論説
COUNTERING COUNTERFETING IN KENYA
AN INTRODUCTION TO KENYA'S ANTI-COUNTERFEITING SYSTEM: CHALLENGES AND PROPOSED SOLUTIONS
2019 年 2019 巻 96 号 p. 15-36
詳細
2019 年 2019 巻 96 号 p. 15-36
The research leading to this paper was geared towards obtainment of a primary apprise on the issues fettering the fight against counterfeits in Kenya with a keen interest on problems encountered by foreign companies doing business in Kenya, the challenges faced by institutions dealing with Intellectual Property rights and proposals on the best way forward.
This paper outlines the findings based on a research on governmental institutions and personnel and/or experts that deal with combating counterfeiting in Kenya, directly or indirectly. Based on the analysis of the responses received, it become apparent that counterfeiting is a deep-rooted problem that is enhanced by diverse yet significant factors such as corruption, non- collaboration between the private sectors (brand owners) and governmental institutions, and the inadequate border control of counterfeits entering the Kenyan market.
The paper is in a bid to further probe into factors enhancing counterfeiting and to identify possible strategies that can be employed to combat counterfeiting.
Kenya is a lower middle-income country with has a population of about 48 million people and a GDP of 74.94 Billion USD1 and is regarded as one of the fastest growing economies in Sub-Saharan Africa. Despite the large and robust population, about 29% of the citizens are very poor and living on about ＄1.90 a month.2 Due to the high level of poverty, these citizens are more prone to counterfeiting due to the lack of proper education and majority being unable to afford purchase of quality products.
According to Organization for Economic Cooperation and Development (OECD) 3 in its report titled, "Trade in Counterfeit and Pirated Goods: Mapping the Economic Impact", it estimates that globally, imports of counterfeit and pirated goods are worth nearly half a trillion dollars a year, which represents about 2.5% of global imports.
The Kenyan government has taken keen interest on Kenya's economic development and one of the key measures is the adoption of Kenya's strategic development plan, vision 20304 that accentuates the importance of promoting innovation in a bid to become a globally competitive and prosperous nation. This initiative has seen as a renewed commitment to attract foreign direct investment (FDI) and assist in the industrialization process (Kenya Investment Policy Review, 2008).
It is of great significance to focus on ways of efficient intellectual property protection such as anti-counterfeiting mechanisms in order to further to have a value-added economy that focus on improved trade, renewed FDI, growth of industries, poverty alleviation and ultimately attainment towards sustainable development goals.
Globalization and evolution of trade has hampered the efficient protection of intellectual property rights leading to exploitation by unscrupulous businessmen such as the infringement of trademark rights which constitute most claims of counterfeiting, which is one of the major challenges that Kenya is now tackling.
Ultimately, my research will be geared towards a comparative analysis between Kenya's anti-counterfeiting measures Vis-a Vis Japan's anti-counterfeiting measures as Japan has achieved efficient control of the infiltration of counterfeits.
Based on my previous working experience at the Anti-Counterfeit Agency, in depth research, analysis, and interviews with personnel dealing with Anti-counterfeiting in Kenya, I will discuss the major challenges that hamper enforcement of anti-counterfeiting in Kenya. Subsequently, as I continue to undertake my research, I will analyze Japan's protection mechanisms that ensure minimal infiltration of counterfeits top the country. After the comparison I will propose plausible solutions that I hope will be a step towards the renewed commitment to efficient protection of intellectual property rights in Kenya resulting in increased trade and development.
Kenya and Japan have had a great history and relationship. To begin with, there exists a great economic Cooperation with Kenya being biggest recipient of Japan's Official Development Assistance (ODA) in Sub-Saharan Africa with loans amounting to 380.3 billion yen, Grants: 125.3 billion yen and technical cooperation 119.2 billion yen.
In terms of trade, Kenya exports mostly agricultural items to Japan (cut flower, tea, coffee, fish fillet, nuts) worth about 6.34 billion yen and mainly imports machinery from Japan (cars, trucks and steel), which is worth about 80.7 billion yen.5
In a bid to strengthen the relationship between the two countries, and to further show the commitment of Japan venturing into the African market, In 2016, Kenya held Tokyo International Conference on African Development (TICAD), the very first of such forums in Africa. The main aim objective of TICAD is "to promote high-level policy dialogue between African leaders and development partners."
