Beyond Trademark Infringement: Bold Government Plan to Switch off Fake Phones

The Communications Commission of Kenya (CCK) has announced a two step approach to phase out counterfeit phones in Kenya. In the first phase, mobile operators are supposed to stop activating new SIM cards used on counterfeit handsets with effect from the end of this month. The second phase is to de-activate all counterfeit phones starting from December 31, 2011.

The Anti Counterfeit Agency (ACA) estimates that Sh3.2 billion is lost annually through tax evasion and sale of counterfeit phones. One of the main problems that the ACA faces in enforcing the Anti Counterfeit Act has been lack of complaints from mobile phone manufacturers whose products are being counterfeited. According to the Act, the ACA can only exercise its enforcement and prosecutorial powers once a complainant comes forward. Hence the ACA works closely with both the Kenya Police and Customs Agents from the Kenya Revenue Authority to ensure that counterfeit products entering the country or circulating within the country are inspected and seized. However the ACA has for a long time complained that mobile phone manufacturers (through their licensed distributors in Kenya) do not come forward and complain or even share information in their possession regarding counterfeits and counterfeiters at large. The ACA reckons that most of the mobile phone manufacturers are afraid that reporting counterfeiters to the police will negatively affect their market share and erode the goodwill associated with their trademarks.

Against this backdrop, the ACA has teamed up with CCK and decided to craft an interagency strategy to deal with the high numbers of counterfeit phones in the market. Aside from the obvious health and safety risks, counterfeit phones are a security risk which in the past have allowed criminals to steal or extort money from mobile phones users without being traced. This explains why the CCK is currently working on Regulations to the Communications Act to provide for mandatory SIM card registration on purchase and also to require mobile operators to deactivate all counterfeit phone users on their respective networks.

As you’re aware, original mobile phones come loaded with a unique number commonly known as the International Mobile Equipment Identity (IMEI), which can be used to identify counterfeit gadgets. Mobile operators say genuine phones register both the IMEI code along with callers’ number on their systems while the fake gadgets record only the caller’s details.

However the government’s plan to switch off fake phones has elicited sharp criticism especially from consumer protection lobby groups. Stephen Mutoro, Secretary-General of Consumer Federation of Kenya (Cofek) was quoted in the Business Daily saying: “Whereas we support the move in principle, it is important to address the influx of these fake gadgets at the port other than punishing the end-users”.

On his part the Executive Director of ACA, Stephen Mallowah says whereas all policies “must have their costs”, mobile operators were largely to blame for activating phones they detected were faulty and should bear the compensation burden — if any.

The Business Daily also reports that the government plan is set to benefit manufacturers such as Nokia, Samsung and Sony Ericsson as consumers will have to spend at least Sh5 billion to replace the counterfeit phones.

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