ENFORCEMENT OF IPR :

A GLOBAL CHALLENGE

National Conference on Combating Counterfeiting & Piracy.

FICCI, Federation House
On April 26, 2007,
New Delhi
M.L.PANDIA.
2.6-HBL-War against spurious goods intensifies
HINDUSTAN TIMES(MUM)29Sep2005
 PROBLEM DEFINITION

INFRINGEMENT ( Country Specific)

Deceptively similar ( Visual / phonetically)
Infringement is not limited to the actual
goods or services but also covers
dissimilar goods or services.

COUNTERFEIT ( Going Global )

Imitation of a genuine product, passed on
as original / Counterfeit in parallel imports
 The battle against Local
Counterfeit / Spurious
.
•
Trade mark journey plan

Market Surveys for Infringements / Counterfeits

Understand business dynamics and Identify the market

operation of the counterfeiters

Ascertain status of the party – financial, political and reputation

Information regarding enforcement agencies

 Must Win Battles

A multifunctional approach to enable business

to grow superior brands:

Nominate Anti Counterfeit Leaders

Focus on key categories to drive growth in his sales area

Ensure relationship building with local enforcement and govt. authorities

Use external investigators to gather intelligence

 Action Against Local Infringements /
Counterfeits :
• Civil Injunction & appointment of Court Receiver.

• Complaint under Sec 156(3) of CRPC & Police Raid.

• Police complaint under Copy Right Act .

• Complaint invoking provisions of legislation viz PFA

D&C , W&M etc.
 GROUND WORK FOR CONDUCTING
RAIDS
.
•
Trade mark journey plan

Market Surveys for Infringements / Counterfeits

Identify the market of operation of the counterfeiters

Ascertain status of the party – financial, political and reputation

Information regarding enforcement agencies

 HEALTH HAZARD
• OPERATIONS IN MOST UNHYGENIC CONDITIONS, SLUM
AREA,

• MAKE SHIFT CAMP, OLD INDUSTRIAL SHED

• NO REGARDS FOR HEALTH AND SAFETY OF PRODUCTS

• CHEAP INGREDIENTS ARE USED

• NO FUNCTIONAL BENEFITS TO CONSUMER

• UNJUST ENRICHMENT BY TRADERS / MAKERS

Counterfeiting – A Global Menace
 Parallel imports & Trans border
movements of counterfeit products

EAST - 58% of International border of 14,880 km

 Source of Counterfeits
Through Parallel Imports

Main source for such products :

India , China , Syria , South Korea & North Africa ( Local
refilling) .

India - PW, Skin Care, Deos Cosmetics.

China - Toothpaste, Shampoo, PW, Skin Care, Deos
Cosmetics, Fragrances. Beverages/Foods.
Syria - PJ, Creams, Roll ons,Shampoos.
Local recycling/refilling - Primarily in North Africa on
liquids. Vim, Vaseline, Royco Muchzi Mix, and Cooking
Oils. In SA local cfts on Rajah Curry Powder.
 Problems
Of
Parallel Imports
Import of Goods bearing HLL Trademark without HLL permission

Imbalance in Domestic Market due to sale of such goods under the name
of Importer without reference to HLL

Infringement of Trademark

Goods from trans-border do not bear the requisite label declarations

MAJOR THREAT – COUNTERFIET PRODUCTS USING WELL

KNOWN BRAND NAMES ARE NOT PRODUCTS OF COMPANY
OWNING THE BRAND .
 FMCG Counterfeit –
The Supply Chain

• Local “garage” manufacturing to international major

production facilities.
• Informal network of independent wholesalers to
increasingly run by trans border operators .
• Internet and in banking makes easy transfer of funds
• Free movements across international state .
• Electronic communications, the ability to scan packs and
sends electronically .
• Buyers and sellers may never need to meet face to face.
 Economics of
Parallel Import

An Illustration
 Wholesalers and Retailers

They earn at least twice the margin on cfts that they do on the
genuine product.

The aim of the end seller, is to sell it to consumer as genuine and at

the same price as the genuine product .

Its about risk and reward, and currently there is little risk, but
huge reward. Very little risk of prosecution.

Retailers know where to buy counterfeits from, and the outlets

which counterfeits are sold into may look different across the
region, but they operate the same way.
 FMCG Counterfeit –
The Manufacturer

• Run by increasingly sophisticated and highly organized groups.

• Nexus with criminals and underworld connection,

• Two core competencies required:

- Efficient, low cost manufacturing
- Excellent distribution network.

