Sri Lanka Strengthens Legal Measures and Court Enforcement Against Counterfeit Goods

Counterfeit trademark and pirated copyright goods pose a significant challenge in Sri Lanka, mirroring a global trend of rising counterfeit trade valued at US$467 billion in 2021, according to OECD data. The country’s primary legal instrument addressing this issue is the Intellectual Property Act No 36 of 2003 (IP Act), which governs all aspects of intellectual property rights and enforcement mechanisms against counterfeiting.

The IP Act grants registered trademark owners exclusive rights to use, assign, and license their marks. Unauthorized use likely to mislead the public, whether for identical or similar goods and services, is expressly prohibited. This legal protection extends to preventing any use prejudicial to the trademark owner’s interests, thereby categorically outlawing counterfeit goods.

Jurisdiction over IP infringement cases lies exclusively with the High Court of the Western Province in Colombo, commonly known as the Commercial High Court. This court handles all proceedings under the IP Act, supported by the High Court of the Provinces (Special Provisions) Act No 10 of 1996.

The IP Act provides for both civil and criminal enforcement. Civil remedies include injunctions to restrain infringement or imminent infringement, damages to compensate losses, and orders for destruction or disposal of infringing goods outside commercial channels. Courts may grant interim ex parte relief, such as enjoining orders effective for 14 days and search orders akin to Anton Piller orders, to prevent irreparable harm or evidence destruction.

Importantly, the law stipulates that mere removal or defacing of counterfeit trademarks is generally insufficient to permit goods’ release into commerce, except in exceptional cases. Courts must balance the seriousness of infringement, remedies ordered, and third-party interests when granting relief.

The IP Act also empowers courts to compel infringers to disclose identities of producers, distributors, and distribution channels, aiding rights holders in dismantling counterfeit networks.

A notable recent case involved Under Armour initiating legal action against House of Fashions Mega Mall, a prominent local retailer accused of selling counterfeit Under Armour garments. The Commercial High Court issued an interim injunction prohibiting House of Fashions from manufacturing, importing, distributing, marketing, or selling goods bearing marks identical or confusingly similar to Under Armour’s registered trademarks. The court also authorized search and seizure operations at the retailer’s outlets, resulting in inventorying counterfeit products.

On the criminal side, Chapter 37 of the IP Act criminalizes willful trademark infringement, false presentation of marks, and forging or unauthorized use of marks closely resembling registered trademarks. Convictions can result in fines, imprisonment, or both, with penalties doubling upon subsequent convictions. The burden of proof in prosecutions for false marking lies with the accused to demonstrate permission or innocence.

Courts may order destruction or forfeiture of all items used in committing offenses related to counterfeit goods, regardless of conviction outcomes. For example, a magistrate’s court recently ordered destruction of counterfeit bearings branded ‘KOYO’ following a guilty verdict.

Customs enforcement is integral to Sri Lanka’s anti-counterfeiting strategy. Amendments to the Customs Ordinance via the IP Act empower customs authorities to prohibit importation and exportation of counterfeit trademark and pirated copyright goods. Registered marks can be recorded with Sri Lankan Customs to facilitate border controls. Counterfeit goods intercepted by customs may be forfeited and disposed of outside commercial channels.

The IP Act defines counterfeit trademark goods broadly to include any goods or packaging bearing unauthorized marks identical or indistinguishable in essential aspects from validly registered trademarks, thereby infringing the rights of trademark owners.

Overall, Sri Lanka’s legal framework combines comprehensive statutory provisions with active judicial and customs enforcement to combat counterfeiting effectively. The system provides trademark owners with powerful tools to protect their rights and safeguard consumers from counterfeit products.