After the conclusion of TICAD, the Nairobi Declaration6 a three-year plan was signed which is aimed at promoting economic diversification and industrialization; a renewed focus on agriculture; innovation and ICT-led economy; quality infrastructure; and skills development.
Japan continues to undertake various projects such as the development of high-quality roads across Kenya, development of special economic zones (SEZs), the development of the Mombasa port, and the development of a geothermal power station.
To emphasize its confidence in Kenya, Japan has set up various regional headquarters of Japan's organizations Japan International Cooperation Agency (JICA), Japan External Trade Organization (JETRO) and Japan Bank for International Cooperation (JBIC) and continues to progress Kenya's economic development through various projects and capacity building. These organizations also serve other neighboring countries.
As at 2018, and in terms of foreign direct investment, there is the presence of more than fifty-four (54) Japanese companies in Kenya such as Toyota, Isuzu, Mitsubishi, Honda, Nippon Express, Kansai paint, Suntory Beverage and Food, Casio, Canon, Seiko Epson etc.
Despite the amiable relationship that exists between Kenya and Japan, it is of great concern and an unfortunate matter that many of the Japanese products are counterfeited and continue to flood the Kenyan market. The subsequent effect is the loss of substantial profit by Japanese companies, devaluation of the Japanese brands, unfair competition among many other vices of counterfeiting.
There exists no specific statistical data on Japanese products in Kenya that are affected by counterfeiting, however, based on my on-the ground research, the level of Japanese counterfeited products continues to increase significantly. For example, I have been able to see counterfeits of SQNY instead of SONY for televisions, phones and other electrical appliances. Other noticeable counterfeits are spare parts for example I was able to witness many counterfeit parts e.g. for Toyota.
Statistically, Kenya imports 80% of its cars from Japan, making it the sixth largest destination of used cars coming from Japan.7 With companies like Toyota, Nissan, Honda etc. who have heavily invested in the motor vehicle industry in Kenya, increasing number of counterfeits in motor vehicle and accessory sector market is continuously becoming a major concern that requires urgent address.
There is however, no specific measure put in place by the Kenyan government, or the Anti-counterfeit agency that specifically focuses on Japanese products, but the Kenyan government has put in place laws, regulations and special institutions that focus on curbing the influx of counterfeits in Kenya.
The anti-counterfeiting agency works in a joint approach with a brand owner if the brand owner actively involves it in its anti-counterfeiting operations. Counterfeiting is a mutual concern that poses a great challenge to not only the Kenyan market but also largely affects Japanese companies.
It suffices to state that a collaborative effort from both Japanese companies and the Kenyan government will ensure the reduction in counterfeits in the Kenyan market. This ultimately creates a good environment that fosters trade relations a catalyst for increased foreign direct investment and sound economic development.
At the international level, Kenya has ratified various international legal instruments that place great importance on intellectual property rights protection. Further, the Constitution of Kenya8, defines property to include Intellectual Property and additionally obliges the State to support, promote and protect the intellectual property rights of the people of Kenya
Under national legislation, Kenya has enacted various acts and regulations with institutions mandated enforce protection of intellectual property rights. The following acts and agencies are directly related to registration, promotion and enforcement of intellectual property rights and particularly the anti-counterfeiting measures;
I. The Constitution of Kenya
II. The Anti-Counterfeiting Act, 2008
III. The Copyright Act, 2001
IV. The Standards Act, 2012
V. The Customs and Excise Duty Act, 2015
The Anti-Counterfeit act is the main law mandated to hamper the trade in counterfeits, but it also provides the coordinated and cooperation with other laws.
I will herein under explain how other various laws are dedicated towards anti-counterfeiting in Kenya, supplementing the anti-counterfeit act. I will also expound on the various agencies that emanate from these laws.
