Let Me Tell You — Why Counterfeit Brands Keep Winning!

I was scrolling through the internet when I came across this headline, which said, and I quote, “By 2030, the value of the global trade in counterfeit goods is projected to reach USD 1.79 Trillion, meaning one in every twenty dollars spent worldwide could be on fake products.”[1] Although I was well aware of the counterfeit markets, I was visibly shocked to see these numbers, which made me dig deep into this rabbit hole of counterfeit industries, and what I came across was very surprising.

According to the report of FICCI (Federation of Indian Chambers of Commerce & Industry), India’s overall illicit market is valued at approximately 7,97,726 cr. Ranking at the top is the Textiles and Apparel industry, with an approximate market size of ₹ 4,03,915 cr., which accounts for 50% of the total illicit market share, followed by the FMCG Packaged Food industry, totalling about ₹ 2,23,875 cr., and at the third place is FMCG - Personal & Household Care Goods industry totalling about ₹ 73,813 cr., both together accounting for 37% of the total illicit market share in 2022-23.[2]

It’s no surprise to see many counterfeits around us, but the above figures are concerning.
There can be many reasons for such extraordinary numbers, one of them is SIZE. The size of the Indian market is not ordinary, and therefore, it is very easy to disguise counterfeit products. We have all seen at least one counterfeit of our favourite product. Perhaps you might have bought it as well, either due to a lack of knowledge or with complete awareness. Given the extraordinary scale and size of the markets, it is not difficult to disguise counterfeits, but very tough to track them back. Before the legitimate brand realizes and takes any further steps, counterfeiters have already maximized their profits and are preparing for their next move. The court naturally passes an injunction and imposes costs, but there are many loopholes in this legal process, and it reveals many fundamental flaws in our enforcement system.

Section 135 of the Trade Marks Act, 1999, clearly says that, in cases of infringement, courts can grant relief in terms of damages or an account of profit together with or without any order for the delivery-up of the infringing labels and marks for destruction or erasure. The Act also provides for various penalties for selling goods or providing services to which a false trademark or false description is applied. Section 105 provides for enhanced penalties in case of subsequent conviction for those who were convicted under section 103 or section 104, with maximum imprisonment of up to three years and maximum fine of two lakh rupees.

To understand it more easily, the Court may grant the following remedies in case of infringement:

1. Temporary injunction

2. Permanent injunction

3. Damages

4. Account of profits

5. Destruction of trademark-infringing goods

6. Cost of legal proceedings

Criminal Remedies:

1. imprisonment for not less than six months, which may extend up to three years

2. Fine not less than 50,000, which may extend up to 2 lakhs

In my opinion, the above reliefs are not enough, at least in terms of penalties imposed, which can be more or based upon the profits earned by the infringing party.

In one such instance, we see that a broad view was taken in the case of Time Incorporated vs. Lokesh Srivastava and Anr. [3] where it was observed:

“time has come when the Courts dealing in actions for infringement of trademarks, copyrights, patents etc., should not only grant compensatory damages but also award punitive damages with a view to discourage and dishearten law breakers who indulge in violation with impunity out of lust for money, so that they realise that in case they are caught, they would be liable not only to reimburse the aggrieved party but would be liable to pay punitive damages also, which may spell financial disaster for them.”

As rightly observed in the Time Incorporated case, punitive damages play a vital role in discouraging like-minded people from taking such steps. The scope of such punitive damages is a question for debate and is for the judge to decide on a case-by-case basis.

Surprisingly, the judgment was overruled by Justice Bhat in the matter of Hindustan Unilever Ltd. vs. Reckitt Benckiser India Ltd.[4], saying that it would be really problematic if we start saying that every violation of the law should automatically call for punitive damages, especially in commercial areas like trademarks and copyrights. Laws like the Trade Marks Act and the Copyright Act already provide their own fines and punishments, hence it would not be fair and legally wrong for courts to grant additional ‘Punitive damages’ on top of that. To some extent, the reasoning given by Justice Bhat is not incorrect, and in a way, he rightly points out, amongst other things, that courts cannot go beyond what is stated in statutes.

In Glenmark Pharmaceuticals Ltd. vs. Curetech Skincare and Anr.[5] Hon’ble Bombay High Court imposed costs of 1.5 cr. it was observed that the defendant was a habitual offender and had a history of producing sub-standard drugs. After examining all the past conduct of the defendant court imposed an extraordinary cost of 1.5 cr. on the defendants, highlighting the greater responsibilities of pharmaceutical companies towards the general public health.

