Consumer

ENFORCEMENT OF IPR : A GLOBAL CHALLENGE

National Conference on Combating Counterfeiting & Piracy. FICCI, Federation House On April 26, 2007, New Delhi M.L.PANDIA.

2.6-HBL-War against spurious goods intensifies

HINDUSTAN TIMES(MUM)29Sep2005

PROBLEM DEFINITION INFRINGEMENT ( Country Specific) Deceptively similar ( Visual / phonetically) Infringement is not limited to the actual goods or services but also covers dissimilar goods or services.

COUNTERFEIT ( Going Global ) Imitation of a genuine product, passed on as original / Counterfeit in parallel imports

The battle against Local Counterfeit / Spurious •

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Trade mark journey plan

Market Surveys for Infringements / Counterfeits Understand business dynamics and Identify the market operation of the counterfeiters Ascertain status of the party – financial, political and reputation

Information regarding enforcement agencies

Must Win Battles A multifunctional approach to enable business to grow superior brands: Nominate Anti Counterfeit Leaders Focus on key categories to drive growth in his sales area Ensure relationship building with local enforcement and govt. authorities Use external investigators to gather intelligence

Action Against Local Infringements / Counterfeits : • Civil Injunction & appointment of Court Receiver. • Complaint under Sec 156(3) of CRPC & Police Raid. • Police complaint under Copy Right Act . • Complaint invoking provisions of legislation viz PFA D&C , W&M etc.

GROUND WORK FOR CONDUCTING RAIDS •

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Trade mark journey plan

Market Surveys for Infringements / Counterfeits Identify the market of operation of the counterfeiters Ascertain status of the party – financial, political and reputation

Information regarding enforcement agencies

HEALTH HAZARD • OPERATIONS IN MOST UNHYGENIC CONDITIONS, SLUM AREA, • MAKE SHIFT CAMP, OLD INDUSTRIAL SHED • NO REGARDS FOR HEALTH AND SAFETY OF PRODUCTS • CHEAP INGREDIENTS ARE USED • NO FUNCTIONAL BENEFITS TO CONSUMER • UNJUST ENRICHMENT BY TRADERS / MAKERS

Counterfeiting – A Global Menace

Parallel imports & Trans border movements of counterfeit products EAST - 58% of International border of 14,880 km

Source of Counterfeits Through Parallel Imports Main source for such products : India , China , Syria , South Korea & North Africa ( Local refilling) . India - PW, Skin Care, Deos Cosmetics. China - Toothpaste, Shampoo, PW, Skin Care, Deos Cosmetics, Fragrances. Beverages/Foods. Syria - PJ, Creams, Roll ons,Shampoos. Local recycling/refilling - Primarily in North Africa on liquids. Vim, Vaseline, Royco Muchzi Mix, and Cooking Oils. In SA local cfts on Rajah Curry Powder.

Problems Of Parallel Imports Import of Goods bearing HLL Trademark without HLL permission Imbalance in Domestic Market due to sale of such goods under the name of Importer without reference to HLL Infringement of Trademark Goods from trans-border do not bear the requisite label declarations MAJOR THREAT – COUNTERFIET PRODUCTS USING WELL KNOWN BRAND NAMES ARE NOT PRODUCTS OF COMPANY OWNING THE BRAND .

FMCG Counterfeit – The Supply Chain • Local “garage” manufacturing to international major production facilities. • Informal network of independent wholesalers to increasingly run by trans border operators . • Internet and in banking makes easy transfer of funds • Free movements across international state . • Electronic communications, the ability to scan packs and sends electronically . • Buyers and sellers may never need to meet face to face.

Economics of Parallel Import

An Illustration

Wholesalers and Retailers

They earn at least twice the margin on cfts that they do on the genuine product. The aim of the end seller, is to sell it to consumer as genuine and at the same price as the genuine product . Its about risk and reward, and currently there is little risk, but huge reward. Very little risk of prosecution. Retailers know where to buy counterfeits from, and the outlets which counterfeits are sold into may look different across the region, but they operate the same way.

FMCG Counterfeit – The Manufacturer • Run by increasingly sophisticated and highly organized groups. • Nexus • Two -

with

criminals

core Efficient, Excellent

low

and

underworld

competencies required: cost manufacturing distribution network.