I. The Constitution of KenyaTo embody international laws into our national laws, Article 2 (6) of the constitution provides that "any treaty or convention ratified by Kenya shall form part of the law of Kenya under this Constitution". The Constitution of Kenya further defines property to include Intellectual Property and additionally obliges the State to support, promote and protect the intellectual property rights.
The constitution also mandates the state to protect national and cultural expressions and ensure communities receive royalties when their cultural rights are used. It also recognizes the role of science and technology in promotion of economic development.
In terms of dispute resolution, the Constitution provides for a judiciary system through which disputes involving intellectual property rights can be addressed. It establishes the superior courts being the Supreme Court, Court of Appeal and the High Court. The Subordinate courts are Magistrate Courts as well as Tribunals.
II. The Anti-Counterfeiting Act, 2008The Act establishes the Anti-Counterfeit Agency (ACA) which is mandated to combating and counterfeiting in Kenya. Other mandates of the agency include; to enlighten and inform the public on matters relating to counterfeits and; to also devise and promote training programs that increase awareness on counterfeiting.
The agency also works in collaboration with county government and relevant stakeholders in research and development, public outreach and enforcement.9
Through the agency, any person who is affected by counterfeits or one who suspects their goods to be counterfeited can file a report to the agency. The Act also provides for inspectors who are empowered to aid in combating trade in counterfeits by investigation and prosecution of infringement of intellectual property rights, they also have the power to search, seize and assess any goods suspected to be counterfeit.
Upon application by the brand owner to the Anti-counterfeit Agency, the agency works with the Commissioner for customs who is authorized to seize and detain goods suspected to be counterfeit.
The following tables (I&II below) represent statistical data on IPR complaints on counterfeiting and those prosecuted. Table I indicates that the number of IPR complaints has been progressively increasing and this reflects the rising number of counterfeiting cases.
Table II indicates the number of cases prosecuted by the Anti-counterfeit agency in court on behalf of the brand owner, upon its application.
The act establishes The Kenya Copy Right Board (KECOBO) whose mandates include but is not limited to the Registration of copyright works e.g. audio visual, music or forms of arts and developing and undertaking public training programs on copyrights and related rights.
KECOBO also deals with copyright infringement (piracy) and it has inspectors who have power to enter any premise that is reasonably suspected of infringement. The agency also has an anti-Piracy Security Device (APSD) that is tamper proof sticker and is applied on legitimate audio and audio-visual works (films, CDS, DVDS and VCDs).
The act also provides for special prosecutors who have mandate to bring the matters to court and prosecute cases filed in respect to crimes in committed in contravention of the Act. The Criminal Procedure Code of Kenya governs these criminal matters.
The Act prohibits counterfeiting of copyrighted materials e.g. importation of pirated copies or to use any copyrighted material in selling, distribution, importation and or exportation without the consent of the owner.
In relation to anti-counterfeiting, the agency maintains a memorandum of understanding with the Anti-Counterfeit Agency in a bid to work in a collaborative approach.10
IV. The Standards Act, 2012This act establishes the Kenya Bureau of Standards (KEBS)- whose main mandates includes Preparation of standards relating to products, measurements, materials, processes; certification of industrial products; assistance in the production of quality goods; and improvement of measurement accuracy and circulation of information relating to standards.
The importance of this agency with relation to counterfeiting is the control of quality of products before they enter the Kenyan market. It is particularly vital as most of the counterfeit products are of inferior quality and hence do not meet the requirement of acquiring a KEBS standardization mark. Besides product quality certification, the Bureau conducts market surveillance and works in collaboration with the Anti-counterfeit agency in apprehension of culprits of counterfeiting. 11
V. The Customs and Excise Duty Act, 2015This act establishes the Kenya Revenue Authority whose main mandate is to control goods at any point of entry into the Kenyan market and provide for management and administration of customs.
An IP rights owner can also file a complaint to the Commissioner of Customs and seek seizure and/or detention of goods about to be imported into Kenya that he/she knows/suspects to be counterfeit. On receipt of such application by the brand owner, the Commissioner is authorized to seize and detain goods suspected to be counterfeit. However, if the complaint is unjustly made, the owner of such goods may challenge the seizure at the High court seeking the goods to be released to him/her.
