This blog has been authored by Vivek J. Vashi
Fashion has become an integral part of the modern Indian society. People have developed a general affinity towards fashion trends to showcase their fashion sense by purchasing various products from brand names. Everyone wants to associate themselves with the latest fashion trends. Sometimes money becomes a constraint, so contrabands and copies of the original creations are purchased.
Fashion has become an essential part of people’s lives as it sets the tone for people to present themselves. Wearing or owning products of a particular brand corresponds with status, eminence, and desirability of an individual. Brands such as Louis Vuitton, Bulgari, Gucci, Prada, Hermes, Rolex, etc. are examples of brands known as ‘luxury brands’ that claim to bestow the wearer with a sense of power and prestige owing to their massive reputation. In the process of self-expression, many a times a design becomes famous and others start copying it resulting in a loss for maker of the original design. Counterfeiting is one of the most significant problems faced by the fashion industry. There are two types of counterfeiting prevalent in the fashion industry. Firstly, Deceptive, where the consumers are under the impression that the product is a genuine product, and secondly, Non-Deceptive, where the consumers are aware that they are buying a knock off product.
One may find counterfeit products of famous brands selling counterfeit products through various trade channels including online portals or branded companies taking advantage of loopholes in law to copy and create products belonging to some other brand. E.g. On 8th December 2017, Nike (the famous brand) was awarded damages and a permanent injunction against a trader selling counterfeit goods using their Nike and Swoosh trademark. The damages were compensatory and punitive. Also, the “Indian media was abuzz with the news of High Fashion brand, Christian Dior having allegedly plagiarised certain designs from a small, Indian art collective and store known as ‘People Tree’. According to reports – which carried allegations raised by the collective – Dior’s Cruise 2018 collection contained a dress that contained exact reproductions of the Block Printing designs created, and sold by ‘People Tree’ in India.”
India is the second-largest market in the Asia Pacific, with retail e-commerce sales growth of 25.5 percent in 2022. Most consumers prefer to continue shopping online even after the COVID-19 pandemic due to an overall positive experience and convenience of online shopping. The counterfeiters deceive the consumers by domain name squatting as the consumers shopping online are increasing. They make the shopping experience look original and professional so that the consumer does not question the counterfeiter’s authenticity. The counterfeiters also make fake reviews and manipulate the buying decisions of consumers while shopping online. Apart from e-commerce portals, social media portals like Instagram, Facebook, WhatsApp and Telegram are utilised to sell counterfeit products. To limit the counterfeit products from appearing on online retail platforms, measures must be taken by the platform to destroy counterfeit products appearing on its online marketplace for the sake of law makers, brands, and consumers.
Counterfeit industry poses a huge threat to the economy too (due to government’s loss of revenue), apart from posing huge challenges to the profits and brand values of the popular brands. The counterfeiting industry is colossal and has had a strong impact of about one lakh crore on the Indian economy. Counterfeiting can have severe legal and economic consequences for the brand owners, as well as the consumers who unknowingly purchase counterfeit goods. This is called as wilful counterfeiting where buyers are aware of the counterfeit products and buy the same. For the brand owners in the fashion industry counterfeiting attributes to a large gap in the price between the original and the counterfeit products. Thus, counterfeiting is the offence of manufacturing or distributing lower quality imitating goods under someone else’s name without their consent or permission. A person is said to “counterfeit” who causes one thing to resemble another thing, intending by means of that resemblance to practise deception, or knowing it to be likely that deception will thereby be practised.
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LEGAL EFFECTS OF COUNTERFEITING
Counterfeiting in the fashion industry can lead to several legal implications for both brand owners and consumers. Some of the legal implications of counterfeiting in fashion include:
- Infringement of Intellectual Property Rights: Counterfeiting in the fashion industry involves the unauthorized use of trademarks, designs, and copyrights, which infringes the intellectual property rights of the legitimate owner of the brand. Under Indian intellectual property law, trademark infringement can result in civil and criminal liability, including damages and imprisonment.
- Unfair Competition: Counterfeiting in the fashion industry can lead to unfair competition, as counterfeiters can sell their products at lower prices, taking away market share from legitimate brands. This can lead to a loss of revenue and reputation for legitimate brand owners.
- Consumer Health and Safety: Counterfeit products in the fashion industry are often of poor quality and can pose a health and safety risk to consumers. Example: Counterfeit cosmetics can contain harmful chemicals that can cause skin and other health related problems. .
The Indian judiciary has dealt with several cases related to counterfeiting in the fashion industry. In the case of Christian Louboutin SAS vs. Nakul Bajaj And Ors. the Delhi High Court has clarified the responsibility and liability of online intermediaries for infringement of trademark. The judgement has shed light on India’s intermediary liability regime as it relates to infringement of trademark. The Plaintiff is Christian Louboutin, the owner of the registered trademarks, including the single colour mark for its distinctive ‘red sole’. According to the plaintiff the products are sold in India only by authorized dealerships. The defendant is “darveys.com”, a website marketing itself as a ‘luxury brands marketplace’. The plaintiff in this case alleged trademark infringement against the defendant, by selling counterfeit products. The defendant argued that the goods which were sold were genuine and there was no infringement on its part because it was mere intermediary and is entitled to be protected by “Safe harbour” provision of Section 79 of the Information Technology Act, 2000.