• Why is it so profitable for them.. Much easier to copy than innovate. ❖ Steal the idea at no cost. ❖ very quick turn around. ❖ •

connection,

How is this done…...

FMCG Counterfeit – The Product •

They will invest in appearance, but not on ingredients.

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The cartoon / outer pack may look like the original, but its performance will not.

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But for Unilever the major health and safety issue is on foods, in unhygienic environments with zero heath standards, or analysis or raw materials.

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But even more worrying is the consumer safety .

FMCG Counterfeit – The Product’s Safety? ❖

Sun care products with no sunscreens.

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Toothpaste with out fluoride,

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Health soaps with anti bacterial agents

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Anti dandruff shampoos with out the anti dandruff ingredients.

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Deodorants which just have an alcohol base with cheap perfume, no deo. properties.

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Drugs products, without the requisite properties.

FMCG Counterfeit – The Economics • Poor

quality

ingredients,

• Lower cost of production . ❖ Very low labor costs, ❖ Less than Min wages ❖ No insurance, pensions or unions. ❖ Factories are not safe or environmentally friendly. ❖ Less / zero working capital ❖ All transactions are cash, with no Tax payment. This then increases profitability throughout the total supply chain.

The Economics of Parallel Import… •1 INR = .65 Paise of Bangladesh currency •For one 125 gm LIFEBUOY Soap Printed Price in Bangladesh currency: TK 11= ( .65p x 11) = 7.15 •125 gm of LB in INR= 11.00 (INDIAN) 120 gm of LB in INR= 7.15 (BD) Difference (Profit) = 3.85 per soap No Advertisement Expenses incurred

The Grammage & Pricing is as follows

Company

SKU Size Name (gm)

Print Price

HLL

LB

125

11

HLL

LB

100

9

Counting the Cost. We have no hard data on the total financial costs in India or globally. Total estimated Unilever loss of sales could be anywhere between $350m to +$ 500m per annum.

Loss of Revenue to the Government and social cost in terms of low employment.

B-STD(DELHI)24Aug2005

Counting the Cost. Loss of Brand Equity as Loss of consumers confidence in her brand purchase involving health and safety issues. The majority of consumers buying counterfeits are the least educated, and generally from the poorer areas. They are unaware that they are buying counterfeits. When the product fails to meet their expectation, they are the least likely to complain, and probably switch brands.

Taxation Loss ……

They also undervalue goods, particularly when it comes to customs clearance, sometimes to what is seen to be ridiculously low levels. This reduces import duties significantly. Where possible they will try to avoid all other forms of taxation, the looser being the Government, which is some countries they can ill afford.

Protecting IP Rights

Why Protection • Retaining consumer confidence . • Environmental sensitive's & Health Hazards. • Arrest loss of sales revenue and consequent loss of taxes. • Increase in job opportunities . • Avoiding adverse impact on desire for investment . • Loss of opportunity cost in terms of money and time on fighting this problem that could be spent on improving operations

THE BATTLE FOR PROTECTION AGAINST PARALLEL IMPORTS - Arrest at the port of Entry . - Court Injunction under TM / Copy right Act. - Complaint to Custom Authorities ( DRI) on Valuation . - Alternative strategies depending on nature of violation.

OTHER LEGISLATIONS Consumer welfare legislations : # Consumer Protection Act ( TM Action ). # The Standards of Weights & Measures Act # Drugs and Cosmetics Act Revenue Legislations: # Sales Tax Act. # Customs Act

Interface between TM Act and other consumer legislations F T

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Our Experiences Despite the consequences:

• No person has been convicted and sent behind bars during the last 20 years (excepting 2 or three cases) • Cases if launched takes 10 to 20 years for the trial to complete • Delay frustrates the efforts and encourages spurious manufacturing • For want of deterrent punishment, same manufacturer carry on manufacturing under different name and style

Drawbacks of the existing system Inadequate awareness Burden on law and order machinery - additional load Delays in the judicial system Deficiency in existing laws Not deterrent enough : Not cognizable Punishment not enough Loopholes - bonafide belief by re-seller * Poor tax Enforcement machinery. * No Nodal agency to exclusively deal with the Issue. * No Single window for investigation/enforcement • • • •

Focus Areas. Finding the Source. ❖

Transit/Supply Chain (Manufacturer to end Buyer).

