Border Patrolling: An Analysis of Border Control Measures

Introduction

With the dilution of trade borders worldwide, the problems pertaining to the grey market as well as counterfeit goods have increased exponentially for nations. Grey market goods are genuine goods on which little to no duty is paid when they enter a domestic market whereas counterfeit goods are the infringing goods which result in loss of revenue, goodwill, reputation as well as brand equity to an IP right holder. In a statement made to the Press Trust of India, President Nakul Pasricha of Authentication Solution Providers' Association (ASPA) said “at present counterfeiting causes around Rs 1.05 lakh crore losses to India per annum. If counterfeiting is curbed by 50 per cent through proper implementation of authentication solutions, enforcement, awareness and monitoring, it can save more than Rs 50,000 crore per annum". Further, he also cited a report of the Organisation for Economic Co-operation and Development (OECD), according to which the trade in counterfeit and pirated goods has risen steadily in the last few years globally with trade volumes in fake products now standing at 3.3 percent of total global trade.[1]

Counterfeiting and piracy affect almost every spectrum of goods, from high ended designer products to mundane day to day goods. According to a study commissioned by the FICCI Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE), the seven sectors most vulnerable to smuggling and counterfeiting are automotive parts, alcohol, computer hardware, personal goods, packaged foods, mobile phones and tobacco products.[2] As a result of piracy, counterfeiting, theft of IP and smuggling activities, severe economic losses are incurred by the Indian economy in terms of loss of jobs as a result of decline in sales and profits, loss of jobs as a result of decrease in demand for services, loss of tax revenue which also results in decrease in welfare spending as well as fall of induced demand due to reduction in expenditure by employees directly employed by the sector.[3] Further, these activities also result in decrease of investment by potential investors in India since they prefer investing in markets with stronger IP protection. Moreover, the problem of counterfeit goods also affects the homeland security of nations.

Thus, owing to the catastrophic results of these activities, countries have become more vigilant in enforcing stricter Border Control Measures. The solution to the problems of counterfeiting, piracy, theft of IP as well as smuggling activities lie in a hand in glove approach of the domestic IP laws, customs rules and laws, international conventions and treaties, international trade laws as well as the actual practices of the enforcement regimes of a country.

Border Measures under TRIPS Agreement 1995

Border Control Measures are envisaged in Articles 51-60 of the WTO Treaty on Trade Related Aspects of Intellectual Property Rights (TRIPS)[4], to which India is a signatory. Countries which are signatories to the TRIPS Agreement are mandated to adapt these measures in their internal legal frameworks, with necessary modifications, for effective enforcement process.

Under the TRIPS Agreement, a right holder has to file a written application with the competent administrative or judicial authorities for suspension of the release of counterfeit trade mark or pirated copyright goods into free circulation by the customs authorities on valid grounds of suspicion. Further, the right holder is mandated to provide adequate evidence to the satisfaction of the competent authorities, as per the domestic laws of the importing country, that there exists prima facie infringement of the intellectual property rights of the right holder. Furthermore, the right holder also has to provide an amply detailed description of the importing goods so that they are easily recognizable by the custom authorities. To prevent abuse of the system, the competent authorities have the power to request for security of any equivalent assurance from the right holder. The authorities are mandated to notify the importer as well as the right holder immediately of the suspension of release of the goods. The duration of suspension of the goods is also mentioned under the Agreement, as per which the right holder has the time period of 10 working days after the applicant has been served the notice of suspension, extendable by further 10 working days, to commence the legal proceedings. In case of wrongful detention of goods, the authorities can direct the right holder to compensate the importer, the consignee and the owner of the goods for any injury caused. The competent authority also has the power to give the right holder as well as the importer, sufficient rights to inspect the goods for validating the claims of the right holder as well as provide any information pertaining to names and addresses of the consignor, the importer and the consignee and of the quantity of the goods. The competent authorities also have the power to act on their own initiative, in good faith and on the basis of prima facie evidence of infringement of an intellectual property right, to suspend the clearance of any suspecting goods. Subject to certain limitations, the authorities have the power to order destruction of infringing goods. Moreover, barring exceptional situations, re-exportation of unaltered infringing goods or subject to a different customs procedure, is not allowed. The Agreement also exempts small quantities of goods of a non-commercial nature contained in travellers' personal luggage or sent in small consignments from the above provisions.[5]