• Why is it so profitable for them..

❖ Much easier to copy than innovate.
❖ Steal the idea at no cost.
❖ very quick turn around.
• How is this done…...
 FMCG Counterfeit –
The Product

• They will invest in appearance, but not on ingredients.

• The cartoon / outer pack may look like the original, but its
performance will not.

• But for Unilever the major health and safety issue is on foods, in
unhygienic environments with zero heath standards, or analysis
or raw materials.

• But even more worrying is the consumer safety .

 FMCG Counterfeit –
The Product’s Safety?

❖ Sun care products with no sunscreens.

❖ Toothpaste with out fluoride,

❖ Health soaps with anti bacterial agents

❖ Anti dandruff shampoos with out the anti dandruff ingredients.

❖ Deodorants which just have an alcohol base with cheap perfume, no

deo. properties.

❖ Drugs products, without the requisite properties.

 FMCG Counterfeit –
The Economics

• Poor quality ingredients,

• Lower cost of production .

❖ Very low labor costs,
❖ Less than Min wages
❖ No insurance, pensions or unions.
❖ Factories are not safe or environmentally friendly.
❖ Less / zero working capital
❖ All transactions are cash, with no Tax payment.
This then increases profitability throughout the total supply
chain.
 The Economics of
Parallel Import…

•1 INR = .65 Paise of Bangladesh

currency
•For one 125 gm LIFEBUOY Soap
Printed Price in Bangladesh currency:
TK 11= ( .65p x 11) = 7.15

•125 gm of LB in INR= 11.00 (INDIAN)

120 gm of LB in INR= 7.15 (BD)

Difference (Profit) = 3.85 per soap

No Advertisement Expenses incurred

The Grammage & Pricing is as
follows
Company SKU Size Print
Name (gm) Price

HLL LB 125 11

HLL LB 100 9
 Counting the Cost.

We have no hard data on the total financial costs in India or

globally.

Total estimated Unilever loss of sales could be anywhere

between $350m to +$ 500m per annum.

Loss of Revenue to the Government and social cost in terms of

low employment.
B-STD(DELHI)24Aug2005
 Counting the Cost.

Loss of Brand Equity as Loss of consumers confidence in her

brand purchase involving health and safety issues.

The majority of consumers buying counterfeits are the

least educated,
and generally from the poorer areas.

They are unaware that they are buying counterfeits. When the
product fails to meet their expectation, they are the least likely to
complain, and probably switch brands.
 Taxation Loss ……

They also undervalue goods, particularly when it

comes to customs clearance, sometimes to what is
seen to be ridiculously low levels. This reduces
import duties significantly.

Where possible they will try to avoid all other forms

of taxation, the looser being the Government, which
is some countries they can ill afford.
Protecting
IP Rights
 Why Protection
• Retaining consumer confidence .
• Environmental sensitive's & Health Hazards.
• Arrest loss of sales revenue and consequent loss
of taxes.
• Increase in job opportunities .
• Avoiding adverse impact on desire for investment .
• Loss of opportunity cost in terms of money and
time on fighting this problem that could be spent
on improving operations
 THE BATTLE FOR PROTECTION
AGAINST PARALLEL IMPORTS

- Arrest at the port of Entry .

- Court Injunction under TM / Copy right Act.

- Complaint to Custom Authorities ( DRI) on Valuation .

- Alternative strategies depending on nature of violation.

OTHER LEGISLATIONS

Consumer welfare legislations :

# Consumer Protection Act ( TM Action ).

# The Standards of Weights & Measures Act
# Drugs and Cosmetics Act

Revenue Legislations:
# Sales Tax Act.
# Customs Act
 Interface between TM Act and
other consumer legislations
F A L S E T R A D E

T R A D E D E S C R I P T
a n d f i t n e s s o f a n y

C o n s u m e r C o m
C o m p l a i n t c a n b e i n r e l

G O O D S U N S A F
 Our Experiences

Despite the consequences:

• No person has been convicted and sent behind bars

during the last 20 years (excepting 2 or three cases)
• Cases if launched takes 10 to 20 years for the trial to
complete
• Delay frustrates the efforts and encourages spurious
manufacturing
• For want of deterrent punishment, same manufacturer
carry on manufacturing under different name and style
 Drawbacks of the existing
system

• Inadequate awareness
• Burden on law and order machinery - additional load
• Delays in the judicial system
• Deficiency in existing laws
- Not deterrent enough :
Not cognizable
Punishment not enough
Loopholes - bonafide belief by re-seller
* Poor tax Enforcement machinery.
* No Nodal agency to exclusively deal with the Issue.
* No Single window for investigation/enforcement
 Focus Areas.
Finding the Source.
❖ Transit/Supply Chain (Manufacturer to end Buyer).

