Legal Power: Role of the Judiciary in combating Smuggling & Counterfeiting in cyberspace

Excerpts from the Address delivered at? MASCRADE 2024 by FICCI Cascade

(Dr) Karnnika A Seth, Advocate & Cyber law Expert, Ministry of Defence & Ministry of Information Technology, Govt of India

Illicit trade has been incessantly on the rise across the World, particularly, in the last few years. The Organization for Economic Cooperation and Development (OECD) and the EUIPO jointly published a 2019 report which highlights that the international trade in counterfeit and pirated products amounted to as much as $509 billion in 2016, estimated to be 3.3% of world trade – up from $461 billion in 2013, representing 2.5% of world trade. FICCI CASCADE's study in 2022 titled - 'Illicit Markets: A Threat to Our National Interests', notes that over a period of 10 years, the tax loss to the Government of India because of the illicit trade has risen by 163% to reach Rs 58,521 crore (from Rs. 22,230 crore) for 5 key industries - Alcoholic Beverages, Mobile Phones, FMCG-Household and Personal Goods, FMCG-Packaged Foods and Tobacco Products.

The advent of internet has magnified the menace of smuggling and counterfeiting both from a national and global standpoint. The anonymity of cyberspace is a haven for illicit traders operating through criminal networks and organised crime groups. By using proxy servers, onion routing and software, criminals camouflage their identities online and trade in illegal goods or sell legal goods illegally across borders and/or trade in counterfeit goods. Technological advances have also facilitated easy creation of duplicate logos, packaging, documentation, with accuracy, speed and anonymity. In present techade, criminals are also misusing IOT,AI, Blockchain, Bitcoins and Metaverse to commit cyberattacks and proliferate counterfeit trade. On the Dark web, illegal weapons ?are sold which pose an imminent threat to national sovereignty, defence and public safety and are used to commit terrorist attacks. Law enforcement agencies deploy strategies to track and combat such illicit trade. For example, India is a member of Financial Action Task Force that works on curbing moneylaundering? and counter financing of terrorism. In the borderless cyberspace, enforcement of laws is a mammoth challenge to concerned authorities as almost 7000 cybercrimes are reported every day at National Cybercrime Reporting Portal, www.cybercrime.gov.in? and 85% of these are financial frauds that may even finance terrorism or be linked with illicit trade.

Though both general and special laws are enacted in India (such as BNS,2023, Trademarks Act,1999, Drugs and Cosmetics Act,1940, Food Safety & Standards Act,2006 amongst other laws) to combat illicit trade , however, even if a law such as IT Act,2000 has prescriptive jurisdiction over foreign nationals, enforcement of the law poses a practical challenge.? ?Under IT Act,2000 unauthorised access, downloading , alteration of data or any computer resource is punishable with upto 3 years of imprisonment and fine of upto 5 lakh. Section 66C and D of IT Act makes identity theft and cheating by personation punishable with upto 3 years of imprisonment. Punishment for creating /selling counterfeit goods/piracy in other special laws such as Trademarks and Copyright law ranges from 1- 3 years or more? . Fine ranges between Rs. 50,000 to 2 lacs. However, these donot have a deterrent effect being non cognisable and bailable in nature. Nevertheless, there are also stringent punishments under the extant laws.For example, Counterfeiting Indian currency falls under the purview of the offence of ‘terrorist act’? in Section 113 of the Bharatiya Nyaya Sanhita, 2023 and the punishment for the same is imprisonment of a term not less than five years but which may extend to life imprisonment and fine. Likewise, making or possessing a Counterfeit seal to commit forgery is punishable under Section 341 ?of BNS Act with punishment for imprisonment which may extend to life imprisonment or upto 7 years in addition to fine. Cyber terrorism is an offence punishable with upto life imprisonment under Section 66F of the IT Act,2000.

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Our Judiciary? has played a? proactive role in interpreting extant law ?and combating illicit trade and counterfeiting. In India,the Commercial courts under the Commercial Courts Act, 2015 were established at the district level and at High Courts with original jurisdiction for dealing with cases of Intellectual Property infringement. In civil remedies, enactments such as Section 55 of the Copyright Act, 2000 provides various? remedies such as injunctions, damages and account of profits.

In one online trademark case, ?Time Incorporated v Lokesh Srivastava and Anr, [MANU/DE/0104/2005] the court granted the plaintiff punitive damages of 500,000 rupees, after it was found that the defendant was guilty of passing off its Hindi news magazine as the famous?Time?magazine by adopting a deceptively similar name, and look and feel of its cover page and layout.

In?Cartier International AG v Gaurav Bhatia, MANU/DE/0013/2016], the Delhi High Court granted damages totalling 10 million rupees, in a case involving infringement of trademarks and the selling of counterfeit luxury brands online.

In Aero Club v Sahara Belts,? 2023 SCC Online Del? 7466, Delhi High court injuncted the defendant from infringing the registered Trademark “Wood land”? and directed damages of Rs. 10 lacs to be paid based on a summary judgement on consideration of Local Commissioner’s report containing clear evidence of infringement.

