A new law aimed at combatting commercial fraud and the importation of counterfeit goods (Federal Law No. (19) on Combatting Commercial Fraud) was issued by the UAE Federal Government on 12 December 2016 (New Law).
The New Law, which is effective immediately from the date of publication, replaces the Commercial Fraud Law (Federal Law No. (4) of 1979 Combatting Fraud and Adulteration in Commercial Transactions), and is intended to strengthen the ability of intellectual property rights owners to enforce those rights in the UAE.
Definition of Counterfeit Goods
The New Law defines counterfeit goods as: “the goods that bear, without permission, a trademark identical to or similar to the legally registered trademark.” This goes further than the definition under the Commercial Fraud Law, in that brand owners are now permitted to take action in respect of goods bearing similar marks to their own registered trademark, rather than just in respect of goods bearing identical marks.
Increased penalties for Commercial Fraud Offenses
Interestingly, committing a “commercial fraud act” is defined in the New Law as importing, exporting, re-exporting, manufacturing, selling, exhibiting, possessing for the purpose of sale, storage, rental, marketing or trade of counterfeit or ‘adulterated’ goods (Commercial Fraud Offense). Essentially, this means that the possession of counterfeit goods may be deemed a violation of the New Law, even if it cannot be proved that there was an intention to sell those goods.
The superseded Commercial Fraud Law, which was drafted in 1979, called for a maximum penalty of two years in jail, and maximum fine of AED10,000 for cheating a customer by delivering goods that are different to what was ordered.
By contract, the New Law imposes harsh penalties on parties who commit a Commercial Fraud Offense, including a potential prison sentence of up to two years, and a fine of between AED50,000 to AED 250,000. Anyone who attempts to commit a Commercial Fraud Offence faces a jail term of up to one year, and a fine of between AED10,000 and AED100,000.
Where the subject of a Criminal Fraud Offense is human or animal food products, pharmaceuticals or crops or organic products, the responsible party faces imprisonment for up to two years and a fine of up to AED1,000,000.
The above penalties apply regardless of whether or not the buyer of counterfeit goods knew that the goods were actually counterfeit before the transaction occurred.
Further, the New Law gives courts the power to seize the counterfeit goods and close down businesses (or part of the business, if it is a department store) where the violations occurred, for up to six months. Repeat offenders risk having their trade licenses revoked, or business closed permanently.
Establishment of committees
A federal committee, which shall report to the Ministry of Economy, will also be established under the Act, and will be responsible for coming up with and implementing strategies for combatting commercial fraud. Subcommittees will be formed in each Emirate to give warning notices to businesses violating the New law, close down businesses where appropriate, follow up on the destruction or returning to source of violating goods, and other day to day enforcement practicalities.
Increased ability to enforce intellectual property rights
Intellectual property rights owners may take samples of their products to the “competent authority” (which remains undefined, but presumably includes port authorities), together with any information required as to how the product works, and proof of their ownership of the associated intellectual property rights.
The competent authority then has the power to issue resolutions requiring any counterfeit goods to be returned to their source by the importer, or if the importer fails to do so, they may order that the goods be destroyed or used for any other purpose for which they are valid (at the cost of the importer).
What this means for brand owners
The new penalties imposed by the New Law are a big step up from those in the Commercial Fraud Law, and mark a step in the right direction towards increasing protection for brand owners in the UAE, due to the added disincentive for third parties to import, sell or otherwise deal with counterfeit products in the Emirates.
This article first appeared in the Luxury Law Alliance Newsletter.