The Front Lines of Defense


Sarah Morgan

The Front Lines of Defense

International groups, national customs authorities, courts, and judiciaries are joining forces with brand owners in global efforts to stem the tide of counterfeit products. Sarah Morgan reports on the situation in various countries.

There’s a huge global market for counterfeits. Amounting to 3.3 percent of world trade, global sales of counterfeit and pirated goods hit US $509 billion a year in 2016, according to “Trends in Trade in Counterfeit and Pirated Goods,” a March 2019 report from the European Union Intellectual Property Office’s (EUIPO) Observatory and the Organisation for Economic Co-operation and Development (OECD).

As new means of communication and distribution channels arise, national customs officials have an ever-evolving fight on their hands in seeking to stem the tide of counterfeits.

The COVID-19 pandemic has exacerbated the activities of counterfeiters. A report issued by Europol in April confirmed that counterfeit pharmaceutical and healthcare products rapidly appeared in markets in the European Union in line with the spread of the virus, and that demand for these types of products surged—and is expected to continue throughout the crisis, despite potential health consequences.

As demand soars, it seems no country is immune to the rising tide of counterfeits. But customs are not standing idle. New technology is being implemented to assist screening, new partnerships are being forged, and old collaborations are being put to use.

In March, Interpol’s annual Operation Pangea—which involves police, customs, and health regulatory authorities from 90 countries—seized counterfeit face masks and unauthorized antiviral medication. This globally coordinated operation, which is aimed at tackling the illegal online sale of medicines and medical devices, is not the only defense against COVID-19 counterfeits.

Indeed, U.S. Customs and Border Protection (CBP) has made significant seizures of counterfeit, unapproved, or substandard COVID-19 products in recent months. Since January, CBP had seized 175,000 U.S. Food and Drug Administration (FDA)-prohibited COVID-19 test kits in 376 incidents, and more than 12.6 million counterfeit face masks in 319 incidents.

In late October, the FDA, CBP, and the U.S. Immigration and Customs Enforcement, Homeland Security Investigations signed a memorandum of understanding to maximize inspection and detection capabilities in a bid to stop harmful products that attempt to enter the United States through FDA International Mail Facilities.

“Nigeria has partnered with various international organizations such as the WHO to advocate against counterfeit drugs and combat peddlers.” Similoluwa Oyelude, G. Elias & Co.







Capitalizing on Demand

Nigeria has also suffered from increased counterfeiting during the COVID-19 pandemic. “It is a well-known fact that crises often present new opportunities for counterfeiters and people in organized crime groups the world over, for them to further carry out their illicit activities,” said Shafiu Adamu Yauri, Registrar of Trademarks, Trademarks Registry, Federal Ministry of Industry, Trade and Investment (Nigeria).

According to Mr. Yauri, there have been dramatic increases in fake pharmaceuticals and other medicines in Nigeria, as in other parts of the world, since the pandemic began.

“One can say that Nigeria is no exception. The pandemic has increased demand for counterfeit products and business in Nigeria,” he added. “Counterfeiters and other crime groups involved in counterfeiting around the world have sought to capitalize on the new demand for virus-mitigating products.”

To combat the surge in counterfeits, interagency collaboration between governmental health agencies and intellectual property (IP) agencies across Nigeria, as well as multi-stakeholder collaborations, are playing a decisive role; public awareness campaigns are being undertaken; and technology is being used to screen for counterfeit products, said Mr. Yauri.

“Crises often present new opportunities for counterfeiters and people in organized crime groups the world over.” Shafiu Adamu Yauri, Nigerian Ministry of Industry, Trade and Investment

Fighting counterfeits is not new for Nigeria. The country was once considered a hotbed of counterfeits, with one in 10 drugs for sale in Africa either fake or substandard, according to the World Health Organization (WHO).

The establishment of the Nigerian National Agency for Food and Drug Administration and Control (NAFDAC) in 1993 boosted the country’s fight against counterfeiting, said Akeem Aponmade, Principal Counsel at A.O. Aponmade & Co. (Nigeria).

He added: “This organization has waged a relentless battle to rid the country of counterfeit drugs and other items within the purview of its enforcement powers. It carries out raids in markets, monitors the ports, and prosecutes offenders.”

The “plague” of counterfeit and low-quality medicines has driven NAFDAC to introduce stringent measures for the control of drugs in Nigeria, said Mr. Yauri.

As part of these measures, NAFDAC formed a collaboration with the trademark registry five years ago, so that the administration requires evidence of a trademark registration before it certifies a product, he explained.