Customs Act, 1962[6]

The law relating to Customs in India is heavily influenced by the provisions of the TRIPS Agreement. Particularly, the following sections of the Customs Act, 1962 provide powers to the Custom Authorities to take action against the import or export of infringing goods at the borders of India i.e. Sections 11, 111, and 113 of the Act.

Under the Act, the Central Government is empowered to, absolutely or conditionally, prohibit the import or export of specific infringing or counterfeit goods, for the purposes specified under the Act. Specifically, the Central Government has the power to prohibit import or export of goods for the purpose of protection of patents, trade marks, copyrights, designs and geographical indications. Further, the Central Government may also restrict the import or export of goods for the purpose of prevention of the contravention of any law for the time being in force.[7] Moreover, the competent authority also has the power to confiscate improperly imported and attempted to be improperly exported goods respectively.[8]

Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007[9]

The Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 (“Rules”) were introduced with the object of prohibiting import of goods infringing the intellectual property rights of right holders under the Copyright Act, 1957, the Trade Marks Act, 1999, the Patents Act, 1970, the Designs Act, 2000 and the Geographical Indications of Goods (Registration and Protection) Act, 1999. Further, the definition of "intellectual property" under the Rules covers copyright, trade mark, patent, design and geographical indication. However, after the 2018 amendment to the Rules[10], Patent rights have been excluded from the purview of the Customs authorities.

In this regard, it is pertinent to note that a registration of a trade mark, design, or geographical indications is necessary for enforcement of these rights at the borders.

Under the Rules, a right holder may register or record his IP rights with the Customs Authority and after grant of registration, the import of infringing or counterfeit goods in India shall be deemed to be prohibited within the meaning of Section 11 of the Customs Act, 1962. This process is often referred to as Customs Recordal, which aims to prevent infiltration of infringing or counterfeit goods in the territory of India.

(a) Procedure prescribed under the Rules[11]

The right holder is mandated to give a written notice to the authorised custom officer, in the prescribed format along with the applicable fee, requesting for suspension of clearance of the goods suspected to be infringing his intellectual property right.
Additional information which may be required by Customs needs to be provided by the right holder within 15 days, which may be extendable.
In case the right holder ceases to be the owner or the intellectual property ceases to be valid, the right holder has to inform the customs authority of the same.
Thereinafter, the customs authority is required to inform the right holder within 30 days from the date of receipt of the notice, whether the notice has been registered or not.
In case of registration, the intimation shall also specify the period of registration, which shall be minimum one year, unless the right holder specifies otherwise.
Recordation remains effective for a period of five years or the expiry of the intellectual property, whichever is earlier.
As per the specified conditions of registration, a bond is required to be executed by the right holder with such surety and security as deemed appropriate by the Commissioner “undertaking to protect the importer, consignee and the owner of the goods and the competent authorities against all liabilities and to bear the costs towards destruction, demurrage and detention charges incurred till the time of destruction or disposal, as the case may be”.
Further, an indemnity bond is also required to be executed “indemnifying the Customs authorities against all liabilities and expenses on account of suspension of the release of allegedly infringing goods”.
As per the 2018 amendment, the right holder is required to give a notice to the customs authorities, within one month of date of communication, in case of any order of amendment, cancellation, revocation or suspension of their subsisting rights by any court of law.
The Customs Authority, on the basis of the notice by the right holder or on their own initiative, can also suspend the clearance of goods in respect of which they have prima-facie evidence or reasonable grounds to believe that the imported goods are suspected to be goods infringing any intellectual property rights.
The Customs Authority is required to immediately inform the importer and the right holder of the suspension of clearance of the goods and state the reasons for such suspension.
In case the right holder or his authorized representative fails to join the proceedings within a period of ten working days, which may be extendable, from the date of suspension, the goods may be released, subject to compliance with all other conditions of import of such goods under the Customs Act, 1962.
In case of perishable goods, the period of suspension of release is three working days which may be extended by another four days, such that the extension does not affect the goods.
In case the right holder joins the proceedings, the authorised custom authority may seize the goods, having reasons to believe that the goods are infringing and liable to confiscation under the Customs Act.
Without prejudice to the protection of confidential information, right holder and the importer or their duly authorized representatives are entitled to examine the goods which have been suspended for clearance, and may obtain samples for examination, testing and analysis for determining whether the goods are pirated, counterfeit or otherwise infringe an intellectual property right.
Goods of a non-commercial nature contained in personal baggage or sent in small consignments intended for personal use of the importer are not subject to the above Rules.
As per the Rules, Customs officers, when acting in good faith and having followed the procedures set out in these Rules, shall not be held liable for any failure to detect goods infringing intellectual property rights, the inadvertent release of such goods or any other action in respect of such goods.

