Birds of Fake

30 June 2020

Birds of Fake Trademark enforcement experts across Asia talk to Johnny Chan about the ever-challenging field, inside out.

 

 

As the difficulty of enforcing intellectual property rights is only going to increase, jurisdictions across Asia Pacific have braced themselves with new laws and regulations. 

With Daren Tang, chief executive of the Intellectual Property Office of Singapore, named to be the next director general of the World Intellectual Property Organization, 2019 did have its fair share of noteworthy events, says Meryl Koh, director of IP and dispute resolution at Drew & Napier in Singapore. “In the latest World Economic Forum’s Global Competitiveness Report, Singapore ranked second in the world and top in Asia for having the best IP protection, and was placed overall first in terms of competitiveness. For trademarks, 2019 saw important changes to the dispute resolution mechanism and cross border enforcement measures, along with numerous fruitful developments in case law.”

Perhaps the most significant sweeping change to Singapore’s IP regime as a whole lies in the enactment of the IP (Dispute Resolution) Act 2019, Koh says. “Two key objectives of the IPDRA are to ensure cost-effective resolution of IP disputes and to strengthen Singapore’s position as a choice venue for the arbitration of international IP disputes. Recently passed on August 5, 2019, the IPDRA has yet to be implemented in totality. However, partial commencement began with provisions relating to arbitration coming into force on November 21, 2019, and further developments are sure to follow in time.”

To achieve cost effectiveness, the IPDRA will introduce two broad changes. “First, the IPDRA will consolidate the majority of civil IP disputes in the Singapore High Court, whereas previously the court’s exclusive jurisdiction in relation to trademarks, for example, was confined to actions for infringement. This change will allow litigants in disputes relating to trademarks and other types of IP to benefit from the expertise and experience of specialist IP judges sitting on the court’s bench. Second, the IPDRA will introduce a specialist track for litigation of IP disputes in the Singapore High Court, with simplified processes and cost-saving features. While details have yet to be unveiled, this track promises to put enforcement squarely within reach for less well-resourced parties such as individuals and SMEs,” she says. 

 

Koh says that the IPOS Annual Report 2018/2019 states that there were 460,416 trademark registrations in force in Singapore as of 2018, with 41,204 registrations taking place in that year alone. “This figure stands in stark contrast to the numbers for contentious hearings before IPOS (37) and the Singapore Court (6) concluded in 2018,” she says. “Costs of enforcement and contentious proceedings may be one of the factors contributing to this. In this context, the IPDRA may be a welcome change for those trademark proprietors have refrained from enforcing their rights due to cost reservations.”

To achieve the second key objective, the IPDRA brought with it consequential amendments to the Arbitration Act and International Arbitration Act. “These amendments achieve clarity in two respects. First, they put the issue of arbitrability of IP disputes beyond doubt by expressly providing that IP disputes are capable of final resolution by arbitration under Singapore law. Second, they specify the scope of arbitral awards: they cannot affect the status of IP on the various IP registers directly but the awards are binding between the parties and can affect the parties’ obligations and liabilities. This clarity, coupled with Singapore’s reputation as a highly-regarded arbitration jurisdiction, grants both local and, in particular, international trademark proprietors yet another possible avenue for recourse – one known not just for privacy and procedural flexibility, but also for expedience and cost-effectiveness especially when disputes span various jurisdictions,” she says. “Indeed, according to the IPOS Report, there were about four times as many foreign trademark registrations (32,678) as there were local registrations (8,526) in 2018. Given that there is an element of internationality inherent in a large number of trademarks registered in Singapore, the importance of clarity brought by the IPDRA in the realm of international arbitration cannot be understated.”

November 21, 2019, also marked the partial commencement of the IP (Border Enforcement) Act 2018. Meant to follow the conclusion of the European Union-Singapore FTA in 2014, the IPBEA represents Singapore’s commitment to honour its international obligations to strengthen cross-border IP enforcement.

“Previously, trademark proprietors had a right to apply to customs for the seizure of suspected infringing goods, but only for those goods which were to be imported into Singapore. The IPBEA now extends this right to goods which are exported out of Singapore as well,” Koh says. “Given that the right of seizure directly translates into a right to commence a civil action for infringement, the IPBEA presents proprietors with a particularly potent enforcement measure.”