Additionally, KRA has in place a special unit to deal with counterfeiting, i.e. the Anti-Counterfeits and Smuggling Unit which is in a bid ensuring that counterfeits do not enter the country by seizing suspected products at the ports of entry and prosecuting importers. The agency also has market surveillance and smuggling office, which works hand in-hand with the anti-counterfeit agency.
The table III below represents data that represents the value of goods seized by the Kenya Revenue Authority (customs) that were suspected to be counterfeit from 2014 to the 2nd quarter of 2018.
The table IV below shows the value of seized goods destroyed by the Kenya Revenue Authority in collaboration with the Anti Counterfeit Agency which I expounded earlier that is only undertaken based on an order of the court.
Kenya is a member of The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement and takes great effort to comply with international standards of intellectual property protection. Article 51 of the TRIPS Agreement12 defines counterfeiting as: "counterfeit trademark goods" shall mean any goods, including packaging, bearing without authorization a trademark which is identical to the trademark validly registered in respect of such goods, or which cannot be distinguished in its essential aspects from such a trademark, and which thereby infringes the rights of the owner of the trademark in question under the law of the country of importation.
The business of counterfeiting is one of the largest informal forms of trade in Kenya and the impact of counterfeiting in Kenya cannot be overlooked. Further, the impact of information and communication technology (ICT) and trade liberalization have been mutually reinforcing and has led to the opening up of territorial borders resulting in a rise in free (uncontrolled) markets.13 The rapid growth in counterfeiting covers an increasingly wide scope that ranges from dilution of trademark, anti-competitiveness, loss of revenue, negative health impacts, undermining foreign direct investment, adverse health effects and so on.
Kenya is the biggest market in East Africa and serves as a hub to other neighboring countries. The East African Community aims to promote a common market which emphasizes on free movement of goods. Despite Kenya's competitive advantage alluding to its strategic position, the promotion of trade and free movement of goods results in a bigger market for counterfeit goods across East Africa.
A report by the Kenya Association of Manufacturers (KAM) 14, indicate that China is the main source of influx and trade in counterfeit goods results in an annual net loss of ＄368 million in Kenya and cost over US＄500 million in the East African annually in form of lost tax revenue annually.
Local industries, foreign direct investors and manufacturers are negatively impacted in various ways such as the negative impact on the brand image, loss of market share and sales, unfair competition and potential legal repercussions.
Tracking and enforcement of anti-counterfeiting takes up valuable resources and discourages innovation in new products, as companies fear unfair competition
4.1 Major challenges undermining enforcementFrom the standpoint of supporting Foreign Direct Investors, the enforcement of intellectual property rights is marred with many challenges. Some of the major challenges include but are not limited to the following;
i. Non-collaboration by of brand owners to file a complaint of counterfeits with the ACA;
ii. Failure to impound imports of counterfeit goods at the ports of entry,
iii. Overlapping agencies
I will expound of the above three main challenges that I feel hamper the efficient administration of anti-counterfeiting in Kenya.
i. Non-collaboration by of brand owners to file a complaint of counterfeits with the ACAThis is the most significant and relevant problem facing foreign companies in Kenya. Most of the companies, including foreign companies that have established business and invested in the Kenyan market do not work in a collaborative approach with the Anti -Counterfeit Agency. One of the plausible explanations is that some companies feel that by reporting the existence of counterfeits of their products destroys the corporate image to consumers and which they believe will subsequently reduce its sales.
According to Mr. Atsuhiko Naoe, the Executive Director of JETRO Kenya,15 the situation is worsened as some of the companies do not consider the margin of their products that are affected by counterfeits to be significant, hence at this point do not consider it as a threat that requires urgent attention.
ii. Failure to impound imports of counterfeit goods at the ports of entryThis problem is also related to the first one as companies are mainly notified by their agents and through market surveillance when an unauthorized or a counterfeit consignment is about to enter a country.
