No More Sham Chanel®, Rip-Off Rolex®, Phony Ferragamo ...

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No More Sham Chanel®, Rip-Off Rolex®,

Phony Ferragamo® or Copied Cartier®?

Anti-Counterfeiting

in the Twenty-First Century*

I Introduction

Our story begins in the year 2016. George Faux, head of quite a large

counterfeiting operation, sold fake handbags, wallets, and wristwatches in cities

along the east coast of the United States, especially New York City. (George is

shown on the cover in his younger, back-alley days, before he made it big.) He

“imported” his goods from China, somehow eluding U.S. Customs, sold them

in substantial quantities, and amassed a considerable fortune. He used that

fortune to buy a mansion on the Gulf in Naples, Florida, a Cessna airplane,

and a yacht that sleeps ten. All was in fact going swimmingly for George –

until several FBI agents paid him a visit. They arrested him, padlocked his

mansion, chained his yacht to the dock and sealed the hangar where he kept

* Copyright © 2006 Matthew Bender & Company, Inc., a member of the LexisNexis Group.

Trademark Protection and Practice

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his Cessna. The United States government had obtained an indictment and

charged George with criminal counterfeiting, seeking forfeiture of his

mansion, boat and plane, a fine of $2,000,000 and a jail term of ten years.

George consulted an expert trademark lawyer, who gave him the bad

news: A decade ago, on March 16, 2006, President Bush had signed the Stop

Counterfeiting in Manufactured Goods Act, substantially strengthening U.S.

criminal anti-counterfeiting laws.1 Under the Act, counterfeiters may be

ordered to forfeit proceeds from their criminal counterfeiting, any property

derived from those proceeds, and any property used or intended to be used to

commit the crime, including equipment used to manufacture and package the

counterfeit goods.2 Clearly, the intent was to make criminal counterfeiting as

unprofitable as possible in the United States and to deter future violations with

the specter of harsh penalties. Our story has a happy ending, though not for

George Faux. Seeing no alternative, he pleaded guilty, agreed to the forfeiture

and a fine of $1.5 million, and began serving six years in jail.

Counterfeiting is currently a global, modern day scourge. Throughout

the world, counterfeiters continue to attack and poach on businesses and their

1 Pub. L. No. 109-181. 2 18 U.S.C. § 2320(b)(1), (3). For more on forfeiture by a criminal counterfeiter, see § VI[b][ii] infra.

Anti-Counterfeiting in the Twenty-First Century

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trademarks. They curtail the ability of those businesses to compete effectively

in domestic and international markets, jeopardize the health and safety of

consumers, and in the United States alone cause tens of thousands to lose their

jobs.

Counterfeiting also thwarts both the trademark owner’s ability to

assure its customers of quality products and the consumer’s ability to associate

goods and services with their source. Not only are luxury consumer goods

frequently counterfeited, but so too are more mainstream products like car

parts, medications, children’s toys and even baby formula.3 The United States

Federal Bureau of Investigation and Bureau of Immigration and Customs

Enforcement estimate that sales of counterfeit goods reach a staggering $500

billion each year,4 and the United States Customs Service estimates that

3 Responding to Organized Crimes Against Manufacturers and Retailers: Hearings Before the Subcomm. on Crime, Terrorism and Homeland Security of the House Comm. on the Judiciary, 109th Cong. 2 (2005) (hereinafter “2005 Hearing Responding to Organized Crimes”) (opening statement of Rep. Daniel Lungren). See also the website of U.S. Immigration and Customs Enforcement (“Counterfeit merchandise not only represents a billion dollar industry at the expense of American companies, it also represents a public safety hazard when the merchandise involves medicines, auto and aircraft parts, as well as inferior hardware that could potentially be used in the construction of buildings, bridges and other major structures.”) (www.ice.gov/graphics/cornerstone/commercialfraud.htm). 4 H.R. Rep. No. 109-68, at 3 (2005). The country with the worst counterfeiting record by far is the People’s Republic of China, with Hong Kong, Mexico, South Korea and Malaysia rounding out the top five. Id. (citing statistics from 2003).


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counterfeiting has usurped 750,000 American jobs and costs the United States

approximately $200 billion each year.5 No part of commerce remains

untouched. Although the hypothetical example of George Faux should strike

fear into current counterfeiters, the battle continues.

This pamphlet focuses on United States anti-counterfeiting law, both

civil and criminal.

II What is Counterfeiting?

Commercial counterfeiting is the practice of placing a false trademark

on a product, often of inferior quality, in order to make the product

superficially indistinguishable from the genuine article. It is an imitation made

with the intention of deceiving consumers as to its source. Often the product

itself or its packaging will also be copied, not simply the trademark or logo, in

order to mislead the consumer. The Lanham Act and the United States

criminal law define a “counterfeit mark” in more detail.6

[a] – Counterfeiting or Infringement?

Counterfeiting is a subset of trademark infringement. All counterfeits

infringe, but not all infringements are counterfeit. In both counterfeiting and

5 2005 Hearing Responding to Organized Crimes, 109th Cong. 3 (statement of Rep. Joseph Knollenberg). 6 For more on these statutory definitions of “counterfeit mark,” see § IV[a].


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infringement cases, consumers are likely confused about the source of goods

or services and the defendant is benefiting from the plaintiff’s good will. In a

typical counterfeiting case, however, the producer of the fake merchandise

intends its “trademark” to be impossible or very difficult to tell apart from the

genuine article.

Where a copied trademark is identical to the genuine trademark, the

genuine mark is in use and registered for the same goods on which the copy is

used, and the owner of the genuine mark did not authorize use of its mark, a

court should find a violation of the counterfeiting laws. Where the copy of the

genuine mark is so close that an ordinary purchaser would not be able to tell

the difference between fake and real, and all the other statutory criteria are

met, again, a court should find that counterfeiting has taken place.

Creating a label that simulates the genuine label for SIMILAC baby

formula, for example, affixing it on a container with white powder inside, and

offering it for sale is counterfeiting and not merely infringement. Packaging

disks inside a box with the authentic MICROSOFT label copied where

Microsoft did not authorize the use of its mark, and offering that package for

sale is counterfeiting and not merely infringement. Manufacturing STAR

WARS action figures, putting them in a package copied from the actual STAR


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WARS action figure box, and offering them for sale is counterfeiting and not

merely infringement.

If, on the other hand, consumer confusion is not evident and the court

would need to balance the likelihood of confusion factors to determine

whether the copied trademark is likely to confuse consumers, the mark is likely

not a counterfeit.7 Where a consumer buys a container of FUNDOUGH

modeling clay for her kids, erroneously believing it to be produced by the

makers of PLAY-DOH,8 that is infringement and not counterfeiting. Where a

consumer buys HERBROZAC pills, incorrectly believing them to be an herbal

remedy made by the manufacturer of PROZAC prescription medication,9 that

is infringement and not counterfeiting. Legislative history from the 1984

Trademark Counterfeiting Act gives another example to illustrate the

distinction between counterfeiting and infringement:

[M]anufacturers of generic drugs may adopt a mark for their

7 The sponsors of the 1984 Trademark Counterfeiting Act declared that they “do not intend to treat as counterfeiting what would formerly have been arguable, but not clear-cut, cases of trademark infringement.” 130 Cong. Rec. H. 12078 (daily ed. Oct. 10, 1983) (joint statement on 1984 trademark counterfeiting legislation), reprinted in LaLonde, 8 Trademark Protection and Practice, p. 34-619. 8 Kenner Parker Toys, Inc. v. Rose Art Indus., Inc., 963 F.2d 350, 22 U.S.P.Q.2d 1453 (Fed. Cir. 1992). 9 Eli Lilly & Co. v. Natural Answers, Inc., 233 F.3d 456, 56 U.S.P.Q.2d 1942 (7th Cir. 2000).


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goods that is reminiscent of, although certainly not

“substantially indistinguishable from,” a trademark used by the

original manufacturer of a drug. Thus, “Prastimol” might be

used as the mark for a drug that is the chemical equivalent of a

drug sold under the trademark “Mostimol.” Whether or not

this sort of imitation may violate provisions of the Lanham Act

or other statutes, the Committee does not intend the present

bill to reach this type of case.10

A typical infringement case – such as the above cases where the parties

would argue over whether consumers are likely to be confused between the

two marks – does not reach the level of counterfeiting. In general, too, where

the defendant is a reputable business with visible assets, the case is more likely

to be a standard infringement case, but where the defendant is more transient

and able to hide records and assets quickly, the case is more likely to be a

10 130 Cong. Rec. H. 12078 (joint statement on 1984 trademark counterfeiting legislation), reprinted in LaLonde, 8 Trademark Protection and Practice, p. 34-619. See also Idaho Potato Commission v. G&T Terminal Packaging, Inc., 425 F.3d 708, 720-22, 76 U.S.P.Q.2d 1835 (9th Cir. 2005) (finding that former licensee’s unauthorized use of certification mark was counterfeiting rather than infringement); U.S. Structures, Inc. v. J.P. Structures, Inc., 130 F.3d 1185, 1192, 45 U.S.P.Q.2d 1027 (6th Cir. 1997) (holding that “§ 1117(b) does not apply where, as in this case, a holdover franchisee continues to use the franchisor's original trademark after the franchise has been terminated. Although the use of an original trademark is without authorization, it is not the use of a counterfeit mark.”).


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counterfeiting case. In addition, some district courts have held that where

counterfeit marks are involved, they need not balance the likelihood of

confusion factors because “counterfeit marks are inherently confusing.”11

Unlike infringement, counterfeiting is limited in the United States to

marks registered on the principal register of the United States Patent and Trademark

Office (USPTO).12 It is not counterfeiting to use another’s trademark on or in

connection with a good that is only related to those for which the genuine mark

is registered.13 In other words, the mark can only be counterfeit if it is

attached to the precise class of goods or services for which the genuine mark is 11 Lorillard Tobacco Co. v. Jamelis Grocery, Inc., 378 F. Supp. 2d 448, 455 (S.D.N.Y. 2005) (citation omitted). See also Phillip Morris USA, Inc. v. Shalabi, 352 F. Supp. 2d 1067, 1073 (C.D. Cal. 2004) (citing S.D.N.Y. cases); General Motors Corp. v. Autovation Technologies, Inc., 317 F. Supp. 2d 756, 761 (E.D. Mich. 2004) (“multi-factored balancing is unnecessary in cases like this one where the defendant has misappropriated precise counterfeits of the plaintiff's trademarks on goods that compete with the trademark holder's own goods”); Gucci America, Inc v. Duty Free Apparel, Ltd., 286 F. Supp. 2d 284, 287 (S.D.N.Y. 2003) ("[C]ounterfeits by their very nature, cause confusion.”). 12 15 U.S.C. § 1116(d)(1)(B)(i); 18 U.S.C. § 2320(e)(1)(A)(ii). See § IV[b][iv]. 13 15 U.S.C. § 1116(d)(1)(B)(i) (a “counterfeit mark” is a “counterfeit of a mark that is registered on the principal register . . . for such goods or services sold, offered for sale, or distributed”); 18 U.S.C. § 2320(e)(1)(A)(iii) (a “counterfeit mark” is a “spurious mark . . . 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”); 130 Cong. Rec. H. 12078-79 (joint statement on 1984 trademark counterfeiting legislation) (“[B]ecause this act is intended to reach only the most egregious forms of trademark infringement, it does not affect cases in which the defendant uses a registered mark in connection with goods or services for which the mark is not registered.”), reprinted in LaLonde, 8 Trademark Protection and Practice, at 34-619.


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registered. Note, however, that the fake goods do not have to be physically

identical to the genuine goods in order to be considered counterfeit; where the

genuine good is made out of metal and the cheaper copy is made out of

plastic, for example, there can still be counterfeiting.

The distinction between counterfeiting and infringement matters.

Where the civil violation is counterfeiting rather than infringement, the

successful U.S. plaintiff may elect statutory damages14 or may obtain a

mandatory award of attorneys’ fees and treble damages or profits under the

Lanham Act.15

[b] – Knockoffs

There is no neat statutory definition of a “knockoff.” It is generally

understood as a cheap copy intended to evoke the original product and in

many cases knockoffs are counterfeit goods. Some knockoffs, however, like

dresses sold the week after the Academy Awards ceremony that copy the red

carpet gowns almost exactly, are not counterfeit. The original gowns are not

registered with the USPTO and so cannot be counterfeited under the Lanham

14 15 U.S.C. § 1117(c). See Idaho Potato Commission, 425 F.3d 708 (upholding finding that plaintiff was entitled to statutory damages in counterfeiting case). For more on statutory damages in counterfeiting cases, see § V[b][v][B]. 15 See § V[b][iv], [v][A].


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Act, and also may be insufficiently distinctive to ever be registered.16 The lack

of protection for copied fashions may change, however, if a bill introduced in

the United States House of Representatives on March 30, 2006 is enacted.

The Design Piracy Prohibition Act, H.R. 5055, would protect fashion designs

from copying for three years with a penalty of either $250,000 or $5 per copy,

whichever is greater.

III International Anti-Counterfeiting Efforts

While this pamphlet focuses primarily on United States efforts to fight

counterfeiting, international efforts are ongoing as well. This section briefly

describes the major initiatives.

The Agreement on Trade-Related Aspects of Intellectual Property

Rights (known as the “TRIPS Agreement”) is a comprehensive multilateral

intellectual property agreement that took effect January 1, 1995.17 It requires

the 149 countries that are members of the World Trade Organization (WTO)

to follow certain minimum standards for enforcement of intellectual property

rights. They must, for example, adopt procedures that enable a trademark 16 See, e.g., Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205 (2000) (unregistered children’s clothing trade dress protectable only with secondary meaning). 17 The text of the agreement is at www.wto.org/english/docs_e/legal_e/27-trips.pdf. For more on the TRIPS Agreement, see the World Trade Organization web site at www.wto.org/english/tratop_e/trips_e/intel2_e.htm.


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owner to apply to “competent authorities, administrative or judicial,” when

they have valid grounds to suspect that counterfeit goods bearing their

trademark are being imported and request that local customs officials detain

those goods.18 Members must also have procedures for criminal proceedings

and penalties for cases of willful trademark counterfeiting; remedies may

include imprisonment and monetary fine for the counterfeiter and seizure,

forfeiture and destruction of the counterfeit goods and materials used to

commit the offense.19

The World Customs Organization issued model provisions on May 19,

2004 for national legislation on strengthening control of intellectual property

rights at borders.20 These provisions go beyond the standards required by the

TRIPS Agreement and suggest submitting requests for enforcement directly to

local customs authorities, giving customs authorities the power to stop goods

being exported and in transit at the border, and having customs authorities

establish a centralized system for recording and managing intellectual property

rights. 18 Article 51, TRIPS Agreement. 19 Article 61, TRIPS Agreement. 20 See “Model Provisions for National Legislation to Implement Fair and Effective Border Measures Consistent with the Agreement on Trade-Related Aspects of Intellectual Property Rights,” available at www.wcoipr.org/wcoipr/gfx/ModelLawfinal.doc.


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The European Union adopted a Directive in 2004 to strengthen and

standardize legal protection against infringement of intellectual property rights

across the EU.21 It notes that Member States may apply criminal sanctions to

enforce intellectual property rights22 and provides for recall or destruction of

infringing goods at the infringer’s expense.23 In addition, a 2003 regulation

from the Council of the European Union directs all Member States to

implement procedures for rights holders to apply to customs authorities to

take action against counterfeit goods.24 It also describes what the customs

authorities shall do upon receipt of such an application25 and what they may do

with goods found to infringe an intellectual property right.26

There are also various other international and regional anti-

counterfeiting agreements in place to protect intellectual property rights and

strengthen control at national borders.27

21 See Directive 2004/48/EC of the European Parliament and the Council on the Enforcement of Intellectual Property Rights at http://europa.eu.int/eur-lex/pri/en/oj/dat/2004/l_195/l_19520040602en00160025.pdf. 22 Id. at Recital 28. 23 Id. at Recital 24. 24 Chapter II, Council Regulation 1383/2003 at http://europa.eu.int/eur-lex/lex/LexUriServ/LexUriServ.do?uri=CELEX:32003R1383:EN:HTML. 25 Id. at Chapter III. 26 Id. at Chapter IV. 27 International Trademark Association Special Report, “Counterfeiting,” Sept. 2004, at 5, 7.


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IV What is a “Counterfeit Mark”?

There are two types of “counterfeit marks” in U.S. law. The first is

counterfeits of marks that are registered on the principal register of the

USPTO, and are in use.28 (Two district courts have also held that the

counterfeit statute applies to goods using certification marks without

permission.29) The second is spurious designations that are substantially

indistinguishable from Olympic designations protected under the Olympic

Charter Act.30 The United States Olympic Committee has the right to sue for

unauthorized use of an Olympic designation and to seek the remedies

provided in the Lanham Act.31 Olympic designations are not registered on the

principal register in the USPTO, hence this provision was included to ensure

that they are covered by counterfeiting law.

There is a threefold importance to the definition of “counterfeit

28 See 18 U.S.C. § 2320(e)(1)(A) and 15 U.S.C. § 1116(d)(1)(B)(i). 29 United States v. 10,510 Packaged Computer Towers, 152 F. Supp. 2d 1189, 1194-97, 59 U.S.P.Q.2d 1940 (N.D. Cal. 2001) (unauthorized use of Underwriters certification marks on computer towers and packaging where defendant was only authorized to use mark on power supply housed within the computer), citing 15 U.S.C. § 1127 (defining “mark” as including “any trademark, service mark, collective mark, or certification mark”); United States v. 4500 Audek Model No. 5601 AM/FM Clock Radios, 1999 U.S. Dist. LEXIS 19239 (N.D. Ill. 1999) (“The unauthorized representation that defendant radios were certified by UL rendered them counterfeit under 15 U.S.C. § 1127.”). 30 15 U.S.C. § 1116(d)(1)(B)(ii); 18 U.S.C. § 2320(e)(1)(B). 31 36 U.S.C. § 380.