To balance this expansion of proprietors’ rights, the IPBEA also implements safeguards to deter overzealous enforcement, she says. “For example, proprietors may be asked to provide security deposits to customs or made to pay compensation for wrongful detention or subsequent failure to commence action within a three-week timeline.”

 

To highlight on the scope of the IPBEA, one point is in relation to goods in transit, which the IPBEA allows customs to initiate ex officio action to goods suspected to infringe copyright and/or trademarks provided they are consigned to a local party. “The corollaries of this are that: 1) customs cannot seize of goods in transit that have no local consignee; and 2) trademark proprietors have no rights to initiate seizures of goods in transit,” she says. “This, however, does not prevent customs or trademark proprietors from supplying information to the authorities in the destination country for effective enforcement in that country.”

Another point is that the IPBEA does not change Singapore’s stance on parallel imports. “Under copyright and trademark laws, parallel imports are not considered to be infringing goods,” she says. “Accordingly, they are not subject to border enforcement measures under the IPBEA.”

In Taiwan, while the amendments to the Trademark Act put forth by the IP office have not yet commenced, the draft revealed several important regulation changes. “For example, TIPO proposed to abandon the trademark opposition procedure as it overlaps with the invalidation procedure,” says Ruey-Sen Tsai, a partner at Lee and Li in Taipei. “TIPO also proposed to put ‘nominative fair use’ in the relevant articles of the Trademark Act as it is a doctrine applied by the courts but there was no clear language indicating such doctrine in the Act.”

 

E-commerce

In jurisdictions such as India, there have been notable legislative developments around the online business world and the impact of it changes brand owners’ litigation and enforcement strategies.

With a plethora of disputes arising in the digital marketplace in recent times, the Indian legislature has taken steps to issue draft policies to regulate the e-commerce sphere and create a level-playing field for all stakeholders. In February 2019, the Department for Promotion of Industry and Internal Trade released a draft National E-Commerce Policy and invited comments from stakeholders. “The draft policy proposed a technological and legal framework empowering brandowners by helping them effectively protect IP qua e-commerce platforms. Salient features of the draft policy envisage that all counterfeiting complaints are to be communicated to brand owners within 12 hours. Once the brand owner confirms, the relevant seller on the e-commerce platform is to be notified and the listing taken down if the seller is unable to defend the genuineness of the product. Further, counterfeit sellers shall be blacklisted by the marketplace for a specified period,” says V Mohini, an IP litigation partner at Remfry & Sagar in Gurugram. “The draft policy is by no means exhaustive and after deliberating on various issues that have arisen during consultations with stakeholders, the government in November 2019 introduced the draft Consumer Protection (E-Commerce) Rules, 2019 to safeguard the interests of consumers and brand owners vis-à-vis online shopping sites. The rules ensure that e-commerce entities (and in turn, sellers) conduct business in a transparent and impartial manner and hold them liable if they fail to prevent any negative fallout on the business of brand owners on account of the inherent nature of the e-commerce industry.”

Significantly, the draft rules complement existing statutes including the Companies Act, 2013, the Sale of Goods Act, 1930, the Legal Metrology Act, 2009, the Information Technology Act, 2000 and the Information Technology (Intermediaries Guidelines) Rules, 2011 – the last two are particularly significant in terms of fixing liability for IP violations with regard to e-commerce. “It is crucial to keep abreast with the aforesaid developments, especially since the Policy and Rules haven’t yet been implemented under Law. We advise clients to keep in hand complete information regarding source of products, comprehensive list of distributors, as well conducting prior due diligence and investigations before addressing take down notices to e-commerce platforms and subsequently approaching a Court of Law,” Mohini says. “We say this as, the sphere of e-commerce is extremely vast and fast paced, and hence it is important to break down litigious strategy into small steps and seek each remedy available prior to directly approaching courts.”

The handling of data protection issues has continued to grow in importance for all industries, but it has not yet had a major impact on Taiwan’s litigation and enforcement strategies because infringers often use established e-commerce platforms to sell their counterfeits, says John Eastwood, a partner at Eiger in Taipei.

 

Forum shopping

The rule of thumb for choosing a litigation venue is to find one where the infringement transpires, but sometimes it is not as simple as that.

“When right holders are confronted with sophisticated cross-border infringement, cost constraints may dictate pursuing litigation in fewer (but more effective) venues,” says Andy Leck, principal and head of the IP practice at Baker McKenzie Wong & Leow in Singapore.

