Fake products

This article is written by Dhawal Srivastava, an undergraduate student of law, pursuing B.A. LL.B (Hons.) from Rajiv Gandhi National University of Law, Punjab. It is a comprehensive and comparative article dealing with the distinctions between Original and Fake Products. This article is edited by Ilashri Gaur, a law student pursuing B.A. LLB (Hons.) from Teerthanker Mahaveer University (CLLS).

Introduction

In today’s highly modernised world with technological and other advancements, it is not difficult to dupe consumers since the counterfeiting or replication of products in the market could be so subtle that it becomes tough to identify and differentiate between what products are real and which ones are fake. This necessitates an understanding of the differences between an original and fake product to preclude vulnerability of customers, the legal recourse available at their disposal and the implications of having such counterfeit products available in the market.  These important aspects have been discussed elaborately in this article.

How to distinguish an original product from a fake one

The original products are those which are authentically manufactured by an authorised company or brand following all the legally binding compliances expected of them, thus vesting them with suitable Intellectual Property Rights. Fake products, on the other hand, are the inferior quality copies of the original product manufactured under another company’s name, thus violating the trademark, copyright or patent rights of the original manufacturer. 

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According to the Organization for Economic Cooperation and Development (OECD), despite the stagnation of the overall trade volumes, there has been a massive boom in the commerce of pirated and fake products in the last few years. In the year 2019, the trade-in fake goods were 3.3 per cent of the total world trade. The reason for the same is well-founded due to the fact that these products are generally sold at a lower price in order to lure consumers into purchasing these items.

For a better comprehension of what exactly makes a product ‘fake’, it is essential to know about the process put into manufacturing such items. The legal term for the same is ‘counterfeit’. 

What is counterfeit

According to the International Anti-Counterfeiting Coalition, counterfeiting is a procedure of making and distributing cheap copies of products manufactured by brands known to people. Counterfeited products are made in the name of the original producers without their prior permission. The Indian legal framework also criminally penalises counterfeiting. Section 28 of the Indian Penal Code 1860 defines counterfeit as something practised by a person with mala fide intention of causing or facilitating deception by making a thing that bears a resemblance, whether exact or not, an already existing thing. 

Kinds of trades in counterfeit

There are primarily two kinds of trades or rather, trading situations, that are linked with counterfeit and are based on the basic element of ‘knowledge’ of the consumer. These are: 

  • Where consumers knowingly purchase those products which are fake and have got no element of deception. This mostly happens in industries such as clothing, fashion and footwear.
  • Where consumers, intending to buy authentic products, end up purchasing fake products due to the presence of deceptive elements in that product. This mostly happens with electronic goods such as mobile phones, printers, cartridges etc.

Besides counterfeiting, another integral term associated with fake products is knock off, which is discussed below. 

Knock off products 

Although in a layman’s language, both knock-off and counterfeit are used interchangeably, both have different legal meanings altogether. Knock off products are basically those which are identical or similar to some already existing branded products but do not use the label, name, logo or trademark of that brand. 

Which product is better: original or fake 

In 2016, Jack Ma, the founder of Alibaba, raised a lot of eyebrows and faced backlash when he made a statement that counterfeit products are better than the original ones, both in quality and price. However, this cannot be deemed as a reliable and responsible suggestion as fake consumer products are manufactured in an illegal manner and have no restrictions on them of complying with the requisite safety norms and standards. This fact makes them hazardous as producers of counterfeit products tend to use cheap or inferior quality materials which are often unapproved and procured unlawfully. These materials can actually pose many environmental and other personal threats for consumers such as:

  • Pharmaceuticals: Counterfeiting of pharmaceutical medicines is malicious to such an extent that since the last few decades, the World Health Organization has been collaborating with Interpol to combat this problem. While initially, the brunt was faced by developing countries from the Asian and African continents which had a massive flow of fake Anti-HIV and Anti-Malarial drugs, these countries are also now a victim of fake medicines such as lifestyle drugs which are worsening the health conditions of people in these countries. With the advent of online sale of medicinal drugs, counterfeiters have found an easier platform to undertake their malicious enterprise and have expanded their business of supplying fake medicines. Majority of the people are unaware of the implications of this issue, thus making themselves susceptible to its ills.
  • Toys: OECD, in its latest report, has adjudged the total international market value of USD 12 billion of fake games and toys alone. This is a dangerous figure, specifically because these toys are hazardous for kids. These are often made of substandard stuff and are not subjected to rigorous quality checks to ensure their safety levels. Fake games and toys always have some of the other shortcomings such as faulty circuits and chargers, improper shapes, pointed or sharp corners amongst many things. These are also likely to be beautified using paints or materials full of toxins such as lead, which can inhibit and adversely affect a child’s growth.
  • Toilette Products: Fake goods of toilette products such as perfumes and cosmetics are also rampantly produced throughout the world. These are often replicated with such a perfection that it becomes very difficult for an unsuspecting customer to identify the fakeness of the product. Using such products can lead to several skin problems such as itchiness and irritation, damaging the eyes and nervous problems. In fact, a lot of tests have revealed usage of urine, specifically for manufacturing fake fragrances.
  • Food and other household goods: Foodstuffs such as chewing gum, baby food, instant food packets, oils etc. are now very openly produced by fraudsters. These do not undergo any safety tests. For the manufacturing of several other products like toothpaste, chemicals unfit for human consumption and contact are used as ingredients. Fake disposable razors are blunt and faulty in shape, causing serious abrasions and cuts on the face. Electrical appliances which are not genuine have fallacious electrical frameworks and many incidents of such gadgets combusting or exploding have emerged in the last few years. Other essential commodities faked by the fraudsters are soaps, detergents, health drinks, butter, power tools, batteries etc. 
  • Mobile phones and their accessories: Many cases of the explosion of phones have started coming from across the world, threatening the lives of their users and people around them. Fake mobile phones also have hoax accessories such as earphones which can cause long-time or permanent hearing impairments.

Besides these ill effects, there are several other consequences that are attached to using fake products which are enlisted below: 

  • Many fake products are made in developing economies by illegal gangs which have no regard for workers’ rights and subject them to intolerable working conditions, majorly involuntary. They are completely at the disposal of their bosses and get little or no pay for their work. Therefore, buying fake products has rightfully been described as an indirect endorsement of slave practice.
  • The counterfeiting industries, as already have zero regards for the law, do not care about various environmental standards that they are supposed to follow in order to avoid pollution of the ecosystem. Manufacturing of fake products requires toxins, strong paints and dyes which adversely affect the environment. 
  • There is zero customer service or product reliability when it comes to fake products. Many times and often, the seller totally disappears after making the sale, leaving the consumer helpless and at the option of pursuing time-consuming legal actions. 
  • Buying fake products leads to extending (indirectly) support to organized crimes. Counterfeiting is not the only illegality that happens on ground zero; there are many associated sideline crimes such as prostitution and drug trafficking that takes place in lieu of pursuing the industry of manufacturing fake products.

Economic harms of fake products

Besides the above-stated harms caused by fake products, a fully blooming counterfeiting industry is causing devastating economic damages at both the domestic and global level. The consequences of the uncontrollable flourishing of this illegal field are discussed subsequently under the following subheadings. 

Loss of tax revenue and required economic activity

Counterfeiting is an organised crime and in such a setup, all the involved people will never declare their illegal earnings to the government. This loss of potential tax collection is one of the major ill effects the existence of this industry has on the body. According to the International Chamber of Commerce, the amount of sales tax revenue lost by States across the world is almost USD 70 to 89 billion. Besides this, there is an incurring of additional losses of USD 8 to 22 billion as a consequence of other taxes existing in different economies. This is the money that could have gone into the achievement of various socialistic and infrastructural projects such as the construction of hospitals, schools, colleges, universities and roads for providing a better lifestyle to the citizens, improved system of education, promotion of science, technology and innovation and most importantly, for the economic impetus of a country. 

