When Fake Covid Products Hit the Market
The Food and Drug Administration (FDA) announced last week that emergency clearance was granted for the first in-home test kits for COVID-19. Currently, the test kits will be available to health care and emergency workers who have been exposed to the virus or who show symptoms. It is expected that the tests will be open to the public shortly.
This also means it’s now easier for counterfeiters to infiltrate the market. Many counterfeiters wait for opportunities like these. Distributors and consumers may now be less vigilant and assume all home-tests are FDA approved.
How might counterfeiters infiltrate the market?
From our experience, counterfeiters can be very creative, offering pharmaceutical distributors low bulk prices to purchase what appear to be legitimate products.
They might use the fact that home-test results are not immediately available to their advantage to receive payments from distributors, then disappear before customers start requesting results. Or play for time while apologizing profusely for the occasional false negative, or even use a Ponzi type system whereby they sell a few real tests to gain trust, and then start selling fakes.
Commonly, they will set up phony companies with names similar to authorized companies to sell counterfeit home-kits, even using company trademarks. They often use emails to market and sell their products.
A potential influx of cases
Soon lawyers and investigators will need to be ready to deal with cases relating to counterfeit and fake test kits or the selling of home-kits without FDA approval. The Lanham Act (also known as the Trademark Act 1946) provides civil remedies for trademark infringement and counterfeiting, and the Trademark Counterfeiting Act 1984 criminalizes certain violations of the anti-counterfeiting provisions. Other than the above, offenders might be subject to prosecutions by the state or federal law enforcement.
When your corporate client needs help
Some legitimate companies might be overzealous in the race to sell home-tests and find themselves on the wrong side of the law if they end up purchasing tests that turn out to be counterfeit. Reaching a settlement for your client in a case like this could save your client’s company from devastating losses.
Recently, a Los Angeles company, RootMD, settled with the City Attorney over allegations that it misled customers into believing that their tests could screen for the presence of antibodies. The company allegedly further misled customers by falsely stating that the tests were FDA approved.
In this case, the company’s lawyers were able to reach a settlement where the company agreed to stop marketing the tests and refund all individuals who bought test kits. Although not confirmed, the company claimed that no tests were delivered yet. The outcome of a federal prosecution would have been a lot worse for RootMD.
Be prepared to advise your client on settlement options to avoid criminal prosecution.
In some cases, the trademark holder might also come after your client for damages, which could be significant. Reaching a settlement for your client before a jury verdict could save your client a lot of time and money.
When your client holds the trademark
In other cases, you may be the one filing a lawsuit for damages on behalf of your client if your client is the trademark holder. It is sometimes difficult to obtain evidence against a specific person.
The first step is often to conduct an investigation, with an investigator collecting samples of the counterfeit goods and identifying potential defendants. You may want to seek a restraining order against the perpetrators or seek a seizure order.
Defending clients against criminal charges
Your client might end up in a position needing a defense. Maybe your client didn’t know that it was a fake test, maybe he was innocently selling counterfeit tests? Maybe no-one suffered actual damages.
So, if your client, for example, sold counterfeit tests without knowing, or had no reason to suspect that it is counterfeit, there was no intent. He or she might have been under the impression that they are selling for a registered, FDA approved company.
An investigation is often necessary to obtain evidence that could assist in your client’s defense. The same applies when you are filing a lawsuit for damages on behalf of a client, you will have to investigate the allegation thoroughly to obtain proof that your client suffered damages as a result of the defendant’s conduct.
Hiring an investigations firm could be invaluable in assisting your client’s case. By investigating the allegations and interviewing potential witnesses, you will gain insight into the strength of the prosecution’s or your client’s case. You can gauge the witnesses’ credibility and later compare what they told law enforcement with what they are saying in court.