Sep 5, 2018

Brand protection – why you should not purchase counterfeit luxury goods | Davidson Oturu


The 2018 World Cup is scheduled to come up in June 2018. The Golden State Warriors and the Cleveland Cavaliers are playing the NBA Playoff Finals in June 2018. Roland Garros, the French Open, is also taking place in the same month. Due to these significant sporting events, there has been an upsurge in the sale of jerseys and sporting kits worn by athletes and teams that are participating in the sporting fiestas.


Sponsors of sporting kits are also not left out from participating in these events; it is reported that the English national team secured a sponsorship deal from Nike that is valued at £400m.[1] However, due to the pricey nature of most of the luxury items such as Gucci, Nike, Adidas and Calvin Klein, amongst others, there is the tendency for counterfeiters to manufacture counterfeit goods and sell them to the public who unwittingly purchase them. Statistics from the Organisation for Economic Co-operation and Development (OECD) shows that Ray-Ban, Rolex, and Louis Vuitton are the most copied brands worldwide with Nike being the most counterfeited brand globally. Websites have also sprung up that specialize in the sale of counterfeit goods and consumers have encouraged their trade by patronizing these inferior rip-offs.

A classical case is the Nigerian football jersey which is being sold through Nike vendors for $90. However, the knockoffs and counterfeit jerseys that have proliferated the market are being sold for as little as $5[2].

What are counterfeit goods?

Counterfeits are goods made or sold under another's brand name or trademark without the brand owner’s authorization. It can be a form of trademark infringement or passing off (depending on if the trademark is registered) as the manufacturers of the counterfeit goods sells or passes off similar looking goods bearing the trademark or brand of the original brand owner.

A trademark will be deemed to have been infringed where a person, other than the proprietor or owner of the mark, uses an identical trademark so nearly resembling the registered trademark as to be likely to deceive or cause confusion in the course of trade in relation to goods in respect of which it is registered[3]. All that the owner of the trademark would be required to show is that the trademark has been registered.

However, where the trademark is unregistered, the counterfeiter will still be liable for passing off his goods as that of the owner of the trademark/brand. The owner of the brand would however have to show that there is an already established goodwill and reputation attached to the brand.

How valuable are counterfeits?

It is estimated that the production of counterfeit goods has grown by over 10,000% over the last two decades. A study by the International Chamber of Commerce (ICC) estimated that the global value of all counterfeit goods reaches over $650 billion every year. The same study projected that by 2015 the upper bound of the global value of counterfeit and pirated goods was $1.77 trillion, a number that is roughly equal to the GDP of Brazil and represents over 2 % of the world’s total economic output in 2014[4]. In 2016 alone, the U.S. government seized $1.38 billion in counterfeit goods across various industries[5]. The United Arab Emirates has also had its fair share of counterfeits as it is reported that in 2016, the Department of Economic Development (DED) in Dubai seized 67.7 million counterfeit items amounting to Dh1.16 billion. Also in 2017, the Anti-Economic Crimes department of Dubai Police handled 243 cases involving commercial fraud and piracy - worth Dh28, 882,985, including cases involving 719,134 counterfeit products[6].

Recent statistics from The Economist shows that counterfeit products make up 5 to 7% of world trade[7]. As at 2014, it was said to have cost an estimated 2.5 million jobs worldwide[8]. Clearly, counterfeiting of goods appears to be a lucrative business for the counterfeiters.

What to do where a brand is being counterfeited

Civil remedies

The likelihood that consumers will be confused by the goods, which is the standard of trademark infringement, is evident in counterfeiting as the counterfeiter’s primary purpose is to confuse or dupe consumers.

Thus although there is no statutory civil remedy provided for counterfeiting under Nigerian law, the owner of a brand can institute an action at the Federal High Court for trademark infringement.

Where the trademark is unregistered in Nigeria, the owner of the brand can bring an action for passing off which can be instituted at the High Court.

