COVID-19: Pressure points: COVID Counterfeits - combating counterfeiting, product replacement, misleading advertising and cyber crime in the current crisis

Whilst as a global community we have witnessed extreme acts of kindness, compassion and camaraderie since the start of the COVID-19 crisis, regrettably, some have sought to exploit the crisis. From sales of counterfeits, mis-substitution of products and misleading advertising, to reverse engineering and cyber attacks, intellectual property (IP) rights holders are amongst the many becoming victims of such activities. Here we ask what has been happening and what IP holders can do about it. We provide an overview of the options available for IP rights holders to limit the damage caused by such activities, and, if necessary, enforce their rights.

What has been happening?

A range of counterfeit medicines, vaccines and other devices which claim to prevent, test for or even cure COVID-19 have been introduced into the market in the wake of the global epidemic. In some cases these have been found to be relatively non-harmful substances, such as paracetamol or caffeine tablets, whereas in more extreme cases the ingredients have been far more dangerous, such as thiocyanate and hydrogen peroxide. Similarly, for Personal Protection Equipment (“PPE”), counterfeit face masks have been produced that have not been thoroughly tested and consequently do not bear the required “CE” mark.

Incidences of cybercrime are also on the rise as criminals take advantage of the unique opportunity COVID-19 has provided. Included within the broad range of businesses that have been targeted there have been ransomware attacks on scientific testing centres and laboratories and phishing attacks on members of the public, through emails claiming to contain important information from the government.

Supply chains have also been weakened by the crisis, with suppliers either unable to meet demand or unable to sustain themselves with the reduction in demand. In the former case, the temptation is for purchasers to seek alternative sources for required products or component products, leading to an increase in counterfeit or substitute products being offered on the market, possible reverse engineering attempts or misleading advertising of alternatives as suitable replacements.

Although this note focuses on those seeking to exploit the COVID-19 crisis, many people and companies have rallied together to fight the pandemic, such that there have been significant collaborative efforts aimed at solving the medical issues presented by COVID-19 (see our publication COVID-19 Global: Collaboration is key in the race to develop a vaccine).

What can IP rights owners do about it?

Considerations include infringement of patent and trade mark rights, parallel imports, Customs seizure, issues with threatening the supply chain, misleading advertising and passing off, falsified medicines provisions and cyber threats.

Patent infringement

Where the holder of a patent, or the exclusive licensee of a patent, is aware of an infringement of its rights, patent infringement proceedings can be commenced in the national courts where the patent is in force. Where the invention relates to a product, it will be an infringement of the patent right in the country of export to distribute the product, and also an infringement in the country of importation.

A rights holder can also approach the national courts to obtain additional information on possible infringement: for example, in the UK, a type of order called a Norwich Pharmacal order can be sought for the purpose of identifying the wrongdoer (such as the supplier of the allegedly infringing goods or other distributors).  Applications for disclosure and non-party disclosure are also available, where infringement proceedings have been commenced.

Reverse engineering may be attempted to make up for the lack of supply of patented goods or in an attempt to “design around” a patented part or product that cannot be sourced or for which there is a significant delay. If a patent is in force and the inventive concept of the patent is infringed then so-called “designing around” will not avoid infringement, however if alternative ways to achieve the same effect may do so, depending upon the way the patent’s claims are structured.

Trade mark infringement

The Trade Marks Act 1994 ("TMA") contains provisions covering UK trade mark infringement, as well as criminal offences relating to anti-counterfeiting. Further, both the EU Trademark Regulation (2017/1001), which governs the unauthorised use of EU trade marks, and the EU Customs Enforcement Regulation (608/2013), which concerns the customs enforcement of IP rights by customs authorities, have effect in the UK. The Customs Regulation makes it possible for Customs authorities to have intercepted goods destroyed, without the need for a Court to determine whether any right has been infringed under national law. See more on this above.

Whether opportunistic trade mark applications for "Covid" or "Coronavirus" may have any value is another question. During March 2020, there were 7 UK trade mark applications and one EU trade mark application designating the UK for "Coronavirus" or variants thereof (including for "KEEP CALM AND CORONAVIRUS ON"!), as well as 12 applications for "Covid" or variations thereof, although the earliest two of these have been withdrawn. The remaining applications are under examination and it remains to be seen whether they may be registered.

