Before beginning any successful anti-counterfeiting action, a top-flight strategy is needed. Lawyers at Anand and Anand in Noida have provided the following factors for any successful anti-counterfeiting campaign:
Good investigation. The basis of any anti-counterfeiting campaign rests on the ability to gather actionable evidence regarding the source and availability of counterfeits. “The investigation should ideally target the highest accessible point in the supply chain such as the manufacturer (source) or the warehouse. An investigation which reveals an important distributor or a major reseller can also provide excellent results,” says Pravin Anand, managing partner at Anand and Anand. “Further, the investigation should cover both online and brick and mortar stores.”
Strong IP. Strong IP is another prerequisite. “Registered trademarks and copyrights are far easier to enforce than relying on common law rights. Similarly, securing trademark registrations for various aspects of a brand such as the word mark per se, the device and the slogan add strength to the brand,” says Aman Taneja, a senior associate at Anand and Anand. “Lastly, statutory registrations of IP open up alternate methods of enforcement such as customs recordal and criminal actions.”
Choice of Court. This can make it or break it. “It is imperative to approach a court which has a sound understanding of IP law and the manner in which counterfeiting operations function,” Anand says. “In a civil suit, the failure to secure ex-parte relief or an Anton Piller order can result in the counterfeiter destroying all evidence and effectively evading justice. It is for this reason that, in India, the Delhi High Court is the preferred court for IP cases.”
Good precedent. At the start of an anti-counterfeiting campaign, it is important to build up a body of good orders passed in favour of the right owner, Taneja says. “This can be achieved by initially going after the easier targets and gradually building up to the tougher cases.”
Preparation. This is where the lawyers take centre stage. “Preparation for a counterfeiting case requires a well-drafted case brief backed by solid documentary evidence and good legal research. The last and most critical stage in the preparation is putting forth convincing oral arguments before the court,” Anand says. “No anti-counterfeiting strategy can succeed without securing good orders from a court which can be executed on the ground.”
Confidentiality. It is imperative that the entire process — from the initial investigation, to the filing of the case and the hearing in the court, until the ultimate execution of the court order in the form of a raid — remains confidential. “Leakages of information along this chain can tip off the counterfeiters and derail the entire process,” Taneja says. “Therefore, a bare minimum number of persons should be made privy to the anti-counterfeiting strategy and campaign.”
Enforcement. An anti-counterfeiting campaign is most impactful when there is an on ground enforcement of court orders. Securing Anton Piller orders, which allow the conduct of civil search and seizure raids, has a dual benefit. “First, it allows for preservation of evidence, and second, it creates a stir in the market and discourages other traders from handling counterfeits,” Anand says. “Effective enforcement campaigns require smooth coordination among the brand owner’s representatives, court appointed commissioners and local police authorities to ensure that the various locations with counterfeit are hit simultaneously.”
Proper and sufficient PR. The impact of a campaign can be increased exponentially through good media coverage of court orders and raids, Taneja says. “Brand owners should always make efforts to spread public awareness of their anticounterfeiting campaigns especially in local print media as this is a relatively cheap and effective means of increasing the deterrent effect sought to be achieved.”
Reasonable Cost. Anti-counterfeiting is not a onetime job and requires several actions to be taken over a period of time and spread over different territories. It is therefore important for brand owners to take steps to keep the costs of the campaign low. “This can be done in various ways, for example by combining several targets located in a particular territory into a single action,” Anand says. “Multiple brand owners can also join hands by forming industry associations and thereby share the costs involved. Running a campaign through a single firm can greatly reduce the costs involved in the preparation stage as well.”
Quickly done. Speed is the key to success for any anti-counterfeiting campaign. “There should be a minimal time gap amongst the investigations, the lawsuit and the eventual raid as delays increase the chances of a failed raid and leakages of information. Further, once a case is filed, efforts should be made to quickly settle the same even if it requires compromising on recovering damages and costs,” Taneja says. “Long, drawn out trials to recover damages often do not provide commensurate returns on the investment made in perusing the case till its conclusions.”
A New Hope
Lawyers agree that Asia is generally trademark friendly, which gives hope for businesses that are expanding in the east.
