The COVID-19 Impact on Brand Owners and a Changing Counterfeit Space

The COVID-19 pandemic has created a new normal and changed needs. Global companies are pivoting production lines to help address an increased need for personal protective equipment (PPE) in Canada. These efforts exemplify integrity and willingness to work towards a greater good. However, there has been no shortage of bad actors looking to profit in this crisis. In response, law enforcement, brand owners, and IP practitioners need to focus their efforts on targeting unlawful activities connected to criminals who have exploited the pandemic as an opportunity for quick profit and personal gain.  

Co-ordinated Operations

Through March 2020, 90 countries took part in INTERPOL’s “Operation Pangea XIII”, a co-ordinated effort targeting illegal online sales of medical products and medicines. According to the INTERPOL report on the Operation, participating authorities inspected more than 326,000 packages, of which more than 48,000 were seized, and leading to 121 arrests. The goods seized in connection with Operation Pangea XIII were connected to approximately 2,000 online advertisements for COVID-19 medical devices and “coronavirus medicines”.[i] In addition to the counterfeit and substandard PPE materials(including face masks and hand sanitizers) authorities seized over 4 million illicit pharmaceuticals and identified thousands of counterfeit test-kits and surgical instruments. Counterfeit masks continue to be a highly advertised product online. Operation Pangea XIII displays the lengths to which some individuals will go to make a quick profit despite the serious and lethal impact of their activity on public health. Such continued harmonized efforts are necessary to combat the networks working tirelessly to distribute and market substandard, unauthorized, and counterfeit goods in high demand.

Proactive Measures & the 3M Approach  

Counterfeit masks continue to pose a serious threat to the public. Both the Centre for Disease Control (CDC) and Health Canada have issued serious warnings about fraudulent N95 respirators.  On April 14, Health Canada issued an advisory warning Canadians about the risks of using “fraudulent and unauthorized N95 respirators, as they may not protect consumers against COVID-19”. Health Canada advised the public to verify the certification of the mask against the U.S. National Institute for Occupational Safety and Health (NIOSH) and contact Health Canada if a mask is fraudulent or uncertified. Similarly, the CDC has shared detailed information and tips concerning Counterfeit respirators that are falsely marketed and sold as being NIOSH-approved. The CDC continues to post known counterfeit PPE products misrepresenting NIOSH approval on their website in an effort to effectively and efficiently alert the public.[ii]

It is increasingly important for brand owners to be proactive and adjust their enforcement strategies based on the current climate. Prior to the pandemic, there was already a massive shift to online sellers, and brand owners were faced with an influx of unauthorized distribution channels.  While it is critical for brand owners to register their intellectual property with the Customs Border Protection Agency in jurisdictions where their goods are sold, more must be done to urgently protect the health and safety of consumers during this time.

In addition, price-gouging of medical supplies by third party sellers has become a major concern to consumers, governments, and brand owners during this pandemic. Some companies have taken the position that price-gouging practices undermine the value of their brands. 3M Co., a producer of the N95 mask, took early and fast action against such conduct in the United States and Canada in relation to their products. In addition to working with national and international law enforcement, 3M has filed a number of lawsuits in the United States and one in Canada on the basis of trademark infringement, unfair competition, dilution, and false association, among other claims. One lawsuit filed in Ontario targeted a corporation claiming affiliation with 3M, selling coveted protective masks at inflated prices. The subject masks were being sold online through Shopify for five times the suggested retail price.

The importance of health and safety, and the increased demand for medical supplies and protective wear make it incumbent on brand owners to be proactive in their approach. As highlighted by 3M’s increased and aggressive efforts, the goal of brand owners — especially now — is to prevent fraud and illegal activity before it starts.

There are several measures that can be taken to protect copyrights, trademarks and the goodwill of brands. Increased consumer engagement and brand awareness can assist with respect to the threat of increasing false and/or misleading advertisements. Educated consumers may be more inclined to report phony advertisements, fake social media accounts and phishing emails if they know what to look for. Global online marketplaces have been quick to report and remove COVID-19 profiteers, but it is beneficial for brand owners to spend more time online reviewing dishonest sellers who may be recidivist or associated with a larger, illegitimate network. In addition to immediate e-commerce takedown notices, creative and assertive strategies will be needed to pursue those taking unfair advantage of this pandemic.

Critical Online Enforcement

This crisis has exhibited the true dangers and increased risks consumers face when shopping online for any good. Between implemented social distancing measures and the closure of non-essential physical stores, the shift to purchase goods online was anticipated. Unfortunately, in addition to new, authorized sellers who had no choice but to move their business online, the web has been flooded with fraudulent, malicious domains. A report published by cybersecurity research firm, Sophos Labs, indicates that by the end of March 2020, over 42,000 domain names containing “COVID” and/or “corona” had been registered.[iii] 

Online hosts and registrars are not impervious to fraudsters and counterfeiters, but the immediate need to proactively prevent and remove abusive domains and sellers related to the pandemic is immense. Since the start of the pandemic, on the Shopify platform alone, thousands of users have been removed for violating online policies, and approximately 3,000 have been suspended due to sale of masks and hand sanitizers at “exorbitant prices.”[iv] In addition to medical supplies and sanitizers, websites touting counterfeit COVID-19 test-kits and phony “cures” have become rampant. These are particularly insidious, as many of these websites were created to obtain personal information, payment data and log-in credentials. In addition to taking advantage of the procedures offered by marketplaces and social media outlets where such activities occur, brand owners will themselves need procedures in place to assist in the rapid detection and efficient enforcement of these sophisticated bad actors. Brand owners should constantly review popular online platforms as well as the policies and procedures available to them. 

The COVID-19 pandemic will have a long-term effect on e-commerce. The development of COVID-19 related scams is inevitable. To protect the goodwill of a brand and to combat the unavoidable influx of counterfeiters, brand owners must focus on implementing suitable strategies capable of addressing the fluctuating crisis. This is a crucial time for brand owners to review their current IP approach and confirm that the necessary trademarks, copyrights and design registrations are up-to-date and filed with online marketplaces, the CBSA, and other appropriate agencies that can assist in reducing the surge of dangerous, unauthorized products. 

[i] “Global operation sees a rise in fake medical products related to COVID-19” March 19, 2020 https://www.interpol.int/en/News-and-Events/News/2020/Global-operation-sees-a-rise-in-fake-medical-products-related-to-COVID-19
[ii] https://www.cdc.gov/niosh/npptl/usernotices/counterfeitResp.html; https://healthycanadians.gc.ca/recall-alert-rappel-avis/hc-sc/2020/72707a-eng.php
[iii] https://news.sophos.com/en-us/2020/04/14/covidmalware/
[iv] “Profiteers bypassing Facebook, Shopify bans to push marked up masks amid COVID-19 pandemic” March 19, 2020, https://www.theglobeandmail.com/canada/article-profiteers-continue-to-exploit-covid-19-pandemic-to-push-masks/