Promotion of black markets

Since counterfeiting is an organized crime, there is a rare probability of it existing in segregation. For the successful execution of the enterprise, there is proper support of groups and criminal networks who look into the supplying and dispensation of other illegal services. Counterfeit, which is a crime per se, is also associated with other crimes which are engaged in for sustenance of the unlawful trading, such as smuggling, gang wars, human trafficking and organ theft. The thriving of these black markets is also detrimental. According to OECD, China is the originating country of the majority of the supply of the fake goods all across the world, particularly in European, American and Indian markets, thus paving way for the operation of black markets in these continents.

Generation of unemployment

The negative impact of counterfeiting and other related illegal activities are not only felt by brands and corporations through deficiencies in their fiscal or annual financial reports but also by a majority of workers, particularly in developing countries. As per certain recent studies conducted globally, there was a loss of 2.5 billion jobs internationally due to the ill effects of counterfeiting and other associated unlawful activities. As far as India is concerned, in the Financial Year 2018, there was a loss of 16 lakh jobs due to smuggling and other related activities that facilitate black markets and counterfeiting. It is estimated that by the year 2022, there will be an additional loss of 5 million jobs due to the production of fake goods. It is also calculated that 160,000 employment seekers, after losing jobs, will not be able to gain new ones as a result of this crisis. Another possibility which could not be denied is the consequent rapid joining of many such displaced workers in this illegal industry where there will be clear defiance of labour laws and other legal compliances, leading to their exploitation. 

Dissuasion of innovation

Although there are Intellectual Property (IP) safeguards in both the domestic as well as international law, the expansion of the fake manufacturing industry does not seem to cease and is, to the contrary, increasing at a rapid rate with every passing year. There is a clear violation of IP rights of original manufacturers, and the perpetrators are largely left scot-free to continue with their business. This dissuades innovation as it sends an image of incentivising on other people’s ideas and its unofficial permission of infringing upon IP rights of others. This is detrimental for economic growth as it can lead to stagnation or high dependency on fake products.

Loss of foreign investments

If fake product market mushrooms excessively in a country which has got a poor IP enforcement mechanism, there is a deterrence on the part of the foreign investors and companies, specifically those working in fields which are IPR sensitive as they are the worst affected by infringements through counterfeiting. No foreign brands or companies would like to invest money on research, development and innovations in such a country where their products would be ripped off by counterfeiters. 

Impact on individual brands 

Besides economic losses incurred by individual brands, there is also a clear cut depreciation of reputation, as a majority of the consumers who face problems because of fake products end up contacting the original brand, only to be dismayed later on by the realisation about the genuineness of their purchase. However, this does cause existential threats to businesses and corporations. One of the reasons is the lack of a proper infrastructural mechanism for finding and destroying these counterfeited goods. Another reason is the absence of a reliable authenticity tracker of the products by those companies which have complicated supply chains. All these factors make brands extremely susceptible to the risky effects of counterfeiting. 

Ways to spot counterfeit goods

In order to recognize a counterfeited, fake product vis-a-vis an original one, consumers should look out for the following caveats: 