“In my opinion, Singapore and Malaysia are the friendliest anti-counterfeiting jurisdictions,” says Gerald Samuel, a director at Marks & Clerk in Kuala Lumpur. “Singapore has a dedicated enforcement team at the police and a very efficient criminal justice system. As to Malaysia, it has dedicated courts handling counterfeiting offences and the mechanism of administrative enforcement pursuant to the Trade Descriptions Act whereby a complaint can be made to the Ministry of Domestic Trade that will enable their officers to investigate and raid the sellers of counterfeits, seize the same and prosecute the offenders.”
Other friendly jurisdictions include South Korea, China, Hong Kong and Taiwan, says Christine Chen, a partner at Winkler Partners in Taipei. “Taiwan has a dedicated task force for enforcement and customs recordation system, which gives brand owners an advantage in the fight against counterfeiters. The authorities recognize the importance of IP and have developed tools for enforcement.”
The Phantom Menace
As unclear contract terms could hand over brands’ IPRs to counterfeiters, lawyers share the “must-have” clauses to include in manufacturing, distribution and other supply chain agreements to prevent fakes and grey marketing.
“Licensing clauses must be clear, including the geographical area, time and sale period, and detailed information regarding the type of assets that fall under the licensing agreement, whether that is trademarks, copyrighted images and so on. The licensor also needs to add practical ways to identify genuine goods and packaging so that any suspected counterfeit can be identified effortlessly,” Chen says. “There’s an increasing number of technical solutions to help identify licensed products.”
While counterfeit and grey market sales cannot be prevented contractually, contractual provisions can provide the IP owner with recourse against contract parties who are either negligent or willfully violate the terms of any agreement in a manner that results in counterfeiting or grey market sales, says Christopher Rourk, a partner at Jackson Walker in Dallas. “The first and most important part of any contract is to make sure that both parties to the agreement fully understand the expectations of the other party. As such, prior to even entering into an agreement with a manufacturer, distributor, shipper, shipping agent, sales agent or any other party, the IP owner should be clear about the scope of the engagement, such as by discussing limitations on territories in which the products can be sold, the types of downstream parties that the other party to the agreement is authorized to do business with, the actions that the other party to the agreement must perform in response to any investigation or enquiry into unauthorized sales, and so forth.”
While any agreement will need to take into account the specific facts involved, some potentially important clauses are discussed below:
The territory clause of any agreement should clearly identify not only what territories the other party is authorized to conduct business in, but also those territories for which authorization is not provided, Rourk says. “For example, many agreements will state that a party is authorized to sell a product in market X, but might not state that the party is not authorized to sell the product to parties in market X who will resell the product outside of that market, or might not place any requirements on the parties in market X that the other party is authorized to sell to. A contractual record keeping and audit provision that requires the other party to keep records of who they ship, sell or otherwise provide products to, as well as quantities and dates of shipment, and to provide that information upon request, can help with any investigation of unauthorized sales. A periodic audit of such information with follow up enquiries to ensure that all recipients/buyers are legitimate business entities is also advisable, even if the audit is only performed on randomly selected parties.”
A marking clause can also help identify the source of counterfeit or grey goods, particularly where the products themselves can be marked in some manner. If not, then at least every level of packaging should include both country of origin markings and markings specific to the market that the product is authorized for, Rourk says. “For example, a country-specific trademark (e.g. MARK X) can be used for products that are intended for specific markets, in addition to the primary mark for the product (e.g. MARK Y). The other parties to any agreement should be required to include those country-specific marks on the product or to inspect to ensure that those marks are present. The country-specific marks can then be registered in other countries, to allow the trademark owner to use trademark laws of other countries to take action against grey market sales, such as by registering those marks with customs of the other countries. In that manner, customs can properly seize products that include MARK X, but can allow products with only MARK Y (that are presumably authorized) to enter the country. Such country-specific marking can also catch counterfeits, if the counterfeiters copy the country-specific mark for subsequent sale in the wrong country.”
Liquidated damages clauses can also be useful to raise awareness of the risk of unauthorized sales with another party, particularly where the amount of liquidated damages is fair and equitable, and where funds are held in escrow to be applied to any such liquidated damages, Rourk says. “In addition to compensation for lost sales, the cost to enforce the IP owner’s rights can be included as a factor in determining the amount of liquidated damages. Restrictions on the number of units that can be sold and the price that can be charged can also help prevent grey market sales.”
