FEDERAL PROSECUTION OF COUNTERFEIT GOODS/PRODUCTS

By John Teakell
Law Office of John R. Teakell Dallas, TX

I. INTRODUCTION

When a person hears the word “counterfeit,” he/she usually thinks of counterfeit “money” or counterfeit “currency” or counterfeit “bills.” Although there are indeed federal prosecutions for counterfeit currency possessions and counterfeit currency trafficking, many other forms of counterfeiting have risen to affect the economy of the United States in recent years. Prosecutions of these cases is usually federal prosecutions, that allege violations of Title 18, U.S. Code, §2320, known as the Trademark Counterfeiting Act of 1984. The business of counterfeit goods and products is of course driven by the desire to make a profit by using a brand name of merchandise, while providing a “knock off” or artificial brand of merchandise that is inferior and/or less desirable than the popular brand.

Counterfeit products include expense luxury items to batteries and cigarettes. Other counterfeited goods and products sold in violation of the U.S. Code are pharmaceuticals, hair products, clothing, and a variety of other merchandise. Known prosecutions have included counterfeit guitars that were represented to be the original brand of choice of those persons seeking the popular guitar. Manufacturers, ironically, have developed a demand for such desirable products. For example, luxury items commonly counterfeited are purses and handbags. Such companies as Coach and Gucci, are imitated through their counterfeited products found in and out of stores and malls.

II. VIOLATIONS OF THE COUNTERFEITING STATUTE

The Trademark Counterfeiting Act of 1984, found in Title 18 of the United States Code, Section 320, titled as “Trafficking in Counterfeit Goods or Services, makes it illegal for any person to intentionally traffic in good or services, and to knowingly use a counterfeit trademark in doing so. Using a counterfeit trademark is usually achieved by an illegal/counterfeit label, or the packaging used for the counterfeit goods. The counterfeited trademark is a mark that is identical, or almost identical to, the trademark that is registered with the U.S. Patent and Trademark office.

III. OTHER FEDERAL STATUTES USED FOR COUNTERFEIT GOODS

Conspiracies or schemes to counterfeit items and traffic them can also be prosecuted under Title 18, U.S. Code, §371, Conspiracy/Conspiracy to Defraud the United States, or Money Laundering, Title 18 U.S. Code, §§1956 and 1957.

IV. TRAFFICKING IN COUNTERFEIT GOODS OR SERVICES STATUTE

The statute commonly used in prosecutions in U.S. District Court is listed here as printed in 18 U.S. Code §2320.

(a) Offenses. — Whoever intentionally—

  1. (1) traffics in goods or services and knowingly uses a counterfeit mark on or in connection with such goods or services,
  2. (2) traffics in labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags, documentation, or packaging of any type or nature, knowing that a counterfeit mark has been applied thereto, the use of which is likely to cause confusion, to cause mistake, or to deceive,
  3. (3) traffics in goods or services knowing that such good or service is a counterfeit military good or service the use, malfunction, or failure of which is likely to cause serious bodily injury or death, the disclosure of classified information, impairment of combat operations, or other significant harm to a combat operation, a member of the Armed Forces, or to national security, or
  4. (4) traffics in a counterfeit drug, or attempts or conspires to violate any of paragraphs (1) through (4) shall be punished as provided in subsection (b).

(b) Penalties.

(1) In general.— Whoever commits an offense under subsection (a)—

  • (A) if an individual, shall be fined not more than $2,000,000 or imprisoned not more than 10 years, or both, and, if a person other than an individual, shall be fined not more than $5,000,000; and
  • (B) for a second or subsequent offense under subsection (a), if an individual, shall be fined not more than $5,000,000 or imprisoned not more than 20 years, or both, and if other than an individual, shall be fined not more than $15,000,000.

(2) Serious bodily injury or death.—

  • (A) Serious bodily injury.— Whoever knowingly or recklessly causes or attempts to cause serious bodily injury from conduct in violation of subsection (a), if an individual, shall be fined not more than $5,000,000 or imprisoned for not more than 20 years, or both, and if other than an individual, shall be fined not more than $15,000,000.
  • (B) Death.— Whoever knowingly or recklessly causes or attempts to cause death from conduct in violation of subsection (a), if an individual, shall be fined not more than $5,000,000 or imprisoned for any term of years or for life, or both, and if other than an individual, shall be fined not more than $15,000,000.

(3) Counterfeit military goods or services and counterfeit drugs.— Whoever commits an offense under subsection (a) involving a counterfeit military good or service or counterfeit drug—

  • (A) if an individual, shall be fined not more than $5,000,000, imprisoned not more than 20 years, or both, and if other than an individual, be fined not more than $15,000,000; and
  • (B) for a second or subsequent offense, if an individual, shall be fined not more than $15,000,000, imprisoned not more than 30 years, or both, and if other than an individual, shall be fined not more than $30,000,000.
  • (C) Forfeiture and Destruction of Property; Restitution.— Forfeiture, destruction, and restitution relating to this section shall be subject to section 2323, to the extent provided in that section, in addition to any other similar remedies provided by law.

(D) Defenses.— All defenses, affirmative defenses, and limitations on remedies that would be applicable in an action under the Lanham Act shall be applicable in a prosecution under this section. In a prosecution under this section, the defendant shall have the burden of proof, by a preponderance of the evidence, of any such affirmative defense.

