Counterfeiting and the Inclusive Growth Paradox: Why IP Protection Fails Small Businesses Most
Author: Manan Doshi
Consider two small manufacturers, both operating out of industrial estates on the outskirts of an Indian city. The first has spent a decade building a modest but loyal customer base for its branded consumer product, only to discover that a look-alike product, bearing a deceptively similar mark and near-identical packaging, has begun undercutting it in the very markets it built. The second has, without any intention to deceive, adopted a brand name that a much larger, well-resourced company claims infringes its registered trademark, and now finds itself served with a cease-and-desist notice threatening suit, injunction, and damages running into crores. Both scenarios are common in Indian trademark practice. Both illustrate a structural problem that the discourse on counterfeiting rarely addresses: the burden of India's intellectual property regime, whether as victim or as respondent, falls disproportionately on those least equipped to bear it.
The public conversation on counterfeiting is dominated by the interests of large corporates, luxury brands, and multinational conglomerates. This is understandable, since these entities suffer visible and quantifiable losses, and their enforcement actions, often through well-funded brand protection cells, generate headlines. But this framing obscures a more troubling reality. Counterfeiting and trademark infringement, and the asymmetric capacity to respond to either, pose a distinct and under-examined threat to India's micro, small, and medium enterprises ("MSMEs"), precisely the segment that policy consistently identifies as central to inclusive growth.
The Asymmetry of Enforcement
Large enterprises typically maintain in-house legal teams, dedicated brand protection budgets, and standing relationships with IP counsel who can act within days of a counterfeit product surfacing. They can afford to file suits for infringement and passing off under the Trademarks Act, 1999, seek ex parte ad interim injunctions, and, where necessary, invoke the criminal machinery under Sections 103 and 104 of the Act. They can absorb the cost of prolonged litigation before Commercial Courts, and they can afford to lose small battles in the pursuit of long-term deterrence.
MSMEs, by contrast, rarely have any of this. A small manufacturer whose mark is counterfeited must first recognise the infringement, then locate and retain IP counsel, then fund litigation whose timelines, notwithstanding the establishment of specialised Commercial Courts and IP divisions in several High Courts, remain lengthy relative to the pace at which counterfeit goods can be produced and distributed. Many such enterprises never litigate at all. They either absorb the loss of goodwill and market share, or attempt informal remedies, such as approaching local police or trade associations, that offer no binding or lasting protection. The result is that the very enterprises whose growth trajectory depends most heavily on protecting a nascent brand identity are the ones least able to use the legal tools designed to protect it.
The Other Side of the Asymmetry
The same imbalance operates in reverse when a small business is accused, rightly or wrongly, of infringing a larger entity's registered mark. Cease-and-desist notices from established brands are, as a matter of practice, drafted to project maximum leverage: sweeping claims of dilution, demands for immediate cessation of business, and the implicit threat of protracted and expensive litigation. For a large respondent, such a notice is a manageable cost of doing business. For a small enterprise operating on thin margins, the same notice can be existential, whether or not the underlying claim would ultimately succeed on merits. Many small businesses simply capitulate, rebranding at considerable cost, not because the infringement claim is necessarily strong, but because the cost of testing it in court is prohibitive. Genuine inclusion in the marketplace requires not only the freedom to build a brand, but a realistic ability to defend one's right to use it, including against overreach.
Why This Matters for Inclusive Growth
Policy discourse on inclusive growth has rightly focused on access to capital, markets, and digital infrastructure for small enterprises. Access to effective legal protection for intangible assets has received comparatively little attention, despite the fact that brand equity is often the single most valuable asset a small consumer-facing business possesses. An MSME that has spent years building recognition for its mark, only to see that recognition eroded by counterfeiters it cannot afford to pursue, or coerced away by a rights-holder it cannot afford to resist, experiences a form of exclusion that is no less real for being procedural rather than financial in origin.
This is not an argument against IP enforcement. Robust protection of trademarks and other intellectual property is essential to a functioning market economy, and counterfeiting causes genuine harm that deserves genuine remedy. The argument is narrower: that the infrastructure through which IP rights are enforced in India remains calibrated to the capacities of large, well-resourced entities, and that this calibration produces outcomes at odds with the stated goal of inclusive growth.
Toward a More Inclusive IP Enforcement Framework
A few interventions, none of them radical, could meaningfully narrow this gap. First, dedicated legal aid or subsidised counsel schemes for MSMEs facing IP disputes, whether as claimants or respondents, would allow smaller enterprises to test and defend claims on their merits rather than being forced into premature settlement or silent loss. Existing MSME support schemes could be expanded to explicitly cover IP-related legal costs, alongside the credit and market-access support they currently provide.
Second, expanded trademark registration awareness and facilitation drives, run in partnership with industry associations and MSME clusters, would reduce the incidence of unintentional infringement and simultaneously strengthen small enterprises' own claims to protection, since registration remains a foundational prerequisite to swift enforcement.
Third, continued strengthening of summary and fast-track procedures before Commercial Courts and specialised IP divisions, with realistic cost and timeline expectations communicated to first-time litigants, would help close the gap between the formal availability of a remedy and its practical accessibility to a small business owner without an in-house legal team.
Fourth, professional bodies and law firms engaged in IP practice, including through structured pro bono or reduced-fee initiatives, have a role to play in absorbing some of this gap, particularly given the concentration of IP litigation expertise within a relatively small community of specialised practitioners.
Conclusion
Inclusive growth is, at its core, a question of who gets to participate meaningfully in economic life, and on what terms. For India's MSME sector, participation increasingly means building and defending brand identity in competitive, often crowded markets. An IP enforcement ecosystem that functions well only for those who can already afford it undermines that participation as surely as any gap in access to credit or infrastructure. Addressing the counterfeiting problem seriously, and addressing it with an eye to inclusive growth, requires looking beyond the interests of large rights-holders to the far larger, far more vulnerable population of small enterprises for whom a trademark is not merely an asset on a balance sheet, but the accumulated goodwill of years of work.