  • Unbelievable discounts: With the advent of the e-commerce market in India, discount deals have become a norm. However, it is important to wisely acknowledge that if a branded product is being sold at a very unreasonably low discount, say 90%, it is more likely to be fake. In order to prevent this from happening, customers should cross-check from the normal discount offers provided by the original brands on their products from their official websites. 
  • Careless packaging: Good companies and brands ensure proper, meticulous packing of the goods before delivering them to their customers as it represents their accountability and commitment to a better service. Therefore, a neglected packing, with cheap quality plastic covers, ill-fitted boxes or coverings are indicative of the products being counterfeit or fake. Also, if the goods come without any packaging at all, then they definitely are not original. 
  • Fallacious logos or fonts: The fake products tend to have mistakes in the logos and font of the brand name imprinted on them. The customer needs to be extremely cautious in order to identify this. In cases of confusion, the consumer should cross-check the logo of the product from the official online website of the brand. 
  • Grammatical errors and spelling mistakes: These are one of the most easily identifiable mistakes committed by fraudsters while selling away fake products. If consumers find spelling or grammatical errors or both in user manuals, cover boxes of the product or elsewhere, there is a very high probability of the product being fake. 
  • Substandard quality of the product: Counterfeit products tend to have cheap and unoriginal substitutes in place of authentic ones. Used, old or rusted parts in electronic devices, forged leather, slightly changed appearance, apparently pathetic quality material or cloth etc., are suggestive of a fake product. 
  • Absence of important information: All the bonafide companies have information like contact details of the manufacturer, barcode, trademark, model or serial numbers on the product’s package. The counterfeiters tend to miss out on some or other of these details while copying the original product. Another way of identifying this error is verifying the serial number provided on the alleged fake product from that available online. In case of mismatch, it can be concluded that the product is definitely fake. 
  • Missing supplements: Counterfeit products tend to have some or other crucial accessories or supplements of the product missing. If important items like warranty cards, chargers, wires, user or instructions manual are not present in the packing, the customer should urgently get back to the retailer and ask for redressal.
  • Unauthorized sellers: It is best to buy products from retailers and dealers authorised by the original brand for the sale of their products or official brand outlets. Majority of counterfeit products are sold by unauthorised sellers. However, since customers tend to get attracted towards profit if another store tends to offer a good deal, cross-checking of the contact details and information regarding that store online is advised. 
  • Fraudulent websites: This is particularly important for those people who actively shop online. One simple way of avoiding purchasing fake goods is by confirming the authenticity of a web portal. An easy way of doing so is the presence of ‘https’ on the URL of the website and a lock sign. If instead of ‘https’, ‘http’ is visible on the link of the website, there are high chances of it being risky for accessing.

How to prevent products from being illegally counterfeited

After an elaborate discussion on the risks that are connected with fake products and their impact, a reasonable question arises with respect to strategies that should be adopted to stop the counterfeiting of the products. These are elucidated in the following subheadings:

Creation of brand guidelines

This essentially implies educating the employees, stakeholders, associates, business partners and investors regarding the usage of the company’s trademarks and other relevant brand elements after the stipulation of some guidelines around the usage policies of these tangible identity symbols of the company. While doing so, it should be ensured that there is no compromise on brand visibility while maintaining the brand positioning. 

Maintaining a consistency 

It is important for brands to maintain consistency with regards to details such as packaging, name and other pivotal features. Consistency will ensure that customers are able to spot the difference between a genuine and fake product as fraudsters tend to make slight errors while copying the products. However, with the modernisation of technology, it has become very easy to replicate the exact copies of a genuine product and escape the customer’s eyes.

Development of trade strategies 

It is the responsibility of a brand or a company to determine and monitor trademark registrations, domain names and other identifying elements. The most important aspect is having a domain name strategy as protection of trademark against infringing domain names will prevent the customers from getting deceived.

Legal framework in India

As far as India is concerned, there is no specific legislation dealing with piracy and counterfeit issues. However, there are provisions in various statutes that provide for civil, criminal and administrative remedies. Some of the laws of which businesses or concerned parties can take recourse have been briefly discussed below: 

  • Trademarks Act, 1999

The Trademarks Act, 1999 is a law that provisions criminal and civil remedies against the violation of any trademarks. Although there is no direct mention of the word “counterfeit” throughout the Act, mention of clauses such as “falsifying a trademark” or “falsely applying a trademark” under Section 102 of the Act, which is counted as criminal remedies. Civil remedies such as injunction, delivery-up, damages, Anton Piller order (provides for the right owner to visit the defendant’s premises accompanied with a commissioner, search and seize all counterfeited goods), John Doe (similar to Anton Pillar, with the only difference being that the defendant(s) is not known) as Relief under the violation of Section 135 of the Act.

