Transcript Slide 1

FDA Regulated Products:
Understanding & Combating Counterfeiters
Presented by:
Owen J. McKeon
Director
Gibbons P.C.
[email protected]
Topics for Discussion
1.
2.
Introduction to anti-counterfeiting & brand protection
Counterfeiting of regulated products
• Spotlight on Tobacco Products
3.
4.
Strategies for prevention and investigation
Seeking referral for criminal investigation and
prosecution
• Unique aspects of anti-counterfeiting efforts relating to
regulated products
5.
Civil litigation as an anti-counterfeiting tool
How is trademark counterfeiting effecting
the economy in the U.S. and abroad?
Although precise calculations are impossible,
recent studies of counterfeiting activities estimate that
so-called “knock-off” goods may cost American
businesses more than $200 billion a year. Worldwide,
it is estimated that counterfeit goods cost businesses
$600 billion annually. Most disturbing, there has been
10,000 percent increase over the past 20 years.
Source: International Anti-counterfeiting Coalition; see also, Clifford, Stephanie,
“Economic Indicator: Even Cheaper Knockoffs,” The New York Times, 31 July 2010.
The International Anti-counterfeiting Coalition
(IACC), a non-profit organization devoted to combating
product counterfeiting, reports that:
• Counterfeit merchandise results in the loss of more than
750,000 American jobs.
• In the past 30 years, the underground economy of
counterfeit goods has sky-rocketed from $5.5 billion to
approximately $600 billion annually.
• 5%-7% of the world trade is in counterfeit goods.
• Counterfeiting poses a threat to global health and safety.
Products frequently targeted by
counterfeiters include:
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Apparel
Prescription drugs
Baby Formula
Electronic consumer
goods
Tobacco products
Airplane component parts
Seafood products
Building materials, (e.g.,
plaster, cement, etc.)
• Household cleaning
products
• Medical devices
• Luxury goods
• Automobile component
parts, (e.g., brake pads, etc.)
• Computer software
• Footwear
• Cosmetics
• Batteries
Counterfeiting of Regulated Products
Threat to the public, threat to the bottom line
Although the public often thinks of luxury brand goods
when they hear of “knock off” counterfeit products, the
counterfeiting of regulated products is an epidemic,
impacting food products, over the counter and prescription
drugs, medical devices, dietary supplements, cosmetics,
and tobacco products. For each of these product types,
counterfeiters are actively operating within the United
States and in foreign countries worldwide.
While most brand owners are focused on the economic
impact of counterfeiting, manufacturers of regulated
products a primarily focused on the unique health and
safety risks, including potential liability.
Spotlight:
Counterfeit Tobacco Products
Perhaps not surprisingly, cigarettes are a long time
favorite target of counterfeiters worldwide. Anywhere there is
a consumer market for cigarettes, it is a near certainty that
counterfeiters have entered the market, attempting to reap the
financial rewards of distributing and selling counterfeit
cigarettes.
Despite the fact that cigarette manufacturers as an
industry have developed vigilant, creative and well funded
anti-counterfeiting programs, there remains an active
worldwide market in counterfeit cigarettes.
In addition to cigarettes, other tobacco products are also a
focus of counterfeiters.
Spotlight:
Counterfeit Tobacco Products (cont.)
The potential health hazards presented by
counterfeit tobacco products are obvious. Regarding
cigarettes, counterfeits have been known to include
much higher levels of tar, nicotine, carbon monoxide,
lead, cadmium, and arsenic than genuine brand-name
cigarettes.
In response, many manufacturers of tobacco
products have developed who departments and labs
that focus on testing and identifying counterfeit
versions of their particular products and brands.
Spotlight:
Counterfeit Tobacco Products (cont.)
While the health and safety risks of counterfeit tobacco
products are most critical, the economic impact on product
manufacturers is likewise enormous.
Although precise calculations regarding the economic
harm are unknown, a 2014 Wall Street Journal article
noted that “The estimated $34 billion illicit-tobacco market
accounts for more than one in every 10 cigarettes
smoked…”
Source: Evans, P. (March 25, 2014) Tobacco Firms Step Up Fight Against
Cigarette Smuggling, Wall Street Journal. Retrieved from http://online.wsj.com/.)
