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

Introduction

In India, about 80 percent of customers who purchase counterfeit products are estimated to be victims of deception. To attract buyers, counterfeiters use pictures and images of real goods but then supply them with fake goods. According to a study published in the Economic Times, e-commerce accounts for the third-largest number of complaints about fake and counterfeit goods.

The convenience provided by the Internet has encouraged traders to transfer their companies online, and a whole new set of challenges has also been raised. E-commerce is also incredibly attractive to counterfeiters, particularly because the Internet makes it possible for them to remain anonymous. However, the problem is not limited to counterfeit goods being sold locally but also relates to exports of counterfeit goods from India. According to a new study by the Organisation for Economic Cooperation and Development and the EU Intellectual Property Office, India is now the fifth largest exporter of fake products in the world.

Different types of Brand Infringement

Brand owners are dealing with a range of brand security problems, some basic, some complex. They have been classified as follows.

• Clear copying of brands – identical or similar marks used for the same products.
• lookalike products – The brand is not copied, but the color scheme, structure, and basic product packaging elements are the same.
• Use of a well-known mark for different products – a well-known mark is copied for use of entirely different products to take advantage of its goodwill and brand reputation.
• Use of a brand name as a corporate or trade name- use of a registered trademark as part of a corporate or trade name to establish a false perception and relation with the registered mark and.
• Comparative advertising contributes to brand denigration.

Is the smartphone a root cause of this issue?

With smartphones becoming prevalent in India, with a price point below Rs. 8000, people living in both rural and urban areas have immediately started using it. Smartphones enable access to the latest international trends, designs, and labels to individuals and counterfeiters. Also, in-built cameras allow traders to take pictures of goods displayed at official brand outlets and use them via WhatsApp networks to sell counterfeit products.

Recent trends indicate that by developing a cozily networked B2B marketplace from which to distribute their products, counterfeiters find it cheaper and more convenient to sell goods through the WhatsApp group. Because anyone can create a group of up to 250 people from WhatsApp and share product information with them. Sellers can also develop B2C networks, giving customers the option of talking to them directly and supplying them with goods according to their needs.

Jurisdiction

In conflicts involving online transactions, one problem that sometimes arises is the jurisdiction of the court, provided that a website can be accessed from anywhere in the World. The online availability of goods and services poses complicated compliance issues in relation to the rights holder, the infringer, and the internet service provider. In addition, the place where the ad or offer for sale is posted on the Internet, the location of the server, and where the customer downloads the ad or offer may all play a part in deciding jurisdiction.

World Wrestling Entertainment, Inc v Reshma Collection

In this case, the Delhi High Court observed that:

Since the offer to purchase goods was made in Delhi via the website of World Wrestling Entertainment, Inc (WWE), the contract was concluded in Delhi and the payment came from Delhi, WWE could be regarded as “carrying on business” in Delhi, as all the important parts of the transaction took place there and the probability of concluding transactions at a specific location via a website is almost similar to the seller having a shop at that location. 

A global perspective of Counterfeiting of Well-known marks

According to the Report of Global Brand Counterfeiting 2018, The volume of international trade in counterfeit products reached $1.2 trillion in 2017 and is estimated to increase to $1.82 trillion in 2020, and these astounding figures are expected to keep on increasing.

The current production volume and the ease of procurement of counterfeit products are unparalleled as a perverse result of globalization and the ever-growing rate of internet penetration. While manufacturing plants are increasingly shifting away from China to even cheaper production locations such as Bangladesh and Indonesia, it is estimated that China still accounts for between 85% and 95% of all counterfeit products.

The plethora of counterfeit designer handbags readily available in China’s cities for rock-bottom prices is undoubtedly a big headache for global luxury brands, but one thing that may make them easier to rest is the fact that most are usually of poor quality. If after a few days of using a fake Chanel or Louis Vuitton bag falls apart the higher price for an object that could last for decades seems like a wiser investment.

Known as ‘Yuandan’ goods, these black-market luxury products will go for around $100 to $300.

A new Chinese-language study on Sina looks at the prevalence of sellers of these types of bags to find out if they really exist, and its results will make it easier for luxury brands to rest.

