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Pharmaceutical companies should take into consideration intellectual property protection when outsourcing the packaging of their products.
Counterfeit medicines continue to be a threat to patient safety. Jackie Maguire, CEO of Coller IP, a company specialized in intellectual property management, spoke with PharmaceuticalTechnology about the role of packaging as an anticounterfeiting tool and key points to consider when outsourcing the packaging of pharmaceutical products.
PharmTech: How effective is packaging as an anticounterfeiting tool?
Maguire: Counterfeiting and piracy have increased hugely over the years. Previously, it was regarded as being confined to cheap, low-cost counterfeit goods. The problem, however, has spread to large-scale manufacturing plants that can produce cheap and realistic-looking copies of drugs and the associated packaging.
To quote Alison Statham, director of operations at The Anti-Counterfeiting Group, “In the United Kingdom, it has been difficult to put a precise figure on the scale and impact of counterfeiting. One of the reasons is that there is no statutory recording of offences by UK enforcement agencies. Nevertheless, The IP Crime Report 2013/14 by the IP Crime Group (1) confirms that the manufacture, importation/transport, and availability of counterfeit goods remains at a high level in the UK. Current estimates place the cost of IP criminality in terms of lost profits and taxes to the UK economy to be in the region of £1.3 billion per year.” The packaging industry should and is fighting this threat.
A growing number of retail products that look like those from brand leaders-with similar packaging, size, type, and shape of the container and virtually identical graphics and brand name-are causing concern in the industry, as the aim is clearly to piggy-back on the carefully-built reputation of the brand leader. It is also of concern to the UK government, who in 1994, exercised an option under the European Law and introduced provisions in the Trade Marks Act, which prohibit the use of branding that, without due cause, takes unfair advantage of the distinctive character and reputation of well-known registered trademarks. It is easy to see how vital this move is to both pharmaceutical manufacturers and their customers. Using the combined provisions of common law and intellectual property (IP) laws, companies can use the distinctive aspects of their packaging in the battle against counterfeiting.
A range of intellectual property tools can help in the war against counterfeiting, especially if packaging and brand owners take the trouble to register their trade marks and designs fully. Community trade marks and designs can play a big role here. Intellectual property comprises many elements that provide legal protection. It includes trademarks, patents, copyright, registered design rights, unregistered design rights, database rights, and trade secrets.
With collaboration increasingly becoming the name of the game in the pharmaceutical industry, packaging is the subject of much debate, including the requirement to make decisions about combined logos, colours, and completely new company and product identities. These are opportunities to create and manage additional intellectual property that can be used to differentiate and enhance brand value.
While the big players have IP experts in place who will advise on trade mark protection and so on, smaller companies need to ensure they are protected in the best possible way, particularly when discussing mergers, technology transfer, or collaboration deals with larger organizations. The full value of all the intangible assets needs to be valued, understood, and properly protected.
PharmTech: What are your thoughts on outsourcing the packaging of pharmaceutical products? What are the risks and what key considerations should the contracting organization bear in mind when selecting a subcontractor?
Maguire: One aspect of protecting packaging and its branding is when a pharmaceutical company has outsourced the packaging of a product or products, either to a contract packaging firm that is only required to do the packaging or to one that also makes the product. Often these organizations can assist with branding and design. The nature of the agreement between the contracting organization and the subcontractor is crucial to ensure that the future ownership of the packaging design and innovation are correctly and appropriately held by those who need to capitalize upon it.
According to a recent technical market research report from BCC Research (2), the global market for pharmaceutical and biopharmaceutical contract manufacturing, research, and packaging was valued at USD$219.9 billion in 2012 and was expected to reach USD$242.2 billion by 2013. BCC Research projects the market to reach nearly $374.8 billion by 2018, and register a compound annual growth rate (CAGR) of 9.1%.
It is essential that protection of the intangible assets underpinning a product and its packaging are as watertight as possible. An organization needs to be able to retain its assets of value within the supply chain. In addition to having the right patents and trademarks in place, an organization needs to ensure, for example, that its employees can’t take ideas to a competitor or another part of the external supply chain. If IP is not protected, or not protected thoroughly enough, for example in each significant country where it may be at risk, there is a real possibility that trading and product names, branding, identity, as well as ideas and inventions can be stolen.
Sometimes, this problem could come about because an organization in the supply chain discloses, possibly inadvertently, a product and its constituents before it has been given patent protection, which could lead to competitors gaining a valuable edge. In some countries, trade secrets are protected by an expressed or implied contract. That in effect means that because they are not specifically protected by law, in some countries, they may be inadequately or not at all protected. As professional counterfeiters look to develop their businesses and intercept supply, it becomes ever more important to address the issue of the security of IP in the supply chain.
When an organization combines outsourcing with trading globally, the IP implications multiply. Protecting IP in a supply chain, particularly when trading across borders, can seem quite a daunting process, because each country has different procedures and there can be pitfalls in obtaining IP in each country. If an organization has decided to trade in a particular country, it needs to ensure intangible assets are protected, particularly for its goods, as soon as possible in that country through one of the rights indicated above. An IP advisor will recommend the best route according to the nature of what is to be protected.
Attitudes to IP vary widely from country to country. Some organizations trying to trade overseas have experienced difficulties in the past when trying to prevent others from using their IP, largely because reproduction of goods and designs historically has been how business is done in those countries. Employees of a company may sometimes not even be aware that reproduction is forbidden.
The first step, before entering into or expanding a supply-chain arrangement, is to determine the extent to which local law protects your IP. Any agreement needs to ensure, for example, that a supplier abides by such laws as do exist. Define the IP that needs protecting in the clearest possible terms, and be very clear about confidentiality.
It is recommended that wherever commercially appropriate, a company should register the rights to its inventions, trademarks, or designs. Filing an application establishes a record of when the rights came into being. Overseas rights that are not registered are difficult, if not impossible, to protect. As with most things, preparation is vital, and when it comes to the supply chain, careful attention to the nature of contracts is important as is having a good process in place for dispute resolution right from the beginning. Contracts with suppliers, for example, should ensure that subcontractors of the company they are dealing with are not allowed to use patents, designs, trademarks (or other IP that needs to be protected) without a specific license from you to do so.
Where packaging has been outsourced in the supply chain, it is important to understand exactly how far such a contract will protect you. For example, will it stop the subcontractor from selling a similar, although not identical, packaging design to another company, or perhaps a component of the design they have produced for the contractor?
Planning early about how your rights will be used is essential. One way of ensuring that the owner of the IP retains control over their rights is through licensing, in which case you will need licensing agreements and will need to be clear about the way your rights will be used by the licensee. It is important to consider aspects such as how products and packaging are designed and protected so that they cannot be easily counterfeited in the supply chain.
When developing a supply-chain strategy and ensuring that intangible assets are fully protected in the supply chain, especially when trading across borders, it is vital to take IP advice, preferably at an early stage to ensure pitfalls are avoided, opportunities are maximised and costs are kept to a minimum. It can be time-consuming and costly to sort out errors later. In addition, IP protection, including contracts, needs to be reviewed on a regular basis to ensure that, as organizations and legislation change, full protection remains in place and the intangible assets continue to contribute optimally to the business.
1. Annual IP crime report: 2013 to 2014, www.gov.uk/government/publications/annual-ip-crime-report-2013-to-2014, accessed 5 Feb. 2015.
2. BCC Research, “Global Markets for Contract Pharmaceutical Manufacturing, Research, and Packaging,” www.bccresearch.com/market-research/pharmaceuticals/contract-pharmaceutical-manufacturingresearch-packaging-phm043e.html, accessed 5 Feb. 2015.