(b) Provisions for disposal of goods under the Rules[12]

The Rules also provide the procedure relating to disposal of infringing goods, under which if the goods detained or seized have infringed intellectual property rights and there is no legal proceeding pending, the Customs Authority shall destroy the goods under official supervision or dispose them outside the normal channels of commerce after obtaining 'no objection' or concurrence of the right holder or his authorized representative.
The costs toward destruction, demurrage and detention charges incurred till the time of destruction or disposal, as the case may be, shall be borne by the right holder.
Re-exportation of the goods infringing intellectual property rights in an unaltered state is not permissible.
The Customs Authority may on their own, or at the request of the right holder, are also empowered to retain samples of goods infringing intellectual property rights prior to their destruction or disposal and provide the same to the right holder or importer if such samples are needed as evidence in pending or future litigations.

(c) Type of goods which are prohibited

Subject to the Intellectual Property Rights (Imported Goods) Enforcement Amendment Rules, 2018 read with the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 51/2010-CUSTOMS (N.T.) dated June 30, 2010[13], the following goods are prohibited:

Goods having applied thereto a false trade mark as specified in the Trade Marks Act, 1999;[14]
Goods having applied thereto a false trade description within the meaning of the Trade Marks Act, 1999;[15]
Goods made or produced beyond the limits of India, and having applied thereto a design in which copyright exists under the Designs Act, 2000;
Goods having applied thereto a false Geographical Indication within the meaning of the Geographical Indications of Goods (Registration and Protection) Act, 1999;[16]
Goods which are prohibited to be imported by issuance of an order issued by the Registrar of Copyrights under the Copyright Act,1957.[17]

Process of recordal of rights with Customs

IP rights can be recorded manually or online, through the Indian Customs IPR Recordation Portal, accessible at https://ipr.icegate.gov.in. For online application, separate forms need to be completed for each intellectual property right which is sought to be recorded. The right holder needs to create a unique id and a password on the website and fill the online forms and upload the relevant documents. A Unique Temporary Registration Number is then generated (UTRN), which needs to be submitted along with a hard copy of the documents at the IPR cell of the Commissionerate of Customs of the right holder’s choosing. Within thirty days, a Unique Permanent Registration Number (UPRN) will be issued which confirms the recordation.

