Image source: https://blog.ipleaders.in/artificial-intelligence-ipr-door-future/

This article has been written by Lavanya Bhakuni pursuing the Diploma in Intellectual Property, Media, and Entertainment Laws from LawSikho.

Introduction

There is no doubt that street markets are a big hit among Indians; the best of fashion brands are available on a budget, there are numerous “branded options” available to choose from. One cannot think about Delhi without thinking of Janpath, Palika Bazaar, Sarojini Nagar. According to an article by India Today, Delhi is the hub of counterfeit products in India, nearly 75% of counterfeit products originating here. Such notorious markets are prevalent and thriving in every part of the country.  India’s inconsistent efforts to offer protection to Intellectual Property have also been noticed and tagged by other countries, last month the United States added India and eight other countries to a priority watch list for IP protection and enforcement due to the lack of concrete benefits for innovators and creators. According to the Authentication Solution Providers’ Association (ASPA), in 2019 the overall counterfeit products across various industries in India caused losses to the tune of Rs 1 lakh crore annually. 

Fashion is a part of everyone’s daily life, a person may choose not to actively indulge in it however due to the constantly changing market trends and a person’s psychological need for acceptance prompts them to keep up with the times and trends in the fashion industry. As an effect, the fashion industry is one of the most popular and profit making industries. McKinsey forecasts that India’s apparel market will be worth $59.3 billion in 2022, making it the sixth largest in the world. . In 2018 Forbes announced that counterfeiting was the largest criminal enterprise in the world and the sales of counterfeit and pirated goods totals $1.7 trillion per year. 

This article would reflect on the meaning of counterfeiting in the fashion industry, the reasons behind high sale of counterfeited products and lastly, the legal mechanism to regulate counterfeiting in India.

What does counterfeit mean in the fashion industry? 

In the simplest term, counterfeiting is the art of copying brands, it is the imitation of the brand logo, the packaging, material, design without having a license to do so, it refers to the copying of all distinctive features of a brand that leads to the infringement of the brand’s trademark.

  • Fashion Piracy and Forgery- This is the unauthorized copying and reproduction of designer wear. This would include the knock off Sabyasachi lehengas at Chandni Chowk. Forgery is however not the exact copy of the design but a close imitation of it, this is commonly seen for big fashion brands like Gucci and Zara
  • Brand Counterfeiting is the illegal activity of making and selling an identical copy or imitation of the original product at a cheaper price than the original product, with an intention to infringe the Trademark of the Original designer. The total trade in fakes is estimated at around $4.5 trillion, and fake luxury merchandise accounts for 60% to 70% of that amount.
  • Product counterfeiting is manufacturing fake or making unauthorized replicas of the real product. This ruins the commercial value and the “exclusive” value of the product. Due to the demand for these goods, almost all the reputed brands end up getting their products copied.. The founder of Coco Chanel once said ‘if you want to be original, be ready to be copied’ The entire idea of selling and producing counterfeit goods today revolves around this notion. The World customs organization in the year 2016 estimated that product counterfeiting caused an approximate loss of $512 billion in sales to various designers. Another report titled ‘The Economic Impacts of Counterfeiting and Piracy’ indicated that the global economic value of counterfeiting and piracy could reach US$2.3 trillion by 2022.

The practice of counterfeiting occurs across all industries such as medicine, apparels, electronic goods, automotive parts, fashion accessories etc. These trades can be classified broadly into two types-

  • The customer is aware that the product they are purchasing is not the original one and there is no deception from the side of the seller. The Anti-Counterfeiting and Brand Protection Summit 2018 mentioned, “the market for ‘fakes’ is on a constant rise in India and has surpassed over ₹40,000 crores in the organized sector alone”
  • A customer buys a product believing it to be true when in reality the product is not authentic. These buyers are often told that the product is an original one and since it is seized during customs, this is why the cost of the product is lower. In an interview Madhur Verma, DCP New Delhi, said, “These replicas look original and the sellers fool shoppers by claiming that they are ‘chor bazaar ka maal’  or ‘Customs ka seized item.’ Whenever a vendor tells you that he has received the product through a customs raid, it means the product is a counterfeit as there is a proper way prescribed for the disposal of such goods which does not involve them reaching local markets. 

Why do people buy counterfeit products?

There are multiple reasons for which people purchase first copies and fake products, the core of these reasons are the market forces of demand and supply. If there is a high demand for a particular product due to its style, utility or celebrity endorsement, it is highly likely that many identical substitute copies will be available for it in no time. 

Counterfeit products are cheaper 

Counterfeit products are a lot more pocket-friendly as the quality of material used is possibly of a lower quality, there is no warranty provided and hence the longevity of the duplicate product is not guaranteed. For instance, Louis Vuitton one of the most famous luxury brands for designer handbags recently launched their new Monogram Canvas Speedy 40 Bag which costs around $1,200, within few weeks of its launch there were many counterfeit identical products available online at half the cost.

Keeping up with the latest trends

Another reason why many people buy fake goods is that they wish to keep up with the trends and opt for the cheaper alternatives available. Social media has acted like a catalyst in this as it often promotes a lifestyle filled with luxury goods and the latest trends. According to a study featured on Fortune India,  61% consumers bought counterfeited apparel based on “fashion preferences” or because they were seen to be in-trend on social media and otherwise.  