The impact of NAFDAC’s collaboration has been “tremendous,” Mr. Yauri said. The number of applications filed before the trademark registry has received a boost, genuine brand owners are now getting a quick service delivery, and NAFDAC has seen an increased number of applications for certification.

He added: “This action has clearly promoted legitimate trade, while discouraging the actions of those involved in fake products.”

It is a concerted effort across Nigeria, with many authorities working toward the same goal, said Similoluwa Oyelude, Senior Associate and Team Lead of Intellectual Property at G. Elias & Co. (Nigeria). In 2014, the Nigeria Customs Service (NCS) created an IP rights unit, which included in its tasks ensuring officers were trained on IP enforcement.

“Nigeria has partnered with various international organizations such as the WHO to advocate against counterfeit drugs and combat peddlers,” she said.

NCS has worked with various regulatory border agencies, including NAFDAC, to seize IP-infringing goods. The Customs Service also signed an agreement with the Nigeria Copyright Commission, to improve coordination of border management of copyright-infringing imports.

“The Court of Appeal decision has important implications for Singapore’s trans-shipment industry.” Francine Tan, Francine Tan Law Corporation






The Judicial Picture

Courts are having to grapple with the changing world of how counterfeits are transported around the globe, with the Singaporean decision in Burberry Limited & Anr v. Megastar Shipping Pte. Ltd. (2019) being a prime example.

In January 2019, Burberry and Louis Vuitton lost their trademark appeal before the Court of Appeal, the upper division of the Supreme Court of Singapore, in a decision that has far-reaching implications.

The brands had sued freight forwarding company Megastar Shipping over goods imported from China, which were meant for trans-shipment to Indonesia.

Singapore Customs had found more than 15,000 counterfeit items inside two sealed containers, but Megastar had not physically handled the goods (since they were inside the containers) and did not know that the shipment contained the fakes.

To establish liability, according to the court, the plaintiffs had to prove that the defendant had knowingly intended to import or export goods which it knew or had reason to believe bore a sign. But, because Megastar had no reason to suspect that the cargo contained fake goods bearing a trademark, in this case the brands in question, there was no evidence that they had infringed the trademarks.

Francine Tan, Managing Director of Francine Tan Law Corporation (Singapore), said: “The Court of Appeal decision has important implications for Singapore’s trans-shipment industry and the parties that may be involved in such trans-shipment, such as the shippers, carriers, truckers, and, in this case, freight forwarders, even if they have no interest in the goods.”

While the decision has clarified that goods in transit can be the subject of a trademark infringement action even if they are not meant for distribution in Singapore, the law now requires the plaintiff to show the defendant had reason to believe or actual knowledge that there was a sign or signs on the goods.

“The decision appears at first glance to have introduced a difficult evidential threshold to be met, which involves showing the necessary mental element,” said Ms. Tan.

She sees the decision as presenting opportunities for trademark owners to find ways to put freight forwarders on notice that the goods may be counterfeit or that they bear trademarks.

As Singapore is the busiest trans-shipment hub in the world, moving 37.2 million containers in 2019 alone, the implications could be far-ranging, said Ravi Ravindran, Partner at Ravindran Associates LLP (Singapore).

He believes that brands have stopped taking action on trans-shipment issues, as they are awaiting clarity following this landmark decision.

“I suggest that Singapore instead follows the UK system, which is quite administrative. Customs informs the owner of the goods and, if the owner does not come forward, then the goods can be destroyed,” Mr. Ravindran explained.

“Customs informs the owner of the goods and, if the owner does not come forward, then the goods can be destroyed.” Ravi Ravindran, Ravindran Associates






More Power Needed

Singapore is not the only country in Asia facing challenges on the trans-shipment front. The Hong Kong judiciary came to a similar conclusion on the issue more than a dozen years ago.

Amita Haylock, Partner at Mayer Brown (Hong Kong SAR, China), said: “In HKSAR v Kong Hing Agency Ltd. (2007) it was held that a freight forwarder could not be held liable if it did not suspect, with reasonable diligence, that the goods bore a forged trademark or false trade description. Only the importer and exporter of the fake goods would be liable.”

She added that Hong Kong Customs is often less vigorous in enforcing actions related to trans-shipped goods, particularly goods passing through free trade zones and freeports.

“Counterfeiters aware of this will therefore often try to trans-ship their counterfeit goods through these ports to their final destination and seek to hide the country of origin of the goods,” Ms. Haylock warned.