  • Copyright Act, 1957

Copyright Act, 1957 is a law with strict provisions against its violators or infringers since there is no prerequisite condition of having a copyright registration for the applicability of this act. It also provides for both civil and criminal remedies. Section 55 of the Act provides for civil reliefs such as injunction, damages and accounts of profits. The Act also vests powers of seizure of the copyrighted work to the police officials under Section 64 of the Act. Section 63 of the Act states the offence of infringement of the copyright or violation of other rights conferred by the Act.

  • Patents Act, 1970

The Patents Act, 1970 provides for a stipulated time period of 20 years a monopoly right to patentee over his or her invention. The Act does not provide for any civil remedies. However, criminal remedies are provided in cases where the secrecy requirements have been flung or a wrongful representation of an article as patented is said to have been done. The patentee can still apply for a suit under Section 104 of the Act seeking remedies such as interlocutory or permanent injunctions, damages or account of profits.

  • Border measures

Measures for Border Protection is necessary for ensuring that the counterfeited products are neither getting imported nor exported from India. The IPR Rules of 2007, or the Intellectual Property Rights (Imported Goods) Enforcement Rules of 2007, vests competent authorities with suitable powers to suspend the clearance and seize counterfeit, pirated or fake products at the port itself. The rules also empower the Customs Department to destroy goods that have been found to infringe IP Rights. The law allows holders of specific IP rights such as trademarks, copyright, patents, designs and geographical indications to record their grievances with Customs officials for the prompt seizure of counterfeit goods at the port itself.

These are some of the legal remedies available to companies, brands or persons concerned in case of infringement of their IP rights or replication of their genuine products. Special laws, such as the Drugs and Cosmetics Act, 1940, and the Food Safety and Standards Act, 2006, have criminal provisions to handle with spurious products, but only the police and authorized officers, who have been empowered under these respective acts, can carry out searches and seizures.

Indian Penal Code, 1860

The Indian Penal Code, 1860 lays down the penalties for cheating, counterfeiting and possessing of instruments facilitating counterfeits etc. under Chapter XII of the Act. The provisions of the penal code can be invoked in criminal actions, in addition to the provisions of specific statutes.

Recourse for consumers who got fake products

If a consumer unknowingly receives a fake product, he or she can seek legal redressal under the Consumer Protection Act, 2019 and approach consumer forums. The following steps need to be taken by the consumer in case he or she becomes a victim of purchasing a fake product:

  1. The seller of the product should be immediately contacted and intimated about the inauthentic nature of the product. This can be done via the customer care support provided by the selling platforms and every single detail, from time and date of purchase to product code, should be diligently informed to the seller. The vendor may take some time for the verification of the details provided by the customer.
  2. In case of inaction on the part of the seller, the consumer can send a legal notice to the vendor by consulting a consumer court lawyer, who could draft a fool-proof notice incorporating details such as the issue, actively sought, reply of the vendor and the expected action or response by the seller to the grievances of the consumer.
  3. Provided the seller fails to act on the legal notice sent by the consumer, the latter can approach the consumer forum and lodge a consumer complaint against the seller. For the recompense of the compensation or damages, the consumer can hire a consumer court lawyer for fighting their case in the court.
  4. For fake products, a consumer can even notify the original brand which can file a case under the Copyrights Act,1957 for the infringement of copyright.

Conclusion

Despite the availability of these legal provisions, there is a clear lack of adequate framework which solely addresses the problems of duplication or replication of original products and the subsequent manufacturing of the fake products. With the gargantuan dangerous effects of the presence of fake products in the market, it becomes contingent to have a stricter legal regime governing the same for ameliorating the scenario of the Indian economy and providing a better space for investors and businesses to trade-in. Besides having a domestic system, there needs to be an impetus in international coordination and additions to the jurisprudence of international law in order to counter the negatives of counterfeiting that impacts not just individuals but almost all the states globally. Only a systematic approach, effort and strong intent can help pursue this aim and achieve its objectives.

References

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