This article has been written by Vaishali.N, a student at the School of Excellence in Law, Chennai. This article aims to provide an overview of intellectual property theft. It elucidates different kinds of IP theft, their causes, and prevention methods. It also discusses the scenario of IP theft in different countries and recent cases in India. 

It has been published by Rachit Garg.

Introduction 

If you’ve ever written articles or research papers, you know the trouble of getting your content checked for plagiarism. Plagiarism is the act of using content or ideas from another person’s work as your own without giving credit or acknowledgement. It is highly undesirable and considered unethical in academic and creative writing as it is a form of intellectual property theft. 

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Intellectual property theft occurs when a person uses someone else’s creation without their permission. Intellectual property theft can happen in various ways for various reasons, including infringement of the creator’s rights. However, all kinds of infringement of IPR do not amount to IP theft. It occurs when the rights of the owner are infringed on deliberately by the perpetrator with an intent to deceive, not due to a lack of awareness or negligence. 

What is intellectual property theft

Intellectual property is intangible, which means it does not have a physical existence but still has material value and legal protection. Intellectual property constitutes the ideas and mental creations of a person or group of persons. For example, musical pieces, art works, novels, poetry, trade-secrets, trademarks, scientific inventions, etc. 

The laws created around intellectual property provide legal protection by establishing rights and liabilities for the persons  involved in ownership, use, and transfer of the intellectual property. These rights give control of the intellectual property to its creator or owner, who decides who can use his creations and who cannot. So, if a person uses someone’s creation without their authorization, that will amount to intellectual property theft. For example, if A is the creator of a certain popular song and B wishes to use A’s song for his short film, he must seek permission from A to use his song, and A shall let him do so for a certain payment in the form of royalties.

Intellectual property laws protect the owner of a copyright, trademark, or patent from misuse by a third party. Intellectual property theft infringes the rights of the owner, which, though does not cause physical injury to constitute a criminal offence, consequently impacts their business negatively. 

Kinds of intellectual property theft

Intellectual property theft takes place in various ways and for various motives. The following are the common causes for intellectual property theft- 

Copyright infringement 

Copyright means ‘the right to copy’. It is a right possessed by an owner of intellectual property that enables him to make copies of his work and sell them or authorise a third party to use them. Under Section 13 of the Copyright Act, 1957, copyright exists for literary work, including computer data, dramatic, musical, artistic work, cinematograph films, and sound recordings. When any such copyrighted material is used without the permission or authorization of the owner, infringement of copyrights takes place, and this is a kind of intellectual property theft.

Trademark infringement

A trademark can be a word, symbol, designs, logo, etc. The purpose of a trademark is to help people identify and differentiate one’s product or service from the rest. When a third- party uses the registered trademark belonging to a legal entity without its knowledge or permission, it amounts to trademark infringement under Section 29 of the Indian Trade Marks Act, 1999.

For example, Starbucks Corporation is a well known coffeehouse. The right to use its trademark logo solely exists with Starbucks and its franchised shops. If any third-party opens their own independent coffee shop and uses the trademark logo of Starbucks to market themselves without the authorization of Starbucks Corporation, then that leads to trademark infringement.  

Patent infringement 

A patent is a legal certification issued by the government to the inventor to protect his rights over his inventions. A patent is provided for inventions that are novel, non-obvious and have some utility. It provides exclusive rights to the inventor under Section 48 of the Patents Act, 1970, to make, use, and sell his invention. The inventor alone has the right to license a third-party to use his invention. When a person violates these rights of the patent-holder, it amounts to patent infringement. If he uses a patented invention without the knowledge or permission of the patent-holder, it amounts to patent theft. 

For example, if A had invented a hydrogen-powered vehicle and obtained a patent over his invention, any vehicle manufacturing company wanting to mass-produce and sell his hydrogen-powered vehicle must either get licensed or buy the patent over the product from A in order to do so.

Trade – secret theft 

Many companies and businesses thrive by protecting confidential information, which makes their business stand out in the market. This information is called a ‘trade-secret’, and it can be a formula or recipe, business or marketing strategy, unique manufacturing process, their clients and leads, etc. The secret spice recipe of KFC and the formula of Coca-Cola are famous examples. 