Where are the counterfeiters
manufacturing “knock off” products?
Although many counterfeit goods found in the United
States are imported from foreign countries where cheap labor
and weak intellectual property protection laws foster the illicit
activities, domestic counterfeiters remain active.
Counterfeit goods of some type are likely being
manufactured in every state in the United States and nearly
every country worldwide. China, India and Russia product
large percentages of counterfeit regulated products, those
countries by no means have the market cornered. Logically,
the particular type of counterfeit products manufactured varies
from country to country based on its native industries and
resources.
Why aren’t imported counterfeit goods
intercepted at the U.S. ports of entry?
The United States Customs & Border Patrol
(USCBP) is responsible for enforcing intellectual
property rights at the border, but given the number of
imported goods arriving on a daily basis, it opens and
inspects no more than 2% of containers coming into
the United State. As a result, a companies cannot
reasonably expect the USCBP to identify and exclude
all imported counterfeit goods.
Assessing Counterfeiting Threats
• Assess what – if anything - is currently being done to
protect your or your client’s brands and enforce its
intellectual property.
• Think like a counterfeiter - identify vulnerabilities and
counterfeiters’ opportunities.
• Conduct an internal audit of procedures for ensuring the
integrity of brands and intellectual property.
• Clients should make a point of discussing counterfeiting
threats with colleagues to determine whether they have
any information to share regarding the threat of
counterfeiting.
Controlling Counterfeiting Threats
• Make sure the “prerequisites,” which we will
discuss, have been covered.
• Use technology to make it difficult for
counterfeiters to copy products.
• Conduct an investigation to see whether
brands have already been targeted by
counterfeiters.
• Consider whether it makes sense to retain
investigative professionals to assist.
The Anti-counterfeiting “Prerequisites”
– To state the obvious, register trademarks and
copyrights.
– Counterfeiting threats should be a factor when
making business decisions, e.g., choosing
vendors, location of manufacturing facilities,
licensing partners, resellers, etc.
– Utilize sales and marketing resources to predict
markets where counterfeiters may see
opportunity.
– Record your trademarks with U.S. Customs and
equivalent agencies in other countries.
Utilizing Technology To
Prevent Counterfeiting
• Take advantage of technologies aimed at anticounterfeiting when designing and manufacturing your
products.
• Examples:
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Nanotechnology
Radio Frequency Identification Tags (“RFID”) tagging
Electronic fingerprints
DNA-based tracking w/ online database
Investigating Counterfeiters
• Review historical sales data for unexplained anomalies.
• Coordinate efforts with internal sales and marketing staff.
• Conduct basic Internet searches.
• Search within online retail stores, online auctions and
classifieds, social media, e.g., Amazon, CraigsList, eBay,
Alibaba, etc.
• Monitor news and litigation trends in the specific industry to
determine whether threats have been identified, e.g.,
customers, suppliers, competitors, etc.
• Utilize the services of technology and investigative
professionals.
Legal Strategies:
Combating Identified Counterfeiters
Manufacturers of all products have a variety of options, namely:
1. Internal enforcement
2. Referral for criminal investigation and prosecution
3. Commence civil litigation
There are “pros” and “cons” that all manufacturers must
consider when deciding the best course of action to respond to
identified counterfeiters. Most often, the decision involves
determining whether the matter is appropriate for civil litigation or
an attempted referral for criminal prosecution.
Manufacturers of FDA-regulated products, however, have a
far higher likelihood of a successful criminal referral due to the
health and safety risks unique to their products.
Blocking Importation of
Counterfeit Goods
• Record all registered trademarks with USCBP.
• Develop relationships and meet with USCBP at the
ports of entry in order to provide specific information
about distinguishing between genuine and
counterfeit versions of products. The goal is to
educate the agents and raise awareness.
• If the circumstances call for it, consider filing a 337
Action with the International Trade Commission
(ITC) seeking an exclusion order.