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mark.” First, it helps define the scope of criminal conduct proscribed by the

Act, as well as associated penalties. Each counterfeit mark supports a separate

criminal count. Thus, a defendant convicted under 18 U.S.C. § 2320 of

trafficking in goods bearing five different counterfeit marks was properly

convicted of five separate and punishable crimes.32 Second, it identifies those

cases for which the Act authorizes ex parte seizures.33 Third, it defines those

circumstances in which treble damages or profits and attorney's fees should be

awarded, absent extenuating circumstances.34

[a] – Statutory Definitions in United States Law

The phrase “counterfeit mark” is defined in three places in U.S. law —

; once in the criminal code and twice in the Lanham Act.35 The meaning given

in the definitions section of the Lanham Act is the most concise: “A

‘counterfeit’ is a spurious mark which is identical with, or substantially

indistinguishable from, a registered mark.”36 The detailed definition from the

Lanham Act is as follows: 32 United States v. Song, 934 F.2d 105, 109, 19 U.S.P.Q.2d 1630 (7th Cir. 1991) (“We hold that the correct unit of prosecution under § 2320 is the counterfeit mark, so the indictment charging different counterfeit marks in each count was not multiplicitous.”). 33 See § V[b][i]. 34 See § V[b][iv], [v][A]. 35 18 U.S.C. § 2320(e)(1); 15 U.S.C. §§ 1116(d)(1)(B), 1127. 36 15 U.S.C. § 1127.


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(i) a counterfeit of a mark that is registered on the principal register in

the United States Patent and Trademark Office for such goods or

services sold, offered for sale, or distributed and that is in use, whether

or not the person against whom relief is sought knew such mark was

so registered; or

(ii) a spurious designation that is identical with, or substantially

indistinguishable from, a designation as to which the remedies of this

Act are made available by reason of Section 220506 of title 36, United

States Code;

but such term does not include any mark or designation used on or in

connection with 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.37

Being a part of the Lanham Act, the definition of “counterfeit mark”

contained in Section 1116(d)(1)(B) incorporates the Section 1127 definition.

The criminal provision states that a “counterfeit mark” is:

37 15 U.S.C. § 1116(d)(1)(B).


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(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


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(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, hangtags, 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.38

The following sections break these statutory provisions down into their

elements.

[b] – Elements of a Counterfeit Mark

38 18 U.S.C. § 2320(e)(1), as amended by the Stop Counterfeiting in Manufactured Goods Act of 2006, Pub. L. No. 109-181.


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A mark is counterfeit under United States law if it is a spurious mark39

that is identical to or substantially indistinguishable from the plaintiff’s mark40

where the plaintiff’s mark was in use41 and registered on the USPTO’s

principal register for use on the same goods to which the defendant applied

the mark.42 In addition, the defendant must not have been authorized to use

the plaintiff’s mark.43 Under the Lanham Act, anyone who uses a counterfeit

mark in commerce “in connection with the sale, offering for sale, distribution,

or advertising” of goods or services where “such use is likely to cause

confusion, or to cause mistake, or to deceive” shall be liable in a civil action,44

and the criminal statute also states explicitly that the use of the mark must be

“likely to cause confusion, to cause mistake, or to deceive.”45 In the criminal

law, there is an additional requirement that the mark must also be “used in

connection with trafficking in any goods, services, labels, patches, stickers,

wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases,

39 15 U.S.C. § 1127, 18 U.S.C. § 2320(e)(1)(A). See § IV[b][i]. 40 15 U.S.C. § 1127, 18 U.S.C. § 2320(e)(1)(A)(ii). See § IV[b][ii]. 41 15 U.S.C. § 1116(d)(1)(B)(i), 18 U.S.C. § 2320(e)(1)(A)(ii). See § IV[b][iii]. 42 15 U.S.C. §§ 1116(d)(1)(B)(i), 1127, 18 U.S.C. § 2320(e)(1)(A)(ii). See § IV[b][iv]. 43 15 U.S.C. § 1116(d)(1)(B); 18 U.S.C. § 2320(e)(1). See § IV[b][v]. 44 15 U.S.C. § 1114(1)(a). See § IV[b][vi]. 45 28 U.S.C. § 2320(a). See § VI[a][iv].


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hangtags, documentation, or packaging of any type or nature.”46

[i] – Non-Genuine or “Spurious”

A “spurious” trademark is “one that is false or inauthentic.”47 A

genuine trademark does, however, become spurious when it is used on

counterfeit goods. Thus, filling genuine Coca-Cola bottles with a “cola-like”

carbonated beverage (not Coca-Cola) and selling it as Coca-Cola involves a

counterfeit, or “spurious,” mark.48 Adding non-genuine parts to a genuine

product may also be counterfeiting; for example, several cases involving

altered luxury watches have held that adding non-genuine parts to the genuine

timepieces converted them into counterfeit goods.49 Where the original

46 18 U.S.C. § 2320(e)(1)(A)(i). See § VI[a][i], [iii] for more on trafficking. 47 United States v. Petrosian, 126 F.3d 1232, 1234 (9th Cir. 1997). The legislative history of the original U.S. counterfeiting law states that “spurious” means “not genuine or authentic.” 130 Cong. Rec. H. 12078 (joint statement on 1984 trademark counterfeiting legislation), reprinted in LaLonde, 8 Trademark Protection and Practice, at p. 34-618. 48 Petrosian, 126 F.3d 1232. See also, e.g., Westinghouse Elec. Corp. v. General Circuit Breaker & Electric Supply, Inc., 106 F.3d 894, 41 U.S.P.Q.2d 1741 (9th Cir. 1997) (finding that unauthorized use of genuine, original trademark can qualify as trademark counterfeiting); General Electric Co. v. Speicher, 877 F.2d 531, 11 U.S.P.Q.2d 1125 (7th Cir. 1989) (holding that the use of boxes bearing plaintiff’s genuine mark and supplied by plaintiff to sell goods that did not originate with plaintiff was still counterfeiting; “We can see no difference, so far as the objectives of section 1114(1)(a) are concerned, between doing this and making a reproduction of [plaintiff’s] trademark.”). 49 Rolex Watch USA Inc. v. Meece, 158 F.3d 816, 48 U.S.P.Q.2d 1589 (5th Cir. 1998) (finding “considerable evidence” that the defendant's use of genuine ROLEX marks constituted counterfeiting where non-genuine parts were added; remanding to


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trademark has been removed and defendant’s mark substituted, however,

unauthorized resale of plaintiff’s goods is not within the scope of the

counterfeiting law.50

[ii] – “Substantially Indistinguishable” from Genuine Mark

A counterfeit mark is one that is, among other elements, “identical

with, or substantially indistinguishable from, a mark registered on the principal

register” of the USPTO.51 Use of the phrase “substantially indistinguishable”

the district court for final determination); Cartier v. Aaron Faber, Inc., 396 F. Supp. 2d 356, 77 U.S.P.Q.2d 1572 (S.D.N.Y. 2005) (watch retailer who added diamonds to the bezel of stainless steel CARTIER watches liable for counterfeiting; addition of diamonds was to make the steel watches resemble the more expensive white gold versions); Cartier v. Symbolix, 386 F. Supp. 2d 354, 361 (S.D.N.Y. 2005) (finding that addition of diamonds to stainless steel CARTIER watches constituted counterfeiting). See also Rolex Watch, U.S.A., Inc. v. Michel Co., 179 F.3d 704, 710, 50 U.S.P.Q.2d 1589 (5th Cir. 1989) (noting unappealed district court finding that sale of used ROLEX watches “customized” with non-ROLEX parts was counterfeiting and finding that district court should have enjoined defendant from selling such watches with ROLEX trademark visible). 50 Electronic Laboratory Supply Co. v. Motorola, Inc., 1989 U.S. Dist. LEXIS 16475 (E.D. Pa. 1989) (finding that unauthorized resale of defective semiconductors marked with defendant’s trademark was not “within the ambit” of the civil counterfeiting statute, though it could violate other trademark laws). See LaLonde, 2 Trademark Protection and Practice, § 5.09[3]. 51 18 U.S.C. § 2320(e)(1)(A)(ii), 15 U.S.C. §§ 1116(d)(1)(B)(i), 1127. See GTFM, Inc. v. Solid Clothing, Inc., 215 F. Supp. 2d 273. 300 (S.D.N.Y. 2002) (finding defendant’s use of 05 and PLAYERS 05 on its shirts was not substantially indistinguishable from plaintiff’s use of its 05 mark); United States v. 10,510 Packaged Computer Towers, 152 F. Supp. 2d 1189, 1198-99, 59 U.S.P.Q.2d 1940 (N.D. Cal. 2001) (finding defendant’s “reverse-UR” mark to be substantially indistinguishable from Underwriters Laboratories’ “reverse-UR” certification mark); In re Circuit Breaker Litigation, 852 F. Supp. 883 (C.D. Cal. 1994) (giving as a hypothetical example that


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means that the law does not require that a mark be precisely identical to the

genuine mark in order to be adjudged “counterfeit.” A requirement of

identical appearance would allow counterfeiters to easily circumvent the law by

slightly modifying registered trademarks. Nevertheless, the two marks should

be quite difficult to tell apart to be “substantially indistinguishable.” The vast

majority of opinions on counterfeiting do not need to tackle the issue of

whether the marks are substantially indistinguishable because their similarity is

usually only too apparent.

The test for whether a spurious mark is “substantially

indistinguishable” from the real thing is narrower in the criminal context than

the civil context.52 It is the point of view of the average purchaser and not a

trademark expert that matters in deciding whether a mark is substantially

indistinguishable from the genuine mark.53

KORTENKAMPWEAR would be substantially indistinguishable from KORTENKAMPWEAR but that KURTSKAMPINGWEAR would not). 52 United States v. Guerra, 293 F.3d 1279, 1288 (11th Cir. 2002). 53 Montres Rolex, S.A. v. Snyder, 718 F.2d 524 (2d Cir. 1983) (pre-Counterfeiting Act case holding that the inquiry into whether a mark is counterfeit must be conducted “from the standpoint of an average purchaser”); 10,510 Packaged Computer Towers, 152 F. Supp. 2d at 1198 (holding that “the proper test for a counterfeit mark is whether, in the eyes of an ‘average’ purchaser, the mark is ‘spurious’ and ‘identical with, or substantially indistinguishable from, a registered mark.’”); Fimab-Finanziaria Maglificio Biellese Fratelli Fila S.p.A. v. Helio Import/Export, Inc., 601 F. Supp. 1, 3, 223 U.S.P.Q. 795 (S.D. Fla. 1982) (pre-


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Note that the goods the mark is attached to need not be substantially

indistinguishable from the genuine goods. If that were true, defendants with

low quality merchandise could not be found to have committed counterfeiting.

Showing the trier of fact the registered trademarks and genuine goods

produced by authorized licensees gives “a valid basis for comparison” as to

whether the allegedly counterfeit designs are identical or substantially

indistinguishable.54 The trademark owner need not testify in a criminal trial

nor must the trier of fact always examine the genuine trademarks as affixed to

the genuine goods.55

[iii] – Genuine Mark is In Use

The trademark on which the counterfeit mark is modeled must be in

current use at the time the counterfeiting occurs.56 There is no explicit

Counterfeiting Act case holding that likelihood of confusion should be determined from the stand point of the ‘typical” buyer of the product and that an “ocular” test is the correct one for judicial determination of counterfeiting). 54 Guerra, 293 F.3d at 1288. 55 Id. But it may be useful for the trier of fact to hear from a representative of the trademark owner. See United States v. DeFreitas, 92 F. Supp. 2d 272, 278 (S.D.N.Y. 2000) (stating that the CEO of Ty, Inc. testified at the criminal trial “regarding the validity of the marks on the genuine Beanie Babies”). 56 18 U.S.C. § 2320(e)(1)(A)(ii), 15 U.S.C. § 1116(d)(1)(B)(i). See also United States v. Foote, 413 F.3d 1240, 1248, 75 U.S.P.Q.2d 1353 (10th Cir. 2005) (“The counterfeiting statute requires . . . that the mark be in actual use at the time of the defendant's use of that mark.”); Guerra, 293 F.3d at 1290 (finding that “the genuine mark must … be actually in use”) (emphasis in original).


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requirement as the extent of use as to duration, sales volume or geographic

area. Where the prosecution in a criminal trial does not show that the genuine

trademark is in use at the time the defendant trafficked in the counterfeit

goods, the court will grant a motion for judgment of acquittal as to those

goods.57

Certified copies of certificates of registration are insufficient to show

that the marks are “in use.”58 Testimony from a representative of the

trademark owner that the trademark was in use at the time of the offense and

that its goods displayed the trademark is an appropriate method of proving

use.59

[iv] – Genuine Mark is Registered on the Principal Register for

The Same Goods

In order for a claim of counterfeiting to prevail, the plaintiff or

complainant’s trademark must be registered on the USPTO’s principal register

for use on the same goods to which the defendant applied the mark.60 It is not

counterfeiting to use another’s trademark in connection with a good that is

57 See Foote, 413 F.3d at 1244, 1248. 58 Id. at 1248; Guerra, 293 F.3d at 1290. 59 Foote, 413 F.3d at 1248. 60 15 U.S.C. § 1116(d)(1)(B)(i); 18 U.S.C. § 2320(e)(1)(A)(iii).


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only related to those for which the mark is registered,61 though it may be

trademark infringement. The defendant, in a criminal or civil case, need not

know the mark is registered to be held liable for a violation.62 In any event, the

defendant will always have had constructive notice of the registrant’s claim of

ownership of the mark under Section 22 of the Act.63

The only exceptions to the registration requirement are designations

that are substantially indistinguishable from Olympic designations protected

under the Olympic Charter Act, which are not registered on the principal

register in the USPTO but are separately designated as marks that, when

copied, may be considered counterfeit.64

Counterfeit marks are limited to those that are registered on the

principal register so that the laws’ scope is limited to a clearly defined set of

marks and there will not be any dispute in counterfeiting cases about the

validity of the genuine mark. In addition, functional trade dress cannot be

counterfeited under the statute because it cannot be registered on the principal

61 See 130 Cong. Rec. H. 12078-79 (joint statement on 1984 trademark counterfeiting legislation) (“[T]his act . . . does not affect cases in which the defendant uses a registered mark in connection with goods or services for which the mark is not registered.”), reprinted in LaLonde, 8 Trademark Protection and Practice, at p. 34-619. 62 15 U.S.C. § 1116(d)(1)(B)(i); 18 U.S.C. § 2320(e)(1)(A)(ii). 63 15 U.S.C. § 1072. 64 15 U.S.C. § 1116(d)(1)(B)(ii); 18 U.S.C. § 2320(e)(1)(B).


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register.65

Owners of unregistered marks can still sue under 15 U.S.C. § 1125(a) for

trademark or trade dress infringement and may obtain damages and attorneys’

fees under certain circumstances.66

[v] – Genuine Mark is Used Without Authorization

The term “counterfeit mark” does not include a mark used when the

manufacturer or producer of the good was, at the time of manufacture or

production, authorized by the trademark owner to use the mark on that type

of goods.67 The product overrun and parallel import exceptions stem from

this exclusion.68

[vi] – Counterfeit Mark Causes Confusion

The core of any counterfeiting (and infringement) case is whether the

defendant’s use of the mark will likely confuse consumers.69 Under the

Lanham Act, any one who uses a counterfeit mark in commerce in connection

65 See LaLonde, 1 Trademark Protection and Practice, § 2A.04 for more on trade dress functionality. 66 See LaLonde, 2 Trademark Protection and Practice Chapter 7 and 3 Trademark Protection and Practice § 11.03[2][a][ii] for a discussion of federal unfair competition law. For more on monetary relief, see 3 Trademark Protection and Practice § 14.03. 67 18 U.S.C. § 2320(e)(1); 15 U.S.C. § 1116(d)(1)(B). 68 See § IV[c][i], [ii]. 69 See LaLonde, 1 Trademark Protection and Practice, § 5.01 for an introduction to the basic concept of likelihood of confusion.


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with the sale or advertising of goods or services where “such use is likely to

cause confusion, or to cause mistake, or to deceive” shall be liable in a civil

action,70 and the criminal statute also states explicitly that the use of the mark

must be “likely to cause confusion, to cause mistake, or to deceive.”71

[c] – Exclusions

There are some explicit exclusions from the definition of “counterfeit

mark.” Under the criminal statute, the term “counterfeit mark” does not

include any mark used with goods or services or applied to labels, stickers or

any packaging where

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.72

The civil statute contains similar exclusions; a counterfeit mark does

not include

any mark or designation used on or in connection with goods

70 15 U.S.C. § 1114(1)(a). 71 18 U.S.C. § 2320(a). 72 18 U.S.C. § 2320(e)(1).


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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.73

As described below, these exclusions encompass product overruns and

inventories of former licensees and distributors as well as parallel imports (also

known as gray market goods).74 Under these exclusions, the goods are genuine

and were produced by or with the authorization of the trademark owner, so

the harm to consumers and the mark owner is minimal.75

As noted above, the statute excludes sales by former licensees and

distributors depending upon whether they were authorized “at the time of the

manufacture or production.” Although the meaning of this exclusion may not

be absolutely clear, the First Circuit upheld the constitutionality of this

73 15 U.S.C. § 1116(d)(1)(B). 74 United States v. Milstein, 401 F.3d 53, 63 (2d Cir. 2005). 75 United States v. Hanafy, 124 F. Supp. 2d 1016, 1023-24 (N.D. Tex. 2000) (“A common denominator of these two exceptions is that the goods to which the mark is attached were manufactured by, or with the permission of, the owner of the mark – that is, the goods themselves are genuine.”), aff’d, 302 F.3d 485, 64 U.S.P.Q.2d 1050 (5th Cir. 2002).


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provision, finding it not impermissibly vague.76 A terminated licensee in that

case had continued to manufacture products and affix the trademark owner’s

mark on them and was convicted of counterfeiting. He challenged the phrase

“at the time of the manufacture or production in question” as not being

sufficiently definite to give him notice that his conduct was forbidden by the

statute. The court refused to sustain his challenge: “Though perhaps not a

model of the most exacting legislative craftsmanship, we think this language

nonetheless makes clear beyond reasonable dispute that the authorization to

use the mark must exist ‘at the time of,’ that is, from beginning of the

production or manufacture up to and including the time at which the goods or

services have been finally ‘manufactured or produced.’”77

In addition, the criminal law adds a related exclusion: “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

76 United States v. Bohai Trading Co. Inc., 45 F.3d 577, 33 U.S.P.Q.2d 1625 (1st Cir. 1995). See also United States v. McEvoy, 820 F.2d 1170, 1172-73, 3 U.S.P.Q.2d 1399 (11th Cir. 1987) (finding that the entire Counterfeiting Act is not unconstitutionally vague because it adequately apprises individuals of the nature of the proscribed conduct); United States v. Gantos, 817 F.2d 41, 43, 2 U.S.P.Q.2d 1536 (9th Cir. 1987) (summarily dismissing defendant’s argument that Section 2320 is unconstitutional). 77 Bohai Trading, 45 F.3d at 580-81.


