Counterfeiting and Illicit trade in ASEAN

A new report called Tackling Illicit Trade in ASEAN Advocacy Paper, 2020 by the EU-ASEAN Business Council and the Transnational Alliance to combat Illicit Trade (tracit.org) sets out some stark data on how counterfeits fit into the illicit trade world. 

Illicit trade comprises all kinds  of cross border illegal trade from smuggling, to narcotics to wildlife and of course counterfeit goods are a major part of this. The problem comprises both into ASEAN region trade and intra ASEAN member states.  Some key features of the report relevant to anti-counterfeiting are set out below:

• Covid has had an impact in 2020 – 150,000 counterfeit 3M masks were seized in July 2020 in Vietnam. Philippines Customs reports $5M of counterfeit medical and PPE products this year.
• Ecommerce is a huge driver of the counterfeit trade. The  UNODC reported 2500 websites offering counterfeit sanitizer, masks and medical supplies. Major ecommerce sites like Shopee, Lazada, Topkopedia and Bukalapak are criticized by the US and EU for failing to tackle unauthorized sellers, counterfeit goods, rogue domain names and false advertisements. Hidden trader identities are a major barrier to stopping the problem. The boom in small-parcel postal services is the main delivery mechanism.
• Pharmaceuticals – the tarde in counterfeit pharma products is estimated to be $4.5 bn today. The problem is especially bad in Indonesia, with a growing online sales challenge. The Pharmaceutical Security Institute reported on 673 cases in Philippines, Thailand and Indonesia.
• Some sectors like tobacco and alcohol are hit by the triple whammy of smuggling, counterfeiting and refilling, leading to massive government tax losses (JTI estimates Malaysia lost RM1 billion in cigarette tax in 2020). The WHO asserts that ASEAN has the highest illicit (smuggled, refilled, counterfeit) liquor consumption in the world – a massive danger to consumers.
• Particular consumer sectors suffering from counterfeits in ASEAN include toys and auto parts, with these cases almost always being imports from China – according to examples like counterfeit BMW parts in Thailand.
• Agrochemical counterfeits are largely sourced from China and India according to seizures in Cambodia, Vietnam Malaysia, Philippines and Thailand. Many are very dangerous.
• China remains the main counterfeit goods source due to its proximity and shippers’ use of Free Trade zones to support the trade. Local counterfeit manufacture occurs in Malaysia, Thailand and Vietnam, including repackaging.
• The total counterfeits market in Southeast Asia is estimated to be worth $40Bn
• Weak enforcement mechanisms, poor sanctions and low Customs seizures in ASEAN countries make counterfeiting easy and attractive for criminals

The full report is available here 

The Philippines mayor and the counterfeit sneakers

Mayor Joy Belmonte of Quezon City a region of Metro Manila has had to issue a formal warning to her department. It appears that the Quezon City government accidentally ordered 1100 pairs of counterfeit sneakers, for use by local athletes representing Quezon City in various national sports events.

The City's Procurement Department's Bids and Awards Committee has a Technical Working Group which apparently selected the supplier of the sports shoes. They will now need to investigate what happened. Mayor Belmonte ordered the City Legal Office to initiate legal action against anyone who was involved or conspired to commit any offenses. apart from the IP laws, the Consumer Protection Act and the Procurement Act may have been breached. The mayor has ordered the recall and replacement of the counterfeit shoes.

Chelsea FC wins battle with Indonesian registrant

IPKomodo is pleased (the lizard must declare his interest as a Chelsea fan) to report success in the recent CHELSEA trademark dispute in Indonesia.  See here for background https://ipkomododragon.blogspot.com/2019/10/chelsea-football-club-s-defence-of-its.html

A local registrant Hardiman had sued to invalidate two of Chelsea FC's marks as conflicting with his own. The Jakarta Commercial Court found against him.  The decision doesn't provide much insight; no clear rationale from the court why. If the mark was similar and prior it ought to be rejected. The proper course of action for Chelsea FC was to cancel Hardiman's mark, rather than wait for him to attack.  The court refused the Defendant' Chelsea FC's procedural objections. That is no surprise as there isn't much reason to suspect procedural errors. 