❖ Brand Protection Groups.

❖ In market Investigations.

❖ Proactive Legislative amendments ( Route to

Prosecutions/seizures.)

❖ Training/Awareness- Internal CD /Mkt /Legal.

❖ External. Customs/Police/Judiciary/NGOs

❖ Packaging Controls, registrations, Audits etc.

 Focus Areas.
Finding the Source.
❖ Transit/Supply Chain (Manufacturer to end Buyer).

❖ Brand Protection Groups.

❖ In market Investigations.

❖ Proactive Legislative amendments ( Route to

Prosecutions/seizures.)

❖ Training/Awareness- Internal / CD /Mkt /Legal.

❖ External. Customs/Police/Judiciary/NGOs

❖ Packaging Controls, registrations, Audits etc.

 What Can Corporates
Do Better Internally…..
Global central data collection & library.

❖ Investigate security on packaging innovation, improve

in house expertise.

❖ Raise the technology barriers, and except possible on

costs to increase brand protection.

❖ Insure all legal protection taken, particularly design &

packaging registration.

❖ Regular comprehensive trade visits by Mkt & Sales to

the bottom end of the trade seeking co operation .
 Communications to Business
Partners
• To ,
• All Dealers
• & partners in progress .
• COME FORWARD TO FIGHT TOGETHER AGAINST COUNTERFEIT PRODUCTS

• Dear Friends
• Firstly on behalf of Hindustan Lever I would like to thank you for your help and cooperation. It is
only through you and under your support we have been able to reach to our valued customer
including millions of people all over India.
• Recently it has been observed that some dishonest traders in collaboration with their agents are
selling Counterfeit/ look alike products of our brands like Lux, Lifebuoy, Dove, Fair & Lovely ,
Sunsilk Shampoo, Clinic all clear Shampoo, Vasaline, Ponds Cream, wheel , Rin, Surf
Detergent powder, Taja tea, Red Label tea etc in the shops/ markets .
• As a result , Consumers are deprived of the right choices of original goods and the trust on you
and the all the retailers in the distribution chain is getting impacted severally . On one hand as
the consumers are being cheated being exposed to the poor quality of goods impacting their right
and interest , on the other, the Government is being deprived of its due revenue.
• You are also aware that production, distribution and sale of Counterfeit / look alike products is an
offence and there are provisions under law including Criminal law for severe punishments which
includes imprisonment, fine etc. In the interest of the consumer at large and to ensure to stop
distribution and sale of Counterfeit / spurious / look alike products we have Communicated with
the concerned authorities and they have given full assurance in this regard to take necessary
action . we will soon take necessary action through the concerned authority. ……………….
 What Can Corporate Do
Better Internally…..

❖ Need Global Operational Guidelines/Policy for market

actions, product safety. Contingency plan including PR.

❖ Need a Global large scale investigations across

regions and countries. Supply chain out of China.

❖ Transfer best practice, talk to competitors, all in the

same boat.

* Finally, do not underestimate the cfter’s resources

( manufacturing & financial) speed to market.
 What can Corporate do
better Externally
❖ We must work with all similarly effected companies, even
our major competitors.

❖ Build awareness & work with dealers & consumer groups,

educating their members, as well help lobby on
manufacturers behalf.

❖ Lobby and advice Governments on best practices and

laws in the region to be adopted where relevant.

❖ Many Governments do not have resources, or expertise in

this area, we need to help. This can be through contacts
with major Global groups, WCO, WIPO, Interpol etc, or our
own training programs.
15.6-HBL(Brandline)-Fake accompli
 Summary
❖ Counterfeits are now a major threat globally to all
business.
❖ No longer a small scale local/regional problem.
❖ It will only cease when the risks outweigh the rewards.
❖ This which will happen at the selling, rather than
manufacturing end of the supply chain.
❖ This will happen country by country.
❖ For many countries it is still in reality, years away.
❖ Companies needs to address the problem globally, and
at the highest level.
 WAY FORWARD
Cons
ume
r Awa
ren ess
Making repre
se ntation for am
endment of l
egislations

Inter company Interaction

or i t i es
e nt a l auth
e p ar t m
it h d
i o n w
Int e r ac t
Thank you for your time....