Civil actions:  For counterfeit goods, the use of a sign in the course of trade will normally be identical to the registered trade mark and in relation to identical goods. Accordingly, this constitutes a subcategory of infringement under Section 10(1) of the TMA) or Article 9(2)(a) of the Trade Mark Regulation in relation to EU trade marks). In the case of use of an identical mark on identical goods, the trade mark owner is not required to demonstrate a likelihood of confusion.

If urgent action is required, in certain circumstances UK courts can grant interim injunctions and search and seizure orders against the infringer. These orders can be applied for without notice to the infringer and granted within days. Where urgent action is not warranted, then the trade mark owner may initiate proceedings seeking permanent injunctions against future infringement, orders for the infringer to pay damages or an account of profits to the trade mark owner, orders for the infringer to deliver up or destroy the infringing goods and costs.

Criminal Actions: Under section 92 of the TMA, it is a criminal offence to use without the proprietor's consent a sign identical with a trade mark, or likely to be mistaken for that mark, with a view to make a gain or to cause a loss to another. The Fraud Act 2006 and the Proceeds of Crime Act 2002 may also be relevant to criminal IP cases:

• Under the Fraud Act, it is a criminal offence to dishonestly make a false representation with an intention to make a gain for oneself or another or an intention to cause loss to another or expose another to a risk of loss, and to make or possess articles for use in or in connection with fraud, and to make or supply articles for use in fraud.
• The Proceeds of Crime Act provides for the recovery of assets and proceeds obtained through crime, including IP crime, as well as recovery of proceeds of crime through civil proceedings where a criminal conviction has not been possible.

Trade mark owners have the right to bring private prosecutions under the various criminal IP provisions. Alternatively, the Crown Prosecutions Service may bring criminal proceedings against suspected offenders, but has no influence over private prosecutions. National Trading Standards also provides national and local protection and enforcement of IP rights, and is empowered to bring criminal prosecutions themselves, issue statutory notices and cautions, and obtain search and seizure orders from the courts. Further, the Police Intellectual Property Crime Unit (PIPCU) is the specialist unit within the police service tasked with tackling serious and organised IP crime and in particular IP crime committed online.

Parallel Imports

During the current times of high demand for particular products and the potential/actual breakdown of normal supply chains, there may be an increase in supply from jurisdictions where products are available at a lower price or simply are still available. This leads to what is called parallel imports or grey goods markets, where products that were only supposed to be supplied to one country's market are sold into another. IP rights can be used to prevent this except where they have been "exhausted". IP rights in goods that have been put on the market in the EU with the consent of the IP right owner and are now circulating in the EU are deemed exhausted, unless there has been repackaging of the product in the case of pharmaceuticals, and then generally only where there is some element of risk to the ultimate consumer. It may be possible to prevent importation from third countries however, depending on whether the courts consider international exhaustion of rights to have occurred. Much will depend on evidence of consent or otherwise of the IP right owner.

Customs seizure

When it is not clear whether an infringement of intellectual property rights is occurring, or by whom, it is important to turn to the national customs authorities, which monitor the goods that are passing through their borders each day.

EU Regulation No 608/2013 gives patentees an avenue to ask border authorities to inspect and seize possibly counterfeit and pirated goods upon importation into the member state.  Under this regulation, an application can be made to each customs authority to request them to seize goods that are suspected of infringing an intellectual property right.  Such application should provide the authority with sufficient information in which to identify possibly infringing goods, including detailed descriptions and photographs of the goods and any likely packaging or labelling. (See above for more on trade mark infringing goods).

If possibly infringing goods are seized by customs, the authority is to provide the applicant with information about the goods, including photographs of goods and the names and addresses of the consignee and the holder of the goods, and their origin, provenance and destination. In some instances, it will be possible to request that a sample of the goods be analysed The applicant can request destruction of the goods if they consider that the goods are indeed infringing their rights, and/or the applicant can commence legal proceedings for infringement.

Threatening an infringer’s supply chain

At first glance, it may appear that a quick way to stop infringements would be to contact those retailing the infringing products or supplying materials to the infringer for their manufacture. However, the national laws on unjustified/groundless threats (such as those in the UK, as updated by the Intellectual Property (Unjustified Threats) Act 2017) could result in liability and proceedings against the rights owner making such a threat. Under UK law threats could be actionable as unjustified threats as a matter of patent, trade mark or design law if threats are made in relation to secondary acts of infringement, such as sale or supply of essential means. As a consequence, great care needs to be taken when sending letters threatening action to anyone other than primary infringers for primary infringing acts.