In this case the Delhi High Court examined ‘intermediary’ under section 2(w) of the Information Technology Act, 2000 and discussed intermediary position in the European Union, the United States and in India. The court analysis was based on whether the role played by the defendant was neutral i.e., if the conduct was merely technical, automatic, and passive, pointing to a lack of knowledge or control of the data that it stored. The court examined various judgements and concluded that knowledge of infringement by intermediaries makes the liability shift. This was also stated in the Indian judgement of MySpace Inc. v. Super Cassettes Industries Ltd. 
The concept of constructive knowledge and the active knowledge was discussed. In the MySpace judgement, it was declared that even if the intermediary has a knowledge of the illegality happening in their website, then the intermediary does not need a court order to stop the counterfeited product or infringing product from using their intermediary service. The activities that happen even after a minimum knowledge of the infringement can be claimed to be of a sort of abiding by the infringement done by the third party and it would amount to the intermediary becoming liable. The defendant Darveys.com was exercising complete control over the products and identified the sellers, which enabled them actively, promoted them and sold the products in India. When an e-commerce website is conspiring, abetting, aiding, or inducing, or contributing to selling counterfeit products, it could be said to cross the line from being an intermediary to an active participant. In such a case, the website would be liable for infringement in view of its active participation. The position in MySpace judgement is in line with the position on intermediary liability in cases of copyright infringement adopted by leading international jurisdictions such as United States, particularly in the case of A&M Records, Inc v. Napster, relating to reasonable knowledge of infringement.
At last, the court in Christian Louboutin case concluded that the defendant is more than an intermediary and exercised complete control over product being sold. Therefore, the conduct of intermediaries in failing to observe ‘due diligence’ with respect to Intellectual Property could amount to conspiring, aiding, abetting, or inducing unlawful conduct would disqualify it from the safe harbour exemption, as per Section 79(3)(a). Finally, the Court ordered that the intermediary must require its sellers to honour the warranties and guarantees provided by the plaintiff and must also remove all meta-tags containing the plaintiff’s mark.
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THE WAY FORWARD
In the recent years online platforms play an important role in facilitating the exchange of information at a scale. This allows spreading of all types of content, legal and illegal. The role of online platforms sometimes expands from hosting information to governing how content is shown and shared which raises pressing questions on role and responsibility of platforms in preventing criminals and other persons involved in infringing activities online from exploiting their services. Some platforms have self-regulation of the content however, arbitrary actions by online platforms could affect freedom of speech and expression. The challenge of regulatory framework for online platforms is to find the correct balance between enhancing the role of online platforms and government in detection, moderation and the need to ensure protection for users and their fundamental rights and freedoms.
The Government of India has brought reforms to effectively curtail the trade of counterfeit products in the country. On 23 July 2021, the Department-related Parliamentary Standing Committee on Commerce presented the 161st report on “Review of the Intellectual Property Rights Regime in India” in the upper house (Rajya Sabha) of Parliament. It acknowledged that counterfeiting and piracy are rising threats to IP rights and recommended specific legislation to curb counterfeiting and piracy in India. A separate Central Coordination Body on IP Enforcement was also recommended to facilitate coordinated efforts involving various ministries, departments and government agencies. The Government has formulated due diligence requirements for intermediaries to adhere to under the Information Technology Act, 2000 and the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 to safeguard itself for the information it holds or transmits. The intermediaries remain immune from liability unless they are aware of the illegality and are not acting adequately to stop it. They are subject to ‘duties of care’ and ‘notice and take down’ obligations to remove illegal content.
Approved on 12th Match 2016, the Government of India has formulated the National IPR policy which is reviewed every 5 years for a vibrant IP regime. The National IPR Policy was formulated after intensive stakeholder consultation with nearly 300 organisations and individuals by an IPR Think Tank, as also 31 departments of the Government of India.
Also, the courts in India are taking strict view on online intermediaries thereby narrowing the scope of safe harbour to prevent online infringement. One effective legal framework to resolve issues relating to domain names in India is the .IN Domain Name Dispute Resolution Policy (INDRP). It was drafted in accordance with international guidelines (of the WIPO) and the provisions of the Information technology Act, 2000. The INDRP governs disputes regarding domain names containing the .IN or .Bharat code at the end. Any person aggrieved by the registration of a ‘.in’ domain on the grounds that it is identical or confusingly similar to his or her name or trademark may file a complaint before the National Internet Exchange of India, an administrative body for resolving issues under INDRP. It provides a quick and effective grievance redressal mechanism.
As Import of infringing goods is prohibited under the Customs Act 1962 and the Intellectual Property Rights (Imported Goods) Enforcement Rules 2007, the brand owners can record their trademarks with Customs so that the import of any products that infringe the trademarks is stopped. Further, the laws empower the enforcement authorities to seize misbranded and spurious goods and to suspend manufacturing licenses of businesses involved in such counterfeiting activities. Freedom to do business should not be an excuse to perform acts of counterfeiting and trademark infringement. In this regard, Sections 102, 103 and 135 of the Trademarks Act, 1999, can be employed as remedies against infringement and counterfeiting as they deal with falsification and false application of a trademark. Notably, Section 103 mandates imprisonment of three (3) years and a fine up to two lakh rupees as penalties for counterfeiting. The Courts have also stepped in by compensating brand owners who are the victims of widespread counterfeiting in India.
With an increase in awareness of intellectual property rights among the consuming public and brand owners taking actions on counterfeiters, the end to this epidemic may be possible soon.
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