This case may have worked out because Chelsea is so famous the court could not side with a pirate. In the similarity comparison court probably found sufficient differences. Firstly the two marks Hardiman claimed against were CHELSEA FOOTBALL CLUB and CHELSEA FC. Whereas his marks are CHELSEA and CHELSEA with logo.  A difference from CHELSEA FOOTBALL CLUB could possibly be right, but it is more suspect to say that CHELSEA and CHELSEA FC are not similar. 

Chelsea FC may have a longer battle on as Hardiman has other Chelsea marks. many other Chelsea marks are on the register too.  But IP Komodo is happy with outcome if not the method of getting there. Unlike this weeks draw against Arsenal which IP Komodo is not at all happy about at all!

First Customs seizure in Indonesia

Indonesia’s customs system is working for domestic companies only so far. It is understood that the obligation to have a fully operating subsidiary is the main reason most foreign companies cannot submit recordal applications. 

The first seizure took place recently for Indonesian stationary brand STANDARD. A container containing 858,240 ballpoint pens branded STANDARD and also model names AE7 Alfa Tip 0.5 and marked ‘Made in Indonesia’ and estimated to be worth Rp 1,019,160,000 (USD75,000) were imported into Tanjung Perak port in Surabaya on 6 December 2019.  The Indonesian owner PT Standard Pen  had recorded their marks with Customs after the Customs recordal system began operation in 2018. The company has a substantial international trade for its products, exporting worldwide. 

PT SI provided confirmation and approval for the temporary suspension of the goods by submitting a bank guarantee to Customs in Tanjung Perak, after which the goods could be inspected. The joint inspection was conducted by a Judge of the Surabaya Commercial Court, clerk of a court, Customs and Excise officers, expert witness and applicant representatives (PT Standard Pen), and the importer. The goods were determined as counterfeits. The next step is the legal process. This is an area of uncertainty since it is not clear if all cases must got to the Commercial Court or whether they can be dealt with out of court.

SE Asia landmark IP mediation

WIPO and Singapore's IP office (IPOS) launched a special IP mediation service earlier this year, called the Enhanced Mediation Promotion Scheme (EMPS). A development of a previous mediation service,  it is intended to be low and subsidized cost, efficient and crucially, to cover non Singapore IP disputes. 

A dispute between US bone conducting headphones company Aftershokx and a Thai trader called Suravit Kongmebhol was conducted through the EMPS recently. The dispute was a trademark conflict between the US company’s trademark rights and Kongmebhol’s registrations in six SE Asian countries.  

After a mediator was agreed the parties had several days of mediation, then reached a resolution. WIPO and IPOS have stressed the low mediation cost (due to its subsidy), the lack of wasted legal fees, and avoiding years of litigation delay (in six countries).  It was also unique in replacing multiple national proceedings. The exact settlement was not disclosed, but positive press coverage suggests it could be a useful system for other regional IP disputes. 

Design validity and infringement claims in Indonesia

The bifurcation of validity and infringement is a common problem in many, usually civil law countries. In Indonesia the practice is to hear the disputes separately. In the DC Comics Superman case (see here) the case was rejected for combining claims. This is also a risk when you run validity and infringement in the same case.

A designs case from the Surabaya Commercial Court is a good example of how case involving both validity and infringement should be decided to avoid wasting court time on separate cases. PT Solihin Jaya Industri sued Chung She for invalidity claiming his industrial designs (which dated back to 2009) for wheelbarrows with various features were not novel and should be revoked. Chung She counterclaimed for infringement. The Surabaya Commercial Court rejected the Plaintiff’s revocation arguments. Instead they found the Plaintiff had infringed the Defendant’s designs. They granted a reasonable material damages of IDR 250,000,000 (USD14,000), plus a ridiculous IDR 13 billion immaterial damages (USD 1 million)!

