The Falsified Medicines Directive, the Medicrime Convention and the Anti-counterfeiting Trade Agreement are set to strengthen the position of pharmaceutical trademark owners – just as the issue of goods in transit looks set to create new challenges
Recent statistics from the European Commission show that in 2009 EU Customs detained around 11.5 million medical products suspected of infringing IP rights. In some parts of Europe fake medicines represent up to 20% of the market, while in developing countries and online these products represent over 50% of market value. As these products not only threaten trademark holders’ business, but also constitute a severe threat to public health, the fight against counterfeit medicines is very important to protect both interests. In this ongoing battle, it is therefore critical to track new developments regarding legislation, technical solutions and current legal practice. Of the latest developments, the Falsified Medicines Directive, the Medicrime Convention and issues surrounding goods in transit merit particular attention.
Defining falsified medicines
The term ‘falsified medicines’ refers to medicines which contain fake or inferior active ingredients. These products may also lack active ingredients or contain the wrong dosage. Therefore, falsified medicines may be unsafe and, depending on the substances present in the product and the indication for which the medicine may be used, possibly life threatening. Furthermore, the circulation of possibly dangerous falsified medicines undermines public confidence in health authorities and healthcare systems.
Complicating the picture, falsified medicinal products have become increasingly difficult to detect without the conduct of analytical laboratory tests. In the past, falsifications were especially found among lifestyle drugs, but today more and more life-saving medicines are being falsified. Falsified medicines are increasingly found in the legal supply chain through manufacturers, wholesalers and distributors.
In December 2008 the European Commission drew up a package of legislation known as the ‘pharmaceutical package’. This included a proposal to amend Directive 2001/83/EC regarding the prevention of the entry into the legal supply chain of medicines which are falsified. The legal supply chain often involves players in the various member states, and the cross-border aspect of the prevention of falsified medicines in the legal supply chain therefore requires harmonised measures at a European level.
It is important to note that the terms ‘falsified’ and ‘counterfeit’ sometimes give rise to confusion. While the term ‘counterfeit’ seems to implicate trademark infringement, the World Health Organisation (WHO) and the Medicrime Convention of the Council of Europe also use the term ‘counterfeit’ for issues relating to the quality, safety and efficacy of medicines, even though this does not necessarily mean that these products infringe trademark rights.
However, the Directive on Falsified Medicines provides a clear definition of ‘falsified medicinal products’. In short, a ‘falsified medicinal product’ is defined as a medicinal product with a false representation of its identity (ie, packaging, labelling, composition), its source (ie, manufacturer, country of origin, marketing authorisation holder) and its history (ie, records, documents relating to distribution channels). Although the directive focuses on the protection of public health and disregards IP issues in relation to falsifications, in practice IP infringements and the occurrence of falsified medicines often coincide. This makes these topics supplementary to each other and ensures that the directive will have implications for trademark holders.
The Falsified Medicines Directive
The Directive on Falsified Medicines was adopted by the European Parliament on February 16 2011; the next step will be for the Council of Europe to formally approve the directive. Subsequently, member states must implement the new legislation in national legislation, with the directive to be transposed within 18 months of its entry into force (although some measures will have a longer implementation time).
The directive introduces obligations for more players in the legal supply chain than Directive 2001/83/EC on human medicines. In addition to marketing authorisation holders, manufacturers and wholesalers, the Directive on Falsified Medicines addresses traders in medicines in a broad sense.
The new legislation aims to eliminate legal uncertainty relating to the import of medicines for re-export to third countries. Specifically, it means that the requirement to obtain medicines only from distribution authorisation holders or marketing authorisation holders is not required for medicines in transit. However, the requirement for member states to ensure that medicines which are suspected of claiming a falsified identity, history or source, and which are not intended to be placed on the market, are not introduced in the European Union shall also apply to medicines in transit.
The directive additionally stipulates that safety features should be affixed on the outer packaging of prescription medicines, which should allow, among others, wholesalers and pharmacists to ascertain the identification, authenticity and traceability of a medicine.
The most relevant provision from a trademark law perspective is the obligation for holders of a distribution authorisation immediately to inform the competent authority of medicines that they identify as falsified or suspect to be falsified. Furthermore, the directive introduces new obligations for member states, such as having a system in place designed to prevent suspected dangerous medicines from reaching patients and laying down rules on the penalties for infringement in the national provisions adopted pursuant to the directive.
Ultimately, the Directive on Falsified Medicines will have important financial and administrative implications for manufacturers, wholesalers, distributors and other players in the pharmaceutical supply chain. Assuming that the directive is approved, a marketing authorisation holder will be informed, by either the competent authority or the holder of the distribution authorisation, of suspected falsified medicines. Since the trademark holder and marketing authorisation holder will often belong to the same company, the organisation will therefore be informed about falsifications, possibly implying trademark infringement. Therefore, the proposal may indirectly but significantly improve the position of trademark holders in enforcing their trademark rights against infringers.