Since trade-secrets of a company are what become a major reason for the company’s competitive sustenance and are unique to the company, they are also protected as intellectual property. 

If a third-party unethically acquires the trade-secrets of a company and establishes a competing business of his own, it amounts to trade-secret theft. 

Counterfeiting 

Counterfeiting is a form of intellectual property infringement. It involves imitating a particular genuine product using a trademark to make it look like the original, and selling it to the customers, mostly at a cheaper price. Often, when you browse for clothes online or even in local bazaars, you could find knock-off outfits and accessories that look very similar to the originals that are exclusive to a branded clothing line and are available at a much cheaper price.  These are examples of counterfeit products. Counterfeiting is illegal and unethical, as it leads to a loss of sales for the owners of the original products. In India, Section 103 of the Trade Marks Act, 1999, provides for penalties in counterfeiting cases, which might be imprisonment up to three years, a fine up to two lakhs, or both.

Piracy 

When a party engages in the unauthorised use, duplication, reproduction, and distribution of someone else’s copyrighted work without their knowledge or consent, it amounts to piracy. These days, if one wishes to buy a book for a cheaper price, they might find themselves at a grey-market that sells low quality copies of the original book or even download the digital version of the book from illegal sites free-of-cost! Another familiar example would be the illegal copying and selling of CDs and DVDs of movies or music albums. 

Piracy is highly unethical and prohibited by law, as it leads to loss of business for the owners of products since they’ll receive no royalties for the pirated copies sold. 

The Copyright Act of 1975 protects intellectual property from piracy. The act of piracy comes within the ambit of cheating under Section 415 of the Indian Penal Code, 1860, which imposes a penalty of one year’s imprisonment, a fine, or both. Section 65A of the Copyright Act focuses on controlling digital piracy. However, the penalty for digital piracy is provided by Section 66 of the Information Technology Act 2000, which punishes the infringer with imprisonment up to 3 years, fines up to 2 lakhs, or both.

Geographical Indication (GI) theft 

Geographical indications, as defined by the World Intellectual Property Organization (WIPO), “is a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin”. Internationally, it is governed by the WTO’s (World Trade Organization) TRIPS (Trade-Related Aspects of Intellectual Property Rights) agreement, while in India, it is governed by the Geographical Indication of Goods (Registration and Protection) Act, 1999. 

A GI theft occurs when the producers of a product falsely claim their products to have originated from the specific geographical location they belong to, but in actuality they are produced elsewhere. This misleads consumers, makes the customers doubt the authenticity and quality of the product, and also causes huge losses to legitimate producers. 

Causes of IP theft 

Intellectual property thefts can happen for the following reasons – 

Economic gains 

One of the primary reasons for intellectual property theft is personal gain. It is easier and cheaper to imitate or duplicate a successful product or service and make money out of it than to invest in the research, development, and production of one’s own ideas or innovations. 

Globalisation  

With markets expanding above and beyond  borders, international trade and the interconnectedness of various businesses have changed the nature of trade and commerce. With no such international law existing to regulate intellectual property rights, it has become easier for one country to steal the intellectual property of another country that has weak laws protecting its innovations. For example, turmeric, neem, and basmati rice are indigenous to India, and they’ve been cultivated and used for centuries by Indians, who are well aware of their properties and utility. But most of the patent rights owing to the discovery of these items are registered in European countries and the United States due to the lack of strong intellectual property laws in India. 

Cybercrimes and hackers

Heavy reliance on cyberspace is another reason for intellectual property theft. Committing cyber-theft is cheap, quick, and effective. With all the important data and documents being stored digitally, it has become easy for hackers and other cybercriminals to break into computer systems and steal valuable information through phishing, online scams, malware, etc. 

Lack of ethics and integrity in business 

Employees, contractors, or freelance workers often have access to confidential information about a company or their employer, which they might use for personal gain. The employee might turn rouge or otherwise be lured by the competitors or any other third-party through bribery or coercion to work for them as insiders to steal and provide them with sensitive information or trade-secrets of the company. 