On appeal to the Supreme Court, the Supreme Court upheld the finding of novelty on the basis that the Plaintiff had not provided sufficient evidence otherwise. The Plaintiff’s appeal on novelty was a factual matter for the lower court, and did not concern comprise an error of law, which was the only proper subject for appeal. Meanwhile the infringement was clear. The Supreme Court did however cut immaterial damages down to a more reasonable IDR 1 billion (USD70,000).

This case sets out a clear pattern to argue for both validity and infringement. It would be interesting to see a Supreme Court case deal with the other usually opposite pattern, namely an allegation of infringement leading to an invalidity defence. There is a difference the other way around, since the IPO must be a party to be bound by a cancellation decision. The IPO would not normally be a party in an infringement claim, making a counterclaim for invalidity more complex to enforce.

Philippines trade names and unfair competition

Trade name infringement is a headache in much of Asia. Different ministries issue company names from trademarks, so company registrants tend to think they have a right to use arising from their company name issuance. A case in the Philippines found one way of resolving the issue.

The case was Asia Pacific Resources International Holdings Ltd v Paperone Inc. APRIH makes paper products, (such as the printer paper shown here) owned a trademark PAPER ONE registered by the IPO. It sued Paperone for Unfair Competition on the basis that it has used Paperone as its company name since the name was approved by the Department of Trade and Industry in 2001. Paperone claimed it did not use it as a trademark but as its corporate name. It identified itself as the manufacturer on products, but they were typically also branded with another trademark.

The case went to the Supreme Court, who reversing lower court rulings, held that there could be confusion over the product origins so this was a clear case of Unfair Competition.

Fake Aboriginal artwork from Indonesia

In October 2018, a company called Birubi Art was fined by the Federal Court of Australia for selling fake Aboriginal artworks that were actually made in Indonesia.  Between 2015 and 2017, more than eighteen thousand (18,000) units of boomerangs, bullroarers, didgeridoos and message stones were sold to retail outlets around Australia by Birubi Art falsely labelled as “Aboriginal Art”, genuine” and “Australia”.   The Federal Court of Australia confirmed Birubi Art had “breached the Australian consumer law” and fined them AUD$2.3 million. This was an unusually large penalty due to the “serious cultural harm” to genuine Aboriginal artwork,“not just direct economic loss but a weakening of the value of the authentic products”. The belief is these were imported, perhaps smuggled into Australia from Indonesia.  

Fake art in Indonesia is unfortunately well known. The Indonesian Fine Art Lovers Association (PPSI) concedes that replica art is acceptable as long it does not display a forged signature of the original artist or have the blessing of the artist’s family.  To address this issue, PPSI published a booked titled Melacak Lukisan Palsu (Tracing Fake Paintings) to address art forgery in Indonesia.  Renowned Indonesian artists such as S.Sudjojono, Hendra Gunawan and Lee Man Fong are among the most widely forged in Indonesia.

Thailand invalidates all cannabis patents

The cannabis patent dispute has now escalated. The Thai government has issued a decree ordering the Thai DIP to invalidate all cannabis related patents. The military government is allowed to do this under the its special powers. Thailand legalised medical marijuana and kratom applications last year. 

The background is here but in essence an access to medicines lobby type panic has arisen because several pharma companies applied to patent cannabis related inventions. Unfortunately wild misinterpretation of patent rules has led to speculation that usual ogre, MNC big pharma is trying to block local research and prevent Thai medicinal products based on cannabis reaching patients. No one appears to have checked whether the patents are valid or not, instead simply asserting that they must be for natural processes. Nor did the government wait for the DIP’s usual patent examination. 

A frenzy of misreporting and misunderstanding seems to be part of the problem. The 10 or so patents in question ought to be rejected anyway if they don’t comply with Thai law, that is they are not novel uses. But it takes time to examine a patent and the government seems to have accelerated their decision in the face of a media frenzy.  The media does not report if the patents are for valid inventions or not? 

Now the worry is a worse situation will be created by the possible automatic invalidation of possibly good patents, in breach of WTO rules. Whether appeals will be filed is the next step to watch.