INTRODUCTION
Brands, as well as consumers all over the world, are facing the problem of counterfeited goods quite often these days which in the result is causing disruption and loss to consumers, companies, and as well as to the economy of the countries.
After the COVID-19 pandemic and the sudden surge in the demand for medicines, the incidents of counterfeiting in medicines and vaccines have also increased drastically.
The fraudulent imitation of a well-known brand or product is known as counterfeiting. The counterfeiting of the product usually happens through tampering, copying, or alteration in the packaging of the product.
Moving forward in this article, we shall discuss further about what is counterfeiting, and the measures to prevent the same across the various sectors in the market.
WHAT IS COUNTERFEITING?
As stated above, counterfeiting can be defined as the wrongful imitation of authentic products, that is not genuine in nature and sold to people with the fraudulent intention of deceiving them. Mostly counterfeiting takes place with the purpose of enjoying the fruits of the superior value of the copied product.
Product counterfeiting is a common form of consumer fraud wherein a product is sold in guise of something it is not. A very common and mostly experienced example is the counterfeit money i.e., money not produced or released by appropriate authorities. However, counterfeiting is not limited to just currency in the present times.
COUNTERFEITING IN PACKAGING AND PRODUCTS
The market has witnessed a rise in the counterfeiting of packaging and of products. Such imitation of packaging and the products of a trusted brand of a company, damages the goodwill of the said brand and the product.
Counterfeit products pose to be a terrifying problem as these false and fake goods are made to look unrecognisably identical to the genuine products, making it impossible to distinguish them from the genuine products.
Packaging is the link connecting the production with marketing, after which the goods reach from the production centre to the consumers in a secured condition. Additionally, packaging contains all the information pertaining to the product i.e., the date of manufacturing and expiry, information about the manufacturing company, contents of the product, how to use it, etc.
In the event of counterfeiting of the packaging of the product, such important information tends to be false or missing, which subsequently affects the consumers and the manufacturing brand.
Furthermore, counterfeit products are not up to the mark or is usually of a lower quality. When a consumer purchases a counterfeit product, he is unaware about the poor quality of the product, and purchases it under the impression that the product is of the said trusted brand. Gradually, this entire process affects the reputation of the brand the products of which are subject to counterfeiting.
Counterfeiting in packaging and products with respect to the Pharmaceutical Industry
One of the most vulnerable areas and most affected sector due to counterfeiting is the pharmaceutical industry. The pharmaceutical products and their packaging are extremely prone to counterfeiting and are one of the most vulnerable markets. Due to their high share in market, manufacturing and demand in the market, counterfeiting is very common.
As per the definition provided by the World Health Organization (WHO), counterfeit medicines are the “one which is deliberately and fraudulently mislabelled with respect to identity and/or source”, i.e., a counterfeit medicine is one which is falsely and intently mislabelled in accordance to the authentic products.
Counterfeiting is a high-volume, high-profit business that violates Intellectual Property Rights (IPR), medicine laws, and other areas of the criminal law. Counterfeiting and piracy are synonymous as they both involve the creation of exact copies of the original goods.
So-called lifestyle medications are the most frequent counterfeit drugs in industrialised or developed countries. Individuals frequently purchase these medicines from the internet or through unlicensed pharmacies. Counterfeit medications are a leading cause of morbidity, mortality, and creates distrust in the healthcare system.
Consumers in India indicated that counterfeit and pirated products were being reused, and refilled more frequently. In Europe and the United States, repackaging is one of the main sources of counterfeited medications. Estimates show that the total lives lost to fake medications and counterfeited pharmaceuticals are between 5,00,000 to 10,00,000 people per year.
COUNTERFEITING IN INDIA
Counterfeiting activities have increased in India by 24 percent since 2019, incurring loss of Rs. 1 lakh crore to the Indian Economy. The sectors that reported most cases of counterfeiting from 2018 and 2019 included Fast Moving Consumer Goods (FMCG), alcohol, lifestyle, apparel, and pharmaceutical.
Additionally, the pandemic has brought turmoil in the pharmaceutical industry regarding organised supply chains, and has also increased demand by the consumers.
What is more disturbing is that, the recent counterfeiting in these times of distress has expanded from counterfeited medicines to falsely advertised COVID-19 vaccines because of the high demands. Between February and April 2020, more than 150 counterfeiting incidents took place which were mostly for counterfeited PPE kits, sanitisers and masks due to the high demand of these products during the Pandemic.
MEASURES TO PREVENT COUNTERFEITING OF PRODUCTS UNDER INDIAN AND INTERNATIONAL LAWS
In India, in light of the recent COVID-19 pandemic, and free- run of counterfeit products in Uttar Pradesh, Rajasthan, Madhya Pradesh, Punjab, Bihar, Jharkhand, Delhi, Gujarat and Uttarakhand, the States have requested for urgent actions as a total 45 percent of counterfeiting of products took place in the abovementioned states.
The cases of counterfeiting have become very common all over the world and thus, there are various laws and legislations, conventions and treaties which although not specifically are for the prevention of counterfeiting of products, but discuss the sanctions and penalties in case of commission of such offence.
To stop counterfeiting of products especially in pharmaceuticals, many practices such as hidden features and features seen prima facie are devised to prevent copying, altering, and tampering with the products.
1. Overt features: These features are significant as they provide assistance to the consumers to confirm the authenticity of the product and its packaging. Such features in accordance with the name are prominent and also complex as well as expensive to reproduce.