(E) Presentence Report.—

(1) During preparation of the presentence report pursuant to Rule 32(c) of the Federal Rules of Criminal Procedure, victims of the offense shall be permitted to submit, and the probation officer shall receive, a victim impact statement that identifies the victim of the offense and the extent and scope of the injury and loss suffered by the victim, including the estimated economic impact of the offense on that victim.

(2) Persons permitted to submit victim impact statements shall include—

  • (a) producers and sellers of legitimate goods or services affected by conduct involved in the offense;
  • (b) holders of intellectual property rights in such goods or services; and
  • (c) the legal representatives of such producers, sellers, and holders.
  • (F) Definitions.— For the purposes of this section—

(1) the term “counterfeit mark” means—

  • (A) a spurious mark—
  • (i) that is used in connection with trafficking in any goods, services, labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags, documentation, or packaging of any type or nature;
  • (ii) that is identical with, or substantially indistinguishable from, a mark registered on the principal register in the United States Patent and Trademark Office and in use, whether or not the defendant knew such mark was so registered;
  • (iii) that is applied to or used in connection with the goods or services for which the mark is registered with the United States Patent and Trademark Office, or is applied to or consists of a label, patch, sticker, wrapper, badge, emblem, medallion, charm, box, container, can, case, hangtag, documentation, or packaging of any type or nature that is designed, marketed, or otherwise intended to be used on or in connection with the goods or services for which the mark is registered in the United States Patent and Trademark Office; and
  • (iv) the use of which is likely to cause confusion, to cause mistake, or to deceive; or

(B) a spurious designation that is identical with, or substantially indistinguishable from, a designation as to which the remedies of the Lanham Act are made available by reason of section 220506 of title 36; but such term does not include any mark or designation used in connection with goods or services, or a mark or designation applied to labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hang tags, documentation, or packaging of any type or nature used in connection with such goods or services, of which the manufacturer or producer was, at the time of the manufacture or production in question, authorized to use the mark or designation for the type of goods or services so manufactured or produced, by the holder of the right to use such mark or designation;

(2) the term “financial gain” includes the receipt, or expected receipt, of anything of value;

(3) the term “Lanham Act” means the Act entitled “An Act to provide for the registration and protection of trademarks used in commerce, to carry out the provisions of certain international conventions, and for other purposes”, approved July 5, 1946 (15 U.S.C. 1051 et seq.);

(4) the term “counterfeit military good or service” means a good or service that uses a counterfeit mark on or in connection with such good or service and that—

(A) is falsely identified or labeled as meeting military specifications, or

(B) is intended for use in a military or national security application;

(5) the term “traffic” means to transport, transfer, or otherwise dispose of, to another, for purposes of commercial advantage or private financial gain, or to make, import, export, obtain control of, or possess, with intent to so transport, transfer, or otherwise dispose of; and

(6) the term “counterfeit drug” means a drug, as defined by section 201 of the Federal Food, Drug, and Cosmetic Act, that uses a counterfeit mark on or in connection with the drug.

(G) Limitation on Cause of Action.— Nothing in this section shall entitle the United States to bring a criminal cause of action under this section for the repackaging of genuine goods or services not intended to deceive or confuse.

(H) Report to Congress.—

(1) Beginning with the first year after the date of enactment of this subsection, the Attorney General shall include in the report of the Attorney General to Congress on the business of the Department of Justice prepared pursuant to section 522 of title 28, an accounting, on a district by district basis, of the following with respect to all actions taken by the Department of Justice that involve trafficking in counterfeit labels for phonorecords, copies of computer programs or computer program documentation or packaging, copies of motion pictures or other audiovisual works (as defined in section 2318 of this title), criminal infringement of copyrights (as defined in section 2319 of this title), unauthorized fixation of and trafficking in sound recordings and music videos of live musical performances (as defined in section 2319A of this title), or trafficking in goods or services bearing counterfeit marks (as defined in section 2320 of this title):

(a) The number of open investigations.

(b) The number of cases referred by the United States Customs Service.

(c) The number of cases referred by other agencies or sources.

(d) The number and outcome, including settlements, sentences, recoveries, and penalties,of all prosecutions brought under sections 2318, 2319, 2319A, and 2320 of title 18.

(a) The report under paragraph (1), with respect to criminal infringement of copyright, 5 shall include the following:

  • (i) The number of infringement cases in these categories: audiovisual (videos and films); audio (sound recordings); literary works (books and musical compositions); computer programs; video games; and, others.
  • (ii) The number of online infringement cases.
  • (iii) The number and dollar amounts of fines assessed in specific categories of dollar amounts. These categories shall be: no fines ordered; fines under $500; fines from $500 to $1,000; fines from $1,000 to $5,000; fines from $5,000 to $10,000; and fines over $10,000.
  • (iv) The total amount of restitution ordered in all copyright infringement cases.

(b) In this paragraph, the term “online infringement cases” as used in paragraph (2) means those cases where the infringer—

  • (i) advertised or publicized the infringing work on the Internet; or
  • (ii) made the infringing work available on the Internet for download, reproduction,performance, or distribution by other persons.

(c) The information required under subparagraph (A) shall be submitted in the report required in fiscal year 2005 and thereafter.

  • (i) Transshipment and Exportation.— No goods or services, the trafficking in of which is prohibited by this section, shall be transshipped through or exported from the United States. Any such transshipment or exportation shall be deemed a violation of section 42 of an Act to provide for the registration of trademarks used in commerce, to carry out the provisions of certain international conventions, and for other purposes, approved July 5, 1946 (commonly referred to as the “Trademark Act of 1946” or the “Lanham Act”).