Organised criminal groups

Organised criminal groups like cyber terrorists, spies or other threat actors target business, organisations, governments or important individuals and directly steal information through phishing, vulnerability exploitation, spreading malware, etc. 

Prevention of IP theft

IP theft can leave the owner or the original creator with huge financial losses and damage to their reputation. Hence, protecting one’s IP from such dangers should be the top priority of IP owners and creators. The following measures can be taken to prevent IP theft- 

  1. Register intellectual property – Even though it is not mandatory to register one’s IP, it is still an essential step to follow because registration provides legal protection to the owner. Without registering one’s IP, one cannot enforce his legal rights or claim damages in the event of infringement of his IP rights. 
  2. Education and awareness- Creating awareness among the employees, partners, and related parties about IP rights, liability, and the consequences of theft is another way. Educating and training employees on the best practices to secure sensitive information and predict potential threats is a way to prevent IP theft.
  3. Strengthen company policy – Creation of strict regulations around the protection of IP and impose stringent actions against perpetrators. Limit access to confidential data to only a few authorised personnel.   
  4. Non-disclosure agreement (NDA)- Preparing an NDA is extremely essential, as it creates a legal obligation on the parties to the agreement to keep confidential sensitive information and trade-secrets. 
  5. Monitoring competitors- Keep a close watch on your competitors to look out for potential infringements of your IP rights. In cases of suspicion, engage in negotiations and legal proceedings to deter theft. 
  6. Conduct intellectual property audits – Conduct regular audits to evaluate existing security measures and discover potential vulnerabilities and threats. 
  7. Strengthening cyber security- Protect digital systems and networks with professional cybersecurity software to prevent hacking and other cyber-attacks.
  8. Stay updated on trends in IP thefts, potential threats, and vulnerabilities, and take measures to reform your security strategy accordingly. 

Recent case laws   

Mondelez India Pvt. Ltd. v. Neeraj Food Products (2022) 

This case involves a dispute between Mondelez India Pvt. Ltd. (Cadbury) and Neeraj Food Products. Cadbury sells a well known product, button chocolates covered in colourful candy shells, under the trademark “GEMS”. It is the owner of the registered trademarks “GEMS” and “GEMS BOND”, which it previously used to market its product in the 1970s. Neeraj Food Products launched a chocolate product similar to that of Cadbury’s Gems under the trademarks “JAMES” or “JAMES BOND” or “JAMMY BOND”, using similar packaging and cover styles to Cadbury’s product. Cadbury thus filed a suit against Neeraj Food Products, claiming that they’ve caused trademark and copyright infringement as their design is very similar to that of Cadbury’s, and this can easily confuse customers. 

The Delhi High Court ruled in favour of Cadbury. The Court observed that Cadbury’s GEMS is widely known to the public. Its pillow packaging, colour scheme, and trademark logo are very well known to its consumers. The defendant’s product has many elements that are very similar to those of the plaintiff’s, and hence, the acts of the defendant constitute infringement and passing off of the plaintiff’s trademarks. The Court also used the principle of res ipsa loquitur (the thing speaks for itself) owing to the similarities between both products, releasing the plaintiff from the burden of proving the same. 

Therefore, the Court granted a permanent injunction in favour of the plaintiff and ordered the defendant to pay Rs. 15.86 lakh in compensation. 

Neetu Singh & Anr. v. Telegram FZ LLC & Ors. (2022)

The issue in this case revolves around the liability of the intermediary (telegram, in this case) with regards to copyright infringement.

Neetu Singh, the plaintiff, is the author of popular competitive examination books. K.D. Campus is a coaching institute that turned to taking online classes during the pandemic. They started circulating the plaintiff’s copyrighted books on a messaging app called “Telegram” without any authorization. The plaintiff claims that telegram hosting channels that disseminate her copyrighted works have infringed on her rights. The Court thus had to decide whether or not Telegram should be held liable for hosting channels that infringe Neetu Singh’s copyrights. 

Firstly, the Court asserted jurisdiction over the case due to the infringement having occurred in Delhi. It was decided that the plaintiff’s video evidence qualified as “literary work” and “cinematograph films” under the Copyrights Act. It dismissed the defendant’s defence of privacy, stating that privacy cannot be a ground for non-disclosure and that the right to seize infringing copies under the Copyrights Act overrides privacy concerns. 

