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covid 19

RISE IN COUNTERFEIT PRODUCTS DURING COVID-19

INTRODUCTION

Along with the battle of COVID-19, the world has faced another major problem i.e, misinformation. With the mainstream media focusing more on the number of cases every day, the general public has fallen trap to fraudulent individuals who have taken advantage of the vulnerability of the public. As the pandemic took over the world, the governments across nations called for a nationwide bans and imposed strict lockdown restrictions. These included guidelines about how one must carry themselves in the public, that is, with N95 masks, preferably along with gloves and sanitisers. While major multinational brand companies jumped into the manufacturing the essential commodities, so did the local manufactures, whereas few started producing fake products, in other words, counterfeit products. In this article we will analyse how COVID-19 has impacted the counterfeit market.

 

INTELLECTUAL PROPERTY RIGHTS

According to the World Trade Organisation (WTO), Intellectual Property Rights, commonly referred to as IPR, are ‘rights given to person over creations of their minds’.[1] These provide the owner with exclusive rights for a certain period of time. IPR is customarily divided into two main parts: ‘Copyright and rights related to copyright’ and ‘Industry Property’. Copyrights cover authors of literary, performers (for example, actors, singers and musicians) and artistic works (for example, paintings, sculptures, music compositions, films and so on).[2]  The main objective of copyrights is to encourage and reward creative work. Industry Property includes patents for inventions, trademarks, industrial designs and geographical indications.

  • Patents

To patent an invention means to get exclusive right over it for a particular period of time. The patent owner is provided with protection for their inventions which incentivizes individuals or companies to invest in research and development. A patent can be obtained for a product or a process and the invention has to be such that it offers a new solution to a problem. To get patent rights over an invention, the technical information of the same has to be disclosed to the government and the public in a patent application.

  • Industrial Design

The ornamental or aesthetic aspects of an article are referred to as the industrial design. To be protected, an ID must be original and non-functional, which means that only the aesthetic can be protected and not any technical feature of the article. The latter can be protected under a patent.

  • Geographical Indication

When a good is associated with a sign that has a specific geographical origin and possesses the qualities or the reputation  due to that place of origin, then such a sign is called a geographical indication.

  • Trademark

A trademark is basically the identification using easily recognizable signs, symbols, name or logos, which give exclusive rights to the owner to make financial profit off the recognition and discourage unfair competition, for example, counterfeiters. Trademark infringement occurs when the trademark is used without the authorization of the trademark owner or licensee.

 

COUNTERFEIT GOODS

The International Anti-Counterfeiting Coalition (IACC) defines counterfeiting as ‘a federal crimes, involving the manufacturing or distribution of goods under someone else’s name and without their permission’[3]. Such goods are generally manufactured from components of very low quality, in an attempt to sell a cheaper imitation of goods produced by brands that are widely known and trusted by consumers. The main driving of the counterfeit industry is consumer demand. According to a report issued by the Organisation for Economic Cooperation and Development (OECD) in 2019, trade in counterfeit products contribute to over 3.3% of the overall world trading.[4] The Global Brand Counterfeiting Report issued in 2018 states that the total value of the counterfeit product on a global scale is about USD 1.20 trillion as of 2017 and is expected to surge by more than 50% to USD 1.82 trillion by 2020.[5]

Counterfeiting is a threat to all of many levels – it deprives the right holders of a product of their rightful benefits, it harms and damages the brand image of the company, it discourages a company from moving towards innovation and new creation. Legitimate manufacturers devote a huge amount of resources into research and development (R&D) of products while simultaneously building a reputation for quality amongst the consumers. Counterfeits, in turn, profit unfairly off another company’s good name. The resulting lost sales and profits lead the companies to cut wages, take away jobs and lose their consumer market owing to untrust. Further, it can put the consumer of the product at the risk of identity theft and credit card fraud, it stagnates the overall economic growth of the country since counterfeiters do not pay tax, it supports and rather encourages child labour, providing them with very low wages and poor working conditions. Most importantly, it puts consumer’s health and safety into jeopardy.[6]