The Empire can be difficult to beat
Rourk says that counterfeiting is more difficult to prevent with contractual provisions, particularly where the counterfeit can be manufactured at an unauthorized manufacturing facility. However, many counterfeits are made with parts from authorized suppliers, or by employees who establish duplicate manufacturing facilities in nearby buildings, he adds. “In such cases, contractual limitations on the parties who are authorized to make parts, contractual requirements to perform background checks of employees, and contractual provisions to cooperate with investigations can be useful not only to raise awareness with the other party, but also to provide some basis for recourse against the other party if they fail to take adequate steps to prevent counterfeiting, and counterfeiting occurs as a result of that failure.”
The Rebels Strike Back
The empire may have the death star but the rebellion is one with the force… of customs.
According to China’s Regulations on Customs Protection of Intellectual Property Rights, all the customs recordation for registered trademarks should be filed with China General Administration of Customs instead of the customs offices at various seaports or airports. As soon as the application for customs recordation is approved by CGAC, the information of the registered trademark will be added to the official computer system of CGAC and will be shared by every customs officer within Chinese territory.
“When customs officers undertake routine inspections on the exported or imported goods, normally they will pay more attention on the goods bearing the recorded trademarks and notify the trademark owners when they find suspected goods,” says Bin Zhang, deputy director of the litigation department at CCPIT Patent & Trademark Law Office in Beijing. “Some cities, such as Tianjin, Shanghai, Ningbo, Xiamen, Fuzhou, Guangzhou and Shenzhen, have relatively big, busy and influential seaports, so there should be more batches of goods declared at these seaports for exportation, which leads to a situation where there might be more chances for customs at these areas to find suspected goods.”
It is also effective to register goods with Taiwan’s customs offices. “When recording marks with customs, the right owners must indicate previous cases of infringement for reference, so customs are aware of the differences between the brand owners’ products and the counterfeits,” Chen says. “Brand owners must also frequently help train customs officers so that they can identify suspect shipments more easily.”
To file an application for customs recordal in Taiwan, the trademark owner needs to submit the following:
• A document proving the ownership of the trademark registration;
• Photographs showing at least one authentic product and one counterfeit, not limited to that found in Taiwan (an electronic file is further needed);
• A detailed description of the characteristics of the authentic product, including the position of the trademark, and a general guideline on how to identify anti-counterfeiting devices, such as anti-counterfeit labels/tags, internal/ external packaging and how to spot the differences between a genuine product and a counterfeit (an electronic file is further needed); and
• Information on the trademark owner’s local contact (such as a subsidiary, a branch office, a distributor, a sales agent or a trademark agent).
Note that an application can cover one single registered trademark only, says Julia Hung, a partner at Saint Island International Patent and Law Offices in Taipei.
Beyond registration, establishing and maintaining a good relationship with customs is crucial. “Customs is always likely to be more vigilant about spotting, inspecting, and seizing of counterfeit for a company with which it has a good working relationship. While this is perhaps not a surprising revelation, its significance should not be underestimated,” says Kittithorn Bunyakiat, a partner at Baker & McKenzie in Bangkok. “A single effective customs seizure could prevent a substantial amount of counterfeit from being distributed into the market, negatively affecting profits, or worse, reputation amongst consumers.”
Following are some key points to consider when planning a productive relationship with customs:
Introduction. All good relationships start with that. “After an IP owner has recorded its rights, it is advisable to send an introduction letter to customs officials informing them of the recordal and respectfully requesting the assistance of officers stationed in every port with spotting and inspecting incoming and outgoing counterfeit. The letter should be sent to the central customs office and every port throughout the country,” says Chansin Tangburanakij, a partner at Baker & McKenzie in Bangkok. “If possible, a face-to-face meeting with customs officials is also recommended, whereby an IP owner can directly communicate both its commitment to enforcing its rights and its appreciation for customs’ assistance towards that end.”
Training. Holding training sessions to educate customs officials about how to differentiate between genuine and counterfeit products is also important. “Quite simply, a commitment by customs to help enforce an IP owner’s rights is not particularly meaningful if officers can’t reliably tell the difference between genuine and counterfeit products. Beyond this practical consideration, however, training sessions also provide an opportunity for an IP owner to personally introduce their business and humanize themselves, further improving the relationship,” Tangburanakij says. “Ideally, such training should be held at least once or twice a year in various ports. And if there are specific ports through which a substantial amount of counterfeit products are suspected to pass, then it is highly advisable to schedule even more frequent trainings in those ports as well.”