Criminal Prosecution
Pros:
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Decreased costs
Deterrence
Publicity
Restitution Order
Cons:
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Internal priorities of law enforcement agencies
Loss of control
Information flow and pacing set by agency
Restitution not a certainty
Referral Strategies Unique to
Regulated Products
• When seeking to refer a counterfeiting investigation to law
enforcement, focus on criminal laws over civil actions, particularly as
health and safety risks involved in counterfeit versions of regulated
products make criminal referral a near certainty.
• Consider availability of unique laws applicable to regulated products.
For instance, the Family Smoking Prevention and Tobacco Control
Act provides numerous provisions specific to counterfeit tobacco
products.
• Develop relationships and report counterfeiting to specific law
enforcement agencies and departments focused on the particular
regulated products being counterfeited, e.g., FDA’s Office of
Criminal Investigations (FDA-OCI), Bureau of Alcohol, Tobacco,
Firearms and Explosives (ATF).
Criminal Prosecution – Federal
Irrespective of the type of goods or services, counterfeiting is a
crime under federal law.
–The Trademark Counterfeiting Act of 1984, 18 U.S.C. § 2320
–Three main changes to Lanham Act:
» Criminalization of trademark counterfeiting (18 U.S.C. §
2320)
» Authorization of near mandatory treble damages and
attorneys fees in all anti-counterfeiting cases (15.U.S.C.
§ 1117(b))
» Authorization of ex parte orders for seizures (15 U.S.C.
§ 1116(d)(1)(A)).
–RICO Statute – 18 U.S.C. § 1961 et seq. (counterfeiting is a
racketeering activity under RICO);
–Other potentially implicated federal laws include: money
laundering; conspiracy; false statements; mail fraud; wire fraud.
Criminal Prosecution – State
By last count, thirty-six (36) U.S. States have laws relating to
counterfeiting. Many states have criminal trademark counterfeit laws
which can be used to prosecute counterfeiters.
For example, N.Y. Penal Law §§ 165.71, 165.72, and 165.73
makes it an A misdemeanor or E or C felony to sell or offer for sale
goods which bear a counterfeit trademark if the defendant acts “with
the intent to deceive or defraud some other person or with the intent to
evade a lawful restriction [of] sale.” Proving that the defendant knew he
was selling a counterfeit can be accomplished in a number of ways: (1)
prior arrest for same offense (2) low price of goods (3) statement from
defendant or arresting officer.
In many instances, referring a matter for investigation and
prosecution by state or local authorities is less difficult referring to the
federal authorities.
Civil Litigation – The “Pros”
Pros:
• Plaintiff’s recovery of profits, damages, costs, and
attorney’s fees
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Plaintiff must prove sales only
Treble damages
Reasonable attorney’s fees
Willfulness
• Statutory damages - 15 U.S.C. § 1117(c)
– Not less than $1000 or more than $200,000 per mark per type
of goods
– If conduct is willful, up to $2,000,000 per mark per type of
goods
• Destruction of seized items - 15 U.S.C. § 1118
Civil Litigation – The “Cons”
Cons:
• Inconvenience of litigation
• Cost of litigation
• Collecting awarded damages
• Risk of Wrongful seizure
– Defendant can collect damages for lost profits, costs of
materials, and lost goodwill
– Punitive damages if bad faith can be proven
– Attorney’s fees
Civil Remedies – Statutory Law
• The Laws – U.S.
– Civil Laws: The Lanham Act (15 U.S.C § 1114, et
seq.)
• Civil seizures, 15 U.S.C. § 1116
– For counterfeit goods only (not just
infringement)
– Registered trademarks only
– “Identical or substantially indistinguishable”
marks on goods registered in the same class
as genuine mark holder
Civil Remedies
Specific Requirements
It is critical that the company review the relevant statutes and coordinate with
counsel before attempting to seize counterfeit goods by:
–Notifying the U.S. Attorney
–Application to court must have holder’s affidavit or verified complaint
–Posting of bond (wrongful seizure)
–Nothing but an ex parte order will suffice
–No publicity
–Likelihood of success on the merits AND immediate and irreparable injury
–Specific identification of location where counterfeit product is located and
where seizure will occur
–Balancing of harm
–Target of seizure would destroy, move, hide goods and documents if
proceeding was on notice.
