APAA ANTI-COUNTERFEITING COMMITTEE SPECIAL TOPIC - SRI LANKA NATIONAL POLICY AND ACTION AGAINST COUNTERFEITING GOODS

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1 APAA ANTI-COUNTERFEITING COMMITTEE SPECIAL TOPIC - SRI LANKA NATIONAL POLICY AND ACTION AGAINST COUNTERFEITING GOODS Sudath Perera, Shanika Gunawardena Sudath Perera Associates National Policy The first step toward eradication of counterfeiting is recognising its existence. Enforcement is a vital aspect of any system of Intellectual property law. Commercial Counterfeiting flourishes largely due to four factors, the profitability of the exercise, inadequate intellectual property laws and a lack of effective enforcement action, the availability of high-tech equipment which facilitates copying and the perception that Counterfeiting is a harmless crime. Therefore there is a strong need for collective lobbying and to introduce adequate legislation and enforcement as a number of developing countries are saturated by counterfeits and pirated products. The law governing intellectual property rights in Sri Lanka is the Intellectual Property Act No 36 of 2003, based on the World Trade Organization Agreement on Trade Related Aspects of Intellectual Property Rights TRIPS. The IP Act provides an array of options for enforcing IP rights. How it works Criminal Action Criminal actions can be instituted by the rights holder. Actions can be filed in the form of a private complaint in the Magistrates Court. Once a search warrant is obtained, a

2 raid will be conducted by the police. The goods will be seized and put in the custody of court until the conclusion of the matter, where the goods will be destroyed upon a magistrate s order. The accused will very often settle the matter by giving an undertaking in court. The option of filing a criminal action through the Criminal Investigations Department (CID) for execution by the police further strengthens the enforcement of IP rights in Sri Lanka. Under the IP Act a person found guilty of an offence on conviction after trial before a magistrate is liable for a fine up to Rs500,000 (USD 3815), or imprisonment of six months, or both. For a second conviction, the punishment can be doubled. Administrative action A brand owner can make an application to the director general of customs to detain the counterfeit goods. Once the goods are detained the rights holder should institute proceedings within 10 working days, or the goods will be released to the owner. Customs recordation procedure Sri Lanka has not yet formalised its customs recording procedure. The initial steps have been taken but the application procedure is still not in place. At present, most brand owners follow an informal method of recording their trademarks with customs in order to expedite the detection of counterfeit shipments of their brands. Civil action Civil actions are available in cases of IP rights infringement, where the rights holder can seek injunctive relief from the Commercial High Court of Colombo, which has sole jurisdiction over IP matters.

3 Unfair competition is defined in the act as any act or practice carried out or engaged in, in the course of industrial and commercial activities, that is contrary to honest practices. This provision is comprehensive and many civil suits are filed based on this section, which also includes passing-off and undisclosed information. Of the major amendments introduced by the act, the changes to the Customs Ordinance and the High Court of the Provinces (Special Provisions) Act are most significant, as they introduced new IP enforcement provisions to Sri Lankan law. The IP Act grants the director general of Customs and the courts special powers to control offences recognized by the act. These amendments to the Act have made significant changes in the protection of the rights of brand owners in relation to counterfeit and pirated products. Detention of Goods through Customs As per the Customs Ordinance, Customs have the authority to detain any goods which are in contravention of the Intellectual Property Act, and thereafter the registered owner must commence proceedings in a court of law within 10 days of such detention. In terms of section 125A(1) of the Customs Ordinance as amended by Act No.36 of 2003, the importation of counterfeit trademark goods or pirated copyright goods or any other goods in contravention of the Intellectual Property Act No.36 of 2003 shall be prohibited and such goods shall be included among the goods the importation of which are

4 prohibited under section 43 of the Ordinance and included in schedule B of the Ordinance as prohibited goods. In terms of section 125B(1) of the Customs Ordinance as amended by Act No.36 of 2003, a right holder, who has valid grounds to believe that the importation of a counterfeit trademark or pirated copyright goods or of any other goods in contravention of the right holders rights under the Act is taking place, may make an application in writing to the Director General, of Customs requiring him to suspend the release of such goods into free circulation. Accordingly in contrary to the common belief, the amended section 125A, and 125B of the Customs Ordinance provides that the importation of any goods in contravention of the Intellectual Property Act No.36 of 2003 is prohibited. Therefore it can be argued that the prohibition imposed by section 125A applies not only to counterfeit goods but extends to any goods imported in violation of trademark rights of a registered owner. Therefore a registered owner can seek for a suspension of the release of goods at Customs based on this section. Rights of a Registered Owner of a Mark In terms of section 121 of the Intellectual Property Act, the registered owner of a trademark has the exclusive right to the use of a trademark, to assign or transmit the registration of the mark, to conclude license contracts. and the third parties are prevented from using a registered trademark or a mark confusingly similar to a registered trademark. Thus the owner of a registered trademark is entitled for judicial intervention for its enforcement. Moreover this section empowers an owner of a registered mark to preclude third parties from using the registered mark or a sign resembling such mark without the consent of the registered owner.

5 There has been an increase in the Compensation awarded by Magistrates in Counterfeit Actions in the recent past, in comparison with previous years. Globalisation has brought the positives of increased commerce and opened up Sri Lanka for direct foreign investment, which is excellent for the country s economy, but due to Sri Lanka s reputation of being a manufacturing base for garments it has also opened up avenues for the production of counterfeit goods for domestic sale and export. The sale of counterfeit products causes confusion as an unwary consumer may be misled. On a complaint made by a leading specialty retailer of lingerie and beauty products, a team of officers from the CID raided a large stock of counterfeit garments. At the time of the raid the counterfeiters were arranging the fake garments for export. The complainant s brand protection team confirmed that the garments seized at the raid were counterfeit. The material and the thread used by the counterfeiters were of poor quality and way below standard. The accused in this matter pleaded guilty to the charges and the magistrate imposed a fine of Rs10,000 ($76) to the state and awarded compensation of Rs100,000 ($763) to the complainant. There has been an increase in the compensation awarded by magistrates in the recent past, in comparison with previous years. This is a significant step in sending a strong message to would-be counterfeiters and encouraging IP rights holders to come forward and file actions to protect their IP rights. It is evident that against the backdrop of increasing awareness of the value of IP rights, the enforcement mechanism established in Sri Lanka is becoming more adaptable and amenable to changes in the global IP arena. Desirable Policy and Action

6 Creating Public awareness by conducting training programmes and workshops with Consumers, the enforcement authorities and Customs is Sine qua non. Given the growing involvement of organized crime in product counterfeiting it is increasingly important for victim companies to forge close links with law enforcement, including the customs, police, consumer protection authorities and other supporting enforcement organizations. Publicity can be used as a key weapon against counterfeiters. By alerting local Tv and news networks about raids and ensuring maximum publicity, puts pressure on local officials to see that the counterfeiters are effectively punished and also deters potential pirates. Networking and information gathering from various sources and sharing same amongst companies is essential in anti-counterfeiting strategy. Counterfeiting is classified as a criminal offence in many countries which implies that it is the duty of the Police to enforce the rights of the Intellectual Property owner. The role of Customs is to prevent the goods from entering the market. Therefore the victim companies should provide enforcement authorities with detailed information on their products, this includes product samples of the genuine and fake product and documentation on the intellectual property rights registration. Also disclosing security features in the product makes it easier to detect the counterfeit product. A strong indicator for counterfeit products is the illogical routing of shipments, conspicuously low prices, absence of warranties and errors in spelling and details relating to packaging. It is important to bear in mind that Intellectual property protection laws do not stand alone but form a part of an overall commercial environment.

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