The Medicrime Convention
Another new legal framework which has been drawn up by the Council of Europe is the Medicrime Convention. Finalised towards the end of 2010, it encourages national and international cooperation in the fight against counterfeit medicinal products and similar crimes in Europe and worldwide.
As mentioned previously, the Council of Europe uses the term ‘counterfeit’ to indicate a medicine with a false representation as regards identity and/or source. Both member and non-member states will be able to join Medicrime in the coming year and, upon becoming signatories, participating states will have to implement its provisions into their national legislation.
The main rationale behind Medicrime is the danger of counterfeit medicines to public health, meaning that the counterfeiting of medicinal products and similar conduct must be considered criminal offences. Medicrime therefore provides measures for cooperation and coordination at a national level, and offers preventive measures for use by both the public and private sectors in order to protect victims and witnesses. Furthermore, it creates opportunities to take action against counterfeiting by criminalising certain acts.
Although Medicrime concerns medicines regardless of whether they are protected by intellectual property, it is highly relevant because it introduces various new possibilities for trademark owners in the fight against counterfeits. Medicrime essentially enables trademark owners to file criminal complaints or, in some countries, to start criminal proceedings based on their IP rights.
Since the Council of Europe feels that IP rights are sufficiently protected at both national and international level, Medicrime does not explicitly cover any issues concerning the infringement of trademark rights in relation to counterfeit medicines. However, because the term ‘counterfeit’ is defined in Medicrime as “a false representation as regards identity and/or source”, trademark protection is highly relevant.
Medicrime stipulates that the manufacture, supply and trafficking of counterfeits, the falsification of documents and similar crimes are all to be made punishable by criminal law. Also, the aiding of these offences and attempts to commit such offences will be made punishable. In practice, this means that the competent authorities in each country will not have to prove that certain conduct has led to actual damage to the public or individual health. For constitution of a criminal offence, it is sufficient that the conduct in question fall under one or more of the punishable categories mentioned in the convention.
Regarding the falsification of documents, this is meant to include not only the packaging and labelling of medical products, but also texts provided on websites which are specifically designed to accompany the product in question. Therefore, trademark infringement regarding the packaging falls under the scope of this measure. Medicrime further provides an outline for closer international cooperation between the assigning parties in criminal matters, which will help countries and the pharmaceutical sector to combat counterfeiting at a cross-border level.
The relation between Medicrime and ACTA
The Anti-counterfeiting Trade Agreement (ACTA) is another important tool in the fight against trademark infringement in the pharmaceutical sector. Although Medicrime and ACTA have a different scope, the two are related when it comes to the fight against fake medicines.
Medicrime is expressly limited to medicines for human and veterinary use, as well as medical devices and their accessories. Related categories of foodstuffs, cosmetics and biocides do not fall under the reach of Medicrime. Therefore, it is of specific importance to the pharmaceutical sector and the battle against counterfeit medicinal products. ACTA, on the other hand, covers the way that companies and individuals can enforce their IP rights and relates to counterfeit goods in general; thus, it also applies to the infringement of pharmaceutical trademarks.
Although Medicrime’s target is public health and it thus does not protect IP rights, it also covers trademark infringement, as mentioned above. Furthermore, trademark holders can instigate criminal proceedings themselves in several countries. ACTA, meanwhile, is a tool for rights holders to protect their rights against IP infringements. Medicrime and ACTA should therefore complement each other to create effective tools in the anticounterfeiting battle. While they each take a different approach to anti-counterfeiting, the ultimate goal is the same: to ban counterfeit medicinal products from the market.
At present, though, it is difficult to predict exactly what effect Medicrime and ACTA will have in the fight against counterfeit medicinal products. From a pharmaceutical trademark perspective, both agreements – if signed by at least the most important countries – could be useful instruments in order to hinder infringers from putting counterfeit medicines on the market.
The transit question
National borders are a key battleground for preventing the placement of counterfeit goods on the market. The EU Customs Regulation (1383/2003) is a helpful tool in this regard, and new initiatives to combat counterfeiting are also being proposed in various supranational and international agreements.
Often, it will be clear when medicines stopped at Customs are counterfeit. For example, if a shipment of blue, diamond-shaped pills which do not depict the trademark VIAGRA is detected, it is clear that these pills infringe Pfizer’s 3D trademark. But what if the trademark is in fact depicted on these pills? Customs will make a risk analysis of each shipment and, based on this, will detain goods which it suspects infringe IP rights and inform the rights holder (it is then up to the rights holder to investigate the alleged infringement). Customs therefore relies on information regarding possible infringements and infringers, and trademark owners should be aware of the importance of providing lots of information to Customs to assist it in such analysis.