Therefore, the Court ruled that under Section 79(3)(b) of the Information Technology Act, 2000, Telegram was obliged to take down such channels that circulate unlawful materials. Further, Rule 3 of the IT guidelines was cited, stating that intermediaries are prohibited from hosting, displaying, modifying, uploading, or sharing information that infringes copyright. 

Yahoo!, Inc. v. Akash Arora & Anr. (2022)

In this case, the plaintiff (Yahoo! Inc.) filed a suit seeking a permanent injunction against the defendants for naming their service ‘YahooIndia’ and using a domain name of Yahooindia.com, both of which are very similar to the trademark and domain name of the plaintiff. The plaintiffs argued that the domain name and trademarks are not mutually exclusive and accused the defendants of passing off by taking up the name of ‘YahooIndia’. The defendants contended that the plaintiffs cannot plead action as the provisions of the Trademarks Act do not apply to online services and the trademark of Yahoo! Is not registered in India.

The Court remarked that actions passing off are governed by common law; hence, it applies to services also. It was noted that the plaintiff’s business is well known and reputed. The defendant provides the same service as the plaintiff, and hence the similarity between the trademark and domain name is a deliberate attempt to confuse and deceive people. Therefore, the court granted the injunction to make the defendant’s name commercially useless and prevent passing it off. 

ISKCON v. ISKCON Apparel Pvt. Ltd. & Anr. (2020) 

In this case, the plaintiff, the International Society for Krishna Consciousness, is a popular organisation whose acronym “ISKCON” is their trademark registered under the trademarks act of 1999. ISKCON owns several temples and restaurants and also sells various goods like books and clothes under its trademark to its devotees. The defendant, ISKCON Apparel Pvt. Ltd., a separate company, started selling clothes online using the trademark of ISKCON unauthorizedly, violating the rights of the plaintiff. The plaintiff had issued various summons to the defendants, after which the defendant changed the name of their company to ‘Alcis Sports Pvt. Ltd.’ but continued to sell their products under the trademark ‘ISKCON’. 

After evaluating the evidence submitted by the plaintiff, the court acknowledged the worldwide popularity and faith of people in the organisation. It was determined that the plaintiff’s trademark fulfilled the requirements of a ‘well-known trademark’ under Sections 11(6), 11(7), and 2(1)(zg) of the Trademarks Act, 1999. It was clear that, given the popularity of the trademark, the defendant’s action of adopting it was motivated to deceive people and gain profit. Hence, the Court ruled in favour of the plaintiff and banned the defendant from using their trademark.

IP theft in different countries 

China 

China is accused of being the proprietor involved in IP theft from several countries.  It is known for counterfeiting goods across the globe. Being the top manufacturing hub of the world, Chinese companies conveniently started imitating and reproducing lookalike products  of the original brands and selling them to Chinese markets. According to a report, China is believed to maintain its economic competitiveness in the international arena by stealing intellectual property from other countries. China is reported to cause over 50-80% of IP theft from the United States annually. It is said to have been responsible for the theft of trade secrets of several US companies, amounting to 180 billion – 540 billion dollars per year, through espionage, forced technology transfer, or mandatory joint venture deals.

It is one of the blacklisted countries in the USTR’s (United States Trade Representative Office) Special 301 report. The European Union and Japan too have reported the majority of their IP thefts being traced to Chinese groups. Indian companies, being the backend technology of various IT companies, are also engaged in improving their infrastructure to protect themselves from Chinese intrusion. 

India 

As of the 2023 IP Index published by the U.S. Chambers of Commerce, India ranks 42nd out of 55 countries. India has a lot of deficiencies in its Intellectual property laws. The U.S. has accused India of being its second biggest threat to it’s Intellectual property and has been blacklisted by the USTR. 

India also suffers from intellectual property theft, especially in the entertainment industry. According to a news report, there has been a surge in piracy during the pandemic period. Music piracy in India is higher than the global average, and the loopholes and ambiguity in the Copyrights Act have led to theft, misuse, and infringement of copyrights. According to a research conducted by the U.S- India Business Council, piracy alone has caused over 11% of the loss of employment in the film industry. This is one of the reasons for India’s poor ranking and global recognition.  

