Weak intellectual property ecosystem allows counterfeiters to make hay

  • trademarks
- Post Report, Kathmandu

Mar 20, 2018-

Take a look at chewing gum covers of Center fruit, Centre fresh and Center fillz and chances are you would say all three products are manufactured by the same company. This is because fonts used in the packets look identical. But you’re mistaken. 

Center fruit and Centre fresh are chewing gums manufactured by an Italy-based company in India, while Center fillz is a knock-off of these two products and made in Nepal.

Many Nepali companies copy trademarks to take advantage of market position created by renowned international companies. This way they do not have to spend a lot to brand their products and gain a foothold in the market. But this practice of confusing consumers using identical logos of prominent brands is infringement of intellectual property rights and thus illegal. Considering this, Center fillz chewing gums should have been banned right after they penetrated the domestic market. But surprisingly it took the Italian company around three days just to lodge a police complaint to initiate the process of preventing the product from entering the market.

“When we went to a police station in Biratnagar, where the factory of Center fillz is located, the officer denied to file the complaint stating there was no legal provision to initiate action against the company,” said lawyer Janak Bhandari. “We then called the district police office, where district superintendant of police (DSP) was not sure whether action could be taken against the company producing knock-off products. The DSP then called regional police office and the regional police office called the head office in Kathmandu. Finally, someone at police headquarters discussed this issue with a parliamentarian and the complaint was finally registered.”

This is not the first time foreign companies have faced problems related to infringement of intellectual property rights in Nepal. 

Earlier, Kansai Nerolac Paints, an Indian subsidiary of Kansai Paints of Japan, could not introduce its products in Nepal after the trademark ‘Nerolac’ was registered here by a domestic firm. Since then, the matter has reached the court in Nepal. But the Japanese company has lost the first round of legal battle to repossess its own trademark and has started selling products under the brand name KNP, an abbreviation for Kansai Nerolac Paint. 

Good news is that the Supreme Court has accepted the review petition filed by the Japanese company, according to Bhandari. “So, hearings on the case will begin soon,” Bhandari said.

Yet it is not known whether the court will deliver a verdict in favour of the Japanese company, as Nepali law does not have any provision on “determining the first user or adopter of the well-known trademark”. This means a Nepali firm that first registers trademarks of renowned international companies in Nepal are legally entitled to own those marks, complicating matters for international companies that are actual owners of the trademarks. This is unlike in other South Asian countries, where well-known trademarks, like Nerolac, Starbucks or Toyota, are automatically recognised by courts.

One of the reasons why Nepali firms are rampantly violating intellectual property rights is the fine amount, which is too low. The court can impose a fine of up to Rs100,000 on cases related to trademark infringement, while in patent infringement cases, fines cannot exceed Rs500,000. 

“So, firms are prepared to pay the fine, as court cases take a long time to settle in Nepal and perpetrators can earn a lot more than the fine amount even if they are found guilty,” said Bhandari. 

“These types of weaknesses will prevent international companies from entering Nepal. So, Nepal needs laws of international standard to protect intellectual property rights (IPR),” said Shipli Jha, senior policy and legal counsel of the US Embassy in New Delhi, adding, “Good IPR laws are also required to protect startups and promote entrepreneurship and innovation.”

Nepal’s intellectual property sector is currently governed by two laws: the Patent, Design and Trademark Act, enforced over 50 years ago, and the Copyright Act, enforced around 15 years ago. Since these laws are outdated, many new areas of intellectual property, such as trade secret, geographical indications, plant variety and integrated circuit, have not been covered. “We, thus, need to draft new laws that are compatible with the Agreement on Trade-Related Aspects of Intellectual Property Rights (Trips) of the World Trade Organisation,” said Bhandari.

Once the laws are enforced, Nepal also needs to train judges, administrators, lawyers and officials of law enforcement agencies, like police department, as many are not well-versed with intellectual property, which is a technical issue. 

“We are well aware about lapses in laws and lack of expertise. That’s why we are planning to establish a separate office to look into issues of intellectual property rights. However, this issue has not been finalised as the new government is yet to restructure the central administrative system as per the new federal set-up,” said Industry Secretary Yam Kumari Khatiwada. 

The government is also drafting a new law to ensure cases related to infringement of intellectual property rights are well addressed. “The new law will cover issues recommended by the World Intellectual Property Organisation, of which Nepal is a member,” said Khatiwada.

The new law, according to Jha, should also give “suo motu power” to customs officials so that they can act on their own cognizance.

Currently, customs officials, who are aware about imports of counterfeit items, cannot prevent those goods from entering the country, as the law has not given them rights to do so. 

“If possible, a designated court should also be established to look into infringement of intellectual property rights,” Jha said. “This way one can continue updating judges about emerging technologies and laws, so that justice can be delivered effectively.”Currently, intellectual property falls under the domain of a small section in the Department of Industry, which is also a semi-judicial body to look into infringement of intellectual property rights. 

“But when the department decides on cases, it does not use judicial mind because most of the officials have expertise in administrative work,” said Bhandari. “This is also the reason why a designated court is required.”

Published: 20-03-2018 08:19

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