South Africa: Counterfeiting: Bad Medicine

Two different news reports, two very different sides of the counterfeiting story.  CNN recently did a piece about counterfeits in China, with a particular emphasis on one brand,  Beats  - for the benefit of readers who are over twenty, this is the brand of a rapper called   Dr Dre and it's used for headphones.  The report said that headphones that will set you back US$400 in the West can be picked up for a mere US$70 in China.  It told how a recent joint operation involving US and Chinese officials netted some 243 000 counterfeit goods, including Beats and major brands like Apple and Microsoft. It made the extraordinary claim that some 70% of all counterfeit goods are made in China.

The report went on to talk about how brazen the people in the counterfeit business are, how they openly advertise what they do, even handing out business cards which make this very clear. It discussed some of the tricks used by counterfeiters to avoid detection: like using US and European shipping companies rather than  Chinese shipping companies; how goods are double-packaged, first in the counterfeit packaging that the product will be sold in, and then again in a different packaging which is  removed when the goods reach their destination.

The second report was in Business Day and it dealt with the issue of counterfeit medicines. In a previous article we pointed out that the problem of counterfeit drugs has become so serious that the major pharmaceutical companies have teamed up with Interpol to establish a program aimed at training law enforcement officers to identify fake prescription drugs. The Business Day report gave further insight into this problem.

The report told how police in Southern Africa, led by Interpol, had seized some 100 tons of counterfeit medicines and arrested 180 people in the space of a week. It told how the global trade in counterfeit drugs is valued at over R1 billion annually. It said that Africa is particularly targeted by the syndicates who run this trade. An Interpol spokesperson said this: 'Africa is terrible. It is very exposed to this deadly problem because there are problems with integrating medical supply chains into countries' health systems.'  She went on to say that the syndicates can produce 'exact replicas' of legitimate drugs:  'Their intelligence networks are incredible. They know exactly what medicines are required, what regions are affected by what disease, about new emerging drugs and they act on this.'

The Business Day report also discussed how the trade in fake medicines flourishes on the internet,  and how an operation called 'Operation Pangea 6' had netted some 100 milion pills valued at US$37 million in June 2013. The spokesperson added this chilling fact:  'Eighty-percent of so-called medicines sold over the internet are counterfeit.'

All counterfeiting is bad news, but when it comes to medicines it's a particular worry. And just to be clear, counterfeit medicines are not the same as generics: a generic is legal and it involves the sale of a medicine that's equivalent to the original (whose patent has expired) and that's sold under a different name; a counterfeit, on the other hand, is illegal and it involves the sale of a medicine that's at best ineffectual, often harmful, and that's sold under the same name (and in the same packaging) as the original. A generic does not confuse; a counterfeit causes deception.

It's worth remembering that South Africa has counterfeit-specific legislation, the Counterfeit Goods Act 37 of 1997 ('CGA'). This legislation doesn't create any intellectual property rights – these are created by other statutes like the Trade Marks Act and the Copyright Act - but it creates procedural devices for acting against counterfeiters. For example, the CGA enables brand owners to request the police or custom authorities to raid premises or storage containers and seize counterfeit goods that are being imported into or stored in South Africa. These raids and seizures are then followed with civil or criminal proceedings.  The CGA isn't limited to the 'exact replicas' referred to by the Interpol spokesperson, but also extends to goods that are 'substantially identical' to the original and are 'calculated to be confused'.

The CGA has proved to be a very useful tool for brand owners whose goods are targeted by counterfeiters.  But in order for things to work quickly and smoothly, the brand owner needs to put in a considerable amount of work.  For example, in order to be able to move quickly a brand owner has to have ready access to the records of its IP rights. It needs to be able to provide the authorities with a statement explaining why the goods are believed to be counterfeit. It needs to be able to provide the authorities with security in case it transpires that the goods are not counterfeit, and the importer or seller makes a claim. And it needs to have good relationships with the authorities so that it knows exactly who to deal with. In short, it needs a comprehensive anti-counterfeiting strategy. If you want any help in setting up such a strategy, please feel free to give me a call on...

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