Justice Kathawalla, in a discussion on intellectual property matters on the Bombay Bar Association Podcast, observed that the penalties imposed rarely match the profits earned, creating a perverse incentive for counterfeiters who treat legal consequences as nothing more than a business expense. Even when courts award damages, they cover only a fraction of the total harm caused and represent just a small portion of the unlawful gains made by the infringers. He observed that, particularly in such IP matters, the common trend for infringing parties is to accept the charges by saying, “I won’t do it again,” only to resume the same activity under a different name once an injunction is granted. During his tenure, in the matter of Nippon Steel & Sumitomo Metal Corporation vs. Kishor D Jain & Anr.[6], Justice Kathawalla called for the infringing party’s balance sheet and found that they had earned substantial profits. He consequently imposed costs of ₹5 crore, which is an extraordinary order by usual standards.[7]

The Hon’ble Delhi High Court, in the matter of Lifestyle Equities CV & Anr. vs. Amazon Technologies, Inc. & Ors.[8], ordered 339 cr. of damages on the issue of allowing the sale of counterfeit products by a third-party seller. This matter revolved around the intersection of trademark and e-commerce regulation, stressing the importance of accountability of online marketplaces. Not to my surprise, the Judgment was stayed by the division bench of the same court[9], stating that there is no specific claim with reference to 339 cr. along with other reasons. Not going into the merits of the matter here, but what is important to see is the amount awarded.

Just recently, the Hon’ble Supreme Court in the matter of Asian Paints Limited vs. Ram Babu[10] Widened the scope of the definition of the word ‘Victim’ under section 2(wa) of the CrPC, where the question pertained to the right to appeal. This judgment considered Asian Paints as a ‘victim’ within the CrPC, while clarifying that section 372 CrPC is not restricted by any provision of the CrPC, allowing Asian Paints to file a criminal appeal against the acquittal in a case about a counterfeit product. Basically, allowing the company to file a criminal appeal within the meaning of ‘victim’ as it suffered due to counterfeit products.

This strong stance of the Supreme Court helps to recognize and establish how counterfeits directly victimize brands and companies. This is the new pathway in criminal jurisprudence, where companies will also have a remedy against the acquittal, specifically in the case of trademark infringement. This recognition is a bit of a step forward.

Legitimate brands invest years in research and development, building reputation and quality standards; on the other hand, counterfeiters exploit this goodwill overnight with minimal risk of meaningful consequences. The current legal system or legal framework inadvertently rewards infringement by treating intellectual property theft as a civil matter with proportionately insignificant penalties rather than recognising its economic warfare.

It won’t be wrong to say that counterfeiting is one of the biggest problems faced by luxury fashion brands. Counterfeits have become one of the world's fastest-growing and profitable industries over the past few years. But legal loopholes aren’t the only reason counterfeiters thrive; the psychology of consumers plays an equally crucial role.

Counterfeit industries are thriving on consumer behaviour.

Before looking at the reasons why people choose to buy counterfeit products, first, we need to look at the counterfeit industry in detail by dividing it into two parts: i.e.

1. Deceptive Counterfeiting (supply side), and,

2. Non-deceptive counterfeiting (demand side)

In deceptive counterfeiting, the consumer is unaware of the fact that he is purchasing a counterfeit article, or he is being deceived by the seller. In non-deceptive counterfeiting consumer knowingly purchases a counterfeit product. It was also observed that counterfeit industries usually thrive in developing economies due to various reasons such as low literacy level, low purchasing power, low consumer awareness, etc.

It’s clear from the above points that one operates by deceiving consumers while the other thrives on consumers' willingness to participate in such practices, which clearly highlights the real problem. Despite the product being fake, the purchase is justified through social, psychological, and economic reasoning. Therefore, it becomes crucial to understand why consumers make such choices

What is your Buying Intention?

There are different buying intentions, which are generally functions of the personal and social influences that motivate consumers to buy counterfeit goods to satisfy the needs of social recognition. From various buying intentions of the consumers, Status consumption and Peer pressure play a vital role in promoting such thoughts.

Status consumption

We all have seen people getting different treatment once they wear a luxury brand, or let's say a certain type of brand. With the full knowledge of the benefits that can be derived from the consumption of such goods, people buy them to maintain a particular social status. There can be no dispute that status consumption highly influences consumers to buy counterfeit products. This choice of buying counterfeit products is fully associated with the social status offered by the product rather than the functionality aspect.

