Trademark Infringement in Nepal

Trademark infringement in Nepal is a serious violation of intellectual property rights under Patent, Design and Trademark Act, 1965. It occurs when a party uses a trademark that is identical or confusingly similar to a registered mark without authorization from the owner. Understanding the key aspects of trademark infringement is crucial for both rights holders and businesses operating in Nepal.

What Constitutes Trademark Infringement

Trademark infringement in Nepal generally involves the following actions:

1. Using an identical or similar mark for the same or similar goods/services as a registered trademark without permission.
2. Applying a registered trademark or a deceptively similar mark to goods, packaging, or business documents without authorization.
3. Selling, distributing, or importing goods bearing an infringing mark.
4. Using a well-known trademark for unrelated goods/services in a way that could damage the mark’s reputation or distinctiveness.
5. Making, possessing, or selling tools or materials specifically designed for producing counterfeit trademarks.

The key test is whether the unauthorized use is likely to cause confusion among consumers about the origin of goods or services. Even if actual confusion hasn’t occurred, the potential for confusion can be sufficient to establish infringement.

Who Can File a Trademark Infringement Lawsuit

The following parties have legal standing to file a trademark infringement lawsuit in Nepal:

1. The registered owner of the trademark
2. A recorded licensee, if authorized by the license agreement
3. In some cases, an exclusive distributor with contractual rights to the mark
4. For well-known marks, the owner may file even without registration in Nepal

To maintain a lawsuit, the plaintiff must demonstrate a valid trademark registration in Nepal and unauthorized use by the defendant that is likely to cause confusion. Unregistered marks may have limited protection under unfair competition laws, but registration provides stronger enforcement options.

Statute of Limitations for Infringement Claims

The Patent, Design and Trademark Act of Nepal does not specify a statute of limitations for trademark infringement claims. However, general principles of Nepali civil law typically apply:

• Civil claims for damages must generally be filed within 2 years from the date the cause of action arose.
• For ongoing infringement, each instance may be considered a new cause of action, effectively extending the limitation period.
• Criminal complaints for trademark counterfeiting must be filed within 1 year of discovery of the offense.
• Injunctive relief to stop current or prevent future infringement may be sought at any time, regardless of past infringement.

Given these timeframes, trademark owners should act promptly upon discovering potential infringement to preserve their legal rights and remedies.

Damages for Trademark Infringement

Nepali law provides for various forms of monetary damages in trademark infringement cases:

Compensatory Damages

These aim to compensate the trademark owner for actual losses suffered due to the infringement. They may include:

• Lost profits from diverted sales
• Damage to brand reputation and goodwill
• Costs of corrective advertising

Plaintiffs must provide evidence to substantiate claimed losses.

Account of Profits

As an alternative to compensatory damages, plaintiffs may seek disgorgement of the infringer’s profits attributable to the unauthorized use of the mark.

Statutory Damages

In cases where actual damages are difficult to prove, courts may award statutory damages of up to NPR 100,000 per infringed mark.

Punitive Damages

While not expressly provided for in the statute, courts have discretion to award additional damages in cases of willful infringement to deter future violations.

Costs and Attorney’s Fees

The prevailing party may be awarded reasonable legal costs and attorney’s fees, especially in egregious cases.

The choice and amount of damages awarded depend on factors like the nature and duration of infringement, the defendant’s intent, and the strength of evidence presented.

Criminal Penalties for Trademark Infringement

Trademark infringement in Nepal can also lead to criminal sanctions in serious cases:

• Fines of up to NPR 100,000 for first-time offenders
• Imprisonment for up to 6 months in cases of repeat offenses
• Fines of up to NPR 200,000 for subsequent offenses

Criminal prosecution is typically reserved for large-scale counterfeiting operations or repeat offenders. The Department of Commerce and Supply Management is responsible for initiating criminal actions, often based on complaints from trademark owners.

Injunctive Relief for Trademark Infringement

Read More: 9. 1. Benefits of Trademark Registration in Nepal 2. Intellectual Property Law in Nepal 3. Copyright Act, 2002

Injunctive relief is a crucial remedy available to trademark owners in Nepal:

Temporary Injunctions

Courts can grant immediate temporary injunctions to halt alleged infringement during the pendency of a lawsuit. Requirements include:

• Prima facie evidence of infringement
• Likelihood of irreparable harm without the injunction
• Balance of convenience favoring the plaintiff

Permanent Injunctions

After a full trial, courts can issue permanent injunctions prohibiting future infringement. These may also require:

• Destruction of infringing goods and materials
• Removal of infringing signs
• Corrective advertising to address consumer confusion

Injunctions are often combined with damages to provide comprehensive relief to trademark owners.