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deceive or confuse.”78 Beyond the exclusions for genuine goods, purchasers of

counterfeit goods do not violate the statute.79

[i] – Overruns

The counterfeiting law explicitly excludes, in its definition of

“counterfeit mark,” those marks that are used in connection with so-called

“overrun goods.” Overruns are products that a licensee has manufactured

under license from the trademark owner but that the trademark owner could

not sell, usually because the licensee has manufactured too many.80 If a

licensee manufactures overruns during the course of a valid license, the marks

on those goods will remain non-counterfeit, “whatever changes may later

occur in the relationship between the trademark owner and the licensee.”81

The overrun exemption does not apply if a licensee produces goods on

78 18 U.S.C. § 2320(f). For more on this exclusion, see § VI[a][vi]. 79 See § IV[c][iii]. 80 See Tommy Hilfiger Licensing, Inc. v. Goody’s Family Clothing, Inc., 2003 U.S. Dist. LEXIS 8788 (N.D. Ga. 2003) (overruns are “products that have already been produced but cannot, for whatever reason, be sold as intended”). 81 130 Cong. Rec. H. 12079 (joint statement on 1984 trademark counterfeiting legislation) (“Thus, if goods are manufactured during the course of a valid license, and sold after the termination of the license, the marks of those goods remain noncounterfeit. In addition, if one purchases goods or services produced by a former licensee in the good faith belief that the licensee is then authorized to produce that type of goods, one will not “know” that the goods are counterfeit and will thus not be liable under [the Act].”), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. 34-621.


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which it was not authorized to use the trademark in question.82 Unlike

overruns of genuine quality merchandise, consumers and trademark owners

both face harm from such unauthorized goods.

The overrun exemption should not injure trademark owners because,

first, it is the trademark owner who has made it possible for the manufacturer

to produce goods bearing the trademark, and, second, the owner has the

means to protect itself with contractual provisions in the original agreement.83

In addition, because the goods themselves are genuine and authorized by the

mark owner, there should be no harm to consumers.

The sale of irregular goods produced by licensees does not fall within

this exception. Where a criminal defendant affixes trademarks to defective or

irregular goods, goods manufactured for but rejected by the trademark owner,

82 Id. (“Thus, if a licensee is authorized to produce ‘Zephyr’ trenchcoats, but without permission manufactures ‘Zephyr’ wallets, the overrun exception would not apply.”).

Note that in order for the licensor to succeed in the hypothetical ZEPHYR counterfeiting case, the mark must have been registered on the principal register for wallets. For a mark to be counterfeit, the genuine mark it imitates must be registered on the USPTO’s principal register. See § IV[b][iv]. 83 “For example, the trademark owner can specify in the contract that the making of overruns shall constitute a breach of contract, and that the manufacturer shall be liable for liquidated damages if overruns are made. The contract might also specify that the trademark owner has the right to inspect the manufacturer's facilities to ensure that overruns are not being made.” H. Rep. 98-997, 97th Cong., 2d Sess. 13 (1984), quoted in 130 Cong. Rec. H. 12079 (joint statement on 1984 trademark counterfeiting legislation), reprinted in LaLonde, 8 Trademark Protection and Practice, at p. 34-620.


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he is in violation of 18 U.S.C. § 2320(a).84 The sale of irregular or defective

goods with the trademark affixed deceives consumers into purchasing clothing

that the trademark owner has rejected as low quality.85

[ii] – Parallel Imports, or Gray Market Goods

The Act also excludes from its definition of “counterfeit mark” the

marks on “parallel imports,” also known as “gray market” goods.86 Gray

market goods are goods on which a genuine mark was legitimately placed on

the goods by the manufacturer at the time of manufacture. They were,

however, not intended for sale in the United States and may be materially

different from the U.S. product because of varying regional tastes or

compliance with different local laws. Marks on gray market goods are not

counterfeit because they were affixed with the trademark owner’s consent.

Thus, a trademark owner may not seek an ex parte seizure order of gray market

84 United States v. Farmer, 370 F.3d 435, 441-42 (4th Cir. 2004). 85 See LaLonde, 2 Trademark Protection and Practice, § 5.09[3] for more on resale of damaged goods. 86 130 Cong. Rec. H. 12079 (joint statement on 1984 trademark counterfeiting legislation) (“The term ‘counterfeit mark’ . . . also excludes the marks on so-called ‘parallel imports’ or ‘gray market’ goods . . . .”), reprinted in LaLonde, 8 Trademark Protection and Practice, at p. 34-619 to 34-620. See 2 Trademark Protection and Practice, § 5.10A for a full discussion of gray market goods.


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goods under the counterfeiting statute.87

Where the products were genuine but their markings were altered, they

are not excluded gray market goods and are likely counterfeit. For example,

where a company obtained genuine INTEL computer chips and relabeled

them with the product number of a faster and more powerful chip, those were

found to be counterfeit and not gray market goods.88 If a gray market product

is repackaged in a way that will deceive consumers, that product is also

counterfeit. For example, where a criminal defendant had repackaged

medications intended for foreign sale so as to falsely suggest that they were

FDA-approved and removed identifying codes from the goods, the Second

Circuit upheld his conviction under Section 2320(a).89

[iii] – Purchasers

Neither the civil nor the criminal counterfeiting laws imposes liability

on private individuals who purchase counterfeit goods exclusively for their

87 Martin's Herend Imports, Inc. v. Diamond & Gem Trading USA, Co., 112 F.3d 1296, 42 U.S.P.Q.2d 1801 (5th Cir. 1997) (finding that ex parte seizure of gray market goods was wrongful). 88 Intel Corp. v. Terabyte Int’l, Inc., 6 F.3d 614, 618-20, 28 U.S.P.Q.2d 1182 (9th Cir. 1993). 89 United States v. Milstein, 401 F.3d 53, 62-63 (2d Cir. 2005). See § VI[a][vi] for the statutory exception for genuine repackaged goods.


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personal use, even if they know the goods are counterfeit.90

V United States Civil Counterfeiting Law

A company that has been the victim of counterfeiting may bring a

federal civil claim to stop the continuing damage to its good will and

reputation and recoup its losses. The U.S. government lacks the resources to

prosecute most counterfeiters and so private parties must take it upon

themselves to deter and stop those who counterfeit their products.

[a] – Civil Counterfeiting Claim

[i] – Elements of a Civil Counterfeiting Claim

Under the Lanham Act, a counterfeit mark is a spurious mark that is

identical to or substantially indistinguishable from the plaintiff’s genuine

mark.91 Anyone who uses a counterfeit mark in commerce in connection with

the sale or advertising of goods or services where “such use is likely to cause

90 See United States v. Guerra, 293 F.3d 1279, 1286 (11th Cir. 2002) (stating that “individual purchasers of the goods . . . clearly fall outside the purview of the [Trademark Counterfeiting Act]”); 130 Cong. Rec. 31675 (joint statement on 1984 counterfeiting legislation) (“It is not a crime under this act for an individual knowingly to purchase goods bearing counterfeit marks, if the purchase is for the individual's personal use.”).

Under 19 C.F.R. § 148.55, an individual may bring into the United States one counterfeit item for personal use and not for resale. See LaLonde, 1 Trademark Protection and Practice, § 4.05. 91 15 U.S.C. § 1127. See § IV[b] for more on the elements of a counterfeit mark.


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confusion, or to cause mistake, or to deceive” shall be liable in a civil action.92

An offer for sale will suffice.93 In addition, anyone who counterfeits a

registered mark and applies that imitation mark to labels, signs, packages, or

advertisements to be used in commerce in connection with the sale or

advertising of goods or services where “such use is likely to cause confusion,

or to cause mistake, or to deceive” shall be liable in a civil action.94

A plaintiff may only prevail in a counterfeiting case where its mark was

in use95 and registered on the USPTO’s principal register for use on the same

goods to which the defendant applied the mark.96 In addition, the defendant

must not have been authorized to use the plaintiff’s mark at the time of

manufacture or production of the goods or services.97

92 15 U.S.C. § 1114(1)(a). 93 In a civil action for counterfeiting, the Ninth Circuit held that a defendant's mere offer to sell 10,000 “blank” sets of jeans and corresponding LEVI'S labels was a sufficient basis for liability. Levi Strauss & Co. v. Shilon, 121 F.3d 1309, 43 U.S.P.Q.2d 1616 (9th Cir. 1997). There was no need to make an actual sale or shipment, and there was no basis for an “entrapment” unclean hands defense. 94 15 U.S.C. § 1114(1)(b). 95 15 U.S.C. § 1116(d)(1)(B)(i). See § IV[b][iii] for more on the use requirement. 96 15 U.S.C. §§ 1116(d)(1)(B)(i), 1127. See § IV[b][iv] for more on the registration requirement. Designations that are substantially indistinguishable from Olympic designations protected under the Olympic Charter Act are not registered on the principal register in the United States Patent and Trademark Office, but are still protected from counterfeiters under the statute. 15 U.S.C. § 1116(d)(1)(B)(ii). 97 15 U.S.C. § 1116(d)(1)(B). See § IV[b][v].


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[ii] – Intent in Civil Counterfeiting

Unlike criminal counterfeiting,98 civil counterfeiting need not be

intentional to violate the statute. The scale of statutory damages is different in

cases of willful counterfeiting and non-willful counterfeiting,99 therefore the

statute covers non-willful counterfeiting.

At first glance, this seems counterintuitive. It would be almost

impossible for a manufacturer of counterfeit goods, labels or packaging to

innocently or accidentally make an identical or substantially indistinguishable

copy of plaintiff’s genuine mark. However, many civil suits proceed against a

retailer of counterfeit goods that may or may not be aware that the goods it

sells are counterfeit or could be willfully blind to the possibility, which courts

treat as intending to sell counterfeit goods.100

[b] – Civil Remedies

There are multiple remedies available to plaintiffs in civil counterfeiting

actions. At the start of the proceedings, the plaintiff may request seizure of

98 See § VI[a][ii]. 99 15 U.S.C. § 1117(c)(1), (2). 100 See, e.g., Lorillard Tobacco Co. v. J.J. Shell Food Mart, Inc., 2005 U.S. Dist. LEXIS 26626 (N.D. Ill. 2005) (finding defendant retail store did not act willfully in selling counterfeit cigarettes; awarding $7500 in damages); Lorillard Tobacco Co. v. Division & Noble Amoco Corp., 390 F. Supp. 2d 678 (N.D. Ill. 2005) (similar facts; awarding $3500). See § V[b][v][A] for more on willful blindness.


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the counterfeit goods without notice to the counterfeiter.101 The court may

also order expedited discovery, if necessary.102 And at the conclusion, a

prevailing plaintiff is entitled to essentially mandatory attorneys’ fees103 and

treble damages or profits,104 or, in the alternative, may elect to obtain statutory

damages.105 Finally, the counterfeit products may be recalled and destroyed.106

[i] – Ex Parte Seizure of Counterfeit Goods

Under certain circumstances, a court may grant an order “providing

for the seizure of goods and counterfeit marks” involved in the use of a

counterfeit mark “in connection with the sale, offering for sale, or distribution

of goods or services.”107 The order may also include seizure of “the means of

making such [counterfeit] marks, and records documenting the manufacture,

sale, or receipt of things involved in such violation.”108 The statutory basis for

seizure orders is Section 36 of the Lanham Act, 15 U.S.C. § 1116. 15 U.S.C. §

1118 permits a party to seek the destruction of articles seized under the ex

parte procedures by giving ten days notice to a United States Attorney before 101 See § V[b][i]. 102 See § V[b][iii]. 103 See § V[b][iv]. 104 See § V[b][v][A]. 105 See § V[b][v][B]. 106 See § V[b][vi], [vii]. 107 15 U.S.C. § 1116(d)(1)(A). 108 15 U.S.C. § 1116(d)(1)(A).


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doing so, unless the party can show good cause for giving lesser notice.109

Application for a seizure order may be made ex parte, that is, without

notice to the defendant. The purpose of ex parte seizures is to ensure that the

courts are able “to exercise their jurisdiction effectively in counterfeiting

cases.”110 There will be no counterfeit goods to rule on if the defendant, given

notice of the seizure, destroys or hides the offending goods. Trademark

counterfeiters are often “fly by night operators” who sell goods on street

corners and who will, if given notice of impending court proceedings, dispose

of the counterfeit goods to someone else in the counterfeiting network or

simply destroy them as a cost of doing business in order to escape legal

liability.111

In preparing the seizure order, the court must consider two competing

considerations. The United States Marshal, the law enforcement official

overseeing the seizure, will not be sufficiently familiar with the goods or

services in question to be able to determine what materials or documents

should be seized. Hence, the court may permit a representative of the 109 15 U.S.C. § 1118. See § V[b][vi]. 110 H.R. Rep. No. 98-997, 98th Cong., 2d Sess. 15 (1984). 111 Id. See also Vuitton v. White, 945 F.2d 569, 571, 20 U.S.P.Q.2d 1133 (3d Cir. 1991) (“Consistent with their calling, professional counterfeiters and dealers in counterfeit goods generally are not upstanding citizens. This presents a major obstacle to trademark owners trying to protect their marks.”).


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applicant, such as its counsel, to accompany the U.S. Marshal in order to assist

in making these determinations.112 However, the purpose of the ex parte

seizure is to protect materials from destruction or concealment; it is not a

device by which the plaintiff may bypass the normal discovery process and

gain unlimited access to the defendant’s records during a seizure. By issuing

appropriate orders, based on all the circumstances of the case, courts can give

the law enforcement officials sufficient information to carry out the seizure

while simultaneously preserving normal operation of the discovery process and

the confidentiality of privileged business records. The sponsors of the 1984

counterfeiting legislation suggest that the court could “ask the applicant's

counsel, whether or not he or she accompanies the law enforcement officials

who execute the seizure, to provide the officials with a `checklist' of matters to

be seized, and with other needed information.”113

[A] – Requirements for Obtaining Ex Parte Seizure Order

A court must make seven specific findings before issuing a seizure order

112 130 Cong. Rec. H. 12082 (joint statement on 1984 trademark counterfeiting legislation), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. 34-627. See § V[b][i][[C]. 113 130 Cong. Rec. H. 12082 (joint statement on 1984 trademark counterfeiting legislation), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. 34-627.


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under the Act and must require the applicant to post an appropriate bond.114

[1] – Providing Bond

The applicant must provide security “determined adequate by the court

for the payment of such damages as any person may be entitled to recover as a

result of a wrongful seizure or wrongful attempted seizure under this

subsection.”115

[2] – Finding That Any Other Order Would Be

Inadequate

A court must find “that it clearly appears from specific facts” that an

order less drastic than an ex parte seizure would be inadequate.116 If the

114 15 U.S.C. § 1116(d)(4)(B). 115 15 U.S.C. § 1116(d)(4)(A).

“The provision of a bond is one of the critical procedural protections designed to ensure that the defendant's rights are adequately protected during the course of an ex parte seizure. In setting the amount of security, courts should err on the side of caution—;that is, towards larger bonds—;in light of the need to protect the unrepresented defendant, and to ensure that the defendant will have an effective remedy if he or she is the victim of a wrongful seizure.” 130 Cong. Rec. H. 12080 (joint statement on 1984 trademark counterfeiting legislation), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. 34-623. 116 15 U.S.C. § 1116(d)(4)(B)(i). “[T]he applicant must establish that a temporary restraining order on notice to the defendant, or an ex parte temporary restraining order, would not be adequate to achieve the purposes of the Lanham Act. This provision simply codifies the traditional equitable principle that the court should use the least intrusive remedy that will be effective under the circumstances.” 130 Cong. Rec. H. 12080 (joint statement on 1984 trademark counterfeiting legislation), reprinted in LaLonde, 8 Trademark Protection and Practice, at p. 34-624.


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applicant’s interests would still be protected if the defendant had notice of the

seizure, a temporary restraining order would be adequate117 and a court should

not order an ex parte seizure.

[3] – Finding That Applicant Has Not Publicized

the Requested Seizure

A court must find “that it clearly appears from specific facts” that “the

applicant has not publicized the requested seizure.”118 The legislative history

explains that

when a private applicant obtains an order directing law

enforcement officials to seize materials from an unrepresented

defendant, the applicant should not be permitted to take

advantage of the ‘surprise’ character of the seizure to unfairly

injure the reputation of the defendant. For example, it would

be highly unfair to a defendant who has been given no advance

notice of a seizure if the applicant were to alert the press to the

upcoming seizure in an effort to create damaging publicity 117 “’Proceed[ing] on notice’ (i.e., not ex parte) will usually entail serving the defendant with a TRO and proceeding to an adversary hearing on a preliminary injunction.” Lorillard Tobacco Co. v. Bisan Food Corp., 377 F.3d 313, 320, 71 U.S.P.Q.2d 1953 (3d Cir. 2004) (finding plaintiff failed to demonstrate that an order other than a seizure order would be inadequate). See § V[b][ii]. 118 15 U.S.C. § 1116(d)(4)(B)(ii).


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about the defendant. This provision therefore requires a party

seeking an ex parte seizure to certify to the court that it has not

publicized the requested seizure.119

Because “unfair surprise” is the rationale for limiting the plaintiff's efforts to

publicize the seizure, the need for protection will primarily exist before and

during the seizure. After the seizure, defendant will presumably be better able

to defend itself in the press. Additionally, Subsection (d)(6) directs the court

to “take appropriate action” in order to protect the defendant from publicity

generated by the plaintiff about the seizure of the defendant's goods.120

Practice Tip

The applicant should file the papers requesting the ex parte seizure

under seal. Otherwise, the court may find that filing the motion so that it is

accessible to the public constitutes publicizing the seizure.