Jack Chang, Co-founder and a Vice Chairman of the Quality Brands Protection Committee of China (QBPC) (China), said that, based on the committee’s recommendation, the Supreme People’s Procuratorate in China initiated a one-year pilot program in November 2019 in Beijing, Fujian, Guangdong Province, Jiangsu, Shanghai, and Zhejiang to “promote and experiment with the practice that IP owners shall be notified by the local procuratorates which prosecute crime cases infringing their IP to exercise the rights available under PRC Criminal Procedural Law as the victims of the IP crimes prosecuted.”

Mr. Chang said: “Take Shanghai People’s Procuratorate as an example. In 2018, it sent out notices to IP owners of 410 cases prosecuted. In 2019, the number increased to 922 cases.”

“China Customs is paying increasing attention to the rights of domestic, not just foreign, IP rights holders.” Amita Haylock, Mayer Brown






Customs and COVID-19

Customs officers in Hong Kong are facing a mountain of counterfeits, but the deployment of an artificial intelligence (AI) system which screens various online platforms 24 hours a day is helping. In the first half of 2018, Customs reportedly increased its seizure of online counterfeit goods by more than 30 percent, since deploying its AI system in December 2017.

While current figures are not yet available, Ms. Haylock estimates, based on data from the Hong Kong Customs’ website, that the total value of counterfeit goods seized by Hong Kong Customs in 2019 is around HK $73 million.

The import of counterfeit face masks has increased significantly during the COVID-19 pandemic. To combat this, Hong Kong Customs began a territory-wide operation in January to combat the sale of counterfeit personal protective equipment.

Then, in April, it rolled out a compliance program for local mask manufacturers and online surgical mask retailers to ensure compliance with local consumer rights and trademark regulations.

As part of its effort, Hong Kong Customs seized more than six million falsely labeled face masks in July. The masks had been procured by the Government Logistics Department (GLD) for distribution to various government departments, according to Ms. Haylock.

In addition, Customs has a separate ongoing investigation into 32 million masks also procured by the GLD and suspected of bearing a false origin claim, mainly from Japan. In late October, it seized 100,000 counterfeit medical-grade masks intended to be trans-shipped overseas via Hong Kong.

So far, Hong Kong Customs has conducted more than 38,000 inspections at chain stores, pharmacies, medicine stores, and shops selling daily necessities, seizing nearly six million surgical masks, 314 bottles of disinfectant alcohol, and 23 bottles of normal saline, relayed Ms. Haylock.

China is also facing a significant increase in counterfeit production of face masks, she said. In April alone, China Customs seized around one million masks declared for export for not having the requisite medical certification, despite the packaging being marked “medical mask.”

In June, the chairman of a Beijing-based pharmacy chain was convicted of buying and reselling around 500,000 counterfeit masks.

“China Customs is paying increasing attention to the rights of domestic, not just foreign, IP rights holders,” Ms. Haylock said, noting that the proportion of seized goods involving domestic IP rights has grown significantly from 2015 to 2018.”

China and Hong Kong continue to be by far the biggest originators of counterfeit goods, but the March 2019 report from the EUIPO’s Observatory and the OECD found that China’s share has been “progressively decreasing” while Hong Kong’s has been rising.

“The illicit cross-border trade of counterfeit goods has been a serious issue to which brand owners, and the governments of China and her trading partners, are trying hard to find a solution,” said Mr. Chang.

Progress is being made: the Shanghai police force has developed software to enhance the effectiveness of big data analysis. According to Mr. Chang, the software searches keywords of critical manufacturing materials and parts, which seem to be “legitimate goods but are purchased by both legitimate buyers and counterfeit goods manufacturers.”

“The illicit cross-border trade of counterfeit goods has been a serious issue to which brand owners, and the governments of China and her trading partners, are trying hard to find a solution.” Jack Chang, Quality Brands Protection Committee of China








Uniting in Europe

It’s not just customs and courts that are fighting counterfeits. In Europe, the European Anti-Fraud Office (OLAF) is tasked with investigating matters relating to fraud, corruption, and other offenses affecting EU financial interests.

OLAF’s main partners in the fight against counterfeiting are national EU customs authorities. The office provides them with information that can help them detect and seize counterfeit goods, as well as identify the traffickers.

OLAF has signed more than 80 agreements with non-EU partners, enabling it to work with its non-EU partners to identify and counter the sources of illegal goods in their territory, according to Marta Castillo González, Head of Sector at OLAF.

She added: “OLAF’s goal with regard to counterfeiting is to prevent illicit goods entering the EU and to cooperate with the authorities in third countries with the aim of enabling them to disrupt the production of counterfeit goods.”