According to the study, higher demand among Chinese customers for quality means that there has been a rise in sellers saying that their bags are from the actual factories of the brands. Sellers make allegations that due to minor discrepancies, bags were made of discarded material or failed to pass inspection. However, the study finds that most of these sellers have turned out to be somewhat unscrupulous, simply selling genuinely fake items and passing them off as the real thing.

According to the 2018 Global Brand Counterfeiting Report, Chanel, Louis Vuitton, Prada, Fendi, Gucci, and Dior are the most counterfeited luxury brands. They are mostly inexpensive to manufacture and infringe on well-known brands so that they can be sold for a fast profit in any market on the planet with few repercussions in the event of a seizure.

In the luxury industry, originality and rarity are the main factors for success. If a luxury good becomes familiar with the public, it will stop selling, and all the research and development methods, design, marketing, and promotion resources invested in creating something unique or different will be wasted.

A clear concern for luxury brands is the mass sale of counterfeit goods allowed by the Internet. The luxury industry consists mainly of wearable products (e.g. sunglasses, apparel, leather products, and perfumes) and the production of such goods is highly regulated, even though the goods are not high-end products. Counterfeits do not comply with any safety requirements and thus have the ability to endanger their owners. The risk of using counterfeit sunglasses are high, as they do not provide their wearers with sufficient protection. The same applies to perfumes or clothes that have direct skin contact and may contain toxic substances.

YouTube, Facebook, WhatsApp, WeChat, QQ, Qzone, Instagram, and TikTok are the most popular online platform today. These apps have billions of active users and as many prospective buyers. Studies show that approximately one-fifth of the content shared about luxury brands on social media is fraudulent.

For counterfeiters, this means of free ads provide an additional gain. First, they do not rely on the marketplace and its rules for IP compliance. Second, for brand owners, shop addresses are harder to locate, as they are either not well ranked or entirely inaccessible from search engines. Finally, counterfeiters can connect with multiple web addresses instead of listing a single online shop and limit the risk of getting all their sales stopped when one site is suspended. Many luxury brand infringement cases brought important amendments to the trademark industry. Let us discuss a few of them.

Land Rover’ Trademark infringement dispute case

Jaguar Land Rover Co., Ltd. Vs. Guangzhou Fenli Foods Co., Ltd., Mingzheng WAN (Guangdong Higher People’s Court (2017) Yue Min Zhong No. 633 Civil Judgment).

Land Rover affiliates applied for registration in China of trademarks No. 808460, 3514202,  and 4309460 ‘LANDROVER’ in 1996, 2004, and 2005, and all of which were allowed for use in the 12th class of ‘Land Motor Vehicles’ and had a higher reputation and were subsequently transferred to Land Rover. Guangzhou Fenli Foods Co., Ltd. (hereinafter referred to as “Fenli foods”), advertises and sells its “LAND ROVER Vitamin Beverages” on its website and in its physical shops. The conflicted marks used on the related products such as packaging boxes and web pages include “路虎” and “LANDROVER”. “Landrover 路虎” and “路虎 LandRover” arranged above and below. 

In 2010, Fenli foods had applied for the registration of the trademark ‘LANDROVER’ in respect of the 30th ‘non-medicinal nutritional liquid’ and 32nd ‘non-alcoholic beverage’ products, but none of them were approved for registration. Land Rover filed an infringement lawsuit on the argument that Fenli foods’ actions constituted infringement. The Court of First Instance ordered Fenli to stop the violation and to reimburse Land Rover for RMB 1.2 million in monetary losses and reasonable rights expenditure. 

The court of second instance held that the evidence submitted by the Land Rover was sufficient to determine that the mark was widely recognized and already well-known to the public in China. The alleged infringement actions undermined the recognition and goodwill of the well-known trademark of the Land Rover involved and harmed the Land Rover’s interests and it should be prevented. Consequently, the appeal was dismissed, and the original judgment was upheld.

The uniqueness, in this case, is that Fenli foods carried out more than once rush registrations of trademarks belonging to well-known brands and well-known individuals, in addition to the accused violation in the present case, the infringement actions had a clear objective of evil intention. The judgment in the present case addressed the facts and the legal basis for a thorough and detailed determination of the amount of the compensation of RMB 1.2 million, showing the judicial attitude of preventing the malicious accumulation of trademarks. 

