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Law360 (April 28, 2020, 10:19 AM EDT )
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| Alison Wong |
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| Anthony Wilkinson |
The global press has reported on this unprecedented run on face masks in mainland China and around the globe. The huge demand, linked to a lack of availability, has not surprisingly resulted in widespread reports of counterfeit masks being sold online and in physical shop premises.
This article discusses the key intellectual property and regulatory issues relating to surgical masks and penalties for the production of counterfeit products in China.
What are the surgical mask specifications?
Surgical masks are specialist pieces of medical equipment designed predominately for use in the hospital environment to protect patients and health care staff from spreading and contracting disease. In general, a basic surgical mask has three layers: the innermost layer is used for absorbing moisture (from the wearer's breath, cough, sneeze, etc.); the middle layer is a filter (for particles and infectious agents); and the outer layer repels liquid (e.g. water, blood, etc.).
There are varying levels of quality for surgical masks and the extent of protection depends on the specifications of manufacture. To ensure the quality and protection of these products, relevant standards exist for their manufacture. As an example, two regularly cited standards are the EU and U.S. standards:
- EU: BS EN 14683:2019 — Medical face masks. Requirements and test methods.
- U.S.: American Society for Testing and Materials 2100 — Standard specification for performance of materials used in medical face masks.
To demonstrate what these standards mean for mask performance, an EN14683 Type II/ASTM Level 1 mask will need to meet the following specifications:
- Bacteria filtration efficiency: >98% (Size of typical bacteria at 3-5 microns);
- Particulate filtration efficiency: >99% 0.1 micron particle size;
- Differential pressure (Delta P): <3.0 mm (breathability - pressure Difference, low value is better); and
- Fluid resistance: 80 mmHg (measures the ability to resist fluids at a specified pressure; Level 1 = 80mmHg, Level 2 = 120 mmHg, Level 3 = 160 mmHg).
There are also Chinese standards for surgical masks[1] that provide the mandatory specifications for these products in China.
As evidenced by these standards, the manufacturing of a surgical mask must be undertaken with some degree of precision. If the product does not meet these specifications, it may not function as required and place the wearer at significant risk.
What are the regulatory requirements for surgical masks?
Surgical masks are regulated as medical devices in mainland China and in other markets around the world, but not in Hong Kong.
For China, the medical device classifications catalogue (effective Aug. 1, 2018) lists both surgical masks (141304) and protective face masks for medical use (141401) as Class II medical devices. This classification places legislative requirements on the product in terms of specifications, license to manufacture, quality control and recording of business operations.
In addition, if the products are to be sold online, there are now also specific measures that must be taken to offer online sales of medical devices.
Enforcement action to tackle counterfeit surgical masks
Given the potential risk associated with surgical masks that do not meet the stated requirements, governments and manufacturers are concerned that fake or counterfeit products may infiltrate the market. Local media in both Hong Kong and mainland China have reported instances of counterfeit masks being found for sale on major online platforms and retail outlets.
The governments in both jurisdictions have been quick to respond. In Hong Kong, customs officers launched a territory wide operation (with the code name Guardian) on Jan. 30 to inspect retail locations selling surgical masks.
This has resulted in the seizure of tens of thousands of suspected counterfeit masks and arrest of proprietors. Similar counterfeiting issues have been evident in mainland China with online news outlets reporting seizures of millions of counterfeit masks.
For legitimate mask manufacturers, there are enforcement options available against counterfeit products.
Hong Kong
In Hong Kong, while there is no relevant regulatory provision for surgical masks, several pieces of legislation are relevant for trade and the consumer.
Trade Descriptions Ordinance Chapter 362
The TDO makes it an offence to use false trade descriptions for products in Hong Kong (e.g. falsely claiming compliance to a standard specification). Part 2 of the TDO states:
any person who supplies goods with a false trade description in the course of trade or business, or is in possession of any goods for sale with a false trade description, or sells or possesses for sale any goods with a forged trademark commits an offence. The maximum penalty upon conviction is a fine of HK$500,000 and imprisonment for five years.
The Consumer Goods Safety Ordinance Chapter 456
The CGSO Part 2 provisions make it "an offence to supply, manufacture or import into Hong Kong" consumer goods unless the goods comply with stated general safety requirements. The maximum penalty upon conviction is "a fine of HK$100,000 and imprisonment for one year on first conviction, and HK$500,000 and imprisonment for two years on subsequent conviction."
The CGSO also requires that, if a standard exists, the goods must meet that standard to be manufactured, supplied or imported into Hong Kong.
The Trademark Ordinance Chapter 559
The TMO carries penalties for the infringement of registered or well-known trademarks. The infringement of a registered trademark in Hong Kong occurs if a person who is not the owner (or licensee) uses "in the course of trade or business a trade mark identical or similar to the registered trade mark in relation to identical or similar goods or services."
As a trademark infringement is a civil wrong, the owner of the mark may be entitled to damages, injunction and destruction/delivery up of the offending goods.