Taiwan’s Customs usually holds training on a yearly basis to help officials in examining the genuineness of products, Hung says. “The trademark owner may consider attending the seminars held by the customs house so that the officials would be more familiar with the trademark owner’s marks and products.”
Hand-outs. An IP owner should consider providing a manual or brief guide detailing trademarks and specific products for which they request customs assistance with enforcement. “Such a manual can often help officers more easily spot and inspect counterfeits, increasing the likelihood that they will be seized for an IP owner’s verification,” Tangburanakij says. “Of course, there is always the possibility that some product information may be classified or sensitive. In such cases, a manual with information on the trademarks and products should suffice.”
Gestures of goodwill. If there are ports that frequently spot and seize counterfeits, an IP owner should consider sending a letter to the central customs office stating its appreciation of such efforts. “Specifically mentioning the number of a particularly helpful unit or the name of a particularly helpful officer is always a nice touch,” Tangburanakij says. “Such gestures, simple as they may be, can go a long way towards cementing an effective working relationship between an IP owner and customs, increasingly the likelihood of officer vigilance.”
“Another good way is to keep open dialogue between industries and customs via chambers of commerce, business associations, participating in the development of white paper proposals and so on,” says Chen.
Maximizing the relationship with customs officials and other enforcement agencies is no easy feat. “Complexity doubles especially in a jurisdiction [with less-developed law], as there are a lot of education, involvement and momentum issues,” says Arno D. Rizaldi Setiawan, a partner at Kusnandar & Co in Jakarta. “This may sound odd as, theoretically, IP practitioners should be receiving guidance from the government. However, such practice can sometimes be reversed when it comes to a developing country.”
In a jurisdiction where the standard of living is low, inadequate education is usually to blame for rampant counterfeit and piracy. “With the average population ‘eating to live’ instead of ‘living to eat,’ the subject of anti-counterfeiting is often relegated downwards on the government’s to-do list, probably after the eradication of poverty and/or corruption, infrastructure, disease control, etc,” says Setiawan.
As a means to maximize relationship with various Indonesian governmental bodies, law practitioners there have undertaken the practice of combining educational programmes about anticounterfeiting through seminars, social events or even university lectures with endorsements from the government which would compel the country’s customs officials and other authorities to read up on the various issues and trends at hand, Setiawan says. “Such initiatives, which must also be communicated to the nonacademia and non-legal-practicing society-at-large, should also involve governmental agencies.”
In developing jurisdictions, there has been a general laissez-faire attitude about counterfeit apparel, which seems to be embraced or even sought-after by tourists and locals alike, Setiawan says. “A connection is seldom made between IP issues such as these versus matters involving fake food and drugs, which suddenly hits home with everyone, including government officers. Thus, a socialization programme of anti-counterfeit campaigns targeting audiences involving students, housewives and small business owners in cooperation with government agencies such as customs and enforcement agencies should continuously be advocated.”
IP practitioners continually encounter and are aware of new cases, trends and studies that happen locally and internationally to which customs and enforcement agencies may not be privy, Setiawan says. “In the spirit of maintaining relationships with them, we continue to involve them by sharing our findings and supporting them through dialogues, brainstorm sessions and legal clinics in the hopes that through mutual knowledge and understanding, we collectively become better developed as an IP jurisdiction.”
While technology advances, IP laws cannot fall behind as doing so may create opportunities for infringers or even influence governmental bodies to turn a blind eye, Setiawan says. “Therefore, actively fostering updates at the government level is necessary as it will help maximize relationships with customs and other enforcement agencies.”
In Taiwan, trademark infringement is subject to criminal liability and such cases may be handled through criminal courts with/without the trademark owner’s criminal complaint, Hung says. “Therefore, upon receiving a notification from the customs house or the police soliciting an assessment report from the trademark owner to determine whether or not the suspected goods are counterfeits, we recommend the trademark owner could assist in this matter immediately and provide the required assessment report by appointed deadline so that the case could proceed smoothly.”
Attack of the Clones
Besides physical borders, the virtual ones also need to be controlled, as counterfeit distribution online is increasing.
“Of particular concern is the sale of counterfeit on websites hosted in Taiwan, while those goods are bought on foreign websites such as Taobao,” says Chen.
As social media has become more important, the scope of IP protection must also be broadened. In Thailand, for example, previous versions of the copyright law did not address online issues. The Department of Intellectual Property used to advise those seeking protection to refer to the Computer Crimes Act B.E. 2550 instead.
