Introduction
Counterfeiters capitalise on COVID-19 demands
What should businesses do?
Increase engagement and collaboration with industry, government and non-government organisations
Targeted enforcement
Educate customers


Introduction

Protecting consumers and company brand identity is more important than ever as counterfeit products surge in the shadow of the COVID-19 outbreak. In this time of social distancing, consumers are beginning to rely more heavily on e-commerce platforms to purchase essential products, such as personal protective equipment and food, as well as non-essential products, including:

  • cosmetic and personal care commodities;
  • household products;
  • work-from-home tools;
  • fitness equipment;
  • entertainment technology; and
  • children's toys.

This economic shift creates additional opportunities for unscrupulous individuals to take advantage of increased demand.

Counterfeiters capitalise on COVID-19 demands

With the global outbreak of COVID-19, criminals are taking advantage of the high demand for personal protection and hygiene products by flooding the market with counterfeit facemasks, substandard hand sanitizers and unauthorised antiviral medication. In March 2020 police and customs and health regulatory authorities from 90 countries took part in a coordinated action to seize more than 34,000 units of:

  • counterfeit and substandard masks;
  • 'corona sprays';
  • 'coronavirus packages'; and
  • 'coronavirus medicine'.

According to Interpol, this seizure "reveals only the tip of the iceberg regarding this new trend in counterfeiting".

US Customs and Border Protection (CBP) is also seeing an uptick in counterfeit products at US ports, including:

  • surgical masks;
  • test kits;
  • medical supplies; and
  • consumer household products, such as hand sanitiser and disinfectant wipes.

Even sales of legitimate products are a concern as third-party sellers have been selling high-demand products on e-commerce platforms, such as Amazon and eBay, with significant price increases. This type of extreme price gouging not only takes advantage of consumers at a financially vulnerable time, but can also create backlash for brand owners, leading consumers to mistakenly believe that the brand owner (and not the third-party seller) is benefiting from the crisis.

This increased presence of infringers and price gougers has led US officials, including the Centres for Disease Control and Prevention, to warn business owners and consumers to monitor products online, as counterfeit goods can harm consumers who may unwittingly turn to lower-quality products with unknown manufacturing standards. Given the spike in consumer demand, and the corresponding shortage of supplies from legitimate sources, businesses must take proper steps to protect consumers from the proliferation of scammers and infringers that seek to take advantage of the COVID-19 crisis.

What should businesses do?

The COVID-19 pandemic is ongoing and evolving daily. Counterfeit goods and services will continue to expand during this crisis, cutting into businesses' market share and creating consumer confusion that damages their reputation and brand loyalty. By inundating the market with low-cost (and low-quality) products, counterfeiters are effectively getting a free ride on the research, development and marketing that legitimate companies have carefully cultivated over the years.

There is no 'cookie cutter' solution to brand protection challenges during these trying times. However, companies that seek to protect their customers and brand throughout this crisis should consider a holistic approach that incorporates anti-counterfeiting and brand protection measures that are tailored to meet their specific needs in the marketplace, including the following strategies.

Conduct internal brand protection audit
Companies must assess how well their key brands and products are secured in terms of legal protection, including an assessment of contracts for the management of supply chains and distribution channels.

Register key IP rights
Companies should combine and layer their IP rights where appropriate and register and update all key IP rights in countries where their products are sold, manufactured and assembled. For many e-commerce sites and online marketplaces, registered intellectual property is a prerequisite for enforcement programmes or to take down a fraudulent listing.

Routinely monitor unauthorised use and establish surveillance of distribution channels
Online monitoring
It is critical to perform structured internet searches for evidence of infringing activity. Companies should make full and regular use of the procedures offered by e-commerce sites and online marketplaces to delist or take down infringing listings or websites. Many companies take advantage of outside vendors, which can save money in the long run.

Physical monitoring
To the extent possible, companies should have structured programmes to:

  • monitor trade shows and swap meets;
  • monitor major retailers (both online and brick-and-mortar);
  • oversee the auditing and investigation of manufacturing facilities;
  • purchase products from seemingly legitimate sites to determine whether customer orders are being fulfilled with authentic products; and
  • monitor returned products to determine whether they are authentic and trace their sources if they are fake.

Increase engagement and collaboration with industry, government and non-government organisations

CBP
Companies should record their intellectual property with CBP. Owners of recorded intellectual property can work with CBP to develop anti-counterfeiting strategies so that officers at ports of entry can properly identify infringing goods.

ITC
Given the advantages and proven effectiveness of the US International Trade Commission (ITC), companies should consider this forum when choosing where to allocate enforcement dollars. The ITC can be great value compared to federal district court enforcement efforts intended to curtail the same imports.

Federal courts
To the extent that counterfeiters can be traced back to the United States, companies can seek redress using federal court litigation. With registered intellectual property and the evidence gathered through the above investigative techniques, a company can go to court and secure emergency injunctive relief through a temporary restraining order or a preliminary injunction, which can facilitate:

  • the seizure and destruction of counterfeit goods;
  • the take down of infringing websites;
  • the discovery of counterfeiting and financial data; and
  • the eventual recovery of monetary settlements or judgments.

Targeted enforcement

Companies should work with legal counsel who are experienced in handling and managing IP and brand enforcement programmes that reduce the impact of infringing activities, including:

  • counterfeiting;
  • illegal price gouging; and
  • fraud.

Businesses may also consider working with counsel to send cease-and-desist demands to infringers. If cease-and-desist letters do not remedy the problem and as specific counterfeiting activities are identified, various levels of enforcement should be considered. Specific enforcement activities generally include more in-depth investigations that trace counterfeits back to their source, for subsequent individual and government action.

Educate customers

Companies should notify their consumer base as to what they should be looking for and how they can confirm that the product which they are purchasing comes from a legitimate source. This is a great way to protect consumers while also building customer loyalty.

For further information on this topic please contact Calvin R Nelson or Taylor G Sachs at Venable LLP by telephone (+202 344 4000) or email ([email protected] or [email protected]). The Venable LLP website can be accessed at www.venable.com.