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Insights SPRING2021
They lack Key Opinion Leaders and will often lack the necessary staff of physicians and legal/regulatory personnel and research and development personnel required to monitor the devices in the marketplace. Therefore, any clinical training and certifications offered with the purchase of the used device are questionable, at least. The best way to receive the proper training on how to use a medical device is to obtain the training directly from the company that made the device. When trained by the UML dealer, a company risks violating the CGMP for not receiving the proper training on how to use the device and for incorrectly and inadequately using the device on their patients.
Title Transfer Issues
A purchaser of a UML may be tempted to save money by buying a second-hand device and think that it can then simply have the device checked and serviced by the OEM. However, an OEM will not service or support a second-hand UML unless a service contract is in place with the owner and title to the UML is formally transferred on the books of the OEM. The service contract and transfer of title will likely cost the new purchaser numerous additional fees ‒ some of which are upwards of $60,000. It is no wonder that UML brokers typically neglect to tell purchasers about these fees in their haste to sell a used device.
Trademark Infringement
In the case of a UML, the purchaser does not obtain a license to use any of the trademarked product names or marketing materials that are typically conveyed by the OEM to a purchaser of a new device. Under the Lanham Act, civil liability will be imposed on any person who “uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which ... misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities.” POM Wonderful LLC v. Coca-Cola Co., 134 U.S. 228, 2234 (2014) (quoting 15 U. S. C. §1125(a)(1)).
As we have seen, UMLs typically do not conform to the OEM’s standards and quality controls and may even contain unverified non-genuine replacement parts. As a result, a UML purchaser who, for example, attempts to promote laser and light treatments by using the OEM’s trademark terms and/or photos in its promotional materials may be held liable under the Lanham Act by the OEM for trademark infringement and/or misrepresenting the consumer into believing that its system is verified by the OEM and is in working order. Id.
For example, in Warner-Lambert Co. v. Northside Dev. Corp., 86 F.3d 3 (2nd Cir. 1996), the court stated
that the distribution of a product that does not meet the trademark holder’s quality control standards may result in the devaluation of the mark by tarnishing its image, and its distribution constitutes trademark infringement in violation of the Lanham Act. The court added that to be entitled to relief, a trademark holder must demonstrate only that (1) it has established legitimate, substantial and non-pretextual quality control procedures; (2) it abides by these procedures; and (3) the non-conforming sales will diminish the value of the mark. Id. These requirements outlined in Warner-Lambert Co. are very easy for an OEM to meet in order to establish a Lanham Act violation.
Further, the regulation of medical devices is held to different and stricter standards than many other products. Therefore, if the used device is considered to be “counterfeit” under, for example, H.R. 5663’s