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In late October, British financial research firm Moody’s
issued a report indicating that supply chain issues caused by the
COVID-19 pandemic would
result in rising consumer costs in hospital care. With many
countries shifting to domestic manufacturing to counter the spread
of coronavirus through international channels, medical supplies
like personal protective equipment (PPE) and pharmaceuticals are
expected to be more expensive to produce. Supply chain constraints
during COVID-19 times are also likely to impact public
construction projects and restrict new hospital builds, further
affecting a sector that is already heavily burdened by the
pandemic.
However, these supply chain issues also portend problems for
Intellectual Property, especially trademark and brand owners.
Counterfeits and knock-off products appearing on the market are
always a problem for business owners holding IP rights, but supply
chain disruptions give malevolent actors the opportunity they need
to take advantage of unwitting consumers to make a tidy profit.
Worse, the urgent need for PPE and other medical equipment during
the pandemic makes hospital administrators and even individuals
trying to stay safe in crowded places more susceptible to
purchasing fake goods.
Despite the shift to domestic production discussed in the
Moody’s report, many countries continue to be a source of
massive numbers of counterfeit products. In June, U.S. Customs and
Border Patrol (CBP) announced that its agents seized more than 2,000
face masks with trademark-infringing designer logos for brands
like Gucci and Chanel. The face coverings were shipped from
locations in Vietnam and China to ports in New Orleans and
Shreveport. These counterfeits show why it is crucial to properly
police trademarks even during a pandemic.
Are you dealing with increased counterfeit concerns during the
COVID-19 pandemic?
Illicit versus counterfeit goods
In some cases, counterfeit imports overlap with health concerns
posed by illicit goods imported into a country in violation of
medical or environmental regulations. In the early days of the
COVID-19 shutdown, the government of South Africa banned the sale
of tobacco and alcohol as a health measure. While South Africa
already had an issue with illicit cigarette sales, a University of
Cape Town study published in July showed that the ban drove about 93 percent of
cigarette consumers to buy illicit cigarettes. Not only do
these goods create problems for brand owners when infringing
trademarks are used, but they are much more likely to pose health
and safety concerns because they are made by bad actors who are not
worried about following regulations. Similarly, this September, CBP
agents seized a shipment from China that contained 500,000 counterfeit
N95 masks, fake versions of the popular personal protective
equipment (PPE) sold by various industrial supply firms. Tests
showed that 10 percent of the masks seized in these shipments had
filtration rates of less than 95 percent, putting anyone wearing
them at a greater risk of contracting the coronavirus.
Some brand owners have looked to trademark law to find
interesting solutions to the supply chain problems affecting
consumers during the COVID-19 pandemic. Back in April, the
multinational industrial firm 3M filed a lawsuit in New York federal
district court against a supplier of 3M’s N95 face mask
respirators, a popular PPE option among healthcare workers during
the pandemic. The lawsuit came in response to the supplier’s
price-gouging, including an alleged offer of N95 respirators to New
York City’s procurement office at markups of 500 percent to 600
percent of the N95’s list price. While trademark exhaustion
doctrine may ultimately limit 3M’s ability to go after a
downstream supplier with infringement, dilution and false
advertising claims under the Lanham Act, it is clear that brand
owners have an interest in protecting consumers along their supply
chain by invoking trademark law.
Moreover, trademark and IP offices around the world have not
only extended filing deadlines in response to business disruptions
experienced during the COVID-19 pandemic, but they have also used
trademark law as a tool in the fight against coronavirus. In June,
the U.S. Patent and Trademark Office announced a prioritized examination
program for trademark applications that seeks the registration
of a mark for use in commerce on a qualifying COVID-19 medical
product that has been approved for sale by the FDA. Accelerated
service mark examination for medical and medical research services
is also available through the program. The program intends to bring
essential health products to the U.S. market more quickly. Many IP
offices across the globe are doing everything they can to continue
providing regular services while also responding to the concerns of
the pandemic. The World Intellectual Property Organization (WIPO)
maintains a COVID-19 Policy Tracker that
gives information on IP-related coronavirus response efforts at
national agencies and legislatures worldwide.
Still, the threat of counterfeits is the most salient concern
for trademark owners during the pandemic, and it is a concern that
was already growing in recent years. A 2019 status report on IP rights
infringement by the European Union Intellectual Property Office
(EUIPO) in partnership with the European Patent Office (EPO) showed
that counterfeit sales as a volume of total world trade had
increased from 2.5 percent in 2013 up to 3.3 percent in 2016. The
report’s estimates on counterfeits imported into the EU from
the rest of the world also increased in 2016 to 6.8 percent of
total EU imports, or €121 billion, up from 5 percent (€85
billion) in 2013. The last thing that trademark and brand owners
need is more supply chain threats that counterfeiters can exploit
for a profit.
Looking ahead
Some have suggested that governments could respond more
effectively to the concerns of small business owners feeling the
impact of both COVID-19 and counterfeits by passing legislation
giving them more enforcement mechanisms to protect their brands.
Despite existing counterfeit seizure tools at the CBP for taking
hold of counterfeit products imported into the U.S., trademark
owners who also have design patents could benefit from the Counterfeit
Goods Seizure passage Act. If passed into law, this bill would
allow CBP agents to enforce design patents registered with the
agency. While trademarks and design patents are often used to
protect similar forms of IP, many counterfeiters can get around CBP
enforcement by importing fake goods and then applying counterfeit
marks once the goods are past the border. With the additional
design patent enforcement tool, many legitimate businesses could
block infringing imports that would not otherwise be seized for
trademark enforcement.
Continued reports from border enforcement agencies indicate that
the knock-off problem is not getting better during the COVID-19
era. In early October, the CBP Mid-Atlantic office announced that it had seized nearly
60,000 face masks within the previous six weeks infringing on a
variety of trademarks related to sports teams, cartoon characters,
car manufacturers and more. Those face masks would have had a
suggested retail value of more than $2.5 million if authentic.
If your company deals with increased counterfeit concerns during
the COVID-19 pandemic, get in touch with our experts.
They can help you better understand your enforcement options and IP
management practices against the threat of knock-off
competitors.
Originally Published by Dennemeyer, December 2020
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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