[4] – Finding That Applicant Is Likely to Show

Defendant Used a Counterfeit Mark


119 130 Cong. Rec. H. 12080-81 (joint statement on 1984 trademark counterfeiting legislation), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. 34-624. 120 15 U.S.C. § 1116(d)(6).


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applicant is likely to succeed in showing that the person against whom seizure

would be ordered used a counterfeit mark in connection with the sale, offering

for sale, or distribution of goods or services.”121

[5] – Finding That Applicant Will Suffer

Immediate and Irreparable Injury Without Seizure

A court must find “that it clearly appears from specific facts” that “an

immediate and irreparable injury will occur if such seizure is not ordered.”122

This should not be a difficult showing to make in a counterfeiting case.123

Courts have repeatedly held that the distribution of infringing goods constitutes

irreparable injury sufficient to order preliminary relief,124 and because the

marks at issue in these cases are not merely infringing but are counterfeit,

121 15 U.S.C. § 1116(d)(4)(B)(iii). “This provision does not require any showing about the defendant's state of mind; it simply requires the applicant to make an adequate showing that the marks in which the defendant is dealing are counterfeit.” 130 Cong. Rec. H. 12081 (joint statement on 1984 trademark counterfeiting legislation), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. 34-624. For more on the elements of a counterfeit mark, see § IV[b]. 122 15 U.S.C. § 1116(d)(4)(B)(iv). 123 Vuitton v. White, 945 F.2d 569, 576, 20 U.S.P.Q.2d 1133 (3d Cir. 1991) (“Courts have held that both potential damage to reputation and likelihood of confusion constitute irreparable injury. Congress was clearly aware of these precedents when it required that seizure order applicants demonstrate a likelihood of irreparable injury. . . . Having found that defendants were likely to flaunt court orders to turn over the counterfeit goods and so were likely to continue selling the counterfeit goods, the district court had no choice but to conclude that [plaintiff] would suffer irreparable injury in the absence of a seizure.”) (citations omitted). 124 See LaLonde, 3 Trademark Protection and Practice, § 14.02[3][b][ii].


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courts should reach this conclusion even more easily.

[6] – Finding That Material to be Seized Will Be At

Location Named in Application


matter to be seized will be located at the place identified in the application.”125

While courts should not grant broad seizure requests – those that name an

entire city, for example – they should nonetheless be somewhat flexible on this

requirement because the applicant may be unable to identify exactly where the

materials are located.126

[7] – Finding That Harm to Applicant of Denying

Application Outweighs Harm to Defendant’s

Legitimate Interests


125 15 U.S.C. § 1116(d)(4)(B)(v). See Sports Design & Development, Inc. v. Schoneboom, 871 F. Supp. 1158 (N.D. Iowa 1995) (denying seizure and finding that plaintiff and its private investigator only speculated that materials to be seized will be located at defendant’s home). 126 130 Cong. Rec. H. 12081 (joint statement on 1984 trademark counterfeiting legislation) (“As the House report made clear, it may be difficult for the applicant to identify precisely where the goods or materials in question are located. The courts should thus be flexible in applying this requirement, but should require as great a degree of specificity as is possible under the circumstances, and should not grant orders, for example, permitting seizure to take place ‘anywhere in downtown Washington, D.C.’ ”), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. 34-624 – 34-625.


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harm to the applicant of denying the application outweighs the harm to the

legitimate interests of the person against whom seizure would be ordered of

granting the application.”127 This showing should not be difficult where

defendant has been engaged in counterfeiting because the plaintiff will face

substantial hardship from the copying of its mark and the defendant will have

little if any legitimate interest in retaining counterfeit goods.

[8] – Finding That Defendant Would Make

Material Inaccessible If It Were Given Notice


person against whom seizure would be ordered, or persons acting in concert

with such person, would destroy, move, hide, or otherwise make such matter

inaccessible to the court, if the applicant were to proceed on notice to such

person.”128 In other words, if notice would “serve only to render fruitless

further prosecution of the action,”129 the court should grant an ex parte seizure

127 15 U.S.C. § 1116(d)(4)(B)(vi). 128 15 U.S.C. § 1116(d)(4)(B)(vii). 129 In re Vuitton et Fils, S.A., 606 F.2d 1, 4-5 (2d Cir. 1979) (per curiam).

“A finding upon emergency application that proceeding on notice would result in the destruction, removal, or hiding of the counterfeit matter is arguably tantamount to a finding that the defendant will not comply with a TRO . . . .” Lorillard Tobacco Co. v. Bisan Food Corp., 377 F.3d 313, 320, 71 U.S.P.Q.2d 1953 (3d Cir. 2004) (finding plaintiff’s failure to demonstrate that without a seizure order the company would destroy, move or hide the counterfeit matter).


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order. This provision is “key to obtaining an ex parte seizure order under this

Act.”130

If the plaintiff can show that the defendant had concealed or destroyed

evidence in the past or ignored a court order, that would be powerful evidence

under this factor.131 In some cases, a showing that other counterfeiters have

destroyed evidence in similar situations may suffice,132 but courts require

“particularized allegations” that the defendant is a member of a group that

would not comply with a court order.133

Previous disobedience of a court order against counterfeiting is “surely 130 130 Cong. Rec. H. 12081 (joint statement on 1984 trademark counterfeiting legislation), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. 34-625. 131 E.g., Vuitton v. White, 945 F.2d at 575 (granting ex parte seizure order under Lanham Act where “at least four of the street vendor defendants apparently are selling counterfeits in violation of the permanent injunction” issued in an earlier action). 132 In re Vuitton et Fils, 606 F.2d at 5 (ordering district court to issue an ex parte TRO where the plaintiff had given evidence that based on its substantial past experience in similar cases and investigations, once a counterfeiter learned of an action against him, he would “immediately transfer his inventory to another counterfeit seller, whose identity would be unknown”). 133 Earth Products, Inc. v. Gordo Enterprises, Inc., 2005 U.S. Dist. LEXIS 27937 (W.D. Wash. 2005). See also Lorillard Tobacco Co. v. Omar, LLC, 2003 U.S. Dist. LEXIS 16681 (D. Conn. 2003) (“Plaintiff alleges generally that counterfeiters commonly destroy evidence and that the defendants would have a motive to do so in light of possible criminal penalties. These general allegations, which could be made in any case involving counterfeit goods, are necessarily insufficient to satisfy the statute's demand for a clear showing, based on specific facts, that these defendants, after receiving notice of the court's issuance of a temporary restraining order, would destroy counterfeit [products] in their possession at the risk of being held in criminal contempt.”).


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highly probative” of some of the statutory requirements for an ex parte seizure

order.134 Nevertheless, “there is no statutory basis for a per se requirement that

prior disobedience be shown to obtain an ex parte seizure order.”135 The

Third Circuit explicitly presumes that parties will be willing to obey a court

order.136

Courts are reluctant to assume that a defendant will hide or destroy

counterfeit goods after notice of a lawsuit where the defendant is a reputable

business, reasoning that where “small independent retailers with fixed places

of business” are accused of dealing in counterfeits, they are more likely to

comply with a court order than itinerant street vendors.137 The Joint Statement

issued by the United States Congress interpreting the bill that became the

Counterfeiting Act of 1984 declared:

It would not be appropriate to order such a seizure against a

reputable merchant, absent unusual circumstances -- such as

when the applicant can make a particularized showing that the 134 Bisan Food Corp., 377 F.3d at 319 n.3. See also 130 Cong. Rec. H. 12081 (joint statement on 1984 trademark counterfeiting legislation) (“The most compelling proof on this point would be evidence that the defendant had acted in bad faith towards the judicial process in the past.”), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. 34-625. 135 Bisan Food Corp, 377 F.3d at 319 n.3. 136 Id. at 320. 137 Id. at 321.


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merchant would be likely to defy a court order to maintain the

status quo. A reputable businessperson would not be likely to

conceal or destroy evidence when notified of a pending lawsuit,

and the issuance of an ex parte seizure order against such a

person would therefore be wholly inappropriate, absent the

unusual circumstances just mentioned.138

The statute requires more than a showing that the counterfeiter or

trafficker has an incentive to destroy, move or hide the counterfeit goods.

“Indeed, arguably anyone who is intentionally selling any counterfeit goods has –

by virtue of the threat of criminal sanction from the criminal trademark

counterfeiting statute – an incentive to dispose of those counterfeit goods.”139

The party seeking an ex parte seizure order must develop specific facts that

suggest that the defendant would destroy, move or hide the counterfeit goods

upon notice of the lawsuit.

Where the defendants have been involved in prior counterfeiting

litigation without attempting to flee or destroy evidence, a court is unlikely to 138 130 Cong. Rec. H. 12081 (joint statement on 1984 trademark counterfeiting legislation), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. 34-625. See Earth Products, 2005 U.S. Dist. LEXIS 27937 (quoting the joint statement); Clorox Co. v. Inland Empire Wholesale Grocers, Inc., 874 F. Supp. 1065, 1069, 32 U.S.P.Q.2d 1206 (C.D. Cal. 1994) (same). 139 Bisan Food Corp., 377 F.3d at 322.


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grant a seizure order.140 One court found insufficient the fact that the

defendants’ business operations were clandestine and difficult to locate

without extensive investigation by plaintiff.141

[B] – What Must be Included in the Court’s Ex Parte

Seizure Order

Subsection 34(d)(5) sets out the information that must be included in

an ex parte seizure order.142 The five required items are:

(1) “the findings of fact and conclusions of law required for the

order;”143

(2) “a particular description of the matter to be seized, and a

description of each place at which such matter is to be seized;”144

140 International Beauty Exchange, Inc. v. Tony Dollar Kingdom, Inc., 58 U.S.P.Q.2d 1638 (S.D. Fla. 2001) (vacating seizure order after discovering that the parties had been litigating related actions for several months without evidence of defendants’ bad faith). 141 Bic Corp. v. Sara Export Import, Inc., 2000 U.S. Dist. LEXIS 18974 (S.D. Cal. 2000) (“The mere fact that locating Defendant's business operations required a significant investigatory effort does not somehow establish that Defendants will conceal or otherwise destroy the disputed evidence.”). 142 15 U.S.C. § 1116(d)(5). 143 15 U.S.C. § 1116(d)(5)(A). 144 15 U.S.C. § 1116(d)(5)(B). “[T]he courts should require the greatest specificity that is possible under the circumstances, but should recognize that circumstances may often make it impossible to list in detail every item that is to be seized.” 130 Cong. Rec. H. 12081 (joint statement on 1984 trademark counterfeiting legislation), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. 34-626.


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(3) “the time period, which shall end not later than seven days after the

date on which such order is issued, during which the seizure is to be

made;”145

(4) “the amount of security required to be provided under this

subsection;”146 and

(5) “a date for the hearing required under paragraph (10) of this

subsection.”147

[C] – Service of Seizure Order by United States Marshal or

Other Law Enforcement Officer

Once the court has issued a seizure order, it must order a United States

Marshal or other law enforcement officer to serve a copy of the order and

carry out the ordered seizure.148 Representatives for the applicant may

accompany the Marshal should the court so order.

Practice Tip

The attorney for the applicant must contact the local U.S. Marshal with

145 15 U.S.C. § 1116(d)(5)(C). 146 15 U.S.C. § 1116(d)(5)(D). 147 15 U.S.C. § 1116(d)(5)(E). For more on the post-seizure hearing, see § V[b][i][F]. 148 15 U.S.C. § 1116(d)(9). This requirement was added by Pub. L. No. 104-153, 110 Stat. 1388 (1996).


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jurisdiction over the location where the seizure will occur149 and arrange for

the seizure, including filling out Form USM-285, “Process Receipt and

Return.”150

[D] – Seized Materials in the Custody of the Court and

Substitute Custodians

The statute provides that “[a]ny materials seized under this subsection

shall be taken into the custody of the court.” 151 While some courts have

permitted applicants or another party, on motion, to act as substitute

custodians of the seized goods,152 others read the statute as requiring the court

itself to serve as custodian and not permitting a substitute.153 Courts refusing

149 To search for a local district office of the U.S. Marshal Service, see www.usmarshals.gov/district/index.html. 150 The form can be found online at www.usmarshals.gov/process/usm-285.pdf. 151 15 U.S.C. § 1116(d)(7). 152 Electronic Lab. Supply Co. v. Cullen, 977 F.2d 798, 801, 24 U.S.P.Q.2d 1421 (3d Cir. 1992) (noting that the district court had granted a motion allowing plaintiff’s law firm to act as substitute custodian); Farm Aid v. Various John Does, 1997 U.S. Dist. LEXIS 15716 (N.D. Ill. 1997) (appointing a Missouri company as substitute custodian of defendant’s seized items); Reebok Int’l, Ltd. v. Marnatech Enterprises, Inc., 737 F. Supp. 1521, 1525 (S.D. Cal. 1990) (finding that protective order protected defendant’s rights where plaintiff or plaintiff’s agent was appointed substitute custodian); Gucci Shops, Inc. v. Conrad, 6 U.S.P.Q.2d 1199 (N.D. Cal. 1987) (appointing plaintiff’s law firm as substitute custodian). 153 Compaq Computer Corp. v. Hardware 4 Less, Inc., 184 F. Supp. 2d 128, 128 (D.N.H. 2002) (holding that “federal law requires the district court to take and


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to allow the naming of a substitute custodian have reasoned that court custody

would best protect defendant’s property and legitimate confidential business

information.154

Practice Tip

As a practical matter, neither the court nor the U.S. Marshal Service

will be eager to take actual custody of the seized materials as they may be quite

voluminous. Neither the applicant nor its attorney should act as custodian for

the seized goods because they are evidence in the case and may contain

confidential information. It is therefore recommended that the applicant file a

motion to appoint a third-party substitute custodian along with the motion for

the seizure order.155 The applicant should identify a specific custodian who has

maintain custody of all items seized from the defendants, and that there is no authority allowing the court to designate a substitute custodian”); General Electric Co. v. Speicher, 681 F. Supp. 1337, 1340 (N.D. Ind. 1988) (holding that “substitute custodial orders should be issued only in the most extenuating circumstances”; “Courts should retain custody of items seized if at all possible. The reason for the requirement that all materials seized be held in court custody is to protect defendants' property and any of defendants' legitimate business information which may be confidential.”). 154 Compaq, 184 F. Supp. 2d at 130; General Electric Co., 681 F. Supp. at 1340. 155 One law review article suggests that practitioners relieve the U.S. Marshal Service of the burden of being the depository of the seized items and provide a substitute custodian, though it should not be the law firm representing the applicant. William P. Glenn, Jr., “Ex-Parte Seizure of Intellectual Property Goods,” 9 Tex. Intel. Prop. L.J. 307, 323, 325 (2001) (“[A] lawyer should not become a custodian for seized goods or documents. It places a burden upon the attorney and/or her firm to be a custodian


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consented to take custody and name that custodian in a proposed order. The

substitute custodian need not keep the seized materials in its office; the

applicant should place the seized materials in a storage facility, under the

supervision of the U.S. Marshal Service so that the chain of custody is

preserved, and deposit the key to that facility with the custodian. If the court

refuses to grant a motion for substitute custodian, the applicant should then

give the key to the storage facility to the court.

After the seizure, the applicant may make a discovery request to review

all of the seized materials.

[E] – Protecting Defendants’ Interests Under Ex Parte

Seizure Orders

The Act includes a number of provisions designed as disincentives for

manufacturers who would abuse the ex parte seizure provision, perhaps to

stifle legitimate competition. These include a requirement that bond be

which may expose the attorney and/or firm to liabilities. . . . Since the U.S. Marshal Service typically does not want to hold such seized goods, and the attorney should avoid keeping records pursuant to the rules of professional conduct, a motion for a substitute custodian should be drafted and presented to the court as part of the ex-parte application.”).


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posted,156 a requirement that seizure orders be placed under seal until the

defendants have an opportunity to contest the order,157 attorneys’ fees awards

for defendants for wrongful seizure,158 required supervision by law

enforcement authorities,159 and a requirement that all materials seized in an ex

parte seizure order be placed in the custody of the court.160 Finally, if

documents are seized pursuant to a valid court order, the courts may enter an

appropriate protective order with respect to discovery of the records, in an

effort to protect any privileged information that may be contained in the

seized records.161

By the terms of the statute, an applicant will need to supply the court

with an affidavit or verified complaint containing information supporting the

findings of fact and conclusions of law necessary for issuance of an ex parte

156 15 U.S.C. § 1116(d)(4)(A). 157 15 U.S.C. § 1116(d)(8). The seal order “shall provide that the applicant may not needlessly publicize the issuance or carrying out of the seizure order until the defendant has been given an opportunity to contest it.” S. Rep. No. 98-526, 98th Cong., 2d Sess. 16 (1984). The Act also provides that once the seizure has taken place, the defendant should be given an opportunity to see the seizure order and supporting materials. 15 U.S.C. § 1116(d)(8). 158 15 U.S.C. § 1116(d)(11). 159 15 U.S.C. § 1116(d)(9). 160 15 U.S.C. § 1116(d)(7). 161 15 U.S.C. § 1116(d)(7).


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seizure order, and any additional information specified in Subsection (d)(5).162

Subsection 34(d)(4)163 specifies the two basic requirements for issuance of an

ex parte seizure order: (1) provision by the applicant of a bond to ensure that

the defendant will be compensated if the seizure turns out to be wrongful and

(2) an adequate showing of the facts that justifies issuing such an order.164

These provisions are designed to ensure that the due process rights of

defendants are fully respected in ex parte seizures authorized under the Act.

Discount retail outlets sometimes obtain their merchandise from

distributors that are not authorized by the trademark owner to provide those

goods to the discount outlets, or from the “gray market.” These records can be

vital to the victimized plaintiff, because if the defendant is permitted to destroy

those records, the plaintiff may be at a complete loss in attempting to prove its

damages. However, courts must be sensitive to the concerns of defendants

about the release of confidential business information, especially when that

information might be used to enforce a scheme of resale price maintenance.

162 15 U.S.C. § 1116(d)(3). 163 15 U.S.C. § 1116(d)(4). 164 Under this provision, the court must find that “it clearly appears from specific facts that” certain conditions and circumstances exist. The Act's language is taken from Rule 65 of the Federal Rules of Civil Procedure. See § V[b][i][A][2]-[8].


