The Rise of Counterfeit Goods And Measures To Protect Intellectual Property Amidst COVID-19

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Where COVID-19 is creating havoc, it gets difficult to think of protecting brands. The twin factors for the same are, failed due diligence and reliance on third parties. Furthermore, control of counterfeiters on the online marketplace also makes it vulnerable. The pandemic has aggravated economic concerns. Operation Pangea XIII of Interpol has seized 34,000 counterfeited masks. Yet, now with the registry functioning, the risks of infringement can abate.

Introduction

According to TRIPS, Counterfeiting is an unauthorized imitation of registered products. Under the Trademarks Act, infringement is a violation of proprietors’ exclusive rights. Panic buying and lack of surveillance on the supply chain have increased counterfeits. 

The FDA seized 2 lakh fake sanitizers from a Kandivali distributor, Riddhi Siddhi. Also another firm, Sanskar Ayurved, selling products under Safe Hands, was booked for counterfeiting. These trends suggest the necessity to secure brands. Stockpiling of counterfeits due to paucity leads to losses of taxes and revenues. 

At times, administrative difficulties cause practical delays. One example is Section 115(4) of the Trademarks Act. As per this, the police have to get opinions from the Registrar before search and seizure. In COVID-19, it seems to be an impossibility. Due to the lockdown, supplier and consumer liquidity concerns have increased. The Government has made Competition rules stringent. 

Product replacements due to failure of the supply chain have increased counterfeits. With the pandemic outbreak, contractual terms have been revisited. Primarily, boilerplate and termination clauses are being looked into. This is because businesses are no longer in a position to honor their terms. With such factors, it becomes necessary to check the counterfeit influx into markets. 

Anti- Counterfeiting Measures for Essential and Non-essential Goods

Essential Commodities are not defined in the Essential Commodities Act. However, there are 9 items in the Schedule to this Act. The latest addition has been of masks and sanitizers due to COVID-19. The government controls the production, supply, and distribution of such commodities. Also, the Government imposes limits on stockpiling. Due to COVID-19, these essential goods have the requisite permission for sale.

Yet, there are chances of mounting counterfeits due to a lack of police scrutiny. A few measures are investigations by agencies and a stringent online monitoring program. Mutual agreements between online marketplaces and verified vendors are also effective measures. Caution notices and even cease and desist notices could serve the purpose. If infringement continues, enterprises should file criminal complaints under the Trademarks Act. 

Non-essential goods are those on which the government doesn’t exercise much surveillance. Hence, these are more susceptible to counterfeiting, especially during COVID-19. Moreover, due to the current scenario, the sale of goods is now permitted on online platforms.

Other Measures 

One measure to curb counterfeits is internal audits and the use of helplines. Proper identification marks and consumer education can also curb the menace. Constant vigilance on new marks can help to file Notice of Opposition.

An illustration of what e-commerce sites can do is the Brand Shield program of Snapdeal. In Brand Shield, there exists a three- checkpoint process to check counterfeits. It is a structured interaction wherein every infringement gets reported. After this, it will take down the infringing product within one business day. This is also in compliance with the IT Act and Intermediary Guidelines, 2011.

Mrs. Twinkle Maheshwary, IP Professor at NMIMS School of Law said:

“The best way to reduce infringement is by filing. Yet, to avoid infringements, awareness among customers is primary. The means to achieve the same is social media. Trademarks should remain secured for related domains.” Through these measures, counterfeited goods will get investigated without any noxious effects.

International Scenario

The pandemic has affected economies and populations globally. Due to the price-wage spiral during the pandemic, counterfeits have been on a rise. The Thai FDA seized 45,000 counterfeited test kits. Also, more bizarre is a Vietnamese trader. This trader sold masks made out of toilet papers at exorbitant prices. 

Such a rise in counterfeits is due to a sudden hike in demand. More online shopping trends (74% spike) and ceased custom checks contribute to counterfeiting. As a result, counterfeits have gushed. 

Even price- gouging has risen. 3M alleged trademark infringement against PSL. 3M sued Performance Supply LLC for trademark infringement in the N95 respirator. They claimed that PSL could confuse due to spike in demand in the wake of COVID-19. 3M also claimed that the defendant had sent a quotation to NYC’s procurement office. The same was for a large number of masks at “a grossly inflated total price of $ 45 million”. With such action via suits, IP infringers need to beware. 

For online counterfeiting, Hong Kong has come up with GS1 (Grow Stronger as One) Hong Kong Bar Code Plus. GS1 is a location information portal. It provides authentic and vital information about the origin of products. This has been able to reduce counterfeits and build consumer confidence. 

Having obtained extended packaging information using GS1 barcodes, customers buy genuine products. The portal authenticates information based on uploaded content by registered traders and dealers. The prefix “489” for COVID-19 masks gives source code details about masks’ origin. By glimpsing through this prefix, customers can get product source information. Hence, IT solutions can lessen the effects of counterfeiting.

The Anti- Counterfeiting Trade Agreement (ACTA) works outside existing forums to combat counterfeiting. The Agreement with Organisations like Interpol works globally through border control.

Conclusion and Recommendations

With COVID-19, counterfeiting has increased manifold. To curb the same, enterprises have been taking anti-counterfeiting measures. These are- filing complaints (following 3M approach) and conducting internal audits.

Some are launching online monitoring. Brand Shield by Snapdeal and spreading consumer awareness are examples of this. Counterfeiting and trademark infringement has risen. Due to pandemic panic buying, supply chain disruptions, and lesser surveillance, counterfeits soared. Yet, with few steps, counterfeiting and infringements can get curbed:

  • A Step-By-Step Counterfeiting Action Plan:

The First step is to identify counterfeiting. Then, draw up a plan, including- education, partnership, practical measures, and enforcement.

  • Social Media as a Tool: 

Spreading awareness through social media about products and portals. Portals will report or get informed about the source of products like the GS1 Hong Kong Portal. Recently, Facebook has released a transparency report against 62.3K counterfeit reports. E-commerce platforms should take up charges like Brand Shield Program by Snapdeal.

Measures against Supply Chain Disruptions: Surveillance can combat supply chain disruptions. Internal audits can also be helpful. A good enforcement mechanism with monitoring agencies can also curb such disruptions. Practical measures include: using smart cards, holographic imaging, and UV- inks. RFID tags with physical attributes can also reduce such disruptions. 

With such measures, counterfeiting becomes tractable even during the pandemic.


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