Civil Remedies – Court Order
Court’s order should include:
–Findings of fact and conclusions of law
–Description of items to be seized and their location
–Seven day window
–Amount of bond
–Date for confirmation hearing
–Gag order
Other requirements:
–Seizure of books and records (protective order)
–Papers filed under seal
–Service by a federal, state or local law enforcement officer
–Seizure confirmation hearing
Thank you for your attention!
Owen J. McKeon
Director
Gibbons P.C.
[email protected]
Counterfeiting in the 21st
Century
An Industry Perspective
Carla Cartwright,
Johnson & Johnson
Global Regulatory Policy & Intelligence
Counterfeiting:
The Crime of the 21st Century
Counterfeiting is a large and growing business
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2008 estimate of counterfeit and pirated products $650 Billion. Projected
15% growth rate puts 2015 estimate at $1.7 Trillion. (1)
Estimate prevalence of counterfeit drugs at 1% in industrialized countries.
Africa, Asia and Latin America 30%. (2)
>8% of medical devices in circulation are counterfeit (3)
>50% of medicines purchased over the Internet from illegal sites that
conceal their physical address have been found to be counterfeit. (4)
Counterfeit products are found in a diverse range of product categories, in
almost every country.
(1) BSCAP/Frontier Economics Report - 2011.
(2) WHO IMPACT publication “Counterfeit Drugs Kill” -2008
(3) WHO 2010 – News Medical.net
(4) HO Factsheet no 275 - 2012
Overview of the Challenge
Counterfeiting has become significant global
problem fueled by….
• Free trade agreements & move towards a global
economy
• Growth and capitalization of emerging markets
• Counterfeiters are well-funded and technologically
advanced
• Under-resourced regulatory and enforcement
agencies
• Profitability of illicit trade practices - high reward to
risk ratio
• Lack of respect & protection for Intellectual Property
in some countries
Facilitated by Innovation and Globalization
• Links between counterfeiters and organized crime
networks
• Internet has facilitated global capabilities for illicit trade
– Customers and counterfeiters connect
• Liberal legislation governing cross border trade
• Globalization of supply chains
• Risks from sourcing, API, manufacturing, etc.
• Inadequate control and visibility of global end to end
supply chain
Combating Counterfeits –
Awareness & Education
• Important awareness and education work undertaken by
international agencies and industry groups – such as
– World Health Professions Alliance (WHPA)
– World Health Organization (WHO)
– Rx360
– ASOP (Alliance for Safe Online Pharmacies)
– IACC (International AntiCounterfeiting Coalition)
• Highlighting risks with powerful educational materials
Key Steps to Safe & Secure Supply Chain
• Identifying brand protection risks across the supply chain, from materials
sourcing, manufacturing, distribution, reverse logistics to product
destruction.
• Introduce policies, practices and measures across the supply chain to
mitigate risks.
• New product development -assessment for counterfeit risk and plan
measures to mitigate those risks.
• Active program to utilize security features on product packaging both
overt and covert features to help identify suspect product
• Market monitoring program to proactively detect illicit trade, such as
internet monitoring, product buys and market surveys
• Enforcement strategy which utilizes available legal instruments to take
enforcement actions against perpetrators
• Implement Incident reporting and escalation processes to effectively
manage and investigate reported incidents.
Johnson & Johnson Position
Anti-Counterfeiting
http://www.jnj.com/caring/citizenship-sustainability/strategic-framework/Anti-counterfeiting
Johnson & Johnson Position
Anti-Counterfeiting
Counterfeiting of health care products is a serious
issue, as it puts people’s health and lives at risk
and undermines confidence in product safety and
effectiveness. It is also a growing problem around
the world. Our companies work hard to identify and
minimize the risk of counterfeits to help ensure that
patients and consumers receive genuine products
of the Johnson & Johnson Family of Companies.
Johnson & Johnson Position
Anti-Counterfeiting: Pre-Market
Taking a risk based approach, we use a range of
product and packaging security measures that
help identify authentic products from those that are
counterfeit. We also work to minimize the risk of
counterfeit products entering our supply chain,
from manufacturing to distribution.
