Navigating rampant false marking, fraud in protective equipment market
Wednesday, July 08, 2020 @ 10:29 AM | By Noel Courage and Jennie Yum
This article will focus on masks as one example of concern.
False marking with certifications, poor quality
All types of hospital-grade masks have a certification. We will use N95 respirators as an example for discussion. N95 respirators are in particular need because they are a type of mask that filters virus better than surgical masks. The typical North American N95 certification is provided by an arm of the U.S. Centers for Disease Control (CDC) called the National Institute for Occupational Safety and Health (NIOSH). An applicant for NIOSH certification must provide its own experimental data, which among other things, has to show that at least 95 per cent of sodium chloride particles are blocked in a test. The CDC will run its own experiments to verify safety and efficacy prior to issuing the certification.
Even prior to the shortage of N95 masks, the CDC was warning of false marking of N95 masks. Now the problem has exploded, as unscrupulous manufacturers look to profit off hospitals and consumers desperate for masks.
Many Canadian health-care institutions can rely on their trusted suppliers to provide quality masks, but not to fully meet the current and immediate mask demand. To resolve the mask shortage, institutions have often had to wade deep into the international marketplace to look for new suppliers. Significant due diligence is required due to the risk of low quality and false marking of masks with certifications.
Health-care institutions are typically avoiding purchasing from new, small online sellers. Online sales platforms introduced various measures to address quality and price gouging concerns for coronavirus-related products, such as face masks, and pulled many listings for counterfeit items. Auction site eBay had a blanket ban on sales of face masks, hand sanitizer and disinfecting wipes in the U.S., while Google and Facebook banned ads for face masks. The effectiveness of these bans was questioned as users and media outlets continued to report seeing listings and ads for these items. Amazon took a different approach and restricted sales of COVID-19 supplies in the U.S. to hospitals and government organizations only, through a new section of its website.
Counterfeiting is not just a risk from small online sellers. In one example, counterfeit masks were sold to a hospital in New Jersey by a trusted, long-time supplier. Even safety equipment suppliers have unknowingly offered counterfeit items for sale.
The firm 3M has established a hotline which provides information on how to identify authentic 3M products, and is encouraging consumers to report fraudulent activity, price gouging and counterfeits.
The sharks in the water are not limited to false marking and counterfeiting. In at least one case in the U.S., a trade union came close to being defrauded when trying to procure PPE. The fraud was inadvertently uncovered after the union put out a press release publicizing the “good news” that it had identified a source for over 30 million masks. It turned out that this was an attempted fraud because the masks did not exist. This has prompted mask manufacturers to warn consumers against scams, some of which have involved fake e-mail addresses and websites.
Trademark enforcement deeper dive
Counterfeit products also raise important trademark protection issues for legitimate mask manufacturers, because the manufacturer’s trademark is often reproduced, in whole or in part, on the counterfeit item. Other products may use confusingly similar brands and packaging. Trademarks are important identifiers of the source of a product, and can carry significant value — particularly when associated with considerable goodwill (e.g., when a manufacturer has an outstanding reputation for high quality products).
In the U.S., 3M recently filed a lawsuit against a supplier, Performance Supply, which falsely claimed to be an authorized 3M supplier. Performance Supply offered US$45 million in N95 respirators for sale to New York City officials at mark-ups of up to 600 per cent above the list price. The lawsuit alleged, among other things, trademark infringement.
In Canada, unauthorized use of a confusingly similar trademark can constitute trademark infringement, passing off and depreciation of goodwill contrary to the Trademarks Act. Enforcing these claims is done through a proceeding in the Federal Court or superior court of a province. The Act also contains specific provisions aimed at curbing commercial activity in counterfeit trademarked goods. For example, it is an offence under s. 51.01 of the Act to distribute, sell, manufacture or import goods bearing a mark that is “identical to, or cannot be distinguished in its essential aspects from, a trademark registered for such goods.” Trademark owners have to be prepared to effectively enforce and protect their trademark rights when dealing with counterfeits or other forms of unauthorized trademark use.
Noel Courage is a partner and patent attorney at Bereskin & Parr LLP in Toronto. His practice focuses on patenting and licensing inventions. He can be reached at email@example.com. Jennie Yum is an associate at Bereskin & Parr. She can be reached at firstname.lastname@example.org.
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