the importer from importing the goods. It ordered absolute confiscation of the imported goods and also imposed of penalty on the importer.

The most recent order of confiscation is passed in December, 2008 against M/s P.S. Grover and Sons for importing cosmetic and toiletries products of registered trademark ‘L’Oreal’ and ‘Garnier’ for importing without first having obtained authorization from registered trademark owners M/s L’Oreal and M/s Laboratoire Garnier & CIE. The Customs Department not only ordered confiscation of imported goods but also imposed huge penalty of Rs 25,000/- on importer and also Rs 5,000/- on partner of importer.

Shortcomings and suggestions for effective enforcement of IPR Rules, 2007

1. Rules provided only with regard to import of goods

One cannot deny the fact that innumerable varieties of counterfeit goods are produced or manufactured in India and are exported to foreign countries. India acts as transition link and in absence of strict enforcement to curb export of counterfeit goods, export of such infringing goods become easy. Reference may be made of S. 56 of Trade Marks Act, 1956 which mandates in respect of application of trademarks on goods to be exported from India. It says that the application of trademarks on export goods from India will constitute the use of that trademark in India with respect to those goods if such goods are used in India. The essence of the provision must be construed to be implicit in the Enforcement Rules, 2007 and customs officials must check the export of counterfeit goods.

2. Recordial period is small - just one year

The right holder can record and register his IPRs with Indian Customs which is effective for one year only. On such recordial and registration, Customs prohibit/suspend the clearance of suspected counterfeit goods. By the time counterfeit goods arrive at the borders, the recordial period comes to end which makes easy for importers to import counterfeit goods in India. Thus it is suggested that the recordial period be increased to 3 or more years.

3. Lax attitude of Customs with regard to IPRs

Trade across borders contributes to a vital share in the economy of country and transaction of counterfeit goods between countries negatively affects the economy of a country, therefore, Customs Department must give more priority to IPRs. Volume of import or export of goods is high on larger ports e.g., North East, Calcutta and Mumbai, so Customs department gives less importance to intellectual property rights. Reason for giving less importance to IPR may be because of unawareness with regard to the issue or because of volume of transaction or for any other reason, it is the loss to the right holder as well as to the country. Customs must act proactively to prevent/prohibit trade of counterfeit goods.It is a known fact that counterfeit goods in voluminous quantities come from Dubai; neighbouring countries like Nepal, China on major ports but due to laxity in approach of Customs department for IPRs, no instance or information of seizure of counterfeit goods have come to be recorded till date from major ports. On the other hand adjudication of the customs matters with respect to IPRs have been reported from small ports viz., Cochin, Surat, Madurai, Tuticorin.

4. No declaration of brand on Invoice

Large numbers of consignments entering into the country do not make it feasible to open each and every consignment. If consignments are not opened trade of counterfeit goods gets unnoticed. To prevent trade of counterfeit goods either every consignment needs to be checked for the brand of goods or brand may be mentioned on invoice. If brands are disclosed on invoice it could be cross checked with recordial easily. If declaration of brand on invoice is made mandatory it would, on one hand, save lot of time, energy and labour of customs department in checking consignments individually and on other hand would prevent import or export of infringing goods.

5. Deposit of 25% of security amount

The Enforcement rule has punitive effect on trademark owner. It imposes an obligation on right holder to execute a bond of surety and security, undertaking protection of the importer, consignee and the owner of goods against all liabilities and for bearing the costs towards destruction, demurrage and detention. The Rules imposes the obligations on the trademark owners to deposit Security Bond worth 25% of the value of the confined consignment of counterfeit goods on the occasion of each and every seizure and Surety Bond of 110% of the total amount of the seized counterfeit goods. If there are many numbers of different consignments, it becomes difficult for IPR holder to deposit huge sum by way of security bond. Security bond of 25% for every consignment in effect blocks a substantial amount of money of the proprietor for a considerable period of time. Instead of paying security every time seizure is effected, I would like to suggest that Rule be amended to provide for General Security bond, requiring an annual renewal to be deposited by the trademark owner. The deposition of guarantee amount – the surety bond of 110% of the total amount of the seized counterfeit goods, which is quite high, which in effect has deterrent effect, needs to be done away with.

6. Delay in return of Security Amount

Security amount is to be returned to the IPR holder after adjudication of matter in his favour. But, unjust delay in return of security amount has been reported. Therefore, specific time period should be provided for return of security amount as 25% security amount makes a huge amount.

7. Burden on Right holder to establish his case

The Enforcement Rules rather than imposing burden on consignee to establish that the goods does not infringe any of the registered trade marks, requires right holder to establish his case and prove counterfeiting. The Rules imposes the obligation on right holder to prove counterfeiting instead of consignee to prove the contrary. Customs calls for right holder to furnish chemical analysis report in 4-5 days which is generally not feasible in short span of time. Burden of proof to produce documents or to give more details must be on consignee rather than on right holders.

8. Repeated hearings for adjudication of small consignments

Customs Department calls for repeated hearings even in adjudication of small consignments. Repeated hearings means right holder has to travel every time to be present at Customs Department when called upon during adjudication process. Travelling charges in such cases then adds to be greater than the value of consignment. As registration of trademarks is prima-facie evidence of ownership of trademarks, recordial should be prima facie proof of genuiness of goods and no further burden be imposed on right holder to establish the genuiness of his goods. Right holder should provide all the relevant documents to customs Department at the initiation of adjudication and Customs officials should rely on the documents provided by the right holder.

9. No effective recordial of copyright/patent

Online recordial is provided for trademarks, patents and copyright but only trademark among all intellectual properties, has effective recordial i.e., general particulars as well as details of registration of trademark could be recorded. For other Intellectual property viz., Patents, copyright, designs, though provisions are made for recordial, the website does not respond after keying in details pertaining to copyright and patent.

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