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COUNTERFEITING & THE MEDICAL DEVICE INDUSTRY BY: RICHARD M. BARNES, ESQ. GOODELL DEVRIES LEECH & DANN, LLP. AUGUST 25, 2016 410-783-4004 [email protected]
COUNTERFEITING & THE MEDICAL DEVICE INDUSTRY
BY:
RICHARD M. BARNES, ESQ.GOODELL DEVRIES LEECH & DANN, LLP.
AUGUST 25, 2016
SETTING THE STAGE: Examples Of Medical Device Counterfeiting
Counterfeit Contact Lenses
•February 2016: Federal Grand Jury Indictment
•Defendant accused of importing thousands of colored contact lenses from the People’s Republic of China and South Korea.
•Contacts bore the trademarks for “Ciba Vision FreshLookCOLORBLENDS,” which are manufactured by Novartis International AG.
Counterfeit Blood Glucose Test Strips
•August 2013: Johnson & Johnson v. Azam Intern. Trading, 2013 WL 40482
•Defendants distributed counterfeit blood glucose test strips, originating in Pakistan and/or China.
•Test strips bore the trademark “OneTouch,” owned by Johnson & Johnson.
SETTING THE STAGE: Examples Of Medical Device Counterfeiting
Counterfeit Contact Lenses
•February 2016: Federal Grand Jury Indictment
•Defendant accused of importing thousands of colored contact lenses from the People’s Republic of China and South Korea.
•Contacts bore the trademarks for “Ciba Vision FreshLookCOLORBLENDS,” which are manufactured by Novartis International AG.
Counterfeit Blood Glucose Test Strips
•August 2013: Johnson & Johnson v. Azam Intern. Trading, 2013 WL 40482
•Defendants distributed counterfeit blood glucose test strips, originating in Pakistan and/or China.
•Test strips bore the trademark “OneTouch,” owned by Johnson & Johnson.
Counterfeit Contact Lenses
•Customers complained about quality of lenses.
•Contacts allegedly contaminated with hazardous bacteria.
•Could cause eye infections, corneal ulcers, and even blindness.
Counterfeit Blood Glucose Test Strips
• Worldwide sale and distribution of potentially deadly counterfeits.
• Unreliable performance, including highly inaccurate test results.
• Could result in serious injury or death from insulin treatment based on inaccurate blood glucose results.
SETTING THE STAGE (Cont.): Counterfeiting Consequences
SCOPE OF THE PROBLEM
WITH MUCH AT STAKE, THERE ARE MANY STAKEHOLDERS
United Nations FDA U.S. I.C.E. Interpol WHO
CDCNational
Consumers League
National Crime Prevention
Council
National Association of
Boards of Pharmacy
PhRMA
National Health Service (England) Health Canada TGA
Health Sciences Authority, Singapore
The Media
COUNTERFEITING IN THE NEWSUSA Today2011
• The Dangerous World Of Counterfeit Prescription Drugs
CBS 60 Minutes2011• The Difficult Fight Against Counterfeit Drugs
Forbes2012• Fake Drugs – All At a Pharmacy Near You!
Bloomberg2013• Inside Pfizer’s Fight Against Counterfeit Drugs
Newsweek2015• The Fake Drug Industry is Exploding, and We Can’t Do Anything About It
Regulatory Affairs Professionals Society2016• US Generics Firm Reports Counterfeit Cancer Drug Sales in Three
Countries
THE BOTTOM LINE
MEDICAL DEVICE COUNTERFEITING: An International Issue
In 2010, the World Health Organization
(WHO) estimated that more than 8% of
medical devices in circulation are
counterfeit.
Operation Pangea VIII: June 2015 Global Effort (FDA)
• Cooperative effort (115 countries) to combat online sale and distribution of potentially counterfeit and illegal medical products.
• Shut down 2,400 websites and seized $81 million in illegal medicines and medical devices worldwide.
• 2008 – 2015 FDA’s Office of Criminal Investigations (OCI) has resulted in the seizure of more than $172 million in unlawful medical products.
