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The Counterfeit Conundrum: Civil and Criminal Remedies for spurious medicines in India

October 14, 2021

By Lucy Rana and Nihit Nagpal

Introduction

The Indian Pharmaceutical sector has seen tremendous growth in the past few decades which has made it one of the leading exporters of pharmaceuticals in the world. While the business for medicines has expanded in the country, the quality of the formulation of drugs has been a major concern at both national and international levels. The dawn of the Covid-19 pandemic has brought forth the perfect circumstances for counterfeiters to increase their production and distribute illegal goods. Aided by a new world-wide supply chain, the dire need for medicines and the new regulatory developments in India, counterfeit products in the country have grown under various parallel supply chains. The Report on Countrywide Survey for Spurious Drugs by the Central Drugs Standard Control Organization under Ministry of Health and Family Welfare in India, states that the supply of spurious goods in the Indian retail market is about 0.3%.

On the other hand, The World Health Organization’s Global Surveillance and Monitoring System Report for Substandard and Falsified Medical Products in 2017, has claimed that about 10.5% of medicines which are sold in lower and middle income countries that include India have been reported to be counterfeit[1] Further, the 301 Special Report on State Intellectual Property protection and enforcement by the United States Trade Representatives have placed India in the “priority watch list” for the sale and promotion of counterfeit medicines and poor Intellectual property rights enforcement for drug piracy.[2] While the variety of survey estimations vary, it is apparent that the supply of spurious drugs can lead to grave consequences for both the patients (consumers) and genuine manufacturers (suppliers) of medicines in India. Considering the dreadful implications on public safety and pharmacy revenues, ascertaining the civil and criminal remedies available as a recourse to both suppliers and consumers in context to their utility is the dire need of the hour.

IP laws in India and Counterfeit Medicines

The Trademark Act, 1999

The Trademark Act, 1999 provides civil and criminal remedies against the infringement of any trademark. The Trademarks Act prohibits the registration of trademarks which are descriptive or which are devoid of any distinctiveness[3]. Pharmaceutical trademarks are usually based on the chemical compound used by the drug or salt composition of the drug which deters the brand from having inherent distinctiveness. However, the distinctive nature of a brand is a prerequisite for a mark to qualify as a trademark. Further, under the Trademarks Act, 1999 a trademark must not be similar to an existing trademark which is likely to confuse the customers.[4] The Trademarks Act, also holds that trademarks must not be deceptively similar to chemical elements, compounds and International Non- Proprietary Names (INN) which have been declared by the World Health Organization and notified by the Registrar of Trademarks.

Furthermore, the Trademark Law necessitates the appropriate action against passing off which refers to the imitation of marks or goods in order to take advantage of the goodwill of the lawful owner in order to deceive the customers.[5] The law against passing off is a form of tort which is based in common law. The recourse against which can be utilized by pharmaceutical companies in order protect the goodwill of their product against spurious drugs. In Cadila Healthcare ltd. V. Cadila Pharmaceuticals ltds,[6] it was held by the apex court that certain factors have to be met in order to hold an action of passing off against a deceptively similar mark. This factors include, the nature of the mark, the degree of resemblances between the marks, the nature of the good and the similarity between the two marks. Furthermore, in Allergen Inc. v. Sun Pharmaceuticals Industries Ltd[7], it was held that in the case of medical products, there cannot be any doubt that the utmost precaution should be taken in order to prevent any confusion in the mind of the customer regarding the actual product that he is taking.

The Trademarks Act provides a penalty for applying for false trademarks or trade descriptions with an imprisonment up to three years and a fine ranging from fifty thousand to two lakh rupees as a criminal remedy[8]. Further, the Trademarks Act also empowers the court to grant ex-parte injunctions in order to restraint the infringers from selling counterfeit goods and for discovery of documents and other related evidence as a part of civil remedy.

The Patents Act, 1970

The Patents Act, 1970 provides protection to the process of making a chemical substance or drug and not to the drug itself. Furthermore, the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the discovery of new property or use of the same substance would not be inventions and would not be provided protection under the Patents Act, 1970[9]. The Supreme Court in Novartis AG v. Union of India emphasized that the true legislative of the protection provided by the Patents Act mentioned above, is to allow genuine inventions with respect to chemical substances but also to stop repetitive patents on chemical substances on spurious grounds[10].

Under the Patent’s Act, any violation of the said act imposes a duty upon the judiciary to intervene and pass orders to secure the patent holders rights. The patentee is required to institute a suit for seeking remedies such as interlocutory or interim injunctions and damages arising out of the said infringement.[11]

Criminal Law in India and Counterfeit Medicines

The Indian Penal Code 1860

The Indian Penal Code, 1860 holds that any individual who adulterates any drug or medical preparation in a manner as to lessen the efficacy or change the operation of such a drug or medical preparation in manner so as to use or sell it for any medicinal purpose would be imprisoned for either description for a term that may extend to six months or a fine up to a thousand rupees[12]. The code further holds that an individual who sells an adulterated medicine in guise of an unadulterated or innocuous substance shall be punished with imprisonment of a term that may extend to six months or a fine that may extend to a thousand rupees or both.