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[F] – Post-Seizure Hearing on Propriety of Seizure Order

The court must hold a noticed hearing for both parties on the

propriety of the seizure order between ten and fifteen days after the order is

issued, unless both parties agree to waive the hearing.165 Either party may ask

that the hearing be delayed; the applicant must show good cause for a

continuance unless the defendant consents because the defendant has incurred

the hardship of its goods having been seized, but the defendant need not show

good cause for a delay. The defendant will have received notice of the hearing

by service of the seizure order.

At the hearing, the plaintiff will have the burden of showing that the

seizure order was justified and that it continues to be justifiable to hold the

defendant's goods or other materials. Otherwise, the order will be dissolved or

appropriately modified.166 In many instances, the plaintiff's proof may simply

consist of the same evidence presented at the ex parte hearing, along with

proof that those facts have not changed.167

165 15 U.S.C. § 1116(d)(10). 166 15 U.S.C. § 1116(d)(10)(A). 167 130 Cong. Rec. H. 12082 (joint statement on 1984 trademark counterfeiting legislation), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. 34-628.


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[G] – Checklist for Obtaining Ex Parte Seizure Order

To obtain an ex parte seizure order of counterfeit goods under 15

U.S.C. § 1118, follow the steps in this checklist.

□ Contact a bail bondsman, bonding company, the client’s

insurance company, or a bank where the client has a letter of

credit in advance of filing to prepare for posting appropriate

bond with the court. 15 U.S.C. § 1116(d)(4)(A) (requiring

bond). At the hearing on the motion, the court will determine

a proper amount for bond if it grants the motion.

□ Assess whether there may be electronic evidence at the site of

the seizure. If so, contact computer forensics experts who can

copy or “mirror” the defendant’s computer hard drives during

the seizure if the computers themselves are not seized.

□ Prepare and file ex parte and under seal

□ a civil cover sheet;

□ an attorney appearance form;

□ motions for admission for the attorneys, if necessary

(e.g., pro hac vice);

□ a disclosure statement under Federal Rule of Civil


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Procedure 7.1 identifying any parent corporation of the

applicant or any publicly-held corporation that owns

10% or more of the applicant’s stock;

□ a check for the filing fee;

□ one summons for each defendant (to be served by the

U.S. Marshal Service at the time of seizure);

□ if required under the local rules, a notice that a claim is

being made involving trademarks;

□ an application to seal the file and a proposed order

granting the motion and sealing the file;

□ a Motion for Substitute Custodian and a proposed

order granting the motion and naming the Substitute

Custodian. The Substitute Custodian should be a third

party who has consented to take custody. See §

V[b][i][D];

□ a verified complaint that alleges counterfeiting under 15

U.S.C. § 1116, along with additional counts as

warranted under the facts of the case, including

infringement under 15 U.S.C. §§ 1114 or 1125(a),


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dilution under 15 U.S.C. § 1125(c), and state unfair

competition counts;

□ an Ex Parte Motion for Seizure Order;

□ a Memorandum of Law supporting the Ex Parte

Motion for Seizure Order with all of the following

elements and with reference to the filed declarations

and exhibits (described below):

□ Demonstrate to the court with specific facts

that a less drastic order, such as a TRO alone,

would be inadequate to protect the applicant

(15 U.S.C. § 1116(d)(4)(B)(i); § V[b][i][A][2]);

□ State that the applicant has not publicized the

seizure (15 U.S.C. § 1116(d)(4)(B)(ii); §

V[b][i][A][3]);

□ Show using specific facts that the defendant

used a counterfeit mark (15 U.S.C. §

1116(d)(4)(B)(iii); § V[b][i][A][4]) by

demonstrating the existence of the following

elements of a counterfeit mark:


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□ State that the defendant’s mark was

spurious and not genuine (§ IV[b][i]);

□ Show that the counterfeit mark is

identical or substantially

indistinguishable from the applicant’s

mark (§ IV[b][ii]);

□ State that the applicant’s mark was in

use (§ IV[b][iii]);

□ State that the applicant’s mark was

registered on the USPTO’s principal

register for use on the same goods to

which the defendant applied the mark

(§ IV[b][iv]);

□ State that the defendant was not

authorized to use the applicant’s mark

(§ IV[b][v]);

□ Explain how the defendant’s use of the

mark is “likely to cause confusion, or to

cause mistake, or to deceive” (§


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IV[b][vi]).

□ Demonstrate with specific facts that the

applicant faces immediate and irreparable injury

without the seizure (15 U.S.C. §

1116(d)(4)(B)(iv); § V[b][i][A][5]);

□ Describe the material to be seized, attaching

specimens or photographs as exhibits, if

possible

□ Counterfeit goods;

□ Counterfeit labels, packaging;

□ Equipment used to make counterfeit

goods, labels or packaging;

□ Paper or electronic business records

documenting manufacture, sale or

receipt of the above

□ Describe each place where the material is to be

seized;

□ Provide specific evidence that the material to be

seized will be at the place named in the


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application (15 U.S.C. § 1116(d)(4)(B)(v); §

V[b][i][A][6]);

□ Show with specific facts that the harm to the

applicant of denying the application outweighs

the harm to defendant’s legitimate interests,

where the applicant faces the damage of having

its mark copied without authorization and the

defendant lacks an interest in retaining illegal

and counterfeit goods (15 U.S.C. §

1116(d)(4)(B)(vi); § V[b][i][A][7]);

□ Show with specific facts that the defendant

would destroy, move, hide, or otherwise make

the counterfeit materials inaccessible if given

notice of the seizure (15 U.S.C. §

1116(d)(4)(B)(vii); § V[b][i][A][8]);

□ Ascertain whether the defendant

concealed or destroyed evidence in the

past;

□ Ascertain whether the defendant


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ignored a court order in the past;

□ Determine whether the defendant is an

itinerant vendor able to move its

merchandise and assets quickly.

□ Suggest an amount for the bond to be posted,

based on the value of the products to be seized

and explaining that the applicant would not

need to compensate the defendant for a loss of

counterfeit goods.

□ Include a request that the court permit the

following to accompany the U.S. Marshal to the

seizure:

□ one or more of applicant’s attorneys;

□ a representative from applicant:

□ representatives conducting electronic

discovery

□ an Ex Parte Motion for Temporary Restraining Order;

□ a Memorandum of Law supporting the Ex Parte

Motion for Temporary Restraining Order, containing


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all of the following elements (note that some of these

elements may duplicate those in the memorandum of

law supporting the Ex Parte Motion for Seizure):

□ Demonstrate with specific facts that the

applicant faces immediate and irreparable

injury;

□ Explain why the court should not give notice to

the defendant;

□ Describe the facts supporting the applicant’s

claim and why it is likely to succeed on the

merits;

□ Show that a balancing of hardships is in the

applicant’s favor;

□ Explain why granting the Temporary

Restraining Order is in the public interest.

□ declarations and appropriate exhibits from

□ the applicant’s attorney certifying that each

factor under 15 U.S.C. § 1116 has been met and

explaining in detail how each factor is met


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(Note, however, that having counsel file a

declaration could risk having counsel called as a

witness in the ex parte hearing. In the

alternative, explain the support for each factor

in the verified complaint);

□ a representative from the corporate applicant

describing the trademarks that were

counterfeited, explaining that they are

registered and in use, on which products they

are used, and their value to the applicant;

□ attach as exhibits certified copies of the

trademark registrations;

□ any witnesses who complained to the applicant

about the quality of the counterfeit goods

believing them to be genuine, to demonstrate

actual confusion;

□ the investigator, describing where he or she

purchased the counterfeit merchandise, where

he or she believes the material to be seized is


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located and why;

□ a proposed seizure order

□ Include proposed findings of fact and

conclusions of law (15 U.S.C. § 1116(d)(5)(A));

□ Include a specific description of what is to be

seized and each location where it is to be seized

(15 U.S.C. § 1116(d)(5)(B));

□ Include the time period during which the

seizure is to be executed (no later than seven

days after the issuance of the order) (15 U.S.C.

§ 1116(d)(5)(C));

□ Include the amount of security to be required

or leave blank for the court to fill in (15 U.S.C.

§ 1116(d)(5)(D));

□ Include a date for the post-seizure hearing

(between ten and fifteen days from the date of

issuance of the order) or leave blank for the

court to fill in (15 U.S.C. § 1116(d)(5)(E),

(d)(10); § V[b][i][F]);


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□ Name the individuals to accompany the U.S.

Marshal to the seizure

□ a proposed temporary restraining order enjoining

defendant from the creation, sale or distribution of

goods bearing applicant’s trademark;

□ Before filing, review local rules to ensure compliance.

□ Immediately after filing, call the clerk of the assigned judge and

find out about the judge’s availability to hear the motions.

□ Prepare a protective order to serve on defendants when they

retain counsel.

[H] – Appealing The Denial of Ex Parte Seizure Order

The circuits are split over whether the denial of a seizure order is

appealable immediately. The Third Circuit has held that the refusal to hear

such an appeal was an abuse of discretion.168 In contrast, the Ninth Circuit

holds that the denial of an ex parte seizure order is not immediately

appealable.169 The Ninth Circuit takes the position that an ex parte seizure

168 Vuitton v. White, 945 F.2d 569, 20 U.S.P.Q.2d 1133 (3d Cir. 1991) (treatise cited). See also Lorillard Tobacco Co. v. Bisan Food Corp., 377 F.3d 313, 318, 71 U.S.P.Q.2d 1953 (3d Cir. 2004) (following Vuitton). 169 In re Lorillard Tobacco Co., 370 F.3d 982, 983, 70 U.S.P.Q.2d 1865 (9th Cir.


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order is not an injunction and thus is not appealable under 28 U.S.C. §

1292(a)(1), which vests courts of appeals with jurisdiction over interlocutory

district court orders refusing to grant injunctions.170

The Third Circuit declares that the standard of review of a district

court’s denial of a seizure order is the same as that used to review an order

granting or denying a preliminary injunction: “We review a district court's

ruling . . . only to determine if there has been (1) an abuse of discretion, (2) an

error of law, or (3) a clear mistake of fact.”171

[I] – Wrongful Seizure

Ex parte seizure orders are an extraordinary remedy.172 A person who

2004) (finding that it lacks jurisdiction because “the district court's denial of a motion for an ex parte seizure order is neither an automatically appealable literal refusal of an injunction nor a practical denial of ultimate injunctive relief”). 170 The Ninth Circuit quoted from the House Report on the Trademark Counterfeiting Act of 1984 to support its conclusion: “A seizure is not the same as an injunction, which generally restrains the defendant from acting in a certain way.” H.R. Rep. No. 98-997, at 15 (1984), quoted in In re Lorillard Tobacco Co., 370 F.3d at 985. 171 Bisan Food Corp., 377 F.3d at 319. 172 E.g., Electronic Laboratory Supply Co. v. Cullen, 977 F.2d 798, 801, 24 U.S.P.Q.2d 1421 (3d Cir. 1992) (“In light of the extraordinary nature of this remedy [of ex parte seizure], the statute creates a cause of action for wrongful seizure.”); Compaq Computer Corp. v. Hardware 4 Less, Inc., 184 F. Supp. 2d 128, 130 (D.N.H. 2002) (“Ex parte seizure orders are extraordinary remedies . . . .”); 130 Cong. Rec., at H12082-83 (joint statement on 1984 counterfeiting legislation) (“[T]he sponsors recognize that ex parte seizure orders are an extraordinary remedy, and that a person who is subject to a wrongful ex parte seizure should be fully compensated by the party who obtained the seizure order.”) (emphasis in original), reprinted in LaLonde, 9


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is subject to a “wrongful” ex parte seizure should be made whole by the party

who obtained the seizure order. The result of the wrongful seizure action is

independent of the outcome of the plaintiff's civil suit against the defendant.173

The party challenging the seizure has the burden of demonstrating that it was

indeed wrongful.174 Where no goods were actually seized pursuant to a seizure

order, the defendant may not recover for wrongful seizure, even if it

surrendered items to the plaintiff.175

The statutory provision that governs wrongful seizure claims, 15

U.S.C. § 1116(d)(11), provides that a person who is damaged by a wrongful

seizure has a cause of action against the party that applied for the seizure

order. Relevant damages can include payment for lost profits, lost materials,

Trademark Protection and Practice, at p. 34-628. 173 H.R. Rep. No. 98-997, 98th Cong., 2d Sess. 26 (1984); Waco Int’l, Inc. v. KHK Scaffolding Houston, Inc., 278 F.3d 523, 530, 61 U.S.P.Q.2d 1460 (5th Cir. 2002) (“[T]hat KHK may be liable under the Lanham Act for its representations in connection with the sale of its goods does not necessarily mean that the seizure was warranted. The ex parte seizure remedy must be narrowly construed, and is not coextensive with liability for any Lanham Act claim.”) (emphases in original); Martin's Herend Imports v. Diamond & Gem Trading, 112 F.3d 1296, 1306 (5th Cir. 1997) (holding that importation of gray market goods was infringement but not counterfeiting and therefore the ex parte seizure applicant could be liable for wrongful seizure). 174 Id. at 774. 175 Major League Baseball Promotion Corp. v. Colour-Tex, Inc., 729 F. Supp. 1035, 1047-51, 14 U.S.P.Q.2d 1177 (D.N.J. 1990) (holding that where the seizure order was not executed, there can be no claim of wrongful seizure; “In order for a ‘wrongful seizure’ claim to hold, it follows that a ‘seizure’ must have occurred.”).


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fees and costs expended in pursuing the wrongful seizure claim, harm to good

will or reputation, attorneys’ fees and any other provable items.176

Attorneys for the seizure order applicant cannot be held liable under

Section 34(d)(11) for damages for wrongful seizure.177 Similarly, there is no

aiding and abetting liability for wrongful seizure.178 The statute specifically

grants a cause of action only “against the applicant” for a wrongful seizure.179

[1] – Guidelines on Wrongful Seizures

The term “wrongful seizure” is not defined in the Counterfeiting

Act,180 but the following are some guidelines concerning “wrongful seizures.”

[a] – Applicant Acted in Bad Faith in Seeking Seizure

Order

A seizure may be considered wrongful if the applicant acted in bad

176 Waco Int’l, 278 F.3d at 535 (rejecting argument that wrongful seizure victim must show lost profits or loss of good will). 177 Electronic Lab. Supply Co., 977 F.2d at 804 (holding that “it is clear from the text of the Lanham Act that section 1116(d)(11) does not provide a cause of action against a party’s attorneys”). But see Skierkewiecz v. Gonzalez, 711 F. Supp. 931, 934 (N.D. Ill. 1989) (finding no “conditional privilege” for attorneys who acted as applicants for ex parte seizure order). 178 Electronic Lab. Supply Co., 977 F.2d 798. 179 15 U.S.C. § 1116(d)(11). 180 Waco Int’l, 278 F.3d at 530 (“Congress intentionally left the definition of ‘wrongful seizure’ to ‘case-by-case interpretation.’”). This was done in the belief that the courts will best be able to interpret this phrase under the circumstances of each individual case, and in light of precedents under Rule 65 of the Federal Rules of Civil Procedure. S. Rep. No. 98-526, 98th Cong., 2d Sess. 16 (1984).


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faith in seeking it.181 The damaged party is entitled to punitive damages if the

seizure was sought in bad faith,182 such as where the applicant seeks a seizure

order in an effort to maintain retail prices at a certain level and to prevent

discounting. A presentation at the ex parte hearing to apply for the seizure

order including compelling reasons for suspecting the defendant of

counterfeiting may suffice to overcome a claim of bad faith.183

The Fifth Circuit has held that the standard for bad faith is whether the

party seeking the seizure did so knowing it was baseless.184 The court upheld

the district court holding that a plaintiff’s good faith belief that defendant is

making or selling counterfeit goods need not be accurate, nor need it have

“conclusive proof” of such trafficking.185

The applicant need not have acted in bad faith for the seizure

ultimately to be found wrongful, as in the guidelines described below.186

181 “The legislative history of the Lanham Act establishes that a seizure can be wrongful if brought ‘in bad faith.’” Martin's Herend Imports, 195 F.3d at 773, citing Senate Comm. on the Judiciary, S. Rep. No. 98-526, at 8 (1984). 182 15 U.S.C. § 1116(d)(11). 183 Martin's Herend Imports, 195 F.3d at 773. 184 Id. 185 Id. 186 Waco Int’l, 278 F.3d at 530-31 (“Congress indicated that a seizure may be wrongful: (1) where an applicant acted in ‘bad faith’ in seeking the order; or (2) if the goods seized are predominately legitimate merchandise, even if the plaintiff acted in good faith. . . . There is no support for the proposition that, in all cases, a wrongful


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[b] – The Matter Seized Was Not Counterfeit

A seizure may be considered wrongful when the matter seized was not

counterfeit.187 Where the goods seized are parallel imports or grey market

goods, for example, which are not counterfeit goods, the seizure should be

found wrongful.188 Where the goods are not counterfeit, whether or not the

plaintiff acted with a good faith belief that the matter was counterfeit is

irrelevant.189 Nevertheless, the incidental seizure of a few legitimate items does

not make the seizure wrongful.190 If it did, “a counterfeiter could ensure that

seizure claimant must show bad faith.”) (emphasis in original); Skierkewiecz, 711 F. Supp. at 934 (“Section 1116(d)(11) does not explicitly or implicitly require the plaintiff to show the applicant acted with malice in obtaining the order . . . .”). 187 Martin’s Herend Imports, 195 F.3d at 773 (“A seizure can be wrongful . . . if the items seized are predominantly legitimate.”); Bacardi & Co. Ltd. v. New York Lighter Co., 2000 U.S. Dist. LEXIS 19852 (E.D.N.Y. 2000) (“[W]e have determined already that the goods seized were not counterfeit within the meaning of Section 1116(d)(1)(B)(i). . . . As such, the execution of an ex parte order of seizure would be improper under Section 1116(d) and the aggrieved party would be entitled to assert a claim against the applicant by reason of the wrongful seizure.”); 130 Cong. Rec. H-12083 (joint statement on 1984 counterfeiting legislation) (stating that “a seizure must be considered ‘wrongful’ when the material to be seized is legitimate, non-infringing merchandise”), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. 34-629. 188 Martin's Herend Imports, 112 F.3d at 1306 (“Plaintiffs had no right to conduct an ex parte seizure of authentic . . . pieces from [defendant].”). See § IV[c][i], [ii] for these exclusions from counterfeiting liability. 189 Waco Int'l, 278 F.3d at 530, 531 (holding that if the goods seized are predominately legitimate, their seizure may be wrongful even if the plaintiff acted in good faith). 190 Senate Comm. on the Judiciary, S. Rep. No. 98-526, at 10 (1984) (“The mere fact that a few non-counterfeit items may have been seized does not make the seizure as a whole wrongful.”).