BEYOND THE BOTTOM LINE
Counterfeiting Consequences
• Potential health risks to consumers
• Legal liability
• Negative branding and/or brand diminishment
• Revenue loss
• Intellectual property theft
• Loss of consumer confidence in medical products, healthcare providers and health systems
• Threat to innovation
• Loss of tax revenue
• Health plans defrauded
• Resources wasted to combat counterfeiting
COUNTERFEITING FAST FACTSThe WHO has found that the majority of counterfeit drugs contain no active ingredient, the wrong active
ingredient, or the wrong amount of the correct active ingredient.
At least 60 different Pfizer products are being counterfeited around the world. More than 920 medical products are reported to be substandard, spurious, falsely labelled, falsified and
counterfeit (SSFFC), according to WHO (2016).As many as 1 million people die annually from ingesting counterfeit drugs, which have been found to contain rat poison, brick dust, boric acid, floor polish, paint and inkjet material, and are sometimes
contaminated with bacteria.
WHO estimated the counterfeit drug trade to be a $431 billion industry (2012).
Worldwide counterfeit sales are increasing about 13% annually – nearly twice the rate of legitimate pharmaceuticals. Sales of counterfeit medical products rose 90% between 2005 and 2010.
50% of online pharmacies are selling counterfeit medications.
PRODUCT LIABILITY IMPLICATIONS
• Plaintiff purchased counterfeit LIPITOR from Rite Aid and sued Pfizer.
• Argued that Pfizer failed to institute reasonable safeguards against counterfeit LIPITOR products entering the stream of commerce and that the risks of counterfeit proliferation were well known to them.
Ashworth v. Albers Medical, Inc.410 F.Supp.2d 471 (S.D.W.V. Aug. 23, 2005)
Ashworth v. Albers Medical, Inc.
Strict Liability and Breach of
Warranty Claims
• Dismissed because Pfizer was not a participant in the counterfeiting scheme.
• It would not make sense for Pfizer to counterfeit its own product – nor did Plaintiff allege this.
Fraud Claim
• Dismissed because any representation about the counterfeit product was not made by Pfizer.
• Pfizer only made representations about genuine LIPITOR, not the counterfeit product.
Negligence Claim
• Typically, under West Virginia law, a person “does not have a duty to protect others from the deliberate criminal conduct of third parties.”
• However, some special relationships can be imposed.
Ashworth v. Albers Medical, Inc.
Pfizer should have designed a more counterfeit resistant
product/package.
Manufacturers do not have a duty to anticipate and frustrate criminal
tampering. Pfizer is not a marketplace insurer of counterfeit goods.
Pfizer should have exercised more control over its
distributors.
There was no law the Plaintiff could point to that placed a duty on Pfizer to
police its distributors.
Plaintiff advanced two negligence theories.
PROTECTING YOUR TRADEMARK
WHAT IS A TRADEMARK?
Trademark: A trademark is a
brand name used to identify and
distinguish the goods/services of
one seller or provider from those of others, and to indicate the
source of the goods/services.
TRADEMARK
BRAND
QUALITY
SOURCE
WHAT IS A COUNTERFEIT?
• Unregistered marks cannot form the basis for a counterfeiting claim.
Counterfeit: “[A] spurious mark
that is identical with, or
substantially indistinguishable
from” a mark registered in the
United States PTO. 15 U.S.C. §1127.
Why would someone counterfeit your trademark?
Your trademark is valuable, and counterfeiters
know it.
• Counterfeiters want to trade on your brand.
• Favorable risk/reward ratio: Penalties are lenient and profit margins are high.
THE GRAY MARKET
Company X manufacturers a
prescription medication that is branded and sold in countries outside of
the Unites States.
That product, substantively identical to a United States branded
product (under a different name), enters the U.S. Gray Market.
Product is resold for a much lower price than
its American counterpart.
The trade of products through legal distribution channels that are not intended by the manufacturer.
Remember, gray market goods are legitimate goods – not counterfeit.
A CASE STUDYWidget Company v. Russian Counterfeiting Incorporated
THE FACTS
■Widget Co. manufacturers highly technical medical devices.
■While using a widget during a procedure, a famous European doctor notices the widget does not work properly (caused injury to patient).
■Following the procedure, the doctor calls Widget Co. to report the problem.
■Ultimately, Widget Co. determines that, although the widget bore its trademark, it was not manufactured by Widget Co.