But since August 4, 2015, Thailand has enforced the Copyright Act (No. 2) B.E. 2558, which extends to cover contents on commercial websites and social media in order to build confidence for foreign investors. Thailand has strengthened its copyright law by prescribing the responsibilities of the internet service providers. The amendment also provides remedies for online infringement – especially when the contents posted are for commercial purposes.
The amendment imposes the burden on the copyright owner seeking court order against the ISP to initiate the legal proceeding to stop the ISP from infringing copyright on its online platform. If after investigation the court finds that there is actual infringement, the court will hand down an injunction against the ISP to stop the infringement and remove the infringing content from the online platform within the period prescribed by the court. Such order can be enforced against the ISP on an immediate basis, and the ISP must be notified of such order without delay. Furthermore, the copyright owner must file the legal proceeding against the infringer within the period set by the court.
The amendment, however, limits the liability of the ISP for contents it did not post. “For example, provided that YouTube cooperates with the court order to remove the infringed content from its platform, it would not be held liable for copyright infringement,” says Gvavalin Mahakunkitchareon, a legal associate at Kelvin Chia (Thailand) in Bangkok. “The problem with the amendment is that the process will usually be slowed down if the court is involved. Furthermore, regardless of the enhanced protection introduced by the amendment, the effectiveness of the court order cannot extend to ISPs outside Thailand, hence, infringement outside of the Kingdom is likely to be ignored and not handled.”
Rights management information and technological protection measures are further defined by the amended Copyright Act. A penalty ranging from B10,000 (US$280) to B100,000 (US$2,800) can be imposed on an infringer, and the penalty could go up to the range of B50,000 (US$1,400) to B400,000 (US$11,200) or imprisonment for three months to two years or both if the infringement was done for commercial purpose.
The amendment grants authority to the court to seize or destroy the infringing goods whether imported into or produced in Thailand. The costs related to such order will be against the infringer.
The Copyright Act (No. 3) B.E. 2558 provides an exception for the reproduction or adaptation of copyrighted works and/or contents for the benefit of disabled people, provided that such reproduction or adaptation has not been done for obtaining profit.
“In sum, even though the amended copyright law has extended protection to uplift Thailand’s status globally, the law is still constrained by the limitation on court jurisdiction, the timeconsuming court process and the burden of proof vested upon the copyright owner for infringement and resulting damage,” Mahakunkitchareon says. “Generally, if people reproduced a copyrighted work with no significant economic value, without intention to profit, and provide reference for such work, such reproduction would be deemed as fair use.”
As for trademark infringement, Facebook and Instagram are increasingly used for counterfeit trade. “In a recent case, a seller sold counterfeits via Facebook Live and the goods in the seller’s possession were seized by the relevant authority as the seller committed the offence of offering and distributing trademarked goods,” Mahakunkitchareon says. “Thai authorities have started to keep their eyes on online platforms. Even though there is no specific amendment made to the Trademark Act in relation to social media, the current terms seem to cover that as well.”
The amended Trademark Act, which became effective in July 2016, allows the filing of applications internationally for Thailand and other countries which are members of the Madrid Protocol, Mahakunkitchareon says. “This means that the trademark owner can seek protection from the infringement of its rights in member countries as well.”
The Force Awakens
Enforcement activities require tremendous resources, so lawyers not only have to battle with counterfeiters but also sometimes with clients as well in order to secure an appropriate budget, particularly during times of recession.
“Brand protection is a key investment in the future of every company,” Chen says. “If you don’t adequately protect your brand, the brand value will diminish over time, with serious, lasting negative consequences to the company and all of its stakeholders. In some industries, anti-counterfeiting activities are even more important, as the use of counterfeits can be dangerous. Thus, the budget for brand enforcement should be seen as one key to the long-term investment in a brand and in consumer protection.”
But what if there is really no ammunition left? You must then better manage your existing arsenal by 1) cooperating with authorities in particular police or enforcement agencies (“In Taiwan, trademark infringement can be pursued without a complaint being filed,” says Chen); 2) if counterfeiting occurs online, a simple takedown request (accompanied by a follow-up cease-and-desist letter if the behaviour persists) is often enough for at least removing that particular item; and 3) brand owners that are able to negotiate settlements prior to costly litigation can, of course, save costs.
May the force be with you, rebels.
