Trademark Infringements : Foreign Brands Facing Big Problems

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Trademark Infringements : Foreign Brands Facing Big Problems

--By Sanjeev Sharma

The Nepal government is notorious for policy and procedural dillydallying when it comes to providing services to businesses. This has led to some serious problems for industries and businesses to continue their operations in the country. Among the many problems being faced by them, infringement of trademarks of reputed foreign companies and multinational brands has become a major issue in the recent years. 

According to the Department of Industry (DoI), the government body under the Ministry of Industry which handles the registration of industrial and intellectual property, there have been 546 registered complaints of trademark violations as of June 15, 2016 with many cases currently in the court. The department informs that it has so far settled about 90 disputes. 

Nevertheless, sources say that the number of such disputes can be as high as 1,200 with some cases continuing to go undecided for over 15 years. Some of the trademark disputes include cases of Dhara Oil, Panparag, Rajanighandha, Pepsico, Havells and Kansai Nerolac, many of which are currently at court. Looking at the disputes, trademark infringement of reputed Indian brands seems to be at the top. According to experts, this has increased since 2003 after Nepal became a member of the World Trade Organisation (WTO). 

Experts point out the absence of proper laws and policies for the increasing trend of trademark in-fringement cases. As the existing Patent, Design and Trade Mark Act, 2022 lacks clarity on registration and security of trademarks, among other things, the theft and duplication of trademarks of globally recognised brands is on the rise, they say. “The lack of clarity in the existing law has caused problems regarding the registration and ownership of trademarks,” says Janak Bhandari, Advocate at Global Law Associate, a law firm looking into the cases of trademark infringement.  

As per the Act, the rights and ownership are only established after the trademarks are registered in Nepal. “Using this provision, local companies here are registering and holding the trademarks of MNCs,” he says. According to Bhandari, the trend has increased over the last decade. He said that there are many instances of registering copied trademarks of MNCs. “When the genuine owners of the trademarks come to Nepal, they find that the marks are already registered here by someone else,” he mentions. 

Reasons for It
The malpractice regarding the registration of trademarks happens for various reasons. “Market value of trademarks is the main reason. A well established brand earns goodwill and reputation among the customers internationally,” opines Bhandari. “The trend is increasing as the involved people are benefitting financially. Many people who have registered trademarks of foreign companies bargain the ownership of the brands in Nepal.”

Similarly, it is easy for the involved people to effortlessly access the market which has already been established by others. According to Bhandari, consumers usually do not purchase goods by studying the details of the brands. They can be satisfied by purchasing items that look similar to established brands. “Many products of international brands are available in the domestic market without the registration of trademarks,” he says.  The carelessness of the genuine owners is also another cause for the rise in infringement cases as they do not register their trademarks in Nepal in time. The negligence of DoI is also causing the infringement of trademarks to happen. “The officials register the internationally recognised trademarks without properly investigating the ownership,” mentions Bhandari.

Legal Weakness
The weak legal provision in the country is providing a fertile ground for the malpractice regarding the registration of trademarks. As per the Patent, Design and Trade Mark Act, 2022 copying and the use of already registered trademarks is illegal. Nevertheless, the law is not strong when it comes to punishment. As per the existing legal provisions, DoI can levy a fine of up to Rs 100,000 and seize related items from the people involved in trademark violations. “However, there are not many instances in the past where people were strongly punished for such deeds,” Bhandari says, adding, “One of the well known cases is the trademark infringement of Goldstar brand shoes when the people involved were slapped with tough punishments a couple of years ago.” 

Inability to Reform Existing Law 
Had Nepal been able to formulate policies in accordance with the Paris Convention for the Protection of Industrial Property, then the trademark disputes would not have arisen in this magnitude. Nepal became a signatory of the landmark global deal in 2001 which incorporates substantive provisions to ensure the protection of trademarks. However, 15 years after signing such an international treaty, the government has not been able to amend or reformulate the existing Act in line with the convention. 

One of the highlights of the treaty is to provide protection to well-known trade and services marks. The article 6bis of the treaty ensures protection to globally famed trademarks without having to register in the signatory countries. However, due to the lack of appropriate legal provisions, well-known trademarks are becoming victims at present. “It clearly shows that our government and lawmakers either do not know the importance of these international treaties or are totally ignoring the significance of the conventions signed by the country,” argues Sushil Kumar Pant, Senior Advocate at the law firm Jurist and Company. The former Attorney General also points to the dishonesty prevailing in the bureaucratic and political levels to continue corrupt practices hindering the formulation of policies to implement such essential international conventions. 