Defenses Against Infringement Claims

Defendants in trademark infringement cases may raise several possible defenses:

1. Prior Use: Demonstrating use of the mark before the plaintiff’s registration or first use.
2. Descriptive Fair Use: Using a descriptive term in good faith to describe goods/services, not as a trademark.
3. Nominative Fair Use: Referring to the plaintiff’s trademark for purposes of comparison or criticism.
4. Acquiescence: Showing the plaintiff knowingly permitted the use for an extended period.
5. Genericization: Arguing the mark has become a generic term for the goods/services.
6. Non-Commercial Use: Using the mark for non-profit or commentary purposes.
7. Parallel Imports: Selling genuine goods obtained from authorized channels in other countries.
8. Invalidity of Registration: Challenging the validity of the plaintiff’s trademark registration.

The success of these defenses depends on the specific facts of each case and the supporting evidence presented.

Counterfeit Goods and Trademark Infringement

Counterfeiting is considered an aggravated form of trademark infringement under Nepali law:

• It involves producing or selling goods bearing exact copies of registered trademarks without authorization.
• Customs authorities have ex-officio powers to seize suspected counterfeit goods at the border.
• Criminal penalties for counterfeiting are generally higher than for other forms of infringement.
• The Department of Commerce and Supply Management can conduct raids and seize counterfeit goods from the market.

Trademark owners can work with customs and law enforcement agencies to combat counterfeiting through both civil and criminal enforcement mechanisms.

Determining Likelihood of Confusion

Nepali courts consider several factors to determine if there is a likelihood of confusion between trademarks:

1. Similarity of the marks in appearance, sound, and meaning
2. Relatedness of the goods or services
3. Strength of the plaintiff’s mark
4. Evidence of actual confusion
5. Marketing channels used
6. Type of goods and degree of care likely to be exercised by purchasers
7. Defendant’s intent in selecting the mark
8. Likelihood of expansion of product lines

No single factor is determinative, and courts weigh the totality of evidence in each case. Survey evidence may be used to demonstrate consumer perceptions.

Online Trademark Infringement

Trademark infringement can occur through various online channels in Nepal:

• Unauthorized use of trademarks in domain names (cybersquatting)
• Sale of counterfeit goods through e-commerce platforms
• Trademark violations in social media accounts and posts
• Misuse of trademarks in online advertisements

While the same legal principles apply, online infringement presents unique challenges in detection and enforcement. Courts are developing jurisprudence to address jurisdictional and technological issues in online trademark cases.

Prior Use as a Defense

Prior use can be a valid defense against trademark infringement claims in Nepal, but its application is limited:

• The defendant must show continuous use of the mark before the plaintiff’s registration date.
• The prior use must be in good faith and without knowledge of the plaintiff’s mark.
• The scope of protection is generally limited to the geographical area of prior use.

While prior use may prevent liability for past infringement, courts may still restrict future use to avoid consumer confusion. Defendants relying on prior use should provide clear documentation of their historical trademark usage.

Process for Filing Infringement Lawsuits

The general process for filing a trademark infringement lawsuit in Nepal involves:

1. Conducting a preliminary investigation to gather evidence of infringement.
2. Sending a cease and desist letter to the alleged infringer, which is often a prerequisite for legal action.
3. Filing a complaint with the Department of Industry or directly with the district court, depending on the desired remedies.
4. Submitting supporting documents, including trademark registration certificates and evidence of infringement.
5. Paying the required court fees, which are based on the amount of damages claimed.
6. Serving notice of the lawsuit to the defendant through the court.
7. Attending initial hearings and complying with procedural requirements set by the court.
8. Engaging in potential settlement negotiations or proceeding to trial if no resolution is reached.

Trademark owners should consult with experienced local counsel to navigate the specific procedural requirements and develop an effective litigation strategy.

In conclusion, Nepal’s legal framework provides various tools for trademark owners to protect their rights against infringement. While challenges remain in enforcement, particularly for online violations, the system offers meaningful remedies for legitimate claims of trademark infringement.

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