In terms of raising the protection of well-known trademarks, controlling malicious rush registrations of trademarks, and leading the public to respect intellectual property rights, this case has a strong ruling guide and demonstration effect.

Hangzhou Moris Technology Co., Ltd. and Aupu Home Style Corporation Limited (Plaintiff)

                                                    Vs. 

Zhejiang Fengshang Building Materials Co., Ltd., Zhejiang Modern New Energy Co., Ltd., Yunnan Jinmei Environmental Protection Technology Co., Ltd., and Sheng Linjun (Defendant) (Zhejiang High people’s Court/ (2019) Zhe Min Zhong No. 22)

During this case, Zhejiang Fengshang Building Materials Co., Ltd.’s (hereinafter referred to as Zhejiang Co.) mark was still valid. The registration of the Hangzhou Moris Technology Co., Ltd. (hereinafter referred to as Hangzhou Co.)Mark had been recognized as a well-known trademark in many judicial and administrative trials for several times and its value was established and promoted by continuous and comprehensive publicity throughout the infringement period.

The Court of the first instance identified the trademark of the Hangzhou Co. as a well-known trademark and, reiterated the Zhejiang Co. intention to ‘free ride’ on the well-known trademark (found in the previous judgment) and pointed out that the use by the Zhejiang Co. of marks had the malicious intent, and finally ruled that Zhejiang Co. violated the exclusive right of the owner to use the registered trademark. Therefore, the Court order to prohibit the use of the relevant logo and Zhejiang Co. trademark which was a registered trademark at the time of ordering.

In terms of the amount of compensation, the court eventually ordered the Zhejiang Co. to pay RMB 8 million, taking into account the exceptionally high profits of the Zhejiang Co. earn from the violation of the immense brand value of the mark of the Hangzhou Co. and the adverse effect of the Zhejiang Co. sequence of acts. The second-instance court upheld the decision of the first instance of judgment. 

This case strongly placed restrictions on the activities of the “free rider” and secured the value of well-known brands through high compensation, which is useful for regulating the order of market competition. The concept of good faith was also fully used in this case.

In a civil case, the first instance court ruled that a registered trademark should be forbidden from being used because it was a malicious registration and the use infringed the prior rights of the complainant, which is a constructive decision for the trademark administrator to settle trademark disputes.

Xiamen Delemeng Science and Technology Co., Ltd., Xiamen Xinghengchang Trading Co., Ltd., Yang Mingfeng, Yang Maogan (Fujian Xiamen Intermediate People’s Court/ (2018) Min 02 Xing Zhong No. 632)

This is a case which involves the crime of counterfeiting registered trademark and selling commodities under counterfeit registered trademark.

The defendant units Xiamen Delemeng Science and Technology Co., Ltd. and Xiamen Xinghengchang Trading Co., Ltd., jointly owned and managed by the appellant’s Yang Mingfeng and Yang Maogan (original defendants), not only bought and sold fake “SKF” and “FAG” bearings and other registered trademarks but also replicated the above-mentioned trademarks on the bearings of no brand or other domestic brands without the permission of the owner of the registered trademarks and earned profits through sales.

The Xiamen Delemeng Science and Technology Co., Ltd. and Xiamen Xinghengchang Trading Co., Ltd have been sentenced to a fine by the Court of the first instance and the fixed-term imprisonment and a fine for the crime of counterfeiting registered trademarks and the crime of selling goods bearing registered trademarks for counterfeiting. Besides, the owner of the registered trademark withdrawn the civil suit brought against the Xiamen Delemeng Science and Technology Co., Ltd. and Xiamen Xinghengchang Trading Co. during the second instance because they have agreed to fulfill their obligation to compensate.

Taking into account considerations such as the voluntary surrender and meritorious service of Yang Maogan, the understanding of the injured unit, and low social harm, the second instance court sentenced him to probation and mitigated his penalty under the statute, and upheld other original judgments.

In ruling on the sentence, the Court of Second Instance took note of the fact that the trademark infringer received forgiveness from the victim unit by active compensation and that the victim unit withdrew the related civil action, which demonstrated the creative outcomes of the ‘three-in-one’ intellectual property adjudication scheme.