The deadline for implementing the convention has been extended thrice for Nepal. The country, after missing the first deadline in 2006, was provided the period of 2007-2015 to update and reformulate its existing law which has now been extended to 2021. 

Impact on FDI
Experts fear that the rising trend of trademark infringement cases will affect the flow of foreign investment to Nepal. The cases of the Japanese paint brand Kansai Nerolac and other international and MNC brands, for example, indicate that foreign companies may stay away from the Nepali market despite the business opportunities they have in our country. “The Paris treaty has incorporated some important provisions such as the 100 percent exclusive rights to the well-known services and trademarks. Nonetheless, we have not been able to provide protection to the brands,” says KP Pandey, Director at Federation of Nepalese Chambers of Commerce and Industry (FNCCI). He mentions effective right, effective implementation and effective remedy as three essential aspects of the convention. “Without ensuring these aspects, no industrial and intellectual property can foster,” he opines. He stresses on the need of formulating parameter to identify the well-known marks. 

Implementing the Paris Convention
Incorporating the provisions of the convention in the existing law is not only necessary to stop the infringement of trademarks, but is also important to fulfill the international obligations of Nepal.

Legal experts are seeking the court’s intervention in order to ease the hurdles to implement the treaty. “The treaty also needs the court’s interpretation so that its status can be established in the country while also paving the way for the government and parliament to amend or reform the existing law,” says Bhandari. “The courts should decide if the provisions of the Paris Convention have the same validity as Nepali law or if the existing Act needs to be reformed on the basis of the treaty.” 

On legal grounds, implementing the convention would not be a hard act as an existing law recognises international treaties signed by the country. According to section 9 of the Nepal Treaty Act, 2047, treaties signed by Nepal shall be enforceable as any Nepali law. 

Unified IP Policy in the Offing and DoI Initiatives
After years of long delay and uncertainty, the government is finally working on introducing a unified intellectual property (IP) policy which aims to provide IP services including registration of trademarks, patent, design and copyright from a single office. Currently, DoI is providing the first three services from its different units while the Office of the Company Registrar is handling the latter. Concerned government officials have said that the proposed Intellectual Property Policy 2016 will include provisions of the Paris Convention and Agreement on Trade Related Aspects of Intellectual Property Right (TRIPS) of which Nepal became a member in 2004. However, to what extent the provisions of the Paris treaty and TRPIS will be incorporated in the new IP policy is still not clear. 

Similarly, DoI, after dealing with the increasing number of infringement of trademark cases of foreign companies over the years, has been using the IPAS software to avoid duplication of well-known trademarks. According to the department, it denies the registration of any proposed trademark that is 50 percent similar to any trademark which is registered or in the process of registration.

 

      "Inability to reform Patent, Design and Trademark Act is the main factor behind trademark infringements"

 

Janak Bhandari Advocate, Global Law Associate PLCJanak Bhandari
Advocate, Global Law Associate PLC

Infringements of trademarks of multinational companies have increased in recent years. How do you assess the present situation?
We have been seeing various cases of trademark infringements of MNCs. Many cases are currently in the courts. Nevertheless, the lack of clarity in the existing law has caused problems regarding the registration and ownership of trademarks. According to the Patent, Design and Trade Mark Act, 2022, rights are only established after the trademarks are registered in Nepal. Using this provision, local companies here are registering and holding the trademarks of MNCs. When the genuine owners of the trademarks come to Nepal, they find that the marks are already registered here. Theft and duplication of trademarks is an emerging trend. There are about 650 cases of trademark infringements. 

What are the reasons behind the infringements of trademarks?
Market value of trademarks is the main reason. A well established brand earns goodwill and reputation among the customers internationally. There are mainly two advantages for those who are involved in such acts. They do not have to make an effort to access the market which has been already established by others. Secondly, consumers usually do not purchase goods studying the details of the brands. They can be satisfied by purchasing items looking similar to established brands. Many products of international brands are available in the domestic market without the registration of trademarks. 

Apart from this, the trend is also increasing as the involved people are benefitting financially. Many people who have registered trademarks of foreign companies bargain the ownership of the brands in Nepal. They ask for hefty sums of money from the genuine owners to return the ownership of the trademarks. Similarly, the trend is also rising due to the carelessness of the genuine owners of the trademarks as they do not register their trademarks here in time. Likewise, the negligence of the Department of Industry (DoI) is also playing a role. The officials register the internationally recognised trademarks without properly investigating the ownership. 