Peer pressure

A peer is basically a person of the same age group or same local position. Peer pressure has its effect on the complete set of such people, influencing their choices. The problem here is when a person who does not belong to a particular status group or a class of people tries to fit into it, he eventually chooses counterfeit products. Consumers, when under peer pressure, tend to engage in illicit behaviour of purchasing counterfeit products.

The above study is from detailed research on consumers' buying intentions of counterfeit products in India.[11] This research concludes that high prices of brands and manufacturers are also one of the reasons for such consumer behaviour. The report also finds that, unless consumers understand the repercussions of their purchase of counterfeit products, it will be difficult to eradicate the problem of counterfeiting. We have everyday examples from both the social groups, which establish and justify consumers' choices, and the damage caused by such counterfeit products cannot be ignored.

Looking at the market size of India, the majority of the global brands would like to try their luck here, but over the period, what they get is a cheap copy of their product at the local markets, which is being sold most probably next to the store of the brand itself. It is really funny if you think about it differently that it’s like punishment for a brand to get famous because maybe they were not doing that great before they got famous but now they also have to bear a lot of losses and deal with consumer complaints of the products which are not ever manufactured by them and spend a lot of resources explaining all this to their consumers while simultaneously filing for a suit to get protection and throw out the counterfeit stock out of the market.

Of course, brands have remedies under IP laws to take legal actions, injunctions, the seizure of counterfeit goods, etc, but these remedies do not at all match the amount the losses a well-established brand, or let's say a fairly new brand entering into markets, which has spent a lot in building their image and maintaining their quality standards, has to suffer.

What's troubling here is, courts are restricted to the statutes and have to pass an order well within the established law. There is very little or no scope for courts to go beyond what the statutes say. Judicial interpretations and activism is there, but with very little scope to go beyond statutes. We need more strict rules and laws along with penalties, which actually exceed profit and create genuine deterrence; until then, these counterfeit mafia will continue to operate, knowing that even getting caught merely represents a temporary setback on their ongoing exploitation of established brands.

All that is needed is a strategic approach to tackle this situation. Many factors affect the overall global counterfeit market, such as a lack of international cooperation, an outdated legal framework, nearly no technological integrations, etc., etc., but out of all these aspects, what affects the most is the lack of consumer awareness, or I would say, even after having complete awareness, consumer still chooses counterfeits maybe because of the reasons explained above about the consumer behaviour and psychology.

So why do counterfeit brands always get away? Let me tell you-

Maybe, because the system allows it. Weak penalties, a different consumer mindset, and slow enforcement; these all make counterfeiting rewarding. Governments, courts, and consumers are all equally responsible for this. Unless laws become sharper, penalties become hefty, and consumers become wiser, counterfeiters will always win, maybe not inside the courtroom but definitely outside of it.

References:

1. Business Wire (2024) ‘Trade in Counterfeit Goods Market Set to Reach $1.79 Trillion in 2030 – Corsearch’, Business Wire, 17 May. Available at: https://www.businesswire.com/news/home/20240515044765/en/Trade-in-Counterfeit-Goods-Market-Set-to-Reach-%241.79-Trillion-in-2030-Corsearch

2. FICCI (2024) ‘Need to instill fear of harsh penalties in minds of perpetrators of illicit trade: Ravneet Singh Bittu, MoS, Food Processing Industries and Railways, GoI’, Press Release, 25 September. Available at: https://www.ficci.in/press_release_details/4943

3. 116 (2005) DLT 599

4. 207 (2014) DLT 713

5. 2018 (76) PTC 114 (Bom)

6. Notice of Motion (L) No 810 of 2019 in COMIP (L) No 383 of 2019

7. Bombay Bar Association. (2024). It is important that a judge is a relief granting judge: Justice Shahrukh J. Kathawalla. March 29. Available at: https://www.youtube.com/watch?v=khzHNMAyZkw&t=1891s

8. CS (COMM) 443/2020

9. 2025 DHC 5036 DB

10. 2025 SCC OnLine SC 1427

11. Verma, S., Kumar, R. and Yadav, S.K. (2018) ‘An Empirical Study on Consumers’ Buying Intentions of Counterfeit Products in India’, Journal of Intellectual Property Rights, 23(November), pp. 250–260. Available at: www.manupatra.com