Intellectual Property RightsCounterfeiting of Products on E-Commerce Platforms

INTRODUCTION

The expansion of e-commerce platforms for the selling and purchase of consumer goods has fostered a rapid surge in the global trade of counterfeit goods. According to a recent research by the Organization for Economic Cooperation and Development (OECD), the trade of counterfeit goods has gradually increased over the previous several years and currently accounts for 3.3% of worldwide trade.

The goods sold over e-commerce platforms are usually not subject to physical checks and inspections which makes it more susceptible to duplicity and counterfeiting. Counterfeit goods not only lead to confusion in the minds of the consumers, but it also affects the goodwill of the brand to a large extent leading to reputational and monetary damages.

THE RISE OF COUNTERFEITING PRODUCTS IN THE AGE OF E-COMMERCE

Section 28 of the Indian Penal Code,1860 (hereinafter referred to as “IPC”) provides the definition of “Counterfeit” and states that:

“A person is said to “counterfeit” who causes one thing to resemble another thing, intending by means of that resemblance to practice deception, or knowing it to be likely that deception will thereby be practiced.”

The scope of counterfeit goods not only includes high-end items but also includes products from a variety of other businesses including apparels, cosmetics, drugs and medicines, gadgets and appliances, etc. Due to the existence and expansion of e-commerce websites, that provides online commercial contracts, for conducting business transactions, counterfeiters now have access to a wider range of platforms and customers.

Officials claim that, counterfeit products are goods designed to deceive the customers which ultimately poses a multitude of risks on both; the individuals, and the economy as a whole.

In the present e-commerce market, the risks of counterfeiting are extremely severe. As a result of which, for example, Nike, had pulled off its products from Amazon, in 2017, citing the fact that Amazon hosts third-party merchants that distribute counterfeit Nike products to customers.

Generating transactions by building networks of accounts throughout various channels and attempting to direct customers to their sites, is a typical method used by counterfeiters. In addition, counterfeiters boost their reputation by paying for favorable reviews with bots and boosting their sales with fictitious transactions.

Counterfeit products may jeopardize the financial viability and creativity of legitimate enterprises and tarnishes the brand image of the product. Furthermore, consumer faith in brand authenticity is also put to risk, and the entire economic growth and market trends suffer a negative impact.

LEGAL FRAMEWORK GOVERNING COUNTERFEIT IN E-COMMERCE PLATFORMS

The following legislations aid in curbing unfair trade practices like that of counterfeiting:

A. Trademarks Act, 1999

The Trademarks Act, 1999 (hereinafter referred to as “Trademarks Act”), employs the terms “falsifying” and “falsely applying trademark”, instead of specifically defining or referring to the word counterfeiting in it its provisions.

However, on several instances, the Judiciary has observed that counterfeiting amounts to trademark infringement under Section 29 of the Trademarks Act.

In the backdrop of the abovementioned, counterfeiters can be punished under Section 104 of the Trademarks Act.

B. Copyright Act, 1957

In case, there is an illegal sale of a work where copyright subsists, i.e., in the event an original work is duplicated, the aggrieved party can initiate criminal proceedings against the person selling such counterfeit work under Section 63 of the Copyright Act, 1957.

C. The Consumer Protection (E-Commerce) Rules, 2020

The Consumer Protection (E-Commerce) Rules, 2020 (hereinafter referred to as “E-Commerce Rules”), has the capability to strengthen the selling models used by e-commerce businesses in India. The E-Commerce Rules protect consumers from price rigging, unjustified networking skills, and mischaracterizing the quality of product and service.

Rule 5(2) of the e-commerce Rules enlists the liabilities of the e-commerce entities and stipulates that every e-commerce entity shall have to maintain due diligence and require every seller to provide an undertaking to ensure that the descriptions, images and other such content pertaining to the goods or services hosted on the e-commerce platforms are accurate and genuine.

Subsequently, Rule 5(3)(a) of the E-Commerce Rules states that every E-commerce marketplace shall provide complete information about the seller, in a clear and accessible manner. Therefore, in the event of counterfeiting over e-commerce platforms, the aggrieved party can seek redressal under the aforementioned provisions of the E-Commerce Rules.