Drugs and Cosmetics Act, 1940

The Drugs and Cosmetics Act, 1940 stipulates procedures to counter adulterated, spurious or misbranded drugs and their exports in India. The Act defines a drug spurious drug as a drug which is manufactured under a name which belongs to another drug or if it is in imitation of or substitute of another drug and purports the purpose of a manufacturer of whom it is not truly a product[13]. Furthermore, the act prohibits the manufacture and sale of such drugs and cosmetics. Furthermore, the Act holds that any drug which is deemed to be adulterated or spurious and which is likely to result in the consumer’s death or cause grievous harm on his body would be punishable with imprisonment for a term which shall not be less than seven to ten years but which may extend to an imprisonment for life and shall also be liable to a fine which will not be less than ten lakhs or three times the value of the drugs confiscated[14]. The act also envisages that when an individual has been convicted under the Act, then the drug inspector may confiscate the stock, packages, labels or any machinery or implements utilized to manufacture the said counterfeit medicine so as to deter any future contraventions.

The Supreme Court in the Drug Inspector and Ors. V. Fizikem Laboratories[15] has held that the inspector appointed under the act has the power to inspect any premises wherein any drug or cosmetic is being manufactured. Furthermore, the inspector has the power to search and also test drugs and cosmetics being manufactured. Additionally the Supreme Court in Union of India v. Ashok Kumar Sharma[16]has stated that that though it is on the Police Officer to register the FIR, the action to be taken in such cases is for the Drug Inspector, whose powers may enable him to search any premises with respect to such offences and take any such steps as stated in the act in order to enable him to curb such offences. The process, as stated by the court is to harmonize interpretation of the law with respect to the Drugs and Cosmetics Act and the Indian Penal Code.

Thus the drug inspector may take any measures that is required to end the manufacture or sale of spurious medicines, which makes the criminal recourse under the Drug and Cosmetics act an efficacious remedy against counterfeiters. Additionally, the act also holds that offences with respect to counterfeit medicines and spurious pharmaceuticals are offences which are cognizable and non-bailable[17]

The Center and the State are both responsible for the enforcement of the Drug and Cosmetics Act. The Central Standard Drug Control Organization (CDSCO) is responsible for the coordinating activities of the State Drug Control Organization (SDCO) and performs regulatory control over the import of drugs, approving these medicines and their clinical trial. CDSCO has six zonal offices, four sub-zonal offices, 13 port offices and seven laboratories under its control. The Organizational structure is divided under the Drug Control General.

The Bureau of Indian Standards Act, 2016

The Bureau of Indian Standards Act also contains penalties for offences conducted by those who use standards (ISI) Mark without obtaining the requisite license. The Bureau investigates and detects the case of misuse of the ISI mark and prosecutes the offenders wherever required.

Various Recourses for Consumer and Manufacturers

Pharmaceutical Companies in India have developed new technologies that include SMS based QR codes to help consumers to acquire information about the supply of the medicines and the details regarding production/manufacturing. These companies have also utilized color and smell based technologies which informs a consumer if the medicine in question has been tampered with. On the other hand, the current scenarios and circumstances have enabled counterfeiters to access global supply chains for the supply of essential pharmaceuticals. Desperate consumers may not pay attention to QR codes or whether the said product contains a tamper-based indicator. With the increase of heavy demand of pharmaceuticals in India, it is prudent to believe that many counterfeiters may aim to meet this demand. The variety of manufacturers, consumers and distributors have different forms of recourses under the laws and legislation mentioned above. These remedies act to provide specific objectives and some may be more practical for stakeholders depending on their need and requirements.

Conclusion

The effective recourse under Indian law to curb counterfeited products is to utilize an amalgamation of both civil and criminal remedies to counter the availability and sale of such a product. The civil remedies under the IP laws in India, though effective, require a higher degree of identification and specification of counterfeited products. Furthermore, the act may only be available as a recourse for Intellectual property right holders. In order to thoroughly address negative externalities like public health and safety, tax and customs grievances and investor confidence, the act must be criminalized and a proper recourse under the criminal law should be utilized to punish and deter all counterfeiters. A national database for recording and accessing information needs to be created which work hand-in-hand with pharmaceutical companies. Legitimate manufacturers of medicines should utilize new technologies to aid the consumers and public authorities. Pharmaceutical companies may utilize artificial intelligence-based recognition softwares, smart packaging and labeling which uses track and trace based technologies to map the products across supply chain, the information for which can be made available to both government agencies and consumers.

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[1] https://www.who.int/medicines/regulation/ssffc/publications/GSMSreport_EN.pdf?ua=1

[2] https://ustr.gov/sites/default/files/files/reports/2021/2021%20Special%20301%20Report%20(final).pdf

[3] Section 9(a) of the Trade Marks Act, 1999

[4] Section 11 of the Trade Marks Act, 1999

[5] Section 134 (b) and 135 Trade Marks Act,1999

[6] JT 2001 (4) SC 243

[7](Cal.) 2006 (32) PTC 495

[8] Section 103 of the Trade Marks Act, 1990

[9] Section 3 (d) of the Patents Act, 1970

[10] (2013) 6 SCC 1

[11] Section 104 of the Patents Act, 1970

[12] Section 274 of the Indian Penal Code, 1860

[13] Section 17B of the Drugs and Cosmetics Act, 1940

[14] Section 27 of the Drugs and Cosmetics Act, 1940

[15] 2008 (2) ACR 2212 (SC)

[16]  Criminal Appeal No.200 OF 2020

[17]  Section 36AC of the Drugs and Cosmetics Act, 1940

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