Misleading advertising and passing off

Misleading advertising and adverts that attempt to pass goods off as those of another, are both actionable and injunctions can be obtained to stop these activities. Misleading advertising can also be a criminal offence (corporate and directorial), in a B2B context, under the Business Protection from Misleading Marketing Regulations 2008 (BPRs), and, in a B2C context, under the Consumer Protection from Unfair Trading Regulations 2008 (as amended by the Consumer Protection (Amendment) Regulations) (CPRs).

The CPRs protect the consumer against unfair commercial practices including misleading actions and omissions, which are prohibited under these regulations. The BPRs prohibit advertising that misleads traders and define advertising as misleading where it: "(a)  in any way, including its presentation, deceives or is likely to deceive the traders to whom it is addressed or whom it reaches; and by reason of its deceptive nature, is likely to affect their economic behaviour; or (b)  for those reasons, injures or is likely to injure a competitor". Anything that would breach the CPRs is also a breach of the BPRs. This could include false attribution of intellectual property rights.  Enforcement is via enforcement authorities (usually Trading Standards) which can require undertakings and bring injunction proceedings.  The BPRs also regulate comparative advertising which is could also be relevant in COVID-19 situations e.g. where products are being advertised or compared as substitutes for example, although there are no criminal sanctions for comparative advertising, only regulatory ones as described above.

For passing off to be made out there has to be an act of misrepresentation that goods/businesses are those of another, that other must have demonstrable goodwill in those goods/business and there must be actual or likely damage.  Passing off actions can be difficult to bring without significant evidence and individual instances of confusion as to the origins of the goods or services being offered. However, the goodwill-owner can bring the action themselves such that it has more control over enforcement and is not reliant on the relevant enforcement authorities to bring actions under the BPRs or CPRs.

Online sales

Online distribution of counterfeit goods is becoming ever more prevalent. Use of social media platforms, including the use hidden closed group on platforms such as Facebook, is now considered to have overtaken the more traditional auction sites and online marketplaces. This can, unfortunately, make such sales harder to detect. Online platforms also have procedures to take down infringing content and listings of counterfeit goods, but the efficiency of these procedures, and scope of what content can be removed, vary between sites.

In addition, the following steps can be considered:

• An action before Nominet, which is the the ‘.uk’, ‘.cymru’ and ‘.wales’ domain registry,. It offers a domain name dispute resolution service (DRS) that rights holders can use to take down domain names used in relation to online IP infringement. Nominet will also suspend domain names involved in online IP infringement in response to requests from PIPCU, who are focussed on stopping online counterfeit trading and can bring prosecutions and have assets seized under the Proceeds of Crime Act.
• Seeking an order from the courts against the internet service providers (ISPs) to block websites known to host infringing content under Section 97 of the Copyright, Designs and Patents Act 1988.
• Involving the National Trading Standards' e-Crime Team, which is focused on investigating online crime, including counterfeiting and IP crime, and has the power to seize counterfeit goods and takedown of infringing website listings.

Falsified Medicines

In relation to medicines, the Falsified Medicine Directive (the “FMD”)) may be of assistance (Directive 2011/62/EU which amended Directive 2001/83/EC on the Community code relating to medicinal products for human use in order to prevent the entry of falsified medicinal products into the legal supply chain). A falsified medicine is defined by the European Medicines Agency (“EMA”) as a "fake medicine that passes itself off as a real, authorised medicine".  The FMD contains provisions requiring Member States to impose penalties for acts involving falsified medicinal products however sold.

The UK implemented the FMD via the Human Medicines Regulations 2012, as amended by two further statutory instruments the following year (the “Regulations”). The Regulations make it a criminal offence to import, manufacture or distribute active substances unless they are registered with the relevant licensing authority and meet stringent regulations elsewhere in the legislation.

Therefore, although not a direct remedy for a rights holder, these provisions offer reassurance to pharmaceutical manufacturers as the Regulations provide barriers to, and sanctions against, those involved in activities relating to falsified medicines if they attempt to introduce falsified medicines into the pharmacy supply chain.

Key contacts and Authors