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any seizure of its counterfeit merchandise would be `wrongful' simply by

mingling a few genuine items with his or her inventory of fakes.”191

[c] – The Seizure Was Improperly Executed

A seizure may be considered “wrongful” to the extent that it is

executed improperly. For example, if the defendant’s property is unnecessarily

damaged or plaintiff takes possession of defendant’s confidential business

records when not expressly permitted to do so by the court, the seizure would

be wrongful. The Seventh Circuit refused to uphold a damage award for

wrongful seizure where a plaintiff took photographs during execution of a

seizure order, holding that everything in the photographs could have been

seized so it was unlikely that the defendant was damaged.192

[2] – Relief For Wrongful Seizure

The damaged party can recover “such relief as may be appropriate,

including damages for lost profits, cost of materials, loss of good will, and

punitive damages in instances where the seizure was sought in bad faith, and,

unless the court finds extenuating circumstances, . . . a reasonable attorney's

191 130 Cong. Rec. H. 12083 (joint statement on 1984 trademark counterfeiting legislation), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. 34-629. 192 General Electric Co. v. Speicher, 877 F.2d 531, 537-38, 11 U.S.P.Q.2d 1125 (7th Cir. 1989).


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fee.”193 The court also has discretion under this subsection to grant

prejudgment interest on such relief.194 Dismissal of the complaint is not

appropriate relief for a wrongful seizure.195

[3] – Seizure and the Fourth Amendment

Court-ordered seizures of counterfeit goods are not exempt from

scrutiny under the Fourth Amendment, and if the Fourth Amendment is

violated, the evidence seized pursuant to that violation may be suppressed.196

Where the plaintiff meets all of the statutory requirements for issuance of the

seizure order, the order does not violate the defendant’s Fourth Amendment

193 15 U.S.C. § 1116(d)(11). See Waco Int’l, 278 F.3d at 535-36 (upholding district court’s finding that there were no extenuating circumstances and allowance of attorneys’ fees, even where defendant allegedly altered business records and had not been awarded damages for lost profits or lost good will). 194 The interest rate is the federal short-term interest rate plus three percentage points. 15 U.S.C. § 1116(d)(11); 26 U.S.C. § 6621(a)(2). The required interest payments would start on the date of service of the claimant's pleading setting forth the claim of wrongful seizure “and ending on the date such recovery is granted, or for such shorter time as the court deems appropriate.” 15 U.S.C. § 1116(d)(11). See § V[b][v][C]. 195 Tommy Hilfiger Licensing, Inc. v. Tee’s Ave., Inc., 924 F. Supp. 17, 19 (S.D.N.Y. 1996). 196 Gucci America Inc. v. Accents, 955 F. Supp. 279, 281, 42 U.S.P.Q.2d 1083 (S.D.N.Y. 1997); Time Warner Entertainment Co. v. Does, 876 F. Supp. 407, 412, 34 U.S.P.Q.2d 1395 (E.D.N.Y. 1994).

The Fourth Amendment reads: “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.” U.S. Const., amend. IV.


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rights,197 unless it does not describe the place to be searched or the items to be

seized with sufficient particularity.198

[ii] – Temporary Restraining Orders and Rule 65

Practice Tip

An applicant for an ex parte seizure order should simultaneously apply

for a temporary restraining order enjoining the defendant from selling or

producing counterfeit goods.199 If both motions are granted, once the goods

are seized, the defendants will be unable to sell any remaining counterfeit

products without violating the TRO and being in contempt of court.

In order to obtain a seizure order under Section 1116(d), the plaintiff

197 Gucci America Inc., 955 F. Supp. at 281 (seizure of goods did not violate defendants' Fourth Amendment rights where all of the statutory requirements were filled); Reebok Int’l, Ltd. v. Su Youn Pak, 683 F. Supp. 929, 930 (S.D.N.Y. 1987) (finding that ex parte seizure order did not violate the Fourth Amendment where plaintiff’s application showed that defendant was a dealer in counterfeit merchandise). See also Time Warner Entertainment Co., 876 F. Supp. at 412 (finding seizure order unconstitutional in part because it failed to require the seizure to be effected by a U.S. Marshal, as required by the statute). 198 See id. at 412-13 (finding seizure order unconstitutional in part because plaintiffs did not describe the premises to be searched or the items to be seized with sufficient particularity). 199 See LaLonde, 3 Trademark Protection and Practice, § 14.02[2] for more on temporary restraining orders.


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must show that a temporary restraining order would be ineffective.200 Despite

that requirement, a plaintiff in a counterfeiting case can move for an ex parte

temporary restraining order at the same time that it moves for an ex parte

seizure order.201 Applying ex parte for a TRO as well as a seizure order does

not undermine the argument that a TRO would be ineffective alone to protect

the plaintiff’s rights.

Under Federal Rule of Civil Procedure 65, a court may order a TRO

without notice to the defendant only if “it clearly appears from specific facts

shown by affidavit or the verified complaint” that the plaintiff will suffer

irreparable harm before the opposing party can be heard and if the plaintiff’s

attorney certifies to the court the reasons why it should not require notice to

the opposing party.202 A court may grant an ex parte TRO but refuse to grant

200 Vuitton v. White, 945 F.2d 569, 575, 20 U.S.P.Q.2d 1133 (3d Cir. 1991) (“§ 1116(d) requires both a finding that notice will thwart effective relief and a finding that a TRO would be ineffective.”). 201 E.g., Nike, Inc. v. Brandmania.com, Inc., 2002 U.S. Dist. LEXIS 12252 (E.D. Pa. 2002) (noting that the court had granted plaintiff’s motion for both an ex parte TRO and ex parte seizure order); Bacardi & Co. v. New York Lighter Co., 2000 U.S. Dist. LEXIS 19852 (E.D.N.Y. 2000) (noting prior court order for ex parte TRO and seizure); Sony Computer Entertainment Am., Inc. v. Gamemasters, 87 F. Supp. 2d 976, 54 U.S.P.Q.2d 1401 (N.D. Cal. 1999) (same); Farm Aid, Inc. v. Various John Does, 1997 U.S. Dist. LEXIS 15716 (N.D. Ill 1997) (ex parte TRO and seizure order). 202 Fed. R. Civ. Pro. 65(b).


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an ex parte seizure;203 the ex parte seizure provisions in the Lanham Act

contain more stringent requirements than those in Rule 65.

If a court denies the plaintiff’s motions for an ex parte TRO and

seizure order, then the applicant may move for a temporary restraining order

with notice to the defendant.204 Under the Lanham Act, a federal court may

grant an injunction “according to the principles of equity and upon such terms

as the court may deem reasonable” in order to prevent the violation of any

right of a trademark registrant,205 including a counterfeiting violation. In one

case, the Third Circuit found that the district court had properly denied a

motion for an ex parte seizure because the defendants could be expected to

comply with a federal court order and thus an ex parte seizure was

unnecessary.206 The court, however, upheld the granting of a TRO, with

203 See Lorillard Tobacco Co. v. Bisan Food Corp., 377 F.3d 313, 71 U.S.P.Q.2d 1953 (3d Cir. 2004) (affirming district court decision to deny ex parte seizure orders but grant broad ex parte TROs for two of the defendants); Lorillard Tobacco Co. v. Omar, LLC, 2003 U.S. Dist. LEXIS 16681 (D. Conn. 2003) (granting plaintiff’s motions for an ex parte TRO, order to show cause, and expedited discovery, but denying its motion for an ex parte seizure order). 204 In re Lorillard Tobacco Co., 370 F.3d 982, 988, 70 U.S.P.Q.2d 1865 (9th Cir. 2004) (“[I]n the face of a denial of an ex parte seizure order, the applicant may still proceed with a temporary restraining order with notice and/or a request for preliminary injunction.”). 205 15 U.S.C. § 1116(a). 206 Bisan Food Corp., 377 F.3d at 315-16. See id. at 316 n.2 for some of the language of the TRO.


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notice to the defendant, directing the defendant to stop dealing in counterfeits

of plaintiff’s product and to preserve the counterfeit goods and all packaging

and business records relating to goods bearing plaintiff’s trademark.

One district court has held that plaintiffs may not obtain a seizure

order under Federal Rule of Civil Procedure 65 for infringing articles that bear

federally-registered trademarks; for such goods, the plaintiff must seek an order

under the seizure provisions of 15 U.S.C. § 1116.207 In that case, plaintiffs had

earlier moved for and were granted an ex parte temporary restraining order

and a seizure order pursuant to Rule 65 based on infringement of plaintiff’s

marks, some federally-registered and some not. After the seizure, defendant

claimed that the seizure violated 15 U.S.C. § 1116. Plaintiffs responded that

they did not have to comply with § 1116 because the seizure order was

properly issued under Rule 65. The court ruled that § 1116 is not simply an

alternative to Rule 65 and found that “Congress in enacting § 1116 was clearly

concerned with providing protection for defendants in addition to that

available under Rule 65.” It held that a court may not hand down one single

order under Rule 65 where both federally-registered and non-federally-

207 Major League Baseball Promotion Corp. v. Crump, 1988 U.S. Dist. LEXIS 14692 (D. Minn. 1988). See also Major League Baseball Promotion Corp. v. Crump, 11 U.S.P.Q.2d 1381 (D. Minn. 1989) (denying plaintiffs’ motion for reconsideration).


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registered marks were at issue because such an order would allow plaintiffs to

circumvent the strict requirements of § 1116.

If the defendant fails to comply with the restraining order, it may be

held in contempt of court. Note that plaintiff's counsel may not be appointed

to prosecute contempt actions for violation of the order obtained by his or her

client. The Supreme Court has held that a disinterested prosecutor is required

because a private prosecutor is subject to the influence of his or her client

rather than the influence of public duty.208 The appointment of an interested

prosecutor is also reversible error because it undermines confidence in the

integrity of the criminal proceeding and creates an appearance of impropriety

that lessens faith in the fairness of the criminal justice system.

[iii] – Expedited Discovery

The Lanham Act’s civil counterfeiting provisions permit a court to

modify the typical time limits for discovery in connection with the post-seizure

hearing.209 The court may issue an order for expedited discovery “as may be

208 Young v. United States ex rel. Vuitton et Fils S.A., 481 U.S. 787 (1987). In one of the first criminal cases to be tried under the 1984 Counterfeiting Act, United States v. Karen Bags, Inc., 226 U.S.P.Q. 136 (S.D.N.Y. 1985), the court upheld the appointment of Louis Vuitton's attorney as a special prosecutor acting on behalf of the United States. That case is no longer good law after Young. 209 15 U.S.C. § 1116(10)(B). See § V[b][i][F].


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necessary to prevent the frustration of the purposes of such hearing.”210 In a

counterfeiting case decided before the 1984 Counterfeiting Act, a district court

opined: “Expedited discovery should be granted when some unusual

circumstances or conditions exist that would likely prejudice the party if he

were required to wait the normal time.”211

Courts have granted requests for expedited discovery in counterfeiting

cases,212 most of which are not published. One court authorized plaintiff to

take defendant’s deposition on 48 hours notice or to request production of

documents or other materials within 48 hours of service of a subpoena.213

Another court ordered expedited discovery as to, among other issues, “all the

facts and circumstances surrounding Defendants' manufacture, purchase, sale,

offering for sale, financing, advertising, promotion and distribution of goods

210 15 U.S.C. § 1116(10)(B). 211 Fimab-Finanziaria Maglificio Biellese Fratelli Fila S.p.A. v. Helio Import/Export, Inc., 601 F. Supp. 1, 3, 223 U.S.P.Q. 795 (S.D. Fla. 1982). See also Notaro v. Koch, 95 F.R.D. 403 (S.D.N.Y. 1982) (giving four-pronged test for whether to grant expedited discovery). 212 E.g., Lorillard Tobacco Co. v. Omar, LLC, 2003 U.S. Dist. LEXIS 16681 (D. Conn. 2003) (granting plaintiff’s motion for expedited discovery); Sports Design & Development, Inc. v. Schoneboom, 871 F. Supp. 1158, 1167 (N.D. Iowa 1995) (granting request for expedited discovery where plaintiff will need it in order to properly prepare for the preliminary injunction hearing). But see Seiko Kabushi Kaisha v. Swiss Watch Int’l, Inc., 188 F. Supp. 2d 1350 (S.D. Fla. 2002) (denying plaintiff’s motion for expedited discovery as well as its motion for preliminary injunction; citing plaintiff’s delay in filing the action). 213 Sports Design, 871 F. Supp. at 1167.


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bearing [plaintiff’s] trademarks.”214 In addition, that order required defendant

to provide sworn statements to plaintiff’s counsel by noon on the fourth day

after entry of the order “as to any inventory of [plaintiff] goods in their

possession, custody or control, or as to any transactions in [plaintiff] goods

currently in process or which are not completed” as well as copies of any

transactional documents or correspondence relating to transactions of goods

with plaintiff’s marks. The order also required defendants’ principals to appear

for depositions beginning ten days after the entry of the order.

Ex parte seizures are not a substitute for discovery. When one plaintiff

sought to retain documents that had been seized from the defendant because

expedited discovery was necessary, the court refused, finding insufficient

evidence to allow expedited discovery.215 The court also quoted legislative

history from the Counterfeiting Act of 1984 to the effect that “the purpose of

the ex parte seizure is to protect materials from destruction or concealment; it

is not to permit the plaintiff to bypass the normal discovery process.”216

[iv] – Attorneys’ Fees

214 Nike, Inc. v. Top Brand Co., 216 F.R.D. 259, 261-62 (S.D.N.Y. 2003). 215 Microsoft Corp. v. Unity Group Unltd., 51 U.S.P.Q.2d 1603 (C.D. Cal. 1999). 216 Id., quoting 130 Cong. Rec. H12076 at 12082 (joint statement on 1984 counterfeiting legislation), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. 32-627 infra.


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Section 35(b) provides for a mandatory award of reasonable attorney's

fees (“unless the court finds extenuating circumstances”) in the case of any

violation of Section 32(1)(a) of the Lanham Act or 36 U.S.C. § 220506

(pertaining to Olympic names and symbols) where the violation “consists of

intentionally using a mark or designation, knowing such mark or designation is

a counterfeit mark . . . in connection with the sale, offering for sale, or

distribution of goods or services.”217 Where the court finds that the

defendant’s actions constitute civil counterfeiting,218 it must then award

attorneys’ fees unless there are extenuating circumstances.219 The “extenuating

217 15 U.S.C. § 1117(b). See LaLonde, 3 Trademark Protection and Practice, § 14.03[9] for more on attorneys’ fees generally. 218 E.g., Chanel, Inc. v. Italian Activewear of Florida, Inc., 931 F.2d 1472, 1476, 19 U.S.P.Q.2d 1068 (11th Cir. 1991) (“[W]here, as here, a registrant seeks the mandatory treble damages and attorneys' fees provided for in § 1117(b), the plaintiff must prove the defendants' intent to infringe.”). 219 Rolex Watch USA, Inc. v. Meece, 158 F.3d 816, 824, 48 U.S.P.Q.2d 1589 (5th Cir. 1998) (“[U]nder [15 U.S.C. § 1117(a)], for willful or deliberate infringement, the district court may award profits ‘subject to the principles of equity’; and, in ‘exceptional cases’, it may award attorney's fees. But, for counterfeiting cases, under [15 U.S.C. § 1117(b)], the court ‘shall’ award treble profits and attorney's fees, ‘unless the court finds extenuating circumstances.’”); U.S. Structures, Inc. v. J.P. Structures, Inc., 130 F.3d 1185, 1192, 45 U.S.P.Q.2d 1027 (6th Cir. 1997) (“Where a counterfeit mark is used, an award of reasonable attorneys' fees is mandated, unless the court finds extenuating circumstances.”); Babbit Electronics, Inc. v. Dynascan Corp., 38 F.3d 1161, 1183, 33 U.S.P.Q.2d 1001 (11th Cir. 1994) (“If the infringement is intentional, . . . and the use of a counterfeit trademark has been proven, then § 1117(b) governs, and the Court is required to treble damages and award attorney's fees unless the Court finds extenuating circumstances.”); Hard Rock Cafe Licensing Corp. v. Concession Services, Inc., 955 F.2d 1143, 1151, 21 U.S.P.Q.2d 1764 (7th Cir.