Where a brand owner is successful in a civil action, he can get orders of injunction restraining further acts of infringements, delivery of infringing articles and items as well as accounts for profits, costs and damages.

Criminal remedies

With regards to criminal remedies, the brand owner can report the counterfeiting to the government authorities and actions can be brought under the Merchandise Marks Act[9] and/or the Trade Malpractices (Miscellaneous Offences) Act.[10]

Section 3 of the Merchandise Marks Act provides that every person who forges any trade mark, falsely applies to goods any trade mark or any marks so nearly resembling a trade mark as to be calculated to deceive or applies any false trade description to goods is guilty of an offence.

Furthermore, anyone who sells or has in his possession for sale or any purpose of trade or manufacture, any goods or things to which any forged trade mark or false trade description is applied, or to which any trade mark or mark so nearly resembling a trade mark as to be calculated to deceive is falsely applied is also guilty of an offence except if he can prove that he acted innocently or had no cause to suspect the genuineness of the trademark.

Where the counterfeiter or the seller of the counterfeit goods is found guilty under the Merchandise Marks Act, he will be sentenced to a term of 2 years or a fine or both imprisonment and a fine.  The Merchandise Marks Act also prescribes imprisonment for 6 months or a fine of N100 upon summary conviction by a Magistrate. In both cases, the offenders are liable to forfeit all chattel, articles or instruments used in committing the offences.

Regulatory bodies

The brand owner may also lay complaints before regulatory agencies such as the Nigeria Customs Service (NCS) and the Standards Organisation of Nigeria (SON). Although Nigeria does not presently have a customs recordal system, brand owners can petition the Comptroller General of the NCS and request for the organization’s involvement with regards to the prevention of the importation of counterfeit goods at the ports and borders. Where there are reasonable grounds to suspect that anything is liable to forfeiture, the NCS can seize and detain such counterfeit goods immediately upon entry into the Nigerian ports or borders.

On the other hand, the SON is the statutory body vested with the responsibility of standardising and regulating the quality of all products that are to be used in Nigeria. It has a set of guidelines for exports to Nigeria called the Standards Organization of Nigeria Conformity Assessment Programme (SONCAP). SONCAP is used to verify products exported to Nigeria except those that appear on the Excluded Product List.

A brand owner who has information about the counterfeiting of his product may make a complaint at the SON office. SON may then conduct an investigation and depending on the outcome, it may carry out a raid to confiscate the counterfeit products.

Conclusion

Part of what fuels counterfeiting is the fact that consumers tend to view buying a counterfeited luxury good or jersey as being harmless and a good bargain. But consider this: counterfeits wreak havoc on the economy and cause other financial turmoil for businesses such as theft of intellectual property rights, low turnover, stolen know-how, lost jobs, wrongful lawsuits caused by counterfeited products and price hikes.

While the brand owners and security agencies continue to find ways to stop counterfeiters from profiting from sale of counterfeited goods, the consumers have their own part to play: do not buy that counterfeit!

For extensive information on brand protection and intellectual property rights, you may contact the author of this article at doturu@aelex.com.



[1]Football Association secures new £400m England kit deal (The Guardian, 13 December 2016

[2] Nigeria World Cup kit sells out in minutes as fakes flood Lagos markets (CNN)

[3] Section 5(2) of the Trademarks Act

[4] Counterfeiting & Piracy (BASCAP) (International Chamber of Commerce) < https://iccwbo.org/global-issues-trends/bascap-counterfeiting-piracy/>


[6]Dubai Police handle counterfeit cases worth Dh29m in 2017 (Khaleej Times)

[7] Knock-offs catch on (The Economist

[8]Crackdown on counterfeiting (International Organisation for Standardisation)

[9] Chapter M10 Laws of the Federation of Nigeria 2004

[10] Chapter T12 Laws of the Federation of Nigeria 2004



Davidson Oturu LL.M
Partner at Aelex/IP, Franchising & Brand Protection I Corporate & Commercial I Dispute Resolution 
Source: LinkedIn 
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