Documents required for recordal of rights with Customs[18]

Proof of ownership of the IP right along with a scanned copy of the registration certificate;
Serial number of the demand draft of INR 2000/-, issued by any nationalized or scheduled bank in India and made out in favour of the Commissioner of Customs of the opted location;
Scanned copy of the power of attorney;
A statement of exclusivity outlining the scope of the intellectual property right sought to be recorded;
Digital images of genuine goods (for trade marks and designs);
Digital images of the infringing goods (if applicable/available);
Statement of grounds of suspension of infringing goods;
Differentiating features of genuine and infringing goods (not mandatory but advisable for trade marks and designs);
The IEC code of the rights holder and/or other authorized importers (not mandatory but advisable);
Customs Tariff headings of the applicable goods (if available);
In case of geographical indications, description of the geographical indications, geographical area of production and map;
The General Bond or Centralised Bond.

Conclusion

As per the applicable provisions and position of law in India, it is evident that the efficacy of the border control measures is reliant on the collaboration between the customs authorities and the right holders. The Intellectual Property Rights (Imported Goods) Enforcement Rules along with their amendment have increased the level of protection afforded to right holders and filing via the online portal has made the process readily accessible to all. However, since the right holders are more often than not ill-informed, unaware and have a lack of knowledge as well as technical know-how, the border control measures are not effectively implemented and are potentially abused. For effectual administration, customs authorities in India need to be better adapted and sensitized to the practice of the international law of enforcement and the measures need to be strengthened considerably. Thus, the concept of border control measures, even though it has effectively evolved over the years, is still an emerging area in the intellectual property enforcement landscape of India.

[1] Counterfeit products cause over Rs 1-lakh crore loss annually in India: ASPA, Economic Times (2019), available at https://economictimes.indiatimes.com/news/politics-and-nation/counterfeit-products-cause-over-rs-1-lakh-crore-loss-annually-in-india-aspa/articleshow/70628912.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

[2] Counterfeiting, Piracy and Smuggling in India – Effects and Potential Solutions, FICCI, available at https://iccwbo.org/content/uploads/sites/3/2016/11/Counterfeiting-piracy-and-smuggling-in-India-Value-of-IP-in-india.pdf

[3] “Socio-Economic Impact of Counterfeiting, Smuggling and Tax Evasion in Seven Key Indian Industry Sectors”, FICCI (2012), available at: http://www.ficci.com/spdocument/20190/anti-smug- ficci-study.pdf.

[4] https://www.wto.org/english/docs_e/legal_e/27-trips.pdf

[5] Ibid. p. 342 to 345

[6] https://www.cbic.gov.in/htdocs-cbec/customs/cs-acts-botm#

[7] https://www.cbic.gov.in/htdocs-cbec/customs/cs-act/cs-act-ch4-revised3

[8] https://www.cbic.gov.in/htdocs-cbec/customs/cs-act/cs-act-ch14-revised2

[9] https://www.cbic.gov.in/htdocs-cbec/customs/cs-act/formatted-htmls/ipr-enforcementrules

[10] http://www.egazette.nic.in/WriteReadData/2018/186661.pdf

[11] Ibid. Rule 3 to 10, Rule 12 and 13 of The Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007

[12] Rule 11 of The Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007, Ibid.

[13] https://www.cbic.gov.in/htdocs-cbec/customs/cs-act/notifications/notfns-2010/cs-nt2010/csnt51-2k10

[14] Section 102 of the Trade Marks Act, 1999, available at http://ipindia.nic.in/writereaddata/Portal/ev/TM-ACT-1999.html#s101

[15] Section 2(1)(i) of the Trade Marks Act, 1999, ibid.

[16] Section 38 of Geographical Indications of Goods (Registration and Protection) Act, 1999, available at http://www.ipindia.nic.in/act-1999.htm

[17] Section 53 of the Copyright Act,1957, available at https://www.indiacode.nic.in/show-data?actid=AC_CEN_9_30_00006_195714_1517807321712&sectionId=14575&sectionno=53&orderno=73

[18] https://ipr.icegate.gov.in/IPR/HomeDocumentViewSuccess, page 2 and 3

The article was originally posted on www.lexology.com on July 09, 2020 and can be accessed here.