In making this determination, right holders must remember their goal of obtaining a judgment swiftly and fairly, which can be easily enforced in other jurisdictions where the infringer holds its assets, he says. “Therefore, transparency of litigation processes, availability of technical experts in offering litigation support, ease of enforcing any judgments, time taken to obtain a final judgment and any applicable appeal processes will have a direct impact in selecting a court.”

“Ability to take local action is vital. No jurisdiction is ‘perfect’ because there are always trade-offs between systems trying to reach justice through fuller information and the time and expense to get that information,” Eastwood says. “But if you want to stop infringement locally, it is important to be able to act locally. That said, you can get better damages awards many times by using arbitration in a neutral location – service of process is easier and the arbitration decision can be enforced more readily.”

While parties in India can consent to jurisdiction of courts, it is governed by legal principles enshrined in Sections 15 to 20 of the Civil Procedure Code, 1908. “These provisions confer jurisdiction on courts on the basis of certain pre-determined criterion, which include courts within whose jurisdiction a defendant resides or carries on business or works for gain (also known as territorial jurisdiction), value of the claim made by the plaintiff (also known as pecuniary jurisdiction) and, where the cause of action leading to the dispute has arisen within the local limits of a court’s jurisdiction,” says Varun Kalsi, a partner at PSA Legal in New Delhi. “Interestingly, Section 134 of the Trade Marks Act is an extension of the Civil Procedure Code in as much as it confers jurisdiction on courts within whose jurisdiction the plaintiff resides or carries on business, in case of an infringement or passing off by the defendant. The intention is to ensure that an aggrieved plaintiff is not inconvenienced and, shall have the right to sue the defendant where the former resides or carries on business or works.”

 

The foregoing is crucial to consider before one dwells on the other aspects, which have a bearing on choice of litigation venue. “Of course, the other factors are as relevant and include sophistication, understanding, awareness, speed and efficiency of the concerned district and high courts, pan-India, in handling IP disputes,” Kalsi says. “But these aspects are intertwined with the Civil Procedure Code and specific statutory provisions, and it won’t be possible for parties to indulge in forum shopping without taking the law governing jurisdiction into consideration. Else, the plaintiff runs the risk of preliminary objections on jurisdiction at the inception of the proceedings.”

 

Recovering damages

Winning litigation is not necessarily the most desirable outcome, as collecting damages from infringers can be difficult.

To increase effectiveness of enforcement and chances of recovery, IP owners should be selective in the enforcement action that they seek to take against infringers, says Gregory Ross, a partner at Eakin McCaffery Cox in Sydney.

“This involves making a commercial decision at the outset before IP owners outlay significant costs to commence litigation.”

 

Considerations will include whether it is economical to pursue legal action beyond an initial cease and desist letter, the extent of the legal action to be taken and the value of the IP, as against the potential benefits to be gained from the litigation in issue, Ross says. “Of course, a proactive strategy is recommended to limit the incidence of infringement by implementing protective measures, such as cease and desist letters, watermarks, physical security or password protection.”

For quantum of damages, courts consider the actual injury caused to a plaintiff in terms of loss of business and goodwill, thus ruling out any speculative, punitive and/or unproven damage. “Damages in India are thus generally compensatory in nature,” Mohini says. “In a significant practice, Indian courts have begun to grant deposit orders by way of which a certain portion of the sales by the defendant of the infringing item is to be paid back to the plaintiff as royalty during the pendency of the suit.”

“While it can be an uphill task to recover damages, as a matter of strategy, we request the court to appoint persons to visit the premises of the defendant to seize infringing products, financial records, etc. Subsequent to the seizure, the defendants appear before the court. In such situations, the court directs the defendants to pay an amount via cheque/bank guarantee to the plaintiff and the matter is disposed of by way of consent order,” she says. “Hence, courts are taking pro-active steps to mandate the presence of defendants in court to settle the matter expeditiously and amount of damages to be paid are negotiated before the court itself, ruling out issues with respect to recovery at a later stage. Further, courts in India have begun to grant damages at an interim stage and parties are directed to deposit such costs immediately to ensure that the matter can proceed towards the stage of trial.”

In order to avoid any possibilities of enforcement of judgments or decisions for damage claiming against their properties, it is highly possible for infringers to attempt to transfer their properties to other parties during the litigations, Tsai says. “The IP owners may file a motion for provision attachment to seize the properties of the infringer as a preemptive strategy.”

