Counterfeiting, Unfair Competition, and Their Convergence Under Iranian Law

The production and distribution of counterfeit goods and pirated works are not merely commercial disputes; they are criminal behaviours with wide-ranging consequences. While intellectual property owners are directly affected through loss of revenue and dilution of their rights, the harm extends much further. Consumers may be exposed to unsafe or substandard products, and on a macroeconomic level, persistent counterfeiting undermines market integrity, discourages investment, and distorts fair competition.

Legal systems generally combat these practices through two principal mechanisms: intellectual property infringement proceedings and legal actions based on unfair competition. Historically, conventional legal analysis by commentators and courts has drawn a clear conceptual boundary between these two doctrines. In practice, however, the structure of modern commerce no longer supports such a clear-cut distinction. Today’s production and distribution models operate through highly fragmented networks of manufacturers, intermediaries, and online vendors that interact across multiple jurisdictions. E-commerce ecosystems and platform-based trade have lowered entry barriers while simultaneously obscuring accountability, enabling wrongdoers to operate through layers of anonymity, shell entities, or shifting digital storefronts. The decentralization of commercial activity and the speed at which goods can be promoted and circulated blur the functional boundaries between different forms of market misconduct. As a result, maintaining a strict conceptual separation between counterfeiting and unfair competition appears increasingly artificial when assessed against the operational realities of contemporary trade.

To understand how these concepts intersect under Iranian law, it is useful to examine their respective definitions and treatment.

Counterfeiting, understood as the unauthorized imitation or reproduction of another party’s IP assets to pass the goods or services off as genuine, is not expressly defined as a standalone concept in Iranian IP legislation, namely the most recent statute enacted in 2024, the Industrial Property Protection Law (the 2024 IP Law). Rather, it is treated as a form of unauthorized use and exploitation of trademarks or trade names that results in consumer deception.[1] In addition, counterfeit trademarks are treated as a form of forgery and are prohibited under the Iranian Penal Code[2].

Unfair competition, on the other hand, refers to abusive and dishonest business practices aimed at harming competitors. The 2024 IP Law follows the examples of unfair competition set out in Article 10bis of the Paris Convention, which prohibits acts contrary to honest commercial practices, such as creating confusion with a competitor’s goods or activities, discrediting competitors, or misleading the public as to the nature or characteristics of goods[3]. Under Article 131(4) of the 2024 IP Law, unfair competition is also characterized as an IP infringement and is subject to criminal prosecution.

Thus, Iranian law addresses the relationship between counterfeiting and unfair competition by placing both within the broader category of IP infringements, each capable of attracting criminal consequences. The connection between them can be distilled into two shared characteristics: deception of consumers and the pursuit of illegitimate economic benefit. Because infringers typically avoid paying taxes, they also evade the costs associated with marketing, instead relying on the established reputation of the counterfeited trademark or pirated copyright. They often cut corners on quality materials and do not bear the expenses for original creative designs, which gives them an unfair economic advantage. In many instances, counterfeiting inherently constitutes unfair competition. However, the converse does not necessarily apply; certain forms of unfair competition do not involve the imitation or falsification that defines counterfeiting.

From a procedural standpoint, rights holders in Iran may invoke multiple legal bases when pursuing enforcement. A claimant affected by counterfeit activity can rely simultaneously on trademark infringement and unfair competition arguments to reinforce their position before the courts. That said, Iranian courts do not simply aggregate penalties across legal grounds. Rather, judges determine sanctions based on the specific facts of the case and may adjust fines or order supplementary measures accordingly, without formally cumulating separate punishments.

Available remedies under the 2024 IP Law include financial penalties, compensation for proven damages, seizure and destruction of infringing goods, and confiscation of unlawfully obtained profits. Notably, imprisonment is generally reserved for certain categories of infringement, particularly those committed through digital or online channels, reflecting the heightened risks associated with cyberspace violations.

A recurring practical difficulty in both counterfeiting and unfair competition litigation concerns the quantification of damages. Iranian courts do not apply statutory or pre-established damage awards in IP cases. Instead, judges may require disclosure of accounting records, sales data, or market information to assess the extent of harm—documentation that companies are often hesitant to submit due to confidentiality and competitive concerns.

In conclusion, enforcement alone is not a comprehensive solution. Litigation frequently functions as a reactive measure, addressing harm after it has occurred. Sustainable protection of intellectual property requires a broader strategy: diminishing the financial incentives that drive counterfeiting and dismantling the commercial structures that enable it to thrive. For practitioners, the objective should therefore extend beyond court proceedings to include preventive and systemic approaches that safeguard market integrity over the long term.

[1] Article 131(2):  The commission of any of the following acts constitutes a criminal offence, and the offender shall, in addition to compensating damages and confiscation of the property and proceeds derived from the offence, be sentenced to a fifth-degree monetary fine or to a fine equivalent to twice the amount of the damages incurred, whichever is higher:

1. …
2. Any unauthorized exploitation or use of a trade name, trademark, collective mark, or certification mark in violation of the provisions of this Law, in a manner that ordinarily results in misleading the public.

[2] Article 529 of the Islamic Penal Code (Ta’zirat and Deterrent Punishments):
“Anyone who forges the seal, punch, or mark of any non-governmental company established in accordance with the law, or of any commercial establishment, or who knowingly uses such forged items, shall, in addition to compensating the damages caused, be sentenced to imprisonment from three months to two years.”

[3] Article 129: The following acts shall constitute unfair competition:

1. Making false statements against a competitor that result in the removal, reduction, or damage to trust in the competitor’s enterprise, goods, or industrial and commercial activities.
2. Engaging in conduct that leads to similarity between one’s own goods or services and those of a competitor, provided that such similarity is likely to mislead consumers.
3. False or misleading advertising, or any presentation of information or creation of a false impression that misleads the public regarding the nature or quality of products, including their components, validity period, origin, method of manufacture, quantity or amount, or availability for use.
4. Misleading comparative advertising by a competitor that harms the reputation or credibility of the competitor’s goods, services, or business activities.
5. Advertising that fails to distinguish between an original product and a product manufactured under license that does not possess the quality of the original product.
6. Any collusion aimed at increasing or decreasing the price of goods or services for the purpose of eliminating competitors.

Note: An expert opinion issued by a competent specialized authority within the scope of its legal powers regarding goods or services shall not constitute unfair competition.