 

IMPACT DUE TO COVID-19 IN INDIA

On the announcement of the lockdown on March 16th, 2020, the Indian economy was severally hit. Though a few sectors like the I.T. could still manage to stay afloat due to shift in working pattern, for example, work from home, but the manufacturing sector was deeply impacted. Challenges such as availability of raw materials, shortage of manpower, transport restrictions, supply-chain disruptions made it extremely difficult for these sectors to continue working at the same efficiency. Since the rigorous lockdown stayed put for a prolonged period of time until very recently, new avenues for illegal activities opened up.[7]

The building panic about shortage of supplies and increase in prices led to people stocking up tons of supplies at home. This meant that people were not as concerned about the quality of the good anymore and were more focused on quantity and price.[8] What added to this was the rise in sales of e-commerce industry . Consumers found it easier to stay at home and purchase goods which promised safe as well as speedy delivery. This made it easier for counterfeiters to sell their products. Many of the advertisements on television as well the internet, took advantage of people’s vulnerability and would deceptively advertise their products such as sanitisers and masks as affiliated with the legitimate healthcare organisations and claims that the standard of quality has been followed.[9] A district administration team sealed an unlicensed unit in Noida’s Section 63 wherein over 10,000 bottles of inferior quality hand sanitisers had been manufactured and were ready to be shipped for sale to Delhi.[10] Not only limited to masks and sanitisers, fake testing kits and drugs that claim to cure the virus have also been seized which provided the consumer with a false sense of security. These counterfeit products have filled the gap created by the shortage of supply of products from well established brands. 

Amazon, the tech giant, found that products on their websites were falsely claiming to have the quality of curing Coronavirus. Sticking to the policy of zero tolerance to counterfeit products, the company met with the World Health Organisation and decided to remove any product mentioning the Coronavirus on their website. It was later reported to have removed almost over a million such counterfeit products.[11]

 

LEGISLATIVE MEASURES IN INDIA

India being a member of the TRIPS (Trade Related Aspect of Intellectual Property Rights), has to comply with all of its regulations. Article 61 of TRIPS[12] lays down that all the members are to provide for criminal procedures and penalties in cases of trademark counterfeiting or copyright piracy. These penalties should be in the form of imprisonment as well as monetary fines as per the gravity of the case. It further states that the remedies should also include seizure, forfeiture and destruction of the infringing goods and any other material used for the commission of the offence.

Now though India does not have any specific laws relating to the counterfeiting of goods, the Indian Customs Act 1962, read along with the IP Rights (Imported Goods) Enforcement Rules, 2007, allows the owner of a trademark to record her/his rights with the Indian Custom Authorities for seizure of imported counterfeit goods. Counterfeit goods fall under the category of ‘prohibited goods’ under this Act, so if any imported good is found to be fake, then the authorities will notify this to the right holder and destroy the goods. Counterfeit is a cognizable offence in India and the law enforcement has search and seizure rights. Further, under the Trade Marks Act 1999, Copyright Act 1957 and the Geographical Indications of Goods (Registration and Protection) Act 1999, the rights holder can additionally attach criminal liability to the offender.

The Drugs and Cosmetics Act (DCA), 1940 also has provisions that held tackle the problem of counterfeit products.[13] Section 9B of this act defines such products under the name of ‘Spurious drugs’ wherein the matter is of import of such products. This includes any drug which is imported under a name that belongs to another drug; imitates or looks like a substitute for another drug in a deceiving manner; claims to be associated with an individual or a company that is fictious or does not exist; has been substituted wholly or in part by another drug; and if its claims to be the product of a manufacturer of whom it is not truly a product.[14] Section 13 of the act prescribed from punishment for the import of spurious drugs. Section 17B  also defines spurious drugs wherein the issue is related to manufacture, sale and distribution. Section 27 of lays down the penalties related to Section 17B, stating that if the use of such a drug by a person, for the purpose of diagnosis, treatment, mitigation or prevention of any diseases or disorder, causes the death or is likely to cause the death of that person, then this harm would be categorised as grievous hurt under Section 320 of the Indian Penal Code and for the same, the offender will be sentenced to imprisonment for not less than a period of 10 years. This may extend to imprisonment for life depending on the gravity of the case. A fine of not less ten lakh rupees or three times the value of the drugs confiscated will also be applicable.[15]