During the course of its investigations, OLAF provides intelligence to the relevant national authorities and requests that they take action. Recent successes involve counterfeit rum, over-the-counter sanitary products, and counterfeit bearings, for example.

In March, OLAF opened an official inquiry into the illicit trade of face masks, medical devices, disinfectants, sanitizers, medicines, and test kits. So far, the investigation has led to the identification of more than 800 suspicious operators and to the seizure or detention of more than 14 million items.

“During the COVID-19 pandemic we have seen that counterfeiters do not stop. In fact, they have new areas where they can act. We are detecting counterfeit COVID-19-related medical supplies as well as an increase in substandard products related to COVID-19 that might be dangerous for the health of consumers,” said Ms. González.

“In spite of the great efforts being made by NAFDAC and other agencies, the fight seems far from being won.” Akeem Aponmade, A.O. Aponmade & Co.






A Battle Not Yet Won

Even as customs authorities develop new technologies to wage war on counterfeits and unite with other bodies, those engaged in counterfeiting strive to find new ways to evade them.

Mr. Aponmade said: “In spite of the great efforts being made by NAFDAC and other agencies, the fight seems far from being won. Nigeria is a large territory and the resources are inadequate.”

He and Mr. Chang both cite the importance of criminal enforcement. With his nearly 30 years of experience in the IP community, Mr. Aponmade said that criminal enforcement of IP rights is more effective than civil actions in Nigeria.

“To enable criminal actions, brands need to work with customs and other law enforcement/regulatory agencies. Striking and maintaining a mutually respectful working relationship with these bodies is therefore absolutely important to a brand enforcing its IP rights in this country,” he noted.

In Mr. Chang’s view, an effective criminal investigation conducted by the police does not always deliver meaningful results. “It must be followed by effective criminal prosecution and a transparent and fair trial,” he said.

“The Supreme People’s Procuratorate, Shanghai People’s Procuratorate, and Beijing People’s Procuratorate have been working with QBPC closely to improve the transparency and effectiveness of public prosecution against IP crimes,” he said.

Since 2002, QBPC and its members have collaborated with Chinese police, co-organizing training workshops and forums for police officers at national and local levels as well as for members.

Mr. Yauri added that IP organizations are working to raise IP awareness and collaborating in the fight against product counterfeiting in Nigeria. In November, INTA collaborated on a workshop to train Nigerian judges and regulatory agencies on fake medicines and online IP crimes.

“Providing customs agents with the genuine product allows them to familiarize themselves with the products they’re looking for.” Uche Nwokocha, Aluko & Oyebode

In Nigeria, the country-based representatives of pharmaceutical companies hold meetings and work together on anticounterfeiting efforts, noted Uche Nwokocha, Partner at Aluko & Oyebode (Nigeria).

“A pharmaceutical company can engage with an investigator to find out what counterfeit drugs are out there, and the investigator will present all the counterfeits he finds. If he finds counterfeits of another company’s pharmaceuticals, the company that has engaged him can collaborate with them in anticounterfeiting efforts,” she said.

Ms. Nwokocha took part in training for customs officials in late 2018, organized by INTA and the Anti-Counterfeiting Collaboration of Nigeria. She added that providing customs agents with the genuine product allows them to familiarize themselves with the products they’re looking for.

As part of the anticounterfeiting efforts, Ms. Nwokocha added: “Brand owners should make it a priority to register and maintain their trademark rights and to monitor their distribution channels.”

For Ms. González and OLAF, the role of right holders is very important. “They often provide OLAF with valuable information and their input is essential to help us distinguish between counterfeit and genuine products,” she said.

In addition, according to Ms. Oyelude, it is important for regulatory authorities which are “saddled with the responsibility” of combating counterfeit drugs to collaborate more with brands.

Mr. Yauri added that future collaborations should extend to other stakeholders in the pharmaceutical industry, such as manufacturing groups and associations.

It is not just strong collaborations that may stop the rising tide of counterfeits: some suggest that a change in the legal system is required.

A more robust legal framework empowering customs to strengthen their enforcement powers and inspect goods in free trade zones and freeports would be helpful in combating the trans-shipment of counterfeits, said Ms. Haylock.

In Singapore, Mr. Ravindran recommended that brands lobby the authorities to see if they can make law enforcement “less painful and more administrative, particularly in cut-and-dried cases.”

Mr. Yauri concluded: “The fight continues. A lot of efforts and new strategies are being put in place daily. It is a battle that must be won.”

INTA 2020, counterfeits, piracy, EUIPO, OECD, COVID-19, technology, medicines, medical devices, FDA, pharmaceuticals, WHO, NAFDAC, trademark owners