In Kenya, the main entry point for counterfeit goods in Kenya is the Mombasa port. Alluding to lack of sufficient training of receiving officers and corruption are the main factors that lead to the intrusion of counterfeits in the market. Most of the officers stationed at the port to examine goods before entry work with the customs office namely the Kenya Revue Authority.
Similarly, some of the goods enter the market through unscrupulous methods such as bribes and as a result do not undergo the customs. Additionally, despite the possession of the knowledge of an existing counterfeit consignment, some companies/brand owner fail to notify the authorities and/or the Anti-counterfeit agency and ultimately, the counterfeit products enter the market.
iii. Overlapping Agencies.One of the major challenges is the existence of overlapping agencies with different mandates are involved in implementation of intellectual property rights. As earlier explained in the report, Kenya has so many intellectual property and related agencies, which sometimes bring about competition on implementation of mandates interagency.
While the agencies argue that they work in a coordinated approach, on a practical level, it appears that coordination may not always attained and there is very little report on agency collaborative measures.
4.2 Counterfeiting and Foreign Direct InvestmentOn one hand, promotion of foreign direct investment is one of Kenya's key strategies of fostering economic growth. On the other hand, foreign companies are seeking to constantly expand their markets and one of the lucrative markets is Africa.
Generally, Kenya has a positive investment climate and is strategically placed in Africa as a hub for East African countries and a gateway for international firms seeking a location for their regional or pan-African operations and it has arguably been one of the largest recipients of FDI inflows in Africa.
The scope and effects of counterfeiting extends beyond trademark and brand dilution, public health and safety or consumer confusion. Counterfeiting undermines a country's economic growth in lieu of the fact that foreign investors are preemptive in investing in a country where their products are highly likely to be counterfeited.
Counterfeit products are anti-competitive and dilute profit margins. The counterfeiting problems have in the past resulted in companies closing shop as they are unable to effectively compete. According to a report16 by the by the Kenya National Bureau of Statistics (KNBS), about 2.2 million Micro Small and Medium Enterprises (MSMEs) shut down in the last five years most companies established in Kenya have been unable to effectively compete in the market and one of the contributing factors is the surplus of counterfeits of their products.
Despite the potential of the Kenyan market for trade and investment, foreign companies must recognize the need to appreciate the effect of counterfeits on their products in this market and enforce a strategic plan in collaboration with relevant authorities.17
Despite ensuring the efficient protection of intellectual property rights, foreign companies doing business in Kenya must among other things employ the following strategies;
I. A collaborative approach with government Agencies (Public-Private Coordination) administering and enforcing IP rights, as this will ensure their Intellectual Property rights are well protected and infiltration of counterfeits is minimized. This will entail reporting of suspected activities and aid in border control and prosecution of cases in court e.g. production of evidence as most anti counterfeit claims fail in court.
II. A push for a joint effort among companies (Private Sector Coordination). Private companies can come up with ways to protect their products from being counterfeited e.g. joint educational forums and public awareness. The Anti-counterfeit agency is mandated to do so but is at times faced with shortage of personnel or lack of funding hence its unable to be as intrusive as it was reasonably foreseen at the time of its establishment.
III. Increase public outreach and awareness of counterfeiting through various programs e.g. through their websites, advertisements, and social media to ensure that the target market is not affected by counterfeits and that they are reasonably able to differentiate genuine products from counterfeits.
IV. Production of quality but low-cost products to match the increasing demand of quality products with an affordable price as this is where most counterfeits are able to compete. As discussed in the introduction, in Kenya majority of the citizens are poor and are therefore unable to meet the price of quality products hence resulting to cheaper options of readily available counterfeits. As way of suggestion, the bottom of pyramid business model whereby low income markets are reached through low price and low margin.
Kenya recognizes the importance of Intellectual Property protection as evidenced by the legislative and institutional framework to enforce intellectual property. Nonetheless, there needs to be a push for the government and relevant stakeholders' collaboration to tackle the vice of counterfeiting is necessary.
In terms of fostering trade and business relation, I believe that an efficient legislative system is a great basis for instilling confidence in investors as companies are secured that their products will be able to thrive in a fair and competitive market.