No awareness that the product is counterfeited

According to FICCI’s Cascade Around 20% of accidents on Indian roads are caused by counterfeit automobile parts, while 30% of FMCG items sold are fake, but 80% of consumers still believe that they are using genuine products. 

Current legal framework 

  1. Trade Marks Act, 1999

There is a dire need to impose strict punishment, imprisonment for counterfeiting and piracy in India. Sections 102, 103 and 135 of the Trademarks Act, 1999, acts as a remedy for infringement and counterfeiting. It deals with falsification and false application of a trademark. Section 103 provides for application of penalty for the use of false trademark and/or trade description. The section also mentions imprisonment up to three years and a fine up to two lakh rupees as penalties. The Delhi courts have stepped in to deter the practice of counterfeiting by providing compensation to the aggrieved party. In the case of Christian Loubutin SAS v. Ashish Bansal & Anr, the Delhi High Court directed an ex parte injunction against the defendant and a compensation of 20 Lakhs was to be paid. The defendant was held for selling counterfeit shoes of a well-known French brand Christian Loubutin bearing the trademark of ‘red soul’ which is considered to be one of the most iconic features of the brand. 

2. Copyright Act,1957

Section 64 of the Copyright Act provides power to the Police to seize the infringed copies of copyrighted work The Act also empowers the registrar of copyright to investigate any alleged ship, dock or premise and order to confiscate them. Section 63 of the Act provides for imprisonment up to three years and fine for indulging in activities of infringement. In the landmark case of Ritika Pvt Ltd vs Biba Apparels Pvt. Ltd, the plaintiff was a boutique designer they brought a suit against the famous apparel designer and manufacture to seek an injunction against the defendant for the reproducing, printing, and selling garments and designs that are a copy of the plaintiff who claimed to be the first owner of these designs.

Online enforcement 

Online shopping has become the new normal today, especially with the pandemic, online sales have increased considerably. The internet has made goods and services accessible but at the same time, it has contributed a fair share in the sale of counterfeit products, people are able to access products that they may or may not believe to be counterfeits through various online platforms. These platforms have acted as a boon for counterfeiters as now they can sell their products on trusted e-commerce platforms and they now have access to millions of customers at the same time.

Platforms like Amazon, Flipchart, Snapdeal have faced severe backlash with regards to the sale of counterfeit products on their websites. A major Wall Street journal after investigation revealed that Amazon has listed “thousands of banned, unsafe, or mislabeled products”. Due to the excessive controversy, Nike had also announced it would be pulling its products out of Amazon. After a lot of damage control, e-commerce sites are now implementing stringent policies in place to avoid selling counterfeit products to consumers and ensuring stringent measures for the verification of the sellers. In the case of Louis Vuitton vs e-Bay, the commercial court of Paris ordered the defendant to pay a sum of €38.6 million as damages due to the lack of measures taken by eBay to regulate the sale of counterfeit products over its platform. 

Conclusion & suggestions

The awareness regarding intellectual property in India has improved significantly over the last decade however, there is a lot of room for improvement. In 2017, Rohit Ball copyrighted his entire collection, he was the first designer in India to do this and the practice was followed by the likes of other designers like Anita Dongre and Anju Modi who copyrighted their collection for the Fashion Design Council of India’s “India Couture Week” 

Amendment in India’s Trademark Act to strengthen protection of well-known marks for both trademarks and trade names is ideal. Under Section 115(4) of the Trademark Act, infringement of trademarks is a cognizable offence, and a police officer not below the rank of DSP may search or seize without warrant, after seeking the opinion of the Registrar of Trademarks on the facts. At the ground level, police refer this matter to the Trademark Register before taking any action. This makes the action only partly cognizable. It is advisable to make it fully cognizable. One mechanism for doing so may be through implementing regulations arising from the Madrid Protocol. Very often the seized counterfeit material finds its way back into the markets hence there is a need to strengthen existing provisions that permit for the destruction of equipment used in the production of infringing counterfeit material

A study by Harvard Business Review revealed that if the brands were to defocus from the logos, the counterfeiters would be less likely to copy the product as here the deciding factor in the eyes of the customer would not be the logo but the quality of the product and it is unlikely that the counterfeiters would be able to keep up with the extensive expense required for quality management. For instance, Chanel’s 1.55 flap bag sported no logo, but the quilted stitch and diamond pattern read “Chanel.” This handbag went on to be a classic product and it was hardly ever counterfeited. 

In countries like France, even the person purchasing counterfeit goods is punished but due to India’s population size, the same may not be possible in India, however with the help of technology, the manufacturers of these knock offs can be tracked, A startup called “Group Project” has developed blockchain technology that can scan the tag on products to identify if a product is genuine or not. Louis Vuitton is working with Microsoft and ConsenSys to create software that will trace the origin of the counterfeit products right from their origin till their sale. In India as well many brand owners now work very closely with e-commerce websites to free the online space from counterfeits and infringement. This measure depends completely on the willingness of consumers who want to avoid buying fake products and will not be effective in the case of consumers who are actively engaging in non-deceptive counterfeiting. 

With measures like creating a national database for IP crimes, increasing the number of Suo-moto raids by the police in these markets, the establishment of mediation centers, and other dispute resolution strategies to deal with the pending trademark cases coupled with the increasing awareness relating to intellectual property, among the consumers as well as brand owners, we can be hope to end this epidemic in the near future.


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