Indian Court have evolved effective concepts to enforce IP Rights by passing Dynamic Injunction orders and take down /blocking directions. In UTV Software Communication ltd v 1337X.To {CS (Comm) 724/2017}, Delhi High court passed dynamic injunction orders against? identified websites and those that could surface later which published copyrighted? content? belonging to plaintiff. This principle was also applied in Supercasettes industries v My space case (2011)48 PTC 49.

Also, online counterfeiting by way of illegal domain registrations can be tackled through arbitrations proceeding under ‘.in’ Domain Name Dispute Resolution Policy (INDRP) or the Uniform Domain Name Dispute Resolution Policy (UDRP) .

? Under the new Consumer law in India, the obligations of e-commerce entities ?in Rule 5(2) and Rule 5(3)(a) of the E-Commerce Rules, requires each e-commerce entity to exercise due care. The Rules require that each seller provides an assurance that the descriptions, images and other content pertaining to the goods or services published on the e-commerce platforms are correct, complete and genuine.?

In case of e-commerce, Rule 3 of the Information Technology (Intermediaries guidelines) Rules, 2011 (the Intermediaries Rules) specifically deals with due diligence to be observed by the intermediary to prohibit display and sale of counterfeit products through e-commerce. The Information Technology Act,2000 makes an intermediary liable incase any counterfeit goods are sold using its service and it upon actual notice does not take necessary action of taking down such illegal content.

In Kent RO Systems Ltd v Amit Kotak,? [MANU/DE/0551/2017], ?the Delhi High court laid down guidelines for intermediary companies to adopt due care in drafting their privacy policy and terms of use in compliance with the IT Act and Intermediary Rules. Intermediaries are under an obligation to also immediately take down infringing, counterfeit, and fake products, on actual notice by the right holder.

In?Christian Louboutin SAS v Nakul Bajaj & Ors,?Ors [MANU/DE/4019/2018],?the Delhi High Court held that e-commerce platforms that actively conspire, abet or aid, or induce the commission of unlawful acts on their website will be liable to face prescribed punishments under the law. The immunity given to intermediaries under Section 79 of IT Act,2000 ?is not absolute, and if they are involved in the process of initiating the transmission, selecting the receiver or modifying the information contained in the transmission, such exemption is lost.

Concerned regulatory authorities have been taking various steps to bring consumer awareness and strengthen enforcement measures in India. RBI has issued circulars to warn users not to fall trap to fake loan scams, and to deal in bitcoin trade solely at their own risk.? Another initiative is being planned by the National Intelligence Grid (NATGRID), which was set up as a nodal agency to analyze all the data accessed from various law enforcement bodies to identify issues pertinent to national security. There are various measures taken by Ministry of Electronics and Information Technology, GOI such as rules under Section 70B IT Act, 2000 requiring retention of logs of user data for atleast 5 years in case of datacentres, VPN providers. Proposed Telecom bill also strengthens user protection by making every subscriber register with due regard to KYC and subscriber name will be flashed on screen of receiver whenever a call is made. The DPDP Act,2023 aims to empower citizens by introducing notice and consent requirements for collection and processing of data. There is an exemption of this requirement incase data is collected or processed for law enforcement reasons.?

At the global level, the role of OECD and other international organisations such as ?United Nations (UNODC, World Intellectual Property Organisation [“WIPO”]), INTERPOL, World Customs Organisation (WCO) and World Trade Organisation (“WTO”) have been pivotal in combating illicit trade. These bodies aim at capacity building, forge space for coordinated international actions, conducting research and sharing best practices. India is also a signatory to the UN Convention against Transnational organised crime. However, India needs to sign a Convention against cybercrime to curb online illicit trade. This is imperative in view of emerging technologies such as blockchain, AI , Metaverse which have made this trade more rampant and brought legal and technical challenges of attribution of liability and traceability. Decentralised /P2P networks and bitcoins allow easy distribution of Counterfeit goods such as virtual currency, artwork , music ?or films /software. These are intangible and are rampantly sold over internet causing huge losses to a legitimate seller’s brand and business.

In my considered view, public awareness, deployment of proactive surveillance technologies, (Facial recognition , RFID, 3D imaging),? robust laws and effective enforcement measures both at National and international level (such as CBI, INTERPOL, and FATF and other agencies) ?can together effectively combat illicit trade. For effective dispensation of justice, e-filing facility and video conferencing has? strengthened our access to justice system. In my view, particularly, setting up fast track courts ?can ?expedite process of adjudicating such cases of illicit trade. Moreover, creating uniform standards and practice rules for production of electronic evidence will enable speedy adjudication of cases of counterfeit goods. Further, enhanced Internet connectivity, use of emerging technologies such as AI and blockchain will render efficiencies in listing urgent matters and preserving digital case records and pave the way for proactive role of law in combating illicit trade.? Judiciary’s proactive role in combating illicit trade combined with joint efforts of other concerned regulators /stakeholders and law enforcement bodies will be the ?roadmap to effectively combat smuggling and counterfeiting.?

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