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circumstances” exception is quite narrowly construed.220 A prevailing plaintiff

may also recover, as part of an attorneys’ fee award, reasonable investigator's

fees, as long as the investigator acted under the direction of an attorney.221

Note that an election of statutory damages, which are available under

the statute “instead of actual damages,” does not carry the presumption of an

1992) (“[I]f the violation ‘consists of intentionally using a mark or designation, knowing such mark or designation is a counterfeit mark,’ treble damages and attorney's fees must be awarded unless there are ‘extenuating circumstances.’”). Cf. Rolex Watch, U.S.A., Inc. v. Michel Co., 179 F.3d 704, 711, 50 U.S.P.Q.2d 1939 (9th Cir. 1999) (“Where . . . the district court finds trademark counterfeiting in violation of section 1114(1)(a), the district court must, when requested, address whether the prevailing party is entitled to the remedies provided by section 1117(b) for those violations.”). 220 See § V[b][v][A] for more on this exception. 221 Silhouette Int’l Schmied AG v. Chakhbazian, 2004 U.S. Dist. LEXIS 19787 (S.D.N.Y. 2004) (awarding investigator’s fees in counterfeiting case); Fila U.S.A., Inc. v. Run Run Trading Corp., 1996 U.S. Dist. LEXIS 6893 (S.D.N.Y. 1996) (awarding reasonably-incurred attorneys’ fees and investigators’ fees under 15 U.S.C. § 1117(b)); Gucci Am., Inc. v. Dart, Inc., 12 U.S.P.Q.2d 1912 (S.D.N.Y. 1989) (awarding attorneys’ fees and investigators’ fees in counterfeiting case); Louis Vuitton S.A. v. Downtown Luggage Center, 706 F. Supp. 839, 842, 10 U.S.P.Q.2d 1619 (S.D. Fla. 1988) (awarding trademark owner reasonable attorneys’ fees and investigatory fees under 15 U.S.C. § 1117(b)); Louis Vuitton S.A. v. After Dark Boutique, 680 F. Supp. 1507, 1512, 6 U.S.P.Q.2d 1641 (N.D. Fla. 1988) (awarding plaintiff reasonable attorneys’ fees and investigatory fees under 15 U.S.C. § 1117(b)); Ford Motor Co. v. Kuan Tong Industrial Co., 697 F. Supp. 1108, 7 U.S.P.Q.2d 1409 (N.D. Cal. 1987) (finding attorneys’ fees award under 15 U.S.C. § 1117(b) includes investigator’s fees) (treatise cited). See also 130 Cong. Rec. H12083 (joint statement on 1984 counterfeiting legislation) (“To the extent that an investigator acts under the direction of an attorney, . . . his or her fees may be recovered by a prevailing plaintiff as part of an award of attorney’s fees.”), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. 34-360.


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attorneys' fee award.222 However, most courts agree that attorneys’ fees may

be awarded in addition to statutory damages.223 Fees may be awarded on other

grounds if the case is “exceptional.”224

[v] – Damages

Where the defendant violates the rights of an owner of a federal 222 15 U.S.C. § 1117(c); Gucci Am., Inc. v. Duty Free Apparel, Ltd., 315 F. Supp. 2d 511, 522 (S.D.N.Y. 2004) (holding that presumption of attorney’s fees does not apply upon election of statutory damages and declining to award attorneys' fees because its $2 million statutory damages award “more than sufficiently advances the goals of deterrence and compensation”); Nike, Inc. v. Variety Wholesalers, Inc., 274 F. Supp. 2d 1352, 1374 (S.D. Ga. 2003) (“The option of statutory damages serves as an alternative to traditional awards based on actual losses under subsections 1117(a) and (b).”). See § V[b][v][B]. 223 Silhouette Int’l, 2004 U.S. Dist. LEXIS 19787 (noting that “most decisions have awarded attorneys' fees even where the damage award is pursuant to § 1117(c)”); Tiffany (NJ), Inc. v. Luban, 292 F. Supp. 2d 123, 125 (S.D.N.Y. 2003) (after granting statutory damages, noting that under § 1117(b), plaintiff is entitled to attorneys’ fees); Rolex Watch U.S.A., Inc. v. Jones, 2002 U.S. Dist. LEXIS 6657 (S.D.N.Y. 2002) (awarding attorneys’ fees under § 1117(b) where plaintiff also elected statutory damages); Sara Lee Corp. v. Bags of New York, Inc., 36 F. Supp. 2d 161 (S.D.N.Y. 1999) (awarding attorneys’ fees under both § 1117(a) (“exceptional cases”) and § 1117(b) (willful counterfeiting violations) as well as statutory damages). But see Rolex Watch U.S.A., Inc. v. Brown, 2002 U.S. Dist. LEXIS 10054 (S.D.N.Y. 2002) (questioning whether a plaintiff may receive attorneys’ fees where it has elected to receive statutory damages under § 1117(c)). 224 E.g., Philip Morris USA, Inc. v. Escandon, 2005 U.S. Dist. LEXIS 26766 (E.D. Cal. 2005) (awarding attorneys’ fees because defendant was in default in counterfeiting case where plaintiff received statutory damages); Silhouette Int’l, 2004 U.S. Dist. LEXIS 19787 (awarding attorneys’ fees for false advertising under the “exceptional case” provision where defendant also violated the counterfeiting laws and plaintiff elected statutory damages); Rolex Watch U.S.A., Inc. v. Brown, 2002 U.S. Dist. LEXIS 10054 (awarding attorneys’ fees because defendant was in default in counterfeiting case where plaintiff received statutory damages). For more on awarding attorneys’ fees in “exceptional” cases, see LaLonde, 3 Trademark Protection and Practice, § 14.03[9][a].


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trademark registration, as proved in a successful counterfeiting action, the

plaintiff can obtain any damages it sustained, defendant’s profits, and the costs

of the action.225

[A] – Mandatory Treble Damages or Profits

United States civil counterfeiting provisions give a virtually mandatory

award of treble damages or profits, whichever is greater.226 The court first

must assess defendant’s profits or plaintiff’s damages. Plaintiff must prove

defendant’s sales and defendant must prove all costs or deductions it claims

from those sales.227 In a non-counterfeiting case, the court “may” award up to

three times actual damages or a number other than the actual profits found.228

In a counterfeiting case, however, the court “shall” enter judgment for three

225 15 U.S.C. § 1117(a). 226 “In assessing damages under subsection (a) of this section, the court shall, unless the court finds extenuating circumstances, enter judgment for three times such profits or damages, whichever is greater, together with a reasonable attorney's fee, in the case of any violation of section 32(1)(a) of this Act [15 U.S.C. § 1114(1)(a)] or section 220506 of title 36, United States Code that consists of intentionally using a mark or designation, knowing such mark or designation is a counterfeit mark (as defined in section 34(d) [15 U.S.C. § 1116(d)] of this Act), in connection with the sale, offering for sale, or distribution of goods or services.” 15 U.S.C. § 1117(b). 227 15 U.S.C. § 1117(a). See Rolex Watch, U.S.A., Inc. v. Michel Co., 179 F.3d at 711-12 (upholding district court’s denial of profits award in counterfeiting case where plaintiff had not met its burden of showing “with reasonable certainty” defendant’s gross sales from counterfeit goods). 228 15 U.S.C. § 1117(a). See LaLonde, 3 Trademark Protection and Practice, § 14.03[3][c] for more on enhancement of non-counterfeiting damages.


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times the amount of profits or damages, whichever is greater, unless there are

“extenuating circumstances.”229

The “extenuating circumstances” exception is a narrow one.230 The

Seventh Circuit quoted the legislative history, noting that the exception is

“intended for extreme cases – cases in which ‘the imposition of treble damages

would mean that [the defendant] would be unable to support his or her

family.’”231 In that same opinion, however, Judge Posner wrote in favor of

229 15 U.S.C. § 1117(b). 230 Levi Strauss & Co. v. Shilon, 121 F.3d 1309, 1314, 43 U.S.P.Q.2d 1616 (9th Cir. 1997) (“The phrase ‘extenuating circumstances’ is not defined in the Lanham Act. However, the exception is extremely narrow.”); Louis Vuitton S.A. v. Lee, 875 F.2d 584, 588, 10 U.S.P.Q.2d 1935 (7th Cir. 1989) (“Section 1117(b) is a severe statute. The trebling of the plaintiff's damages or the defendant's profits -- whichever is greater -- is mandatory (as is the award of the plaintiff's attorney's fees), subject only to the statute's exception for “extenuating circumstances,” which as we shall see is extremely narrow.”). See 130 Cong. Reg. at H12083 (joint statement on 1984 counterfeiting legislation) (“The Senate sponsors have agreed to the House language concerning ‘extenuating circumstances,’ on the understanding that it will be a rare case in which a defendant who had trafficked in goods or services using a mark that he or she knows to be counterfeit can show that he or she should not be assessed treble damages.”), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. 34-629. 231 Louis Vuitton S.A. v. Lee, 875 F.2d at 590, quoting 130 Cong. Reg. at H12083 (joint statement on 1984 counterfeiting legislation), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. 34-630.

See also H.R. Rep. No. 98-997, 98th Cong., 2d Sess. 26 (1984) (“What constitutes extenuating circumstances will depend on the particular case. For instance, it may not be appropriate to impose treble damages where the defendant is an unsophisticated individual operating on a small scale, whose conduct posed no risk to the public's health or safety, and the imposition of treble damages would destroy the defendant financially, thus impairing any ability to support his or her family.”),


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monetary relief for the infringed party, overturning a district court opinion

refusing to compensate a successful plaintiff where the defendant was a small

business: “‘Equity’ is not a roving commission to redistribute wealth from

large companies to small ones. The Lanham Act was not written by Robin

Hood.”232

The “extenuating circumstances” exception has led courts in rare

instances to find that an award under 15 U.S.C. § 1117(b) is not automatic and

may be “limited by equitable considerations.”233 This exception is an

reprinted in LaLonde, 9 Trademark Protection and Practice, at p. IV-369; Tommy Hilfiger Licensing, Inc. v. Goody’s Family Clothing, Inc., 2003 U.S. Dist. LEXIS 8788 (N.D. Ga. 2003) (finding that defendant is “hardly a small scale operation or an unsophisticated individual” and because its “business produces annual gross sales of approximately 1.2 billion dollars, an award of treble damages will not prevent any family from being supported”; holding that plaintiff’s delay in filing suit does not constitute extenuating circumstances); Microsoft Corp. v. CMOS Technologies, Inc., 872 F. Supp. 1329, 1340-41 (D.N.J. 1994) (“The fact that defendants are smaller retailers does not create an ‘extenuating circumstance’ that mitigates against the award of treble profits.”). 232 Louis Vuitton S.A. v. Lee, 875 F.2d at 589. 233 Lindy Pen Co. v. Bic Pen Corp., 982 F.2d 1400, 1409, 25 U.S.P.Q.2d 1570 (9th Cir. 1993) (finding extenuating circumstances where the defendant was unaware of plaintiff’s registered mark and that defendant’s in-house counsel was not aware of its outside counsel’s correspondence with plaintiff); Liz Claiborne, Inc. v. Mademoiselle Knitwear, Inc., 13 F. Supp. 2d 430, 447 (S.D.N.Y. 1998) (finding extenuating circumstances where there was “some doubt” that trebling the damages would be in the interests of justice and where the parties had a “complicated business relationship”); Gucci Am., Inc. v. Rebecca Gold Enterprises, 802 F. Supp. 1048, 27 U.S.P.Q.2d 1857 (S.D.N.Y. 1992) (limited nature of infringement was extenuating circumstance). See also Levi Strauss & Co., 121 F.3d at 1314 (finding that the district court


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affirmative defense and is waived if not presented to the district court.234

There is a two-part mental state requirement for the imposition of

treble damages under the Act: The plaintiff must show that the defendant

acted “intentionally” in dealing in the goods or materials at issue, “knowing”

that the items were counterfeit.235 The statute states that the violation must

consist of “intentionally using a mark or designation, knowing such mark or

designation is a counterfeit mark (as defined in section 34(d) [15 U.S.C. §

1116(d)] of this Act), in connection with the sale, offering for sale, or

distribution of goods or services.”236 Willful blindness to the counterfeit

did not abuse its discretion in finding no extenuating circumstances where the defendant claimed to have been “entrapped”). 234 Louis Vuitton S.A. v. Lee, 875 F.2d at 590. 235 See § VI[a][ii] for more on the mental states of intention and knowledge in the criminal counterfeiting context. 236 15 U.S.C. § 1117(b); Chanel, Inc. v. Italian Activewear of Florida, Inc., 931 F.2d 1472, 1476, 19 U.S.P.Q.2d 1068 (11th Cir. 1991) (holding that “where . . . a registrant seeks the mandatory treble damages and attorneys’ fees provided for in § 1117(b), the plaintiff must prove the defendants’ intent to infringe”).

Numerous courts have found the requisite intent and granted treble damages or treble profits in counterfeiting cases. See, e.g., Larsen v. Terk Techs. Corp., 151 F.3d 140, 47 U.S.P.Q.2d 1429 (4th Cir. 1998) (awarding treble damages in counterfeiting case where defendant “treacherously” committed intentional, knowing, fraudulent passing off and continued to fill orders with counterfeit goods for at least six months after suit was filed); Babbit Electronics, Inc. v. Dynascan Corp., 38 F.3d 1161, 1183, 33 U.S.P.Q.2d 1001 (11th Cir. 1994) (finding intentional infringement and use of a counterfeit mark and requiring award of treble damages); Symantec Corp. v. CD Micro, Inc., 286 F. Supp. 2d 1278 (D. Ore. 2003) (holding that a reasonable jury would have to conclude that the sophisticated defendant “intentionally sold software bearing counterfeit trademarks” and awarding treble damages); H D Michigan Inc. v.


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nature of the mark or activity meets the knowledge requirement.237

There are two purposes underlying an award of treble damages in a

counterfeiting case. The first is to provide an economic deterrent “to those

who contemplate the otherwise lucrative profession of trademark piracy.”238

As the Ninth Circuit declared just before the first counterfeiting law was Biker's Dream Inc., 48 U.S.P.Q.2d 1108 (C.D. Cal. 1998) (defendant committed intentional infringement even where it did not know its actions fell under legal term “counterfeiting”; treble damages awarded); Interstate Battery Sys. of Am., Inc., v. Wright, 811 F. Supp. 237, 26 U.S.P.Q.2d 1699 (N.D. Tex. 1993) (treble damages awarded where defendant had misbranded batteries to make them counterfeit). 237 Hard Rock Cafe Licensing Corp. v. Concession Servs., Inc., 955 F.2d 1143, 1151, 21 U.S.P.Q.2d 1764 (7th Cir. 1992) (“Willful blindness is sufficient to trigger the mandatory provisions of subsection [1117]b.”); Chanel, 931 F.2d at 1476 (finding that “willful blindness could provide the requisite intent or bad faith”); Louis Vuitton S.A. v. Lee, 875 F.2d at 590 (“Willful blindness is knowledge enough.”); Microsoft Corp. v. CMOS Technologies, Inc., 872 F. Supp. 1329 (treble profits awarded in case of willful blindness); Tanning Research Lab., Inc. v. Worldwide Import & Export Corp., 803 F. Supp. 606, 610, 25 U.S.P.Q.2d 1310 (E.D.N.Y. 1992) (following Louis Vuitton S.A. v. Lee and finding willful blindness). See also Nike Inc. v. Variety Wholesalers, Inc., 274 F. Supp. 2d 1352, 1371 (S.D. Ga. 2003) (evidence of plaintiff's steps to ensure that Nike's products were genuine suggested negligence and not willful blindness, so damages were not trebled; plaintiff given attorneys' fees plus the option of $1.3 million in profits or $900,000 in statutory damages). 238 Polo Fashions, Inc. v. Gentlemen’s Corner Wholesale, Inc., 221 U.S.P.Q. 147 (D.S.C. 1983). See also Louis Vuitton S.A. v. Lee, 875 F.2d at 588 (“To stop counterfeiting, a trademark owner must be able to invoke section 1117(b) . . . . Treble damages are a particularly suitable remedy in cases where surreptitious violations are possible, for in such cases simple damages (or profits) will underdeter; the violator will know that he won't be caught every time, and merely confiscating his profits in the cases in which he is caught will leave him with a net profit from infringement.”); Tommy Hilfiger Licensing, Inc. v. Goody’s Family Clothing, Inc., 2003 U.S. Dist. LEXIS 8788 (N.D. Ga. 2003) (“Only by trebling [defendant’s] profits can the court satisfy the purpose of the 1984 amendments of the Lanham Act: to remove all economic incentive from the sale of counterfeit goods.”).


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passed, “an award of little more than nominal damages would encourage a

counterfeiter to merely switch from one infringing scheme to another as soon

as the infringed owner became aware of the fabrication. Such a method of

enforcement would fail to serve as a convincing deterrent to the profit

maximizing entrepreneur who engages in trademark piracy.”239

The second is to encourage private enforcement against counterfeiting.

Prior to the signing of the Trademark Counterfeiting Act of 1984, treble

damages were rarely awarded in counterfeiting cases (which were brought as

trademark infringement actions).240 The Trademark Counterfeiting Act

amended Section 35 of the Lanham Act to mandate an award of treble damages

or treble the defendant's profits (whichever is greater) if the defendant

intentionally trafficked in goods or services knowing them to be counterfeit.241

239 Playboy Enterprises, Inc. v. Baccarat Clothing Co., 692 F.2d 1272, 1274, 216 U.S.P.Q. 1083 (9th Cir. 1982). 240 15 U.S.C. § 1117. Polo Fashions, 221 U.S.P.Q. 147 (quoting Deering, Milliken & Co. v. Gilbert, 269 F.2d 191, 122 U.S.P.Q. 355 (2d Cir. 1959)). Old Section 1117 also provided for recovery of reasonable attorney's fees in “exceptional” cases involving trademark infringement. The likelihood of receiving attorney's fees, though, was approximately the same as having damages trebled. 241 “For purposes of clarity, the Act creates a new Subsection 1117(b) relating exclusively to recovery in counterfeiting cases. The provisions of Subsection (a) remain applicable in counterfeiting cases except insofar as they are inconsistent with Subsection (b). Thus, the sentence of Section 1117 that reads `Such sum . . . shall constitute compensation and not a penalty' is inapplicable in counterfeiting cases, because one of the purposes of the treble damage awards for intentional dealing in


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In addition, federal prosecutors lack the resources to bring criminal charges

against more than a fraction of trademark counterfeiters. Congress's goal is

thus to have private businesses, victimized by counterfeiting, assume the role

of private attorneys general and act to “vindicate both their own rights and the

public interest in accurate trademark information.”242 In pursuit of this goal

and in recognition of the difficulty a plaintiff has in proving more than a

fraction of his or her actual losses, Congress sought to make plaintiffs whole

by providing for a mandatory award of treble damages (or profits).

[B] – Election of Statutory Damages

Under a 1996 amendment to the civil counterfeiting law, a plaintiff that

successfully pursues a counterfeiting case may elect, instead of actual damages or

profits under 15 U.S.C. § 1117(a), an award of not less than $500 or more than

$100,000 per counterfeit mark per type of goods sold, offered for sale, or

distributed.243 In cases of willful counterfeiting, a court may award up to $1

million per counterfeit mark per type of goods sold, offered for sale, or

known counterfeits is to provide an adequate penalty for such conduct.” 130 Cong. Rec. H. 12083 (joint statement on 1984 trademark counterfeiting legislation), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. 34-630. 242 S. Rep. No. 98-526, 98th Cong., 2d Sess. 6 (1984). 243 15 U.S.C. § 1117(c)(1), added by the Anticounterfeiting Consumer Protection Act of 1995, Pub. L. No. 104-153. For more on statutory damages, see LaLonde, 3 Trademark Protection and Practice, § 14.03[5].