 

CONCLUSION

Although there exists a law enforcement in place to tackle the problem of counterfeiting imported goods, there is no specific provision in law regulating the counterfeit of local/regional goods. Moreover, even for the imported goods, the process is cumbersome and not a 100% effective given the quantity and extensive distribution of such products. Hence, as responsible citizens, we can do our part for eradicating the growing use of such products. While purchasing any good, we can exercise due diligence by checking if such a good is actually from the brand it claims to be and whether comes from regulated legitimate sources. If we comes across any counterfeit product, the same can be immediately reported to the concerned authorities. This must be kept in mind especially while purchasing goods online. E-commerce has witnessed a sudden growth in the last decade, it isn’t surprising to see the intrusion of fraudsters in the online trade given that the cyber laws have a long way to go before they are strong enough to eradicate online offences. In such a situation, we can do our part by maintaining caution every step of the way, especially with so much misinformation lingering around us. It is now the time to be citizens who are aware, responsible and rational about the everyday decisions that we take.

 

REFERENCES 

[1] World Intellectual Property Organization (WIPO) , https://www.wipo.int/portal/en/index.htm

[2] “Understanding Copyright and Related Rights” (PDF). www.wipo.int.

[3] International Anti-Counterfeiting Coalition (IACC), https://www.iacc.org/

[4] “Trade in fake goods is now 3.3% of world trade and rising”, Organisation for Economic Cooperation and Development (OECD), 18th March, 2019.

https://www.oecd.org/newsroom/trade-in-fake-goods-is-now-33-of-world-trade-and-rising.htm

[5] Jagvinder Brar & Mustafa Surka, “Ensuring brand protection and integrity in the times of Covid-19” The Economic Times, 29th August, 2020.

[6] “What is Counterfeiting?”, International Anti-Counterfeiting Coalition, 1979.

https://www.iacc.org/resources/about/what-is-counterfeiting

[7] “APDI writes to PM, says counterfeit goods flooding markets during lockdown”, The Economic Times, 9th April, 2020.

[8] “Global Operation sees a rise in fake medical products related to COVID-19”, INTERPOL., 19th March, 2020.

https://www.interpol.int/en/News-and-Events/News/2020/Global-operation-sees-a-rise-in-fake-medical-   products-related-to-COVID-19

[9] “Beware of fraudulent Coronavirus Tests, Vaccines and Treatments”, U.S. Food & Drug Administration. https://www.fda.gov/consumers/consumer-updates/beware-fraudulent-coronavirus-tests-vaccines-and-treatments

[10] “Coronavirus: Beware! Fake masks, spray going ‘viral’ ” India Today, 15th March, 2020.

[11] Annie Palmer, “Amazon tells sellers it will take down listings for products that claim to kill Coronavirus” CNBC, 20th February, 2020.

[12] Article 61, TRIPS Agreement, 1995 states “Members shall provide for criminal procedures and penalties to be applied at least in cases of wilful trademark counterfeiting or copyright piracy on a commercial scale. Remedies available shall include imprisonment and/or monetary fines sufficient to provide a deterrent, consistently with the level of penalties applied for crimes of a corresponding gravity. In appropriate cases, remedies available shall also include the seizure, forfeiture and destruction of the infringing goods and of any materials and implements the predominant use of which has been in the commission of the offence. Members may provide for criminal procedures and penalties to be applied in other cases of infringement of intellectual property rights, in particular where they are committed willfully and on a commercial scale”.

[13] Chitranjan Kumar, “Medical devices to be treated as drugs from April 1” Business Today, 31st March, 2020.

[14] Section 9B, Drugs and Cosmetics Act (DCA), 1940

[15] Section 27, Drugs and Cosmetics Act, 1940

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