Stopping Dangerous Counterfeit Goods in the COVID-19 Era

Criminals around the world are taking advantage of the COVID-19 pandemic.

The European Anti-Fraud office has opened an inquiry into the illicit trade in phony or mislabeled face masks, medical devices, sanitizers, and test kits and is working with customs and enforcement authorities to prevent fake goods from entering Europe.

In March, Interpol led Operation Pangea XIII, in which customs and health regulatory authorities from 90 countries seized counterfeit facemasks, substandard hand sanitizers and unauthorized antiviral medications. During a single week, 48,000 packages were seized.

Law enforcement agencies found 2,000 websites advertising COVID-19 items. About 600 of these sites offered counterfeit surgical masks for sale.

As the US Department of Homeland Security notes,

"Counterfeits threaten national security and public safety directly when introduced into government and critical infrastructure supply chains, and indirectly if used to generate revenue for transnational criminal organizations. Counterfeits also pose risks to human health and safety, erode U.S. economic competitiveness and diminish the reputations and trustworthiness of U.S. products and producers. Across all sectors of the economy, counterfeit goods unfairly compete with legitimate products and reduce the incentives to innovate, both in the United States and abroad."

Internationally, the annual trade in counterfeit and pirated good exceeds $500 billion in value.

Earlier this year, as the New York Times reported, the US Food and Drug Administration (FDA) warned seven companies to stop falsely claiming that silver, herbal “remedies,” and other products could prevent or cure COVID-19, calling this a threat to the public health.

The FDA has since issued more than 100 warning letters to companies that may be selling products that fraudulently claim to prevent, treat, diagnose, or cure COVID-19. Failure to comply with the FDA directives could lead to product seizures or injunctions against the sales of such products.

Some of the fake products that criminals are trying to import into the US are counterfeit copies of genuine products.

These counterfeits may violate the patents, copyrights, and/or trademarks owned by the manufacturers of the genuine products.

A legitimate company fighting the importation of counterfeit copies of its products into the US can seek what’s called a Section 337 investigation by the US International Trade Commission (ITC). Ninety percent of ITC cases involve claims of patent infringement.

The main remedy in a Section 337 action is an exclusion order that directs US Customs officials to stop the infringing goods from entering the US.

As of June, US Customs had seized more than:

• 107,300 FDA-prohibited COVID-19 test kits in 301 incidents;

• 750,000 counterfeit face masks in 86 incidents;
• 2,500 EPA-prohibited anti-virus lanyards in 89 incidents; and
• 11,000 FDA-prohibited chloroquine tablets in 91 incidents.

Unlike patent infringement lawsuits, which can drag on for years, an ITC action is usually resolved within 18 months.

However, more could still be done to protect US companies and consumers from counterfeit goods.

Senate Bill 2987, the Counterfeit Goods Seizure Act of 2019, authorizes US Customs to seize goods or packaging entering the United States that involve design patent infringement.

IP owners can already register patents, copyrights, and trademarks for enforcement under the ITC, and this bill would make it possible to register design patents as well.

A design patent covers the ornamental features of a functional item. For example, the curvaceous shape of the original Coca-Cola bottle and the rounded corners of the original iPhone are examples of features that may be covered by design patents.

Being able to stop goods that violate design patents is especially important because infringing goods may be imported into the US without fake logos and other trademarks. Those markings may be added once the goods have arrived in the US.

Firms that own products covered by design patents can train Customs officials to spot fakes even if they don’t have logos on them yet.

The bill has been stalled in Congress, but its passage could help stop the importation of goods that not only hurt US businesses but also may endanger the lives of US residents.