22 April 2014

Trademark – Prosecution under PMLA for alleged infringement

by Prashant Reddy


In a new dimension to enforcement of trademark rights in India, the Enforcement Directorate (ED) of the Government of India has reportedly initiated action against two firms for allegedly infringing the registered trademarks of the public sector enterprise, Steel Authority of India Ltd. (SAIL).

As per news reports, the alleged infringers were conversion agents of SAIL and were authorized to use SAIL’s trademarks on certain products but according to SAIL, these agents had gone beyond their mandate and had applied the SAIL trademark to a number of products that were not covered by the agreement between the parties. On coming to know of the unauthorized use of its trademark, SAIL reportedly initiated civil and criminal action under trademark law. At the same time, the ED also moved under the Prevention of Money Laundering Act, 2002 (PMLA) to seize office space, flats and luxury cars belonging to the alleged infringers [see end note 1].


Civil & Criminal Remedies under the Trade Marks Act, 1999

Traditionally, statutory Indian trademark law has always provided for criminal punishment for infringing a trademark. The punishment under the Trade Marks Act, 1999 for infringing a trademark extends to imprisonment for a period ranging from 6 months to 3 years along with a fine which can extend from Rs. 50,000 to Rs. 2,00,000. Additionally, the Act also provides for forfeiture of the infringing goods on conviction for trademark infringement. The Act also provides for civil remedies where the registered owner of the trademark can claim damages from the alleged infringer. In recent years, Indian courts have also started awarding punitive damages for trademark infringement.

The addition of trademark infringement to the list of offences under the PMLA provides for far more serious consequences since the Government can now move to attach property and bank accounts of infringers.  


Scheme of the Prevention of Money Laundering Act, 2002

The PMLA was enacted as Act 15 of 2003 with the aim of preventing money laundering and to provide for confiscation of property derived from money laundering. The offence of ‘money laundering’ is defined as ‘Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money laundering.’

The Act empowers the Enforcement Directorate to attach properties that it determines to be the ‘proceeds of a crime’, pending investigation and also confiscate the attached property if an ‘adjudicating authority’ finds such property to be involved in money laundering. The expression ‘proceeds of a crime’ is defined in the Act as ‘any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property’. In addition a person found guilty of such a crime can also be jailed for at least 3 years and which period may be extended to 7 years. Section 24 of the Act also puts the ‘burden of proof’ on the accused.

Originally, the list of offences covered in the Schedule to the Act was limited to certain offences under the Indian Penal Code (IPC), the Narcotic Drugs & Psychotropic Substances Act, 1985; Arms Act, 1959; Wild-Life (Protection) Act, 1972; Immoral Traffic (Prevention) Act, 1956 and the Prevention of Corruption Act, 1988. This Schedule was later amended to include, amongst others, offences under the following legislations which have an IP component: Trade Marks Act, 1999; Copyright Act, 1957; Information Technology Act, 2000; Biological Diversity Act, 2002 and Protection of Plant Varieties and Farmers’ Rights Act, 2001.

Inclusion of these crimes under the PMLA drastically increases the scope of punishment since most IP violations are punishable by a maximum sentence of 3 years, while the PMLA provides for a maximum prison term of up to 7 years in addition to confiscation of the ‘proceeds of the crime’.

While the property suspected to be ‘proceeds of a crime’ can be attached pending  trial for trademark infringement, any order to confiscate the property will have to await a conviction by the court trying the case of trademark infringement.



The inclusion of ‘trademark infringement’ under the PMLA is likely to prove a severe deterrent to possible infringers but businesses should also be aware that the provisions of PMLA can be abused leading to severe hardship.

[The author is a Principal Associate, IPR Practice, Lakshmikumaran & Sridharan, New Delhi]

End Note:

  1. http://www.newindianexpress.com/business/news/First-Case-Ed-Seizes-Assets-for-Faking-SAIL-Trademark/2014/03/28/article2136141.ece#.U0d_h_mSzDw


Browse articles