Passing Off
For an unregistered trademark, the owner of the mark is able to instigate proceedings against the infringer under the common law rule of passing off. This action occurs when another person unlawfully misrepresents that their product or service is that of another person. This can often be through the use of another's brand name, trademark or packaging, etc.
Under the common law, a person must prove three elements to demonstrate passing off:
- The plaintiff's relevant goods/services have goodwill or reputation in the market;
- The infringer has made a misrepresentation leading or will likely lead the public to believe their goods were those of the plaintiff; and
- The plaintiff has suffered or will likely suffer damage due to the misrepresentation.
Similarly to a registered trademark owner, the owner of the unregistered mark may be entitled to damages, an injunction, destruction or delivery up of the goods.
Mainland China
In mainland China, there are several legal provisions potentially available against counterfeit surgical masks.
Medical Device Regulations
The regulations on supervision and administration of medical devices prohibit the sale of unregistered medical devices and institute penalty provisions for failing to register a medical device, manufacturing in an unlicensed facility and selling unregistered devices (fines of ¥50,000-¥100,000 if the total value of illegal products is under ¥10,000 or 10-20 times the value of sales if more than ¥10,000; and possibly a bar on applications for five years).
These regulations also have penalties for the false advertising of medical products (e.g. making false claims of product effectiveness).
A counterfeit product is, under the law, deemed to be an unregistered product.
People's Republic of China Product Quality Law
The PRC product quality law makes selling a counterfeit surgical mask a potential legal violation. Producing or selling a product that does not comply with national standards, or industrial standards for ensuring human health and personal safety, can result in the confiscation of product, the issuing of a fine (up to three times the value of all illegal products) or potential criminal liability.
This law also contains penalty provisions for fabrication or fraudulent use of certification marks or other quality marks (confiscation of product and illegal gain, a fine up to the total value of the illegal products and potential revocation of the business license).
PRC E-Commerce Law
The PRC e-commerce law that came into effect in Jan. 2019 makes it illegal to sell products that do not comply with specified safety requirements and also for products that infringe on another's IP rights (patents, copyright, trademarks).
PRC Criminal Law
The PRC criminal law contains penalties for producing/selling counterfeit products. Specifically, there are penalty provisions for counterfeiting registered trademarks and forging or making others' registered trademarks and logos.
A significant element of the law is that there are penalties for producing and selling fake or substandard commodities and for selling medical devices that do not comply with the national or industrial standards for safeguarding human health.
These latter two penalties carry more severe punishments if they occur during periods of prevention and control of sudden infectious diseases. The penalties are imprisonment and fines equivalent of one-half to two times the sales amounts or confiscation of property.
PRC Trademark Law
The PRC trademark law makes it an offence to use and/or sell goods that violate another's exclusive trademark. There are both civil and administrative actions that can be instigated against an infringer. Under the civil provisions, the court can order the infringing entity to cease manufacture/distribution, etc. and pay damages and also order punitive damages up to five times the infringement amount.
Under the administrative provisions, there is potential for the infringement to warrant criminal investigation if the market regulation administration deems it a crime. Other penalties can be, confiscation and destruction of the counterfeit items and tools used to manufacture, and a fine of either up to five times the illegal turnover if turnover is greater than ¥50,000 or up to ¥250,000 if turnover is less than ¥ 50,000.
PRC Anti-Unfair Competition Law
The PRC anti-unfair competition law makes misleading buyers and false representations a violation of the law. For misleading buyers, a business operator shall not use the marks, names, packaging, etc. of another so as to confuse their products with those of well-known brands/products.
The penalty for such violation will depend on where the case is filed. The statutory damage is up to ¥5 million if filed with the court (although, the final damages may be higher if supported by evidence), or up to five times the illegal turnover if turnover is greater than ¥50,000, or up to ¥250,000 if turnover is less than ¥50,000, and potential revocation of the business license.
Under the false representation provision, a business operator shall not attempt to mislead consumers about a product. The penalty levied by the market regulation administration may be an order to cease illegal acts, and impose a fine of ¥200,000 up to 1 million. For serious cases, a fine of ¥1 million to ¥2 million may be levied and the business license could be revoked.
What does this mean for manufacturers?
Surgical masks are more than just simple material that covers the nose and mouth; they are products that need to meet certain specifications in order to provide sufficient protection. For this reason, counterfeit surgical masks have the potential to expose wearers to significant harm.
Counterfeit products will often look like the real product by using logos, emblems and registration numbers/certifications from the real item. However, counterfeit products will not offer the same protection as the real mask, and legitimate manufacturers do not wish to see their logos or names associated with substandard and counterfeit goods.
The important point for manufacturers to note is that there are mechanisms in place in both mainland China and Hong Kong that can protect their trademarks and product names should they become aware of counterfeit products. As stated above, there are severe penalties for using another's trademark or selling counterfeit products.
Alison Wong is a partner at Bird & Bird LLP and head of the firm's life sciences and health care sector group in Asia.
Anthony Wilkinson is a registered foreign lawyer at the firm.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] GB 19083-2010 Technical Requirements for Protective Face Mask for Medical Use, YY 0469-2011 Surgical Masks.
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