Johnson & Johnson Position
Anti-Counterfeiting: Post-Market
• Monitor markets and investigate counterfeiting activities
• Collaborate with regulatory and law enforcement
authorities, as well as our business partners, to help
identify and remove counterfeits from the market
• May prosecute or take civil action against the
perpetrators
• Work with governments and regulatory agencies to
identify opportunities to strengthen laws, regulations and
enforcement efforts, to help protect and secure the
supply chain
• Take measures to raise awareness among our
stakeholders of the dangers of counterfeit health care
products
DEPARTMENT OF STATE
Office of Intellectual Property Enforcement (IPE)
Role of Department of State in IP and Counterfeiting Issues
The U.S. Is an Innovation
Economy
~The competition is keener; the challenge tougher; and that is
why innovation is more important than ever. It is the key to good,
new jobs for the 21st century ~ President Obama
• The State Department is committed to protecting intellectual
property (IP), which is vital to promoting and encouraging
innovation and creativity in the United States.
• The Economic Bureau works to defend the IP rights of our
creators and innovators, to protect consumers from
counterfeit goods that threaten public health and safety,
support the freedom of the Internet, and encourage the free
flow of information across the digital world.
How important is innovation to
the U.S. economy?
In 2010, IP-intensive industries accounted for
• $5 trillion or 35% of U.S. GDP
• 61% of total U.S. merchandise exports
• 40 million American jobs, 28% of all employment
in the economy
• Jobs in IP-intensive industries pay approximately
42% more than positions in non-IP-intensive
industries
Focus Areas of State’s IP Office
• Improving legal frameworks & implementation
• Bilateral, multilateral, plurilateral
• Policy development and tools
• Special 301 Report, Notorious Markets Report
• Outreach through Posts, in Washington
• Public diplomacy, World IP Day, IVLP
• IP Training
• Facilitate overseas law enforcement training
• Overseas resources
• Embassy teams
IPR Outreach by
U.S. Diplomatic
Posts
KENYA: Coast Girls School
students display their new
"Save the Nation: Say NO
to Counterfeits" bags after
participating in a U.S.
Embassy-led youth
outreach event where the
girls learned about
counterfeit products.
Outreach
China Safe
Medicine Program
Decrease the prevalence of counterfeit and unsafe
medicines by:
 improving the knowledge and skills of health
service providers who counsel patients
 increasing awareness of Chinese journalists, policy
makers, and the general public of the harmful
effects of counterfeit and unsafe medicines
Results
• Trained 256 grassroots health
service providers and 107
pharmacists
• Disseminated 3,000 safe medicine
educational booklets to patients and
community residents
• Used mircroblogs with 1.8 million
followers to educate
• Conducted online safe medicine
knowledge competition
• Published 9 safe medicine articles
via Health News, with a circulation
of 300,000
CAMBODIA - And the winning
slogan was…
World Anti-Counterfeiting Day
INL Training
IPE works with State’s International Narcotics and Law Enforcement
Bureau to utilize a portion of IPR enforcement training funds for
counterfeit medicines.
• FY2011—training agencies received just under $1.1 million for 8
counterfeit medicine related projects
• FY2012—agencies received nearly $400,000 to implement four
counterfeit med projects in Africa and Bangladesh
• FY2013--agencies will receive about $1.1m for 6 counterfeit med
related projects in Africa, SE Asia and the Middle East
International Visitors
Leadership Program
• Journalists – educate about the problem
of counterfeits – danger to human
health & safety
• Educators – role of IPR in promoting
innovation, educating about IPR
• Health & Medical Professionals –
Counterfeit medicines
• Women Leaders – Value capture from IPR; role of trademarks
• Government and Business Leaders – How business works with Govt. to
combat counterfeits, increase respect for IPR
• Scientists & Engineers – Role of IPR in these fields; patents
• Trade Experts – Increasing competitiveness; role of IPR in business
• Arts and Sports Professionals – Copyright and trademark issues
Thank you!
DEPARTMENT OF STATE
Office of Intellectual Property Enforcement (IPE)
Role of Department of State in IP and Counterfeiting Issues