From a historical point of reference, the relationship between law and economic development has formed a great number of modern social theory, attracting great contribution from distinguished philosophers like Max Weber and Émile Durkheim.
The emergence of Japan as a highly developed and market-oriented economy is of great admiration. Japan has over time successfully reinvented and industrialized its economy thereby becoming a superpower in the world. While many other factors contributed to the resurgence of its economy, I believe that reform in its legal regime played a vital in revitalization of Japan.
However, most developing countries, Kenya included are still marred with difficulties in improvement of their legal system in a bid to foster economic growth. The world is now a global village and with the increasing need for heightened international cooperation, trade and modernization, it is vital to explore various methods through which big economies like Japan have successfully and consistently maintained economic growth.
I am positive that understanding of Japan's development experience through improved legal system will map a way for Kenya to also improve its intellectual property system. However, a coordinated approach envisaged by this report will go a long way in ensuring intellectual property rights are well protected which will result in foreign direct investment and ease of doing business in Kenya.18
1 World Bank Group (2017). Doing Business Economy Profile: Kenya. World Bank, Washington, DC. © World Bank. Retrieved from http://hdl.handle.net/10986/25565
2 World Poverty Clock Report (2017) Retrieved from https://worldpoverty.io/
3 OECD (2016) "Trade in Counterfeit and Pirated Goods: Mapping the Economic Impact" retrieved from https://euipo.europa.eu/tunnelweb/secure/webdav/guest/document_library/observatory/documents/Mapping_the_Economic_Impact_study/Mapping_the_Economic_Impact_en.pdf
4 Kenya's long-term national planning strategy that aims at creating a globally competitive and prosperous country and providing a high quality of life for all its citizens
5 Ministry of Foreign Affairs Japan, (April 2018) Japan-Kenya Relations (Basic Data) https://www.mofa.go.jp/region/africa/kenya/data.html
6 Ministry of Foreign Affairs, Japan (August 2016) TICAD VI Nairobi Declaration: Advancing Africa's sustainable development agenda TICAD partnership for prosperity https://www.mofa.go.jp/af/af1/page3e_000543.html
7 The Business Daily, (March 8, 2012) what you need to know when importing a car https://www.businessdailyafrica.com/magazines/What-you-need-to-know-when-importing-a-car/1248928-1361848-9w6cxy/index.html
8 Article 40 (5) of the Constitution of Kenya provides that, "the State shall support, promote and protect the intellectual property rights of the people of Kenya.
9 Interview with Dr. John Akoten (20th March, 2018) Deputy Director, Research, Awareness, Policy and Quality Assurance at Anti-counterfeit Agency.
10 Interview with Kaindo Kiarie (22nd March 2018) Legal State Counsel at Kenya Copyright Board, Nairobi.
11 Interview with Doreen Kerubo (26th March 2018) Officer Market Surveillance Department at Kenya Bureau of Standards
12 The agreement for on Trade-Related Aspects of Intellectual Property Rights (TRIPS), an international agreement that provides for extensive protection of intellectual property by member states.
13 Ben Sihanya, (2016) "Intellectual Property and Innovation Law in Kenya and Africa: Transferring Technology for Sustainable Development" IL &SM publishers, at pages 466-492
14 Kenya Association of Manufactures (2018) MANUFACTURING PRIORITY AGENDA, Retrieved from http://kam.co.ke/kam/wp-content/uploads/2018/02/2018-Manufacturing-Priority-Agenda.pdf
15 The Japan External Trade Organization is a non-profit organization that assists Japanese companies in trade and investment in overseas markets.
16 Kenya National Bureau of Statistics, (2016) MSME Report, retrieved from https://www.knbs.or.ke/download/2016-msme-basic-report/
17 The government has since introduced a multiagency taskforce in 2018 comprised of the Kenyan Revenue Authority (KRA), Kenya Bureau of Standards and the Anti-counterfeit Authority. The committee is still on the implementation stages and not much progress has been reported at the time of compiling this report.
18 The author of this paper is now learning about Japan's legal system and specifically with reference to anti-counterfeiting methods and affluent intellectual property development strategies.