D. Information Technology (Intermediaries Guidelines) Rules, 2011

The e-commerce platforms and marketplaces come under the ambit of ‘intermediaries’, as defined under Section 2(1)(w) of the Information Technology Act, 2000 (hereinafter referred to as the “IT Act”).

Rule 3 of the Information Technology (Intermediaries Guidelines) Rules, 2011 (hereinafter referred to as “IT Rules”), stipulates that due diligence shall be observed by the intermediaries while discharging its duties, such as  informing the users, i.e. the sellers in case of e-commerce marketplaces, to not display, upload, or share any information that infringes any patent, trademark, copyright, or any other proprietary rights.

 E. Indian Penal Code, 1860

As mentioned above, Section 28 of the IPC states that a person is said to ‘Counterfeit’ when he causes one thing to resemble another thing, with the intention to deceive or knowing that it would likely to deceive the other person.

Section 486 of IPC provides for penal punishment for counterfeiting products. It states that if a person has aided the sellers in deceiving the customers, they are liable to be punished with imprisonment or fine.

SOCIAL MEDIA PLATFORMS FACILITATING COUNTERFEIT PRODUCTS

Websites and programs that support users to generate and share content or engage in social networking are known as social media platforms. Forums, microblogging, social networking, etc. are all examples of social media websites and apps.

With the rise of social media, counterfeiters are taking advantage of social media sites by forming various confidential groups to connect with vendors and consumers.

Illegalities on social media can be tackled by using the IP reporting tools given by Facebook, Twitter, and other social media platforms can be used to delete accounts which infringes upon a registered trademark.

CHALLENGE FOR BRAND PROTECTION MANAGERS

The problem of counterfeiters exploiting the Internet must be addressed, but this is easier said than done. Brand Protection Managers, or those responsible with assisting and supporting the brands, confront a difficult task in combating this plague.

Some Brand Protection Managers are delusional, assuming that counterfeit items are not a concern for their businesses, instead it is an issue that solely affects others. On the other hand, some Brand Protection Managers recognize that even though counterfeit products exist, they think that only a small fraction of their goods are counterfeit, and that having such goods in the markets may potentially benefit their business.

Additionally, few Brand Protection Managers acknowledge that they do have a substantial counterfeit goods situation but at the same time they think that the challenge is so large that nothing can be done about it. They have surrendered without a struggle, understanding that counterfeit items are an unavoidable aspect of conducting business.

Lastly, there are Brand Protection Managers who want to do something about the counterfeit issues, but they’re not sure where to begin. They don’t have a suitable procedure in place to steer them through the essential stages of online brand protection, or they don’t have enough data to make educated judgments. Thus, even if Brand Protection Managers decide to work on this issue, the limited availability of legal assistance and strategies is the biggest restrain for them.

AMLEGALS REMARKS

Businesses must be vigilant and take immediate measures for preserving their own brand goodwill and brand reputation.  In order to curb the issue of counterfeiting, brands may also map and monitor platforms by doing keyword searches to identify key infringers while keeping an eye on the platform’s overall trends towards the brand’s products.

Brands should also concentrate on gathering data about users and their locations, as well as comments, quantum of sales, and discount rates. Although, this supervision may be difficult, but it is of utmost importance amid the rise in e-commerce sales.

Multiple platforms should prohibit automated data gathering via scraping bots, necessitating the use of human data collecting to supplement online monitoring technologies. Moreover, it is advisable to familiarize with the Internet enforcement tools already available for redressal purposes. Most platforms have systems in place for brand owners to report and enforce IP infringements.

Presently, it may not be possible to create a unique mechanism to cope up with the counterfeiting of any commodity in the market, including elements of trademark, copyright, industrial design, and patent, and to consolidate the numerous key provisions for such protection and enforcement and avoidance of piracy in these statues, so lawmakers must facilitate cooperation and fill in the regulatory loopholes with specific rules and provisions and deterrent verdicts.

– Team AMLEGALS assisted by Ms. Ayasha Khatri (Intern)