 

Customs

In import/export activities, there are many enforcement considerations.

An important consideration when exporting goods to foreign markets is whether trademarks registered in one language can be infringed by trademarks using words or characters in other languages, says Ross.

“This is particularly relevant if the target market would interpret the infringing mark as conveying the same meaning as, or operating as an equivalent to, the registered trademark,” he says. “This issue arose in the case of Southcorp Brands v. Australia Rush Rich Winery in relation to an Australian-based winery which produces and distributes wine in Australia and overseas. Penfolds, Southcorp’s well-known brand and trademark, had also been registered as Chinese translations/equivalents, namely, a Chinese character mark and the phonetic approximation, ‘Ben Fu’. In that case, Australian winery Rush Rich had exported wine with labels that featured Chinese characters on the label denoting Ben Fu. The court found that Rush Rich’s use of the Chinese characters infringed Southcorp’s trademarks due to their aural similarities. It would be prudent, despite the obvious registration cost issue, for trademark owners to consider registering transliterations of their brands and/or marks in languages or characters appropriate to the main markets to which they export their goods, to reduce the risk of competing products being branded with equivalent foreign language marks.”

Under Section 140 of the Trade Marks Act, 1999, the proprietor of a registered mark can give a notice in writing to the Commissioner of Customs to prohibit the entry of infringing goods in relation to a specific consignment. The xustoms officer on being satisfied by the proof will prohibit the entry of such counterfeits, says Ashish Chang Marbaniang, a partner at K & S Partners in Haryana. “As this provision was effective for a specific consignment, a need was felt for a uniform customs recordation, covering all ports.”

Right holders can register IP with customs and registration is done online. After recordation, the import of any goods infringing the recorded IP is prohibited within the meaning of Section 11 of the Customs Act, 1962 and are confiscated for further procedure to address such infringement. 

 

A brief outline of the procedure following the suspension of imported goods is discussed below:  

  • Upon a consignment stopped by customs, the right holder is intimated through a notice, requesting confirmation whether the suspended goods are counterfeit. 
  • The right holder must reply to the said notice and also interact with the concerned customs official for seeking all necessary information including pictures of the suspended goods.
  • Upon confirmation by the right holder that the suspended goods are counterfeit, the right holder must join the proceedings within 10 days (extendible by another 10).
  • The right holder must also furnish a surety and security bond within three days. The bond value shall be equal to 110 percent of the value of the consignment and security is 25 percent of the bond value in the form of bank guarantee or fixed deposit. Additionally, the right holder would need to furnish an indemnity bond. Thereafter, the importer will be notified and the proceedings before customs will commence.
  • Alternatively, if the right holder confirms that the suspended goods are original and the importer is genuine, customs will immediately release the goods.

 

The following important points must be borne in mind before Customs recordation:

  1. Customs recordal only for imports: Recordation does not extend to exports, Marbaniang says. “As for exports, if there is specific information available, the right holder can address a letter to the concerned customs port invoking Section 113 of the Customs Act, 1962, which empowers customs to confiscate goods sought to be illegally exported.”
  2. Exclusion of patents: Due to the difficult nature of identifying a product infringing a patent absent any expertise, Customs omitted patents from the Intellectual Property Rights (Imported Goods) Amendment Rules, 2018, resulting in no recordation for patents, he says. “Nevertheless, if there is specific information (name of exporter, importer, port of entry, etc.) regarding a consignment, then a right holder can write to the concerned customs port, requesting for suspension of such consignment, supported by appropriate reasoning.”
  3. Disposal of infringing goods:Goods IPRs upon confiscation or seizure are destroyed or disposed of by customs, after obtaining a ‘no objection’ certificate from the right holder. The costs towards destruction shall be borne by the right holder.
  4. No re-exportation of infringing suspended goods:Once the goods are found infringing by customs, they cannot be re-exported. 
  5. Parallel imports allowed:In terms of Section 30(3)(b) of the Trade Marks Act, 1999, parallel imports are allowed as they are considered to be genuine goods imported from another jurisdiction, Marbaniang says. “However, if such goods are tampered with and then sold, it will attract the infringement provisions of the Trade Marks Act, 1999.”
  6. Exception clause: Not applicable to non-commercial goods contained in personal baggage or to those goods sent in small consignments, intended for personal use.


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