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Counterfeit Goods and Piracy in the United Kingdom

Published on : 27 Feb 2020

Laws surrounding Counterfeit Goods and Piracy in the United Kingdom

The terms "piracy" and "counterfeiting" of goods refer to manufacturing, distributing and selling inferior copies of products which have been made without the permission of the intellectual property rights holder in the said goods. Inferior copies of goods are intended to appear similar to that of the original product and to be passed off as genuine items. However, the scope of goods differs in both violations. Piracy is the sale of unauthorised copies of usually copyrighted information such as music, films, television show etc. and counterfeiting refers to the selling of an inferior copy of a product like clothing items, bags etc. As these unauthorised inferior copies are circulated in the market, they hamper its original creator in more than one way.  It not only tarnishes the name of the creator but also harms them monetarily.

Piracy and counterfeiting are two concepts, which are generally used to indicate intellectual property rights violations. Under both these violations, certain acts are carried out without the consent of the rights’ holder. Pirated and counterfeit products have profoundly contributed to intellectual property theft around the world. Governments across many countries along with international organisations like the World Intellectual Property Organization (WIPO) have been working tirelessly to fight against these violations and to strive for economic independence and progression. Counterfeit and pirated products cover virtually all areas of consumer goods, including pharmaceuticals, food, books, films, music, compact disc, and textile material, and footwear, among others.

The term ‘piracy’ is a colloquially used word for copyright infringement. It refers to an unauthorised reproduction or theft of someone's creative work for financial gain. This illegal use results in violation of rights of copyright holder granted to them by law. Individuals and companies who develop new works ensure that they can profit from their creation; therefore, they register for copyright protection. The owner of the copyright may grant permission to other parties to use their work by giving them a license or assignment and charging a fee. However, there are several instances where someone may engage in use/reproduction/distribution/sale of copyrighted work without the creator's permission and engage in copyright infringement. It is important to note that the ethos of copyright law is to protect the value of the creative work of a creator. When a person makes an unauthorised copy of someone's original work, they are taking something of value from the owner without their permission, which is just like taking something tangible from a person without their consent like a pen, car, bag.

Piracy and illegal file-sharing in the online digital world of music, film, television, video games and book publishing industries have become an increasing problem since the inception of the internet. Online piracy has resulted in a considerable loss in revenue in various economies. As per the Motion Picture Association of America, worldwide study of losses to the film industry and international economies due to piracy, the estimated loss from film piracy was as much as USD6.1 billion in 2005 alone. Due to the developing technological advances, lawmakers have been struggling to keep up with the new ways of piracy evolving. Governments continue to search for ways to shoot down the flow of piracy, as well as to discourage consumers from engaging in piracy in the first place. Piracy and primarily, online piracy creates hurdles in the growth of the creative industry. Illegal downloading/streaming devices grants illegitimate access to people who use the original works without paying and rewarding the creators of the work. Copyright protection varies from country to country, with different recourse and varied amount of protection available. UK copyright law - Copyright, Designs and Patents Act 1988 - belongs to common law/copyright legal traditions, and it focuses on both rewarding the authors for the effort they put in for creating the work and also to incentivise the creator for creation of new works. Hence, the UK law tackles the issue of piracy head-on. The UK lawmakers are set out to make it easier for creative businesses to get their due share.

In the United Kingdom, copyright is governed by the Copyright, Designs and Patents Act 1988 (CDPA). Among other things, the CDPA aims at protecting the rights of the copyright holder. CDPA states that the author of a work is the first owner of the copyright. It further states that the infringement of copyright occurs by doing any of the acts restricted under the act without authorisation from the relevant copyright owner. Section 16 of CDPA lays down the list of such restricted acts that lead to copyright violation. The section states that making copy of any work without permission of the creator of the work constitutes a violation; renting, lending or issuing copies of the work to the public will result in copyright violation; performing, showing or playing the work in public will amount to copyright violation; broadcasting the work or including the work in a cable program service will be considered a breach of copyright of the authors of the work and making an adaptation of the work or doing any of the above in relation to making an adaptation will lead to copyright violation.

As the music industry raised several concerns about the growing problem of piracy and illegal-file sharing, the Department of Business Innovation and Skills along with the Department for Culture Media and Sport in 2009 introduced the Digital Economy Bill and eventually in April 2010 The House of Commons passed Digital Economy Act 2010. This statute created a procedure for dealing with online copyright infringement – pirated books, films and, of course, music. The Digital Economy Act 2010 further provided additional solutions to online copyright infringement along with making the copyright protection law in the UK closer in line with technological developments. Sections 3 to 16 of the Digital Economy Act 2010 deals with imposing obligations to Internet Service Providers (ISP) to reduce online infringement of copyright. The copyright protection procedure under the Digital Economy Act 2010 involves identifying infringement, notifying the ISP of infringement along with proof of infringement and the IP address, ISP notifying the alleged infringer and monitoring any future violations. ISP keeps track of how often each alleged infringer is identified, and if they reach a certain threshold of alleged infringements and if the possible infringer meets the set criterion, then their IP address is entered into an anonymous copyright infringement list (CIL). Even though the CIL is anonymous, the copyright owner can seek a court order ­requiring the ISP to identify some or all of the subscribers on the list. If the court grants the order for disclosure, the copyright owners can then commence infringement proceedings against the alleged infringer. Penalty for online copyright infringement is increased as per section 42 of Digital Economy Act 2010, to a maximum of £50,000. It also gives the secretary of state the power to order ISPs to impose technical measures like temporary suspension of an account on users who meet a certain level of infringements.