However, the role of Customs is complicated by one of the most important current issues in the European Union – whether counterfeit goods in transit constitute an infringement based on European trademark law.
In several green papers and other documents, the European Commission explicitly addresses the problem of hazardous counterfeit products, such as counterfeit medicines, being transported through the European Union to developing countries, where these goods cannot be kept out of free circulation due to lackof adequate legislation. Probably for this reason, one could argue that the EU regulation empowers the authorities to seize goods which are in transit. However, there is still discussion as to whether goods in transit infringe IP rights according to European IP law and whether Customs is indeed authorised to detain these goods.
The predecessor of the current Customs Regulation contained a provision which was called ‘the manufacturing fiction’. This stipulated that goods in transit through one of the European member states should be considered as if those goods had been manufactured in that member state. While the current regulation does not explicitly contain such a provision, the preamble implies that the manufacturing fiction could still exist. This lack of clarity regarding transit goods triggered a series of proceedings which eventually led to a decision of the Court of Justice of the European Union (ECJ) in Montex v Diesel ((Case C-281/05, November 9 2006). Without going into the detail of the case, the conclusion was still ambiguous – the majority of the IP community read the judgment in such a way that goods in transit did not constitute trademark infringement. On the other hand, the ECJ did not decide explicitly on the existence of the manufacturing fiction, so uncertainty remained.
Some national courts, such as the court of The Hague in the Netherlands, continued to apply the manufacturing fiction and considered goods in transit to be infringing IP rights in the Netherlands. Yet customs officers throughout Europe applied different approaches from country to country. Some (eg, UK Customs) did not bother to detain goods in transit after the Montex decision, while others continued to detain such goods because the possibility was still provided for in the regulation. Dutch Customs has even detained generic medicines which were in transit because of alleged patent infringement, resulting in a World Trade Organisation complaint by India and Brazil, in which they stated that Europe breached the principle of fair trade by frustrating transit shipments.
Two cases (C-446/09 and C-495/09) which are currently pending before the ECJ involve two important questions: whether the manufacturing fiction can be applied to goods in transit and whether EU Customs can detain goods in transit. A final decision of the court is still pending, although the advocate general delivered his opinion on February 3 2011. In short, he answered that in his opinion, the manufacturing fiction cannot be applied to goods in transit and EU Customs can detain goods in transit only if there are sufficient grounds to suspect that they are counterfeit and are to be put on the market in the European Union.
If the ECJ follows this opinion, this would be a serious blow for trademark owners which face problems invoking their rights in some parts of the world. These right holders could easily have used the manufacturing fiction to intercept counterfeit products on their way to those regions. Without the possibility to stop goods in transit, however, an infringer could circumvent (or at least reduce the danger of) detention of the goods by Customs by transporting its counterfeit goods under a transit status and keeping these products on EU soil – suddenly changing its customs status to import. It is very difficult for Customs to keep an eye on goods which already have been checked upon their first physical entrance into the European Union.
With the decision on goods in transit in mind, one could ask whether this has implications for the detention of goods on grounds other than IP rights, such as falsified medicinal products which are a threat to public health. If goods in transit are not considered to be brought into free circulation in the European Union, then what power does the European Union have to detain these goods at all?
New technical solutions
It is not only supranational institutes which are working on initiatives to combat counterfeit medicines: the pharmaceutical sector itself is also developing new approaches. The European Federation of Pharmaceutical Industries and Associations (EFPIA), for example, has carried out a pilot scheme involving a unique cross-border coding system. This pilot tested the use of a product verification system which made use of a two-dimensional data matrix bar code on each package of medicine handed out to patients. Based on the successful outcome of this pilot, the EFPIA has lobbied for the implementation of such a standard in Europe (although it does not want the implementation of this system to hinder the use of other technologies, such as radio frequency identification).
Ultimately, if the Directive on Falsified Medicines is approved, this will have indirect but significant implications for trademark holders. Medicrime and ACTA could also be strong and useful instruments for trademark holders to combat counterfeiting; if ratified, both legal frameworks will provide for harmonisation and cooperation on a global level. However, it seems that counterfeit goods in transit through Europe can be stopped only if there are sufficient grounds to suspect that the goods will end up in free circulation in the European Union. This could have far-reaching implications for trademark holders, because there is a danger that counterfeits may thus find their way onto the market. Therefore, global harmonisation on border measures regarding counterfeit goods will strengthen trademark holders’ rights. In the end, though, one thing is certain: trademark owners will soon have additional tools in the battle against pharmaceutical counterfeiting.
This article first appeared in World Trademark Review (www.worldtrademarkreview.com) issue 32, published by The IP Media Group