What are the legal provisions in dealing with this issue?
Enforcement is done through the Patent, Design and Trade Mark Act, 2022 to deal with the related issues. The legislation basically prohibits copying and the use of already registered trademarks. However, the punishment for such acts is weak. The DoI can levy a fine of up to Rs 100,000 and seize related items from the people involved in trademark infringements. Nevertheless, there are not many instances in the past where people were strongly punished for such deeds. One of the well known cases is the trademark infringement of Goldstar shoe brand when the people involved were slapped with tough punishments a couple of years ago. 

Mainly, trademark infringements of Indian brands are happening. Infringement cases have been on the rise mostly after 2003 when Nepal became a member of the WTO and products of recognised foreign brands gradually started coming to the Nepali market. 

Nepal has not been able to update or reformulate the existing law in accordance with the Paris Convention which it signed in 2001. How has this affected the security of trademarks in the country?
The inability to amend and reform the Patent, Design and Trademark Act has been the main factor behind the increasing trademark infringement. Being a signatory of the Paris Convention for the Protection of Industrial Property, it is our duty to incorporate the obligations of such a crucial global treaty into our rules and regulations. Some major problems exist regarding the enforcement of the existing law in Nepal. The treaty also needs the court’s interpretation so that its status can be established in the country while also paving the way for the government and parliament to amend or reform the existing law. The courts should decide if the provisions of the Paris Convention have same validity as Nepali law or if the existing Act needs to be reformed on the basis of the treaty.

We also have a law regarding the implementation of international treaties signed by the country. According to section 9 of the Nepal Treaty Act, 2047 BS, treaties signed by Nepal shall be enforceable as law as any Nepali law. The first law for patent, design and trademarks came into effect in 1994 B.S. Some trademarks registered under that law are still awaiting renewal. We have not been able to make significant changes in our patent, design and trademark law over such a long period. 

 How do you see the government’s preparation to amend or reform the existing law according to the treaty?
It is an irony that Nepal has not been able to reform its existing laws even after 16 years of signing the convention. The deadline to implement the treaty has been extended thrice for Nepal. The first deadline was in 2006 when Nepal failed to update or reform the existing law. The second extension from 2007-2015 also passed and now the deadline has been extended to 2021. 

We do not have any parameters to identify well-known trade and service marks in Nepal. What are the international practices regarding the protection of globally recognised trademarks?
Well-known trade and service marks are generally protected across the globe. As they have become familiar to consumers internationally, the article 6bis of the Paris Convention has ensured the protection of well-known marks even without the registration. 

Nevertheless, the parameters to identify the well-known marks are globally disputed. The disputes are related to issues such as whether to take the well-known marks territorially or globally. In many countries the dispute is seen in whether to recognise the trademarks from other countries as “well-known” or not. Many countries are using their own parameters to identify and recognise well-known trade and service marks. 

Grey products of well recognised foreign brands are also widespread in the Nepali market. How can we stop these products from entering Nepal?
There are two types of duplication of trademarks happening currently. One is the copying of the trademarks or infringements of foreign brands by the local companies. Another is the entry of copied trademarks or counterfeiting in the Nepali market which is done outside the country. Customs authorities also can stop illicit products with popular logos and trademarks. The Customs Department itself does not stop such products, but if someone asks for this, customs authorities can stop the flow of such goods.

What is the global practice on this issue?
Different countries are practicing different rules regarding the control of the flow of grey and illicit goods. Generally, authorities across many countries list internationally recognised trademarks if illicit products of such brands try to pass through the customs points.  Even though the effectiveness of such approaches are often questioned, we have been asked by foreign companies if there is a provision for registering trademarks at customs points in Nepal. 

The government plans to introduce unified policy for the protection of intellectual property (IP) aiming to provide IP services from a single office. What are your suggestions for the effective implementation of the policy?   
IP has become one of the pertinent issues at present. The concerned body regarding the registration, protection and initial enforcement of the trademarks and IP are not well equipped. At present, the IP Section is just a small unit at DoI. Dealing with the issues of IP can be effective if the section is established as a different entity with trained manpower. The issues of industrial intellectual property are needed to be handled by those with knowledge of related national and international laws and technical aspects of trademark, design, patent and copyright. 

As per the practice in our government institutions, staff stay at their respective offices for only two years. Their transfers make the little knowledge which they have gained during the period in the office useless

Harihar dhungana ( bhanja)

Respected sir,, Thank you for giving us a lot of information about trademark .. We r excepting much more information about IP law from u through another publication..

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