Digital Economy Act 2010, whose most provisions largely were not passed into law, was then accompanied by a rather extensive Digital Economy Act 2017, which has introduced a broad range of reforms in the areas of electronic communications networks and services, measures to counter online bullying and protection of IP in broadcast material, data sharing and direct marketing. Digital Economy Act 2017has introduced new developments concerning UK's copyright laws; the new act is primarily focusing on targeting people or groups of people doing business out of selling illegal content and not individuals caught file sharing and people unlawfully sharing content online. Therefore, criminal sanctions under the Digital Economy Act 2017may apply to people hosting copyrighted works and offering the works without the consent of the copyright holder. The offences to which this increased sentence apply are those is primarily making copyright works available to others.  It is therefore unlikely that the new act will extend to end-users who are not communicating the work to the public. Nonetheless, users who stream illegal content may still be infringing copyright by copying and could face action by the copyright owner. These new provisions could, however, arguably apply to those downloading infringing content using the BitTorrent protocol, where the downloader also uploads the content they have downloaded. Sections 107(2A) and 198(1A) of CDPA provide a maximum two-year sentence for a person who infringes copyright in any work. Digital Economy Act 2017has extended the maximum custodial sentence for online copyright infringement from two years to ten years, which puts it in line with the maximum custodial sentence for violation in respect of ‘physical goods’. As a result, anyone caught illegally streaming or downloading copyright-protected content can now face a custodial sentence of up to ten years. The ten-year sentence would, however, be reserved for the most serious of criminal circumstances.

To understand the concept of counterfeit better, it is first essential to understand what is a trademark. A trademark consists of a recognisable sign, design or expression, which helps a consumer in identifying the source of goods/services, for instance, the golden arch of the famous fast-food chain McDonald’s.  This recognisable mark is protected by law; however, trademark infringement is said to have taken place when an unauthorised person uses a registered trademark on or in connection with any goods/services in a manner that the use by the unauthorised person is likely to confuse the consumer about the source of the said goods/services. ‘Counterfeit’ means to imitate something authentic, intending to deceive people into believing that the imitation of the product is of equal value to the genuine thing. Counterfeit goods are often of inferior qualities, which are passed off as goods made by the well-known brand owner. The colloquial term 'knockoff' is often used interchangeably with the term counterfeit. Counterfeiting differs from trademark infringement in its scope. Counterfeiting is narrower in scope and applies only to marks made to look similar to the genuine well-known registered trademark. Counterfeit crimes are associated with crime to trademark infringement.

Counterfeiting remains a growing problem in the modern world economy. Counterfeit goods primarily hit the apparel industry hard, Louis Vuitton estimates that two to three million counterfeit Louis Vuitton pieces are produced each year around the world, which is twice the number of original products manufactured by the company. Due to counterfeiting apparel and footwear, companies lost 22 per cent of their sales in 1991-1995, which is around USD 2.1 billion according to the International Trademark Association (INTA). Counterfeiting was the most significant criminal enterprise in the world in 2018, according to Forbes. Just like any other IP infringement, counterfeit products are also produced with the intention to take advantage of the superior value of the imitated product.

In the UK, the legal framework regarding anti-counterfeiting arises out of both UK national laws and European Union legislation. In the UK, the primary piece of legislation concerning the trademarks is the Trademarks Act 1994 (TMA). The act contains provisions covering trademark infringement and provides both civil and criminal remedies in case of any infringement caused by unauthorised use of the mark. The protection granted is for not only identical goods/services but also for goods/services, which are similar to the registered trademark.

Legislative civil provisions relating to trademark infringement are set out in Section 10 of TMA. Use of an identical/similar trademark in the course of trade and relation to same/similar goods/services will constitute as infringement under the section. Civil remedies provided under TMA are permanent injunctions against future infringement are- offender to pay damages or an account of profits to the trademark owner; infringer to deliver up or destroy the infringing goods; and costs awards in favour of the trademark owner. In case of urgent action, UK courts can grant interim injunctions and search and seizure orders against the infringer.