These features include barcodes, thermochromic inks, changing colours and watermarks. Laser technology helps in producing high- quality small images and two-dimensional barcodes.
2. Covert Features: The objective of the covert features of a product assists the Brand owners to recognise a counterfeit product. The speciality of the covert feature is that it cannot be perceived or copied by a layman or general public without the knowledge of an expert in the field.
3. Security enforcing package components: Authentication in packaging is mostly based on the concept of sealing. ‘Holo Seal’ is a proprietary tamper evident holographic security label with a bespoke tamper apparent fracture pattern, black light verification mechanism, and machine-readable embedded code.
Indian Scenario
The remedies provided for counterfeiting of the products under various acts:
The Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 and the Customs Act, 1962 (Customs Act) allows trademark, design, and brand owners to register their rights with Indian Customs Authorities for the seizure of imported counterfeit goods.
Counterfeit products are per se prohibited items under the Customs Act, thus, in the event of any counterfeit goods being imported, the Authority will notify the rights holder of the said goods, and thereafter destroy the counterfeit goods in front of the rights holder. In some cases, even if the rights holder has not registered with the Authority, the Authority will notify them about the counterfeit goods.
Counterfeiting and piracy are cognizable offences in India, which means that law enforcement has search and seizure powers.
In addition, offences committed within the scope of the Trademarks Act,1999, Copyright Act, 1957 and Geographical Indications Act, 1999 may result in criminal penalties.
1. In India, counterfeiters of ‘spurious drugs’ are held liable under the Drugs and Cosmetics Act 1940. (DCA). As per Section 9D of the DCA spurious drugs are defined as those that are “deliberately and fraudulently mislabelled and created to deceive patients by concealing their identity, source of manufacture, and content”.
2. In the event, a registered mark is exploited or infringed upon by an unauthorized person, the trademark owner may file a complaint under Section 29 of the Trade Marks Act, 1999 (Trade Marks Act). However, the Trade Marks Act nowhere refers to the definition of the term counterfeit.
On interpreting Section 29(1) of the Trade Marks Act, which provides the definition of trademark infringement, we can decipher that the process of trademark infringement is what typically happens in the process and while selling counterfeit products on in counterfeit packaging.
The above-mentioned section states that trademark infringement occurs when a person who is not the trademark proprietor uses it in the course of business (a mark that is identical to, or deceptively similar to) the trademark in relation to goods or services for which the trademark is registered.
It is pertinent to note that the question of the deceptively similar or identical items as referred to in Section 29 of the Trade Marks Act does not arise in the case of counterfeiting because those goods are blatant replicas of the commodities being marked.
In the case of Cadbury India Ltd. & Ors. v. Neeraj Food Products, [142 (2007) DLT 724], the Delhi High Court held that the Complainant or the aggrieved party does not have to prove anything else if the counterfeiter has used the same label.
3. According to Section 44(4) of the Legal Metrology Act, 2009, “whoever sells or offers or exposes for sale or otherwise disposes of any weight or measure which, he knows or has reason to believe, bears thereon a counterfeit stamp, shall be punished with imprisonment for a term which shall not be less than six months but which may extend to one year and for the second or subsequent offence, with imprisonment for a term which shall not be less than six months but which may extend to five years.”
In other words, any person who sells or offers to sells, weight with stamps which he knows or has a reason to believe that they are counterfeited is to be punished with imprisonment for the term of six months and for the second consequent offence imprisonment not less than six months and may extend to five years.
International Conventions on Counterfeiting
1. Article 61 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) stipulates that member nations must provide for criminal proceedings and sanctions in cases of wilful trademark counterfeiting or commercial copyright theft.
2. The Counterfeit Pharmaceuticals Initiative (CPI) was launched by the International Chamber of Commerce (ICC) in 2003 for:
- the creation of a counterfeit pharmaceutical database with online search facility;
- construction of a dedicated CPI website;
- liaising with regulators;
- providing assistance to members by lobbying and investigation;
- special projects and surveys, e.g., internet pharmacies; and
- the implementation of anti-counterfeiting technologies.
AMLEGALS REMARKS
Industrial application of overt and covert techniques can raise the bar for counterfeiters, but ultimately, customer awareness is required. Consumers should only purchase medicines from licenced pharmacies and medicine retailers, be wary of substantially discounted medicines, and inspect the packaging for the batch number, manufacturing date, expiry date, and manufacturer’s name for all sorts of products.
Due to the advent of online shopping websites and e-commerce platforms, counterfeit goods have become comparatively easier to sell. The consumers should only purchase from trusted websites or official websites of the said brand in order to avoid the counterfeit products.
Counterfeit pharmaceuticals have an impact on the broader population as well as ailing and innocent users, and demand more attention. Presently, we don’t have any particular anti-piracy or anti-counterfeiting legislation.
As discussed above, the rights holder or owner of the brand has rights under the Trade Mark Act under the provisions pertaining to “passing off” and trademark infringement. Passing off refers to the manufacturing of goods under the same or similar brand name in order to profit on the brand’s goodwill.
India is also a member state to the TRIPS Agreement and under the TRIPS Agreement, “counterfeit trademark goods” are products that bear a trademark that is similar to, or cannot be distinguished in essential respects from a registered trademark without authorization. It is of utmost importance that the consumers and the companies should be aware of the products they are purchasing or manufacturing.
-Team AMLEGALS assisted by Ms. Vaaridhi Jain (Intern)
For any queries or feedback, feel free to get in touch with arushi.vyas@amlegals.com or mridusha.guha@amlegals.com.
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