STEP ONE Obtain the product/device from end user.
Obtain all invoices and documentation.
Pull all information relevant to the origination and chain of commerce
of that particular product.
Gather evidence and maintain chain of custody.
STEP TWOAnalysis of packaging. Analysis of device.
Comparison of internal SKU and
other product identifiers.
Show differences between
legitimate inventory (i.e.
product design).
Look for places where counterfeiters attempted to strip off
original/legitimate markings.
Establish the device is counterfeit and prove that it is not your product.
STEP THREEAnalyze the chain of evidence information.
Look at the packaging and match any connection to internal supply chain.
Might need to sort through multiple layers of sub-distributors.
Trace the counterfeit to the criminal.
WHAT TO DO NEXT?1. Identify Your Marks That Are Infringed.
2. Make Sure Those Marks Are Registered In The United States.
3. Determine Whether You Want To Avoid Or Commence Civil Litigation.
AVOIDING CIVIL LITIGATION
Send a Cease and Desist Letter
Contact FDA’s Office of Criminal
Investigations
Contact the U.S. Attorney’s Office
Contact Customs for Imported Counterfeit
Goods
CONSIDERATIONS WHEN AVOIDING LITIGATION
• Cease and desist letters and government interaction may eliminate the element of surprise.
• Counterfeiters may conceal or destroy counterfeit goods and related documentation.
• It is uncertain how quickly the government would move to shut down the counterfeiter, if at all. Such a delay could have a detrimental effect on company profits, reputation, and good will.
PREVENTING LITIGATION: PROTECT YOUR IP
LEGAL BUSINESS
COMMENCING LITIGATION: STANDARD CLAIMS
Infringement of a Registered Mark Unfair Competition
Trademark Dilution of a Famous Mark that is Distinctive
False Designation of Origin
(Registered and Unregistered
Marks)
Common Law Trademark
Infringement
REMEDIES AGAINST A COUNTERFEITER
TRO/Preliminary Injunction(ex parte)
Permanent Injunction
Seizure of Counterfeit
Goods(ex parte)
Destruction of Counterfeit
Goods
Actual Monetary Damages
Treble Damages
Statutory Monetary Damages
Attorneys’ Fees
CONSIDERATIONS WHEN COMMENCING LITIGATION
Make sure the owner of infringed mark is named as the Plaintiff.
Request the TRO include a gag order, preventing communications between defendant and third-parties (suppliers/manufacturers) to avoid concealment or destruction of evidence.
Federal Rules of Civil Procedure provide for expedited discovery. Prepare Requests for Production, interrogatories and deposition notices.
Make sure to seek injunctive relief against third parties acting in concert with or in participation with defendants.
For ex parte seizures, file the case under seal to avoid alerting counterfeiters and third-parties involved.
AVAILABLE EQUITABLE REMEDIES
TRO/Preliminary Injunction
Permanent Injunction
Seizure of Counterfeit
Goods
Destruction of Counterfeit
Goods
AVAILABLE MONETARY REMEDIES
Actual Monetary Damages
Treble Damages
Statutory Monetary Damages
Attorneys’ Fees
A court may…• issue a TRO against a counterfeiter ex parte when
necessary to preserve the status quo.• grant a preliminary injunction against a counterfeiter that
restrains it from engaging in any counterfeiting activity through trial.
• issue a permanent injunction after a trial on the merits or as part of a decision on a summary judgment motion.
TEMPORARY RESTRAINING ORDERS AND PRELIMINARY INJUNCTIONS
• An Ex Parte order can permit a plaintiff to seize counterfeit goods located at the defendant’s place of business and all property/equipment used to make the counterfeit goods.
• Plaintiff should also seek the seizure of the books and records related to the importation and distribution of the counterfeit goods.
SEIZURE OF COUNTERFEIT GOODS
SHUT THEM DOWN
Work with local and foreign authorities to
accomplish these goals.
Stop the manufacturer.
Stop importation to the United States.
Stop importation to other jurisdictions where you have
a protected mark.
After you’ve identified your counterfeiter and traced their source, these are your next steps.
QUESTIONS?Richard M. Barnes, Esq.
Goodell, DeVries, Leech, and Dann, LLP410-783-4004