Further, India’s failure to protect indigenous inventions has led to various U.S. and European countries claiming patents on Indian discoveries and inventions. This includes the U.S. company RiceTech claiming patents for Basmati rice in 1997. Later in 2011, India won a patent rights battle against RiceTech, claiming three basmati rice varieties, but the patent for  many of the modified basmati rice varieties still remains with the U.S. Moreover, a news article explains that many ayurvedic products belonging to India are being used to make medicines and sold in the U.S. and other countries.

United States 

Has one of the highest numbers of IP thefts in the world. The U.S. loses over 225-600 billion dollars in IP theft by China, India, and other countries annually. The USTR publishes an annual report called “Special 301”, in which the U.S. has blacklisted eleven countries: Argentina, Algeria, Kuwait, Saudi Arabia, Ukraine, India, China, Chile, Russia, Venezuela, and Indonesia, for their poor enforcement of IP rights and being a threat to the IP of the American companies.  

The U.S. loses billions of dollars due to intellectual property theft, which heavily impacts employment. To battle this issue, the U.S. has been planning to adopt “strong deterrence measures that would make IP theft unprofitable, such as imposing banking sanctions and investment and import curbs for companies failing to protect IP”. 

European Union 

The EU suffers a great deal due to IP thefts too. A 2019 report published by the European Union Intellectual Property Office (EUIPO) estimates that the EU loses over 60 billion Euros annually from IP theft in goods and services alone. Counterfeiting and piracy are major challenges the EU has been struggling to deal with. The EUIPO identified ten countries it accuses of being responsible for counterfeits in the EU. They are China, Hong Kong, Turkey, the UAE, India, Morocco, Benin, Gambia, Malaysia, and Panama. 

Many Chinese companies have been sued by several car brands for producing and selling copycat vehicles and designs. Apart from luxury brands, counterfeiting has also expanded to products like pharmaceuticals, pesticides, cosmetics, food and beverages, toys, spare parts, electrical components, gadgets and even daily products like soaps, shampoos, and toothpaste etc. Online platforms are widely used to sell counterfeit goods and pirated digital content like films, music, e-books etc. 

The EU has been making efforts to combat this challenge by working closely with Europol, making financial contributions to its IP Crime unit, and taking initiatives to establish an IP Enforcement Portal. 

Conclusion

With the shift of trade and business to cyberspace, IP thefts have become quite common  all around the world these days. Creating and enforcing strong IP laws has been quite challenging due to constant technological evolution, globalisation and the difficulty of balancing the interests of creators, investors, and the public. India, particularly, has not been faring well in the intellectual property index. The IP laws of India are quite weak due to existing loopholes, ambiguities, and poor enforcement. 

The Indian government has taken several policy initiatives to improve the position of IP laws in India. However, it is necessary that the emphasis remain on strengthening enforcement, establishing separate IP tribunals, improving international cooperation, encouraging innovation, and promoting education and awareness to strengthen IP laws in India. 

 Frequently Asked Questions (FAQs)

What is the difference between piracy and counterfeiting? 

Piracy is the reproduction or duplication of original works that are protected by copyright, like music, artistic works, books, etc., while counterfeiting involves infringing the trademark of an authentic product by imitating its logo, symbol, or any distinctive sign or style that is unique to that original product with a motive to deceive consumers. 

What should one do if their IP is stolen? 

In the case of an IP theft, firstly, evidence regarding the theft should be collected and legal advice should be sought. A cease and desist letter can be issued to the infringer. In many cases, mediation and negotiation are done with the infringing party with the help of a lawyer. If the mediation fails, a complaint can be filed at the intellectual property appellate board or at a relevant High Court.

Can owners of unregistered IP get legal protection from  IP theft? 

In the case of a copyright Infringement, registration is not mandatory to enforce your legal rights. A proceeding can be instituted against the perpetrator, but the plaintiff must prove his or her ownership over the IP. In the case of patents and trademarks, however, no legal action can be claimed as an effect of non-registration. 

References

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