Legislative criminal provisions relating to trademark infringement are set out in Section 92 of TMA. As per the section, it is a criminal offence for a person, to act with an intention to cause loss to another and to gain oneself by sale/hire/distribution of goods that bear a sign identical/similar to a registered trademark and the said acts are done without the consent of the trademark owner. The UK Supreme Court has held that the provisions under section 92 could also apply to goods that are manufactured with the trademark owner's consent but sold without their permission. As decided in R v Keane [2001] FSR 7, in cases relating to trademark infringement, the prosecutor does not have to prove mens rea (knowledge) and that the offence is one of "near-absolute liability" - Torbay Council v Satnam Singh (1999) 163 JP 744. For infringement, the sentence is six months imprisonment and/or GBP 5,000 fine. The maximum conviction on indictment is ten years' imprisonment and/or an unlimited fine.

Trademark Act 1994 was amended, and the Trade Mark Act 2019 came into force. Under the new legislation, the law provides trademark owners right to bring infringement proceedings for preparatory acts. It means that trademark owner can bring proceedings against a person at a mere risk of infringement, like production of packaging labels, tags, authenticity features bearing a trademark which will be used for infringing goods or services. This provides brand owners with an enormous scope to enforce their rights and to take action even before the infringement has occurred. Under the new act along with bringing in, proceedings trademark owners also have the power to prevent counterfeit goods entering the UK, without proving that the products will necessarily put on the market in the UK. The burden of proof is on the person shipping the goods to show that the trademark proprietor has no right to stop them selling in the country of destination. Comparative advertising is also explicitly included as an infringing act if it is contrary to the Business Protection from Misleading Marketing Regulations 2008.

Other pieces of legislation in the UK dealing with the problem of counterfeiting are The Fraud Act 2006 and the Proceeds of Crime Act 2002. Under the Fraud Act, dishonestly making a false representation with an intention to make a gain for oneself or an intention to cause loss to another and to make or possess articles for use in or in connection with fraud, and to make or supply articles for use in fraud, it is a criminal offence. The Proceeds of Crime Act provides for confiscation of assets and proceeds obtained through crime, including IP crime. It also provides for recovery of proceeds of crime through civil proceedings where a criminal conviction has not been possible.

Counterfeit goods are increasingly sold and distributed online; it is no longer just auction sites or online marketplaces social media platforms are now increasingly considered to have overtaken the use of outdated online sale platforms. The UK government very well recognises the challenges that online counterfeiting represents in today's time. Therefore, the government has engaged various national agencies dedicated only towards tackling counterfeiting issue along with assisting right holders in enforcing their rights against counterfeiters. These agencies work together and collaborate with international anti-counterfeiting initiatives to increase the effectiveness of their work. For instance, Operation Ashiko was launched in April 2017 by the UK government, a joint initiative with the International Anti-counterfeiting Coalition Rogueblock program. The aim of the program was to suspend '.uk.' domains being used to commit IP crimes.

Further ISPs through the courts, can be made subject to a blocking order which is available under Section 97 of CDPA, whereby ISPs are ordered to block websites known to host infringing content. Her Majesty's Revenue and Customs (HMRC) and the Border Force are the UK government authorities responsible for protecting the UK borders, including enforcement of IP rights. Border Force practices in dealing with suspect counterfeit, infringing or pirated goods found at the UK border. They identify the counterfeit products, notify the right holder of the infringement; after that, the right holder confirms if the goods are counterfeit; owner of suspected goods must confirm agreement of destruction of products; if the owner of goods resists destruction, then the right holder must commence legal proceedings.

In addition to the above-discussed provisions, there are several UK government agencies operated initiatives which aim at tackling counterfeiting and infringement issues. There are agencies like Anti-Counterfeiting Group (ACG) working with brands government bodies and enforcement agencies to engage in anti-counterfeiting efforts. The National Markets Group, as part of its Real Deal Campaign, runs a cross-sector initiative to curb the problem of counterfeiting, the group, along with the UK police, the UK Intellectual Property Office (UKIPO) and organisations represent rights holders to tackle the trade of counterfeits at physical markets and works towards increasing consumer awareness and trust. Also, the UKIPO's Intelligence Hub coordinates intelligence into counterfeiting and piracy activity received from enforcement agencies and rights holders to disrupt the supply chain and trade of counterfeits.

Online piracy and the sale of counterfeit items is a massive industry, which continues to grow. The consequences of piracy and counterfeit market are not only detrimental to IP rights holders but the economy of a nation as well. Pirated and counterfeit goods deprive the right holders of the fruit of their labour and their positive image. It also harms innovation and investment; companies are less inclined to invest in research and development if the results are not efficiently protected. The loss of revenues from piracy and counterfeiting is estimated at hundreds of billions of euros worldwide. An effective way to fight counterfeiting and piracy is therefore of utmost importance. While there seems to be no easy solution to the problem of piracy and sale of counterfeit items, the way of dealing with these problems appears to be to use legal remedies along with increasing education and awareness among the public creation of.



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