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Brand Protection Groups.

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In market Investigations.

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Proactive Legislative amendments ( Route to Prosecutions/seizures.)

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Training/Awareness- Internal CD /Mkt /Legal.

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External. Customs/Police/Judiciary/NGOs

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Packaging Controls, registrations, Audits etc.

Focus Areas. Finding the Source. ❖

Transit/Supply Chain (Manufacturer to end Buyer).

❖

Brand Protection Groups.

❖

In market Investigations.

❖

Proactive Legislative amendments ( Route to Prosecutions/seizures.)

❖

Training/Awareness- Internal / CD /Mkt /Legal.

❖

External. Customs/Police/Judiciary/NGOs

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Packaging Controls, registrations, Audits etc.

What Can Corporates Do Better Internally….. Global central data collection & library. ❖

Investigate security on packaging innovation, improve in house expertise.

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Raise the technology barriers, and except possible on costs to increase brand protection.

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Insure all legal protection taken, particularly design & packaging registration.

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Regular comprehensive trade visits by Mkt & Sales to the bottom end of the trade seeking co operation .

Communications to Business Partners • • •

To , All Dealers & partners in progress .

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COME FORWARD TO FIGHT TOGETHER AGAINST COUNTERFEIT PRODUCTS

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Dear Friends Firstly on behalf of Hindustan Lever I would like to thank you for your help and cooperation. It is only through you and under your support we have been able to reach to our valued customer including millions of people all over India. Recently it has been observed that some dishonest traders in collaboration with their agents are selling Counterfeit/ look alike products of our brands like Lux, Lifebuoy, Dove, Fair & Lovely , Sunsilk Shampoo, Clinic all clear Shampoo, Vasaline, Ponds Cream, wheel , Rin, Surf Detergent powder, Taja tea, Red Label tea etc in the shops/ markets . As a result , Consumers are deprived of the right choices of original goods and the trust on you and the all the retailers in the distribution chain is getting impacted severally . On one hand as the consumers are being cheated being exposed to the poor quality of goods impacting their right and interest , on the other, the Government is being deprived of its due revenue. You are also aware that production, distribution and sale of Counterfeit / look alike products is an offence and there are provisions under law including Criminal law for severe punishments which includes imprisonment, fine etc. In the interest of the consumer at large and to ensure to stop distribution and sale of Counterfeit / spurious / look alike products we have Communicated with the concerned authorities and they have given full assurance in this regard to take necessary action . we will soon take necessary action through the concerned authority. ……………….

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What Can Corporate Do Better Internally….. ❖

Need Global Operational Guidelines/Policy for market actions, product safety. Contingency plan including PR.

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Need a Global large scale investigations across regions and countries. Supply chain out of China.

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Transfer best practice, talk to competitors, all in the same boat.

* Finally, do not underestimate the cfter’s resources ( manufacturing & financial) speed to market.

What can Corporate do better Externally ❖

We must work with all similarly effected companies, even our major competitors.

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Build awareness & work with dealers & consumer groups, educating their members, as well help lobby on manufacturers behalf.

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Lobby and advice Governments on best practices and laws in the region to be adopted where relevant.

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Many Governments do not have resources, or expertise in this area, we need to help. This can be through contacts with major Global groups, WCO, WIPO, Interpol etc, or our own training programs.

15.6-HBL(Brandline)-Fake accompli

Summary ❖ ❖ ❖ ❖ ❖ ❖ ❖

Counterfeits are now a major threat globally to all business. No longer a small scale local/regional problem. It will only cease when the risks outweigh the rewards. This which will happen at the selling, rather than manufacturing end of the supply chain. This will happen country by country. For many countries it is still in reality, years away. Companies needs to address the problem globally, and at the highest level.

WAY FORWARD Cons ume r

Making repre se

ntation for am

Awa ren

endment of l

ess

egislations

Inter company Interaction

Int

nt e m t r a p e d h it w n o i e r ac t

a

es i t i r o l auth

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