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A long battle between original and counterfeit products in Nepal

Nepal has counterfeit versions of famous international brands like Red Bull, Center Fruit, Asian Paints, Parle-G, Britannia, and others. And these brands are fighting to establish legitimacy.

Kathmandu: As you walk along the streets of Kathmandu, you’ll notice several restaurants resembling KFC, one of the world’s most popular chicken restaurants, around the city. However, they are not the famous KFC that you’re familiar with.

Last December, the Patan High Court restrained a company from producing noodles that closely resembled the trademark of a noodle company.

Nepal even has counterfeit versions of famous international brands such as Coca-Cola, Pepsi, Nike, Adidas, and more. They are cost-friendly, and these counterfeit brands closely resemble the global ones and are available at affordable prices. These products are widely available in the market, and often go unchecked.

In Nepal, cases of trademark infringement have been on the rise each year as the government has failed to enact new laws related to trademark and intellectual property rights.

Five years ago in 2019, the government  prepared a draft bill to introduce a law on trademark, copyright and intellectual property rights. Since then, several governments changed, but the draft bill is yet to get approved from the law ministry.

The bill once endorsed would replace the 60-year-old Patent, Design and Trade Mark Act 1965.

Officials at the Ministry of Industry,Commerce & Supply say the draft bill is in the final stage to be forwarded to the federal parliament.    

Jiblal Bhusal, Joint Secretary at the Ministry of Industry, said that the bill drafted five years earlier is in its final stage for submission to the federal parliament. “This bill includes all the recommendations provided by the Law Ministry and the Finance Ministry,” he said.

Currently, the Department of Industry handles nearly 150 cases of infringement. Also, 1500 cases of trademark infringement have been filed with the department.

Patent, Design and Trademark Act (1965) states that if anyone violates the law, they may be punished with a fine not exceeding Rs 100,000 and articles and goods connected with such offenses will be confiscated on the orders of the department as per the gravity of the offense.

The provision to fine just Rs 100,000 for such offenses is the problem, according to experts. “This law is too weak, and products and companies do not fear infringing trademarks of even well-established companies in the market,” Janak Bhandari, an advocate who handles trademark-related cases, said.  

According to experts, this law is encouraging companies to infringe trademarks and gain benefits as much as they can. “Even if they infringe trademarks, the law only imposes a fine of just Rs 100,000. Illegal businesses gain millions of rupees, and paying just Rs 100,000 is insignificant,” he added.

One example of such infringement is the case involving Kansai Nerolac Paints Nepal Pvt Ltd, a subsidiary of Kansai Paints Company Ltd, Japan, and Rukmini Chemical Industries of Nepal. Kansai Nerolac Paints, an Indian subsidiary of Kansai Paints of Japan, entered the Nepali market in 2014. Shortly after, the multinational company encountered legal obstacles when Rukmini Chemical, a Nepali firm, filed a complaint with the Department of Industries, claiming the right to use the ‘Kansai Nerolac’ brand. Although Kansai Paints won the case from the apex court, it took six years for the resolution.

As per the Patent, Design, and Trademark Act of 1965, the rights and ownership of a brand are only established after the trademark is registered in Nepal. The bill drafted by the industry ministry aims to address various intellectual property thefts of both foreign and domestic investors who have built huge brands.

Experts say trademark infringement is rampant in beverages, alcoholic drinks, chocolates, and chips, as these products have huge demand in the market. 

Under the Patent, Design, and Trademark Act, patents registered do not automatically provide protection to foreign trademarks and designs.

According to Semanta Dahal, an advocate, even though the issue of trademark infringement looks like a small issue in Nepal, it has a huge impact in pushing away foreign direct investment. “Big international giants like Adidas or Nike would hesitate to invest in Nepal as their products are not well valued here,” he said. 

“As the issue of trademark infringement is massive in Nepal, there also lies the solution. The Department of Customs has a key role to play in minimizing the import of counterfeited products. Also, general consumers should also be aware of what they are buying.” 

Nepal does not automatically recognize patents awarded by other nations. Trademarks must be registered in Nepal to receive protection. Once registered, trademarks are protected for a period of seven years.

Not only has the weak trademark law hit domestic as well as international businesses, it has been a serious concern for foreign investors willing to pour in investments in Nepal. 

According to Sunil KC, vice president of the Nepal-India Chamber of Commerce and Industry (NICCI), several international brands have refrained from investing in Nepal because local brands have already registered trademarks of their famous products. For instance, he says, Surya Nepal, a subsidiary of ITC Ltd India, wanted to introduce Aashirvaad Aata to Nepal. However, the trademark has already been registered by a conglomerate in Nepal.

“Currently, multinational companies face recognition challenges as their international brands are domestically registered in Nepal. This limits the launch of these brands by multinational companies,” said KC.

The government of Nepal hosted the third Nepal Investment Summit 2024, on 28–29. “The investors who come to Nepal would not only invest in the projects showcased in the summit. They would also want to invest in other sectors. The law would become a hassle,” KC said.  

Earlier this year, police arrested nine individuals on charges of mixing homemade liquor in expensive brand bottles and distributing them. Likewise, police have been regularly confiscating chocolates with fake wrappers from the market.

Although Nepal has been sluggish in protecting the rights of trademarks and intellectual property, it has long been a party to several international intellectual property-related agreements and conventions.

In 1997, Nepal joined the World Intellectual Property Organization (WIPO), a United Nations agency that promotes and protects intellectual property (IP) worldwide by cooperating with countries and international organizations. 

Similarly, in 2001, Nepal became a member of the International Union for the Protection of Industrial Property (Paris Union), which was founded by the Paris Convention. 

Nepal became a member of the World Trade Organization (WTO) in 2004 and signed the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement. 

The new law, once formed, will help align Nepal’s legal framework with international intellectual property standards, experts say.

A report entitled ‘US Department of State’s 2023 Investment Climate Statements for Nepal’ states that Nepal has failed to protect intellectual property rights, given the weak legislation, which has hammered investment climate in Nepal.

According to Janak Bhandari, an advocate who handles trademark-related cases, the authorities concerned are not well informed about intellectual property rights in Nepal. “After complaints, police raid the market, seize products, and arrest individuals involved in the case. However, when those arrested are brought to court, they are often released because Nepal does not have strong laws related to this kind of crime.”

Bhandari says many international companies are facing hassles in Nepal. He is currently handling cases involving Red Bull, Center Fruit, Asian Paints, Parle-G, Britannia, and other international brands. Such cases, according to him, will not decline unless Nepal brings new legislation at the earliest.

“Not just about business, trademark infringement has also hindered consumers’ rights,” says KC. “It violates consumers’ rights as they do not receive the correct products, and counterfeit goods can pose safety risks.” 

The Consumer Protection Act (1998) states that consumers have the right to quantity, purity, quality, etc, of consumer goods and services to be safe from unfair trade practices.