South Korea: Louis Vuitton v. Louis Vuiton Dak (2016)

A South Korean fried chicken restaurant recently lost a trademark dispute with designer Louis Vuitton is one of the most surprising cases of global trademark infringement. After finding that the restaurant name of Louis Vuiton Dak was too similar to Louis Vuitton, the court ruled in the designer’s favor. Besides the name violation, the logo and packaging of the restaurant closely replicated the classic imagery of the designer. 

After changing their name to LOUISVUI TONDAK shortly after the first decision, the restaurant was eventually hit with another 14.5 million fines for non-compliance. Most brands can escape similarly costly legal fights by avoiding closely mirroring their brand with another, even though there is nothing in common with the goods and purchasing channels. 

China: 3M v. 3N

3M logo

The 3M firm’s case against Changzhou Huawei Advanced Material Co Ltd for the use of 3N resulted in a 3M victory and “significant damages” for 3M. It was eventually held that the notoriety of the 3M mark and the fact that 3N had succeeded in gaining customers and market share by the use of a similar mark constituted an infringement, despite certain variations in goods and pricing.

One important analysis that this may be indicative of the trademark case outcomes in Chinese courts, where these problems are taken seriously.” While this particular case was complicated and ambiguous, by emulating the trademarked name of such a well-known brand, 3N undoubtedly veered into dangerous zones. Ultimately, it was held that the “3M” trademark had a high degree of distinction and credibility.

Conclusion

The course of actions a well-known brand can take against this counterfeiter-

• In cases of copying of marks, brand owners can seek civil or criminal remedies – both of which have their pros and cons. A strategic analysis of the nature of the problem is advisable.
• Police raids may be the preferred choice in cases of infringement or counterfeiting, covering a large area. Civil action obtaining an injunction followed by search and seizure by a court-appointed commissioner is preferred in cases of a single manufacturer engaging in infringing activities as it can lead to a settlement and the termination of the activities of the infringing group.
• Civil lawsuits for trademark infringement and passing off are a safer option in situations involving deceptive similarity of a mark and packaging, as the law enforcement authorities responsible for criminal matters are less likely to be familiar with the complexities of IP law. 
• Besides, it is advisable to resolve matters as quickly as feasible after an injunction has been given and the infringing goods have been confiscated due to a backlog of lawsuits and time-consuming trials. The recurrent delays and the time it takes to decide a case has been one of the difficulties of dealing with Indian courts. By creating Commercial courts, the government has addressed this issue. 

References

• https://economictimes.indiatimes.com/wealth/spend/do-your-due-diligence-while-shopping-online-third-of-ecommerce-buyers-get-fake-products/articleshow/63925229.cms
• https://www.oecd.org/newsroom/trade-in-fake-goods-is-now-33-of-world-trade-and-rising.htm
• https://www.worldtrademarkreview.com/anti-counterfeiting/how-india-helping-brands-combat-counterfeiting
• https://www.worldtrademarkreview.com/anti-counterfeiting/india-counterfeiting-boom-threatens-indias-online-sales-bonanza
• https://www.businesswire.com/news/home/20180515005775/en/Global-Brand-Counterfeiting-Report-2018-2020—ResearchAndMarkets.com
• https://www.worldtrademarkreview.com/anti-counterfeiting/counterfeit-luxury-goods
• https://jingdaily.com/china-counterfeit-report-do-factory-extras-really-exist/
• https://hbr.org/2018/05/8-ways-brands-can-fight-counterfeits-in-china
• https://trademark.eu/louis-vuitton-dont-be-a-chicken/
• https://www.trademarknow.com/blog/9-nasty-trademark-infringement-cases-and-how-to-avoid-them
• https://www.internationallawoffice.com/Newsletters/Intellectual-Property/China/Wan-Hui-Da-Law-Firm-Intellectual-Property-Agency/3M-wins-trademark-infringement-case-against-3N
• https://nlipw.com/starbucks-sues-coffee-rival-over-freddoccino-brand/
• https://www.chinalawinsight.com/2020/04/articles/intellectual-property/2019-top10-ip-typical-cases-released-by-the-supreme-peoples-court-of-the-p-r-c-trademark-cases/
• https://www.mondaq.com/china/trademark/699350/top-10-intellectual-property-cases-of-chinese-courts-in-2017

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