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distributed.244 A willful violation may be established where the defendant

knew its conduct was infringing or recklessly disregarded the trademark

owner’s rights,245 or by defendant’s default.246 Because the statute provides a

separate range of damages for willful counterfeiting and for “innocent”

counterfeiting, it is clear that a plaintiff may elect statutory damages even

where the counterfeiting was not willful or intentional.247

Statutory damages are especially suitable where damages are uncertain

244 15 U.S.C. § 1117(c)(2). 245 E.g., Tony Jones Apparel, Inc. v. Indigo USA LLC, 2005 U.S. Dist. LEXIS 14649 (N.D. Ill. 2005) (finding willfulness where defendants’ knew the goods they sold bore plaintiff’s marks, did not consult counsel to determine if they could use those marks, and failed to respond to plaintiff’s requests to cease and desist); Petmed Express, Inc. v. Medpets.com, 336 F. Supp. 2d 1213, 1220 (S.D. Fla. 2004) (“This Court has defined willful infringement ‘as when the infringer acted with actual knowledge or reckless disregard for whether its conduct infringed upon the plaintiff's copyright.’”) (citation omitted); Philip Morris USA, Inc. v. Felizardo, 2004 U.S. Dist. LEXIS 11154 (S.D.N.Y. 2004) (“The standard for willfulness is whether the defendant had knowledge that [his] conduct represented infringement or perhaps recklessly disregarded the possibility.”), quoting Kepner-Tregoe, Inc. v. Vroom, 186 F.3d 283, 288 (2d Cir. 1999); Rolex Watch U.S.A., Inc. v. Zeotec Diamonds, Inc., 2003 U.S. Dist. LEXIS 5595 (C.D. Cal. 2003) (“Willfulness under this provision has been interpreted to mean a ‘deliberate and unnecessary duplicating of a plaintiffs mark . . . in a way that was calculated to appropriate or otherwise benefit from the good will the plaintiff had nurtured’ or ‘an aura of indifference to plaintiff's rights.’”) (citation omitted). 246 Kenneth Jay Lane, Inc. v. Heavenly Apparel, Inc., 2005 U.S. Dist. LEXIS 28815 (S.D.N.Y. 2005); Rodgers v. Anderson, 2005 U.S. Dist. LEXIS 7054 (S.D.N.Y. 2005); Tiffany (NJ), Inc. v. Luban, 292 F. Supp. 2d 123, 124 (S.D.N.Y. 2003). 247 Lorillard Tobacco Co. v. J.J. Shell Food Mart, Inc., 2005 U.S. Dist. LEXIS 26626 (N.D. Ill. 2005) (“Statutory damages are required for even ‘innocent’ counterfeiting.”).


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because the counterfeiter has not kept records of its unlawful activities,248 but

plaintiffs may elect statutory damages no matter what the status of the

counterfeiter’s records.249

If a plaintiff has registered a word mark and a design mark for the class

of goods that were counterfeited, can it receive damages for both marks? The

statute suggests an award range “per counterfeit mark” but no court has

determined exactly what that means.250 The argument is worth making,

however, by a plaintiff seeking additional damages.

Courts have substantial discretion in determining statutory damages.251

248 “Congress added the statutory damages provision of the Lanham Act in 1995 because ‘counterfeiters' records are frequently nonexistent, inadequate, or deceptively kept . . . , making proving actual damages in these cases extremely difficult if not impossible." Gucci Am., Inc. v. Duty Free Apparel, Ltd., 315 F. Supp. 2d 511, 520 (S.D.N.Y. 2004), quoting S. Rep. No. 104-177, at 10 (1995). See also Silhouette Int’l Schmied AG v. Chakhbazian, 2004 U.S. Dist. LEXIS 19787 (S.D.N.Y. 2004) (“The rationale for this section is the practical inability to determine profits or sales made by counterfeiters.”). 249 See Microsoft Corp. v. Ion Technologies Corp., 2003 U.S. Dist. LEXIS 9946 (D. Minn. 2003) (rejecting defendant’s argument that plaintiff is not entitled to statutory damages because actual damages are readily ascertainable and noting that under the statute a trademark owner may elect statutory damages at any time before final judgment). 250 See Lorillard Tobacco Co. v. S&M Central Service Corp., 2004 U.S. Dist. LEXIS 22563 (N.D. Ill. 2004) (awarding $50,000 for each of five marks where plaintiff had five trademark registrations and defendant produced one counterfeit product). 251 J.J. Shell Food Mart, Inc., 2005 U.S. Dist. LEXIS 26626 (“The Court has broad discretion in setting the amount of a statutory damages award.”); Philip Morris USA, Inc. v. Marlboro Express, 2005 U.S. Dist. LEXIS 40359 (E.D.N.Y. 2005) (“District courts have wide discretion in awarding statutory damages.”).


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The statute directs an award of damages within the range “as the court

considers just.”252 Prevailing plaintiffs in copyright cases may also elect to

receive statutory damages rather than actual damages,253 and courts have often

looked to these cases by analogy in counterfeiting statutory damages cases.254

They have examined the following factors: the profits the defendant reaped

from infringement, the difficulty of proving actual damages, the value of

plaintiff’s trademarks, the defendant's willfulness, the size of defendant's

counterfeiting operation, defendant's efforts to mislead the court and the

plaintiff, and the deterrent effect on the defendant and others.255 Courts

For one creative solution, see Guess?, Inc. v. Gold Center Jewelry, 997 F. Supp. 409 (S.D.N.Y. 1998) (awarding $4500, or ten percent of defendant's annual profits from his entire business, as statutory damages). 252 15 U.S.C. § 1117(c). 253 17 U.S.C. § 504(c). 254 See, e.g., Kenneth Jay Lane, Inc. v. Heavenly Apparel, Inc., 2005 U.S. Dist. LEXIS 28815 (S.D.N.Y. 2005) (declaring that “courts have looked to an analogous provision of the Copyright Act, 17 U.S.C. § 504(c), through which statutory damages for willful infringement may be awarded, for assistance in determining what factors should inform an award of statutory damages pursuant to 15 U.S.C. § 1117(c)”); Philip Morris U.S.A., Inc. v. Escandon, 2005 U.S. Dist. LEXIS 26766 (holding that “some courts have found guidance in [interpreting Lanham Act statutory damages] in the case law of an analogous provision of the Copyright Act”); J.J. Shell Food Mart, Inc., 2005 U.S. Dist. LEXIS 26626 (“Courts interpreting Section 1117(c) have looked to the interpretation of the statutory damage provision of the Copyright Act, 17 U.S.C. § 504(c).”); Sara Lee Corp. v. Bags of New York, Inc., 36 F. Supp. 2d 161 (S.D.N.Y. 1999) (looking to Copyright Act statutory damages by analogy). 255 E.g., Philip Morris USA, Inc. v. Marlboro Express, 2005 U.S. Dist. LEXIS 40359 (E.D.N.Y. 2005); Lorillard Tobacco Co. v. S&M Central Service Corp., 2004 U.S. Dist. LEXIS 22563 (N.D. Ill. 2004); Silhouette Int’l Schmied AG v. Chakhbazian,


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particularly emphasize the importance of deterrence in statutory damages

cases.256

A court may award the maximum penalty of $1 million per counterfeit

mark where the defendant acted willfully, made a substantial profit, and sold a

large amount of counterfeit goods,257 or where the defendant continued selling

counterfeit goods after the court enjoined such sales.258 Where the defendant,

even if not willful, was extremely negligent in failing to suspect that goods

were counterfeit, a court may award the maximum for non-willful

2004 U.S. Dist. LEXIS 19787 (S.D.N.Y. 2004); Tommy Hilfiger Licensing, Inc. v. Goody’s Family Clothing, Inc., 2003 U.S. Dist. LEXIS 8788 (N.D. Ga. 2003). 256 F.W. Woolworth Co. v. Contemporary Arts, Inc., 344 U.S. 228, 233 (1952) (“The statutory rule, formulated after long experience, not merely compels restitution of profit and reparation for injury but also is designed to discourage wrongful conduct. The discretion of the court is wide enough to permit a resort to statutory damages for such purposes. Even for uninjurious and unprofitable invasions of copyright the court may, if it deems it just, impose a liability within statutory limits to sanction and vindicate the statutory policy.”) (statutory damages under copyright law).

For Lanham Act statutory damages cases, see, e.g., Lorillard Tobacco Co. v. Jamelis Grocery, Inc., 378 F. Supp. 2d 448, 458 (S.D.N.Y. 2005) (holding that “statutory damages under the Lanham Act are aimed at deterring future counterfeiting, both by the defendant in question as well as other potential counterfeiters”); Petmed Express, Inc. v. Medpets.com, 336 F. Supp. 2d 1213, 1220-21 (S.D. Fla. 2004) (“Statutory damages under § 1117(c) are intended not just for compensation for losses, but also to deter wrongful conduct.”). 257 Philip Morris USA, Inc. v. Marlboro Express, 2005 U.S. Dist. LEXIS 40359 (E.D.N.Y. 2005); Philip Morris USA, Inc. v. Castworld Products, Inc., 219 F.R.D. 494 (C.D. Cal. 2003). 258 Gucci America, Inc v. Duty Free Apparel, Ltd., 315 F. Supp. 2d 511, 522 (S.D.N.Y. 2004).


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infringement, $100,000 per mark.259 Courts have found the fact that the

counterfeit marks or goods appeared on the Internet and thus reached a

substantial number of customers tilted towards a higher damages award.260

A defendant’s limited finances may influence a court to give plaintiff a

relatively small damages award,261 as may the defendant’s lack of knowledge

259 Nike Inc. v. Variety Wholesalers, Inc., 274 F. Supp. 2d 1352, 1371 (S.D. Ga. 2003) (awarding total of $900,000 in statutory damages for infringement of nine marks; defendant is a $600 million wholesale business with 450 stores that had been previously sued for infringement and was arguably grossly negligent in failing to suspect that the goods it had bought were counterfeit). See also Microsoft Corp. v. Sellers, 2006 U.S. Dist. LEXIS 4355 (E.D. Tenn. 2006) (awarding $100,000 for each of plaintiff’s four trademarks at issue where defendants were on notice that they were infringing and continued to do so); Microsoft Corp. v. Software Wholesale Club, Inc., 129 F. Supp. 2d 995, 1010 (S.D. Tex. 2000) (plaintiff limited itself to non-willful damages of $100,000 per infringement, but court found that evidence of willful blindness and post-notification infringement were relevant to size of statutory damages; suspiciously low prices may also provide a basis for finding constructive knowledge that merchandise was counterfeit). 260 Petmed Express, 336 F. Supp. 2d at 1221 (awarding $400,000 per mark for a total of $800,000); Tiffany (NJ) Inc. v. Luban, 282 F. Supp. 2d 123, 125 (S.D.N.Y. 2003) (default judgment awarding $550,000 total in statutory damages for twenty-eight counterfeit items that each infringed at least four marks); Malletier v. Veit, 211 F. Supp. 2d 567, 584-85 (E.D. Pa. 2002) (finding that the “point of sale” on the Internet was “very relevant to the statutory damages discussion”; awarding $1.5 million for eight trademarks); Rolex Watch U.S.A., Inc. v. Jones, 2002 U.S. Dist. LEXIS 6657 (S.D.N.Y. 2002) (awarding $600,000 in part because of the “virtually limitless number of customers available to [defendant] through his Web sites”). 261 Philip Morris U.S.A., Inc. v. Escandon, 2005 U.S. Dist. LEXIS 26766 (E.D. Cal. 2005) (awarding $10,000 per counterfeit mark where defendants were independent small business owners but who were in default and failed to cooperate with plaintiff); Jamelis Grocery, Inc., 378 F. Supp. 2d at 458 (awarding $2,500 for each of five infringed marks although plaintiff had requested $10,000 each; citing defendant’s “apparently limited financial means”).


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that the goods were counterfeit.262 Where plaintiffs have suffered little actual

injury, the court may lower its damages award unless doing so would make it

insufficient to deter future violations.263 If there are multiple marks involved,

rather than give plaintiff a windfall, courts tend to award an amount without

multiplying it by the number of marks or to lower the award given per mark.264

Because the statute does not give courts any guidelines for what

amount to award within the range given, the plaintiff needs to prepare its case

and persuade the court of the highest possible amount.265 For example, in one

262 Lorillard Tobacco Co. v. Division & Noble Amoco Corp., 390 F. Supp. 2d 678 (N.D. Ill. 2005) (no evidence defendant, who sold counterfeits of plaintiff’s cigarettes, knew that they were not plaintiff’s genuine product; awarding $500 per carton sold for a total of $3500). 263 Compare Microsoft Corp. v. V3 Solutions, Inc., 2003 U.S. Dist. LEXIS 15008 (N.D. Ill. 2003) (awarding $5000 per trademark for seven trademarks) with Polo Ralph Lauren, L.P. v. 3M Trading Co., 1999 U.S. Dist. LEXIS 7913 (S.D.N.Y. 1999) (finding plaintiff’s losses were de minimis but concluding “that a fairly substantial financial award is appropriate, if for no other reason, to ensure adequate deterrence against the continuation of this conduct by these defendants”; awarding $25,000 per trademark for each of ten trademarks). 264 Tommy Hilfiger Licensing, Inc. v. Goody’s Family Clothing, Inc., 2003 U.S. Dist. LEXIS 8788 (N.D. Ga. 2003) (awarding $500,000 for each of four marks and $90,000 for a separate mark); Malletier, 211 F. Supp. 2d at 584-85 (In a case involving egregious and willful conduct but multiple marks, court awarded statutory maximum without multiplication, i.e., $1 million total for six LOUIS VUITTON marks, and $500,000 for two OAKLEY marks; “In similar cases concerning multiple marks, courts have been inclined to either award the maximum without multiplication or to lower the per mark award.”); Rolex Watch U.S.A., Inc. v. Brown, 2002 U.S. Dist. LEXIS 10054 (S.D.N.Y. 2002) (awarding $ 1 million maximum without multiplication for multiple marks where plaintiffs sought $ 1 million for each mark). 265 See Rodgers v. Anderson, 2005 U.S. Dist. LEXIS 7054 (S.D.N.Y. 2005) (“While


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case, a plaintiff requested the maximum award of $1 million per infringed

mark, but the court instead awarded $125,000 per mark, noting that the

plaintiff had failed to provide the court any information about the defendant’s

business, the market in which it sold the counterfeit goods, or an estimate of

how many counterfeit goods it had sold.266

[C] – Prejudgment Interest

The court, in its discretion, may award prejudgment interest on the

damages awarded, at an annual interest rate commensurate with Section 6621

of Title 26.267 The interest rate is the federal short-term interest rate plus three

percentage points.268 The purpose of prejudgment interest “is to compensate

the plaintiff for ‘the foregone use of the money between the time of

infringement and the date of the judgment.’”269

[plaintiff] seeks $ 500,000, he has not provided any basis for that figure nor any cases in analogous situations that would support such an amount.”; awarding $250,000). 266 Kenneth Jay Lane, Inc. v. Heavenly Apparel, Inc., 2005 U.S. Dist. LEXIS 28815 (S.D.N.Y. 2005). 267 15 U.S.C. § 1117(b). See Waco Int’l, Inc. v. KHK Scaffolding Houston, Inc., 278 F.3d 523, 536, 61 U.S.P.Q.2d 1460 (5th Cir. 2002) (rejecting argument that two years of litigation requires award of pre-judgment interest). 268 26 U.S.C. § 6621(a)(2). 269 Tommy Hilfiger Licensing, 2003 U.S. Dist. LEXIS 8788 (holding that unwarranted delay in filing counterfeiting lawsuit makes prejudgment interest inappropriate), quoting General Motors Corp. v. Devex Corp., 461 U.S. 648, 656 (1983).


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[vi] – Civil Destruction Orders

Where the defendant has violated the right of the owner of a federal

trademark registration, such as the right to be free from counterfeits, “the

court may order that all labels, signs, prints, packages, wrappers, receptacles,

and advertisements in the possession of the defendant, bearing the registered

mark” be destroyed.270

Even though the civil statute does not provide for destruction of the

counterfeit goods themselves, as the criminal counterfeiting law does, several

district courts have still ordered such destruction, without discussion of the

statute.271 One court ruled soon after the passage of the 1984 Counterfeiting

270 15 U.S.C. § 1118. 271 American Honda Motor Co. v. Pro-Line Protoform, 325 F. Supp. 2d 1081, 1086-87 (C.D. Cal. 2004) (ordering, pursuant to 15 U.S.C. § 1118, that within sixty days, defendant shall produce to plaintiff or submit a certificate of destruction for any products, labels, packages, etc. that bear an unauthorized reproduction of plaintiff’s marks or a colorable imitation of plaintiff’s marks); General Motors Corp. v. Autovation Technologies, Inc., 317 F. Supp. 2d 756 (E.D. Mich. 2004) (ordering, pursuant to 15 U.S.C. § 1118, that within thirty days, defendant shall produce to plaintiff or submit a certificate of destruction for any products, parts, labels, etc. that bear or use plaintiff’s marks or a simulation of plaintiff’s marks); Rolex Watch U.S.A., Inc. v. Zeotec Diamonds, Inc., 2003 U.S. Dist. LEXIS 5590 (C.D. Cal. 2003) (ordering, pursuant to 15 U.S.C. § 1118, that within thirty days defendants shall deliver to plaintiff’s attorneys for destruction all products and documents that violate the anti-counterfeiting order); Tanning Research Labs., Inc. v. Worldwide Import & Export Corp., 803 F. Supp. 606, 25 U.S.P.Q.2d 1310 (E.D.N.Y. 1992) (permitting plaintiffs to destroy counterfeit goods seized from defendant, pursuant to 15 U.S.C. § 1118); Ford Motor Co. v. B&H Supply, Inc., 646 F. Supp. 975, 1 U.S.P.Q.2d 1094 (D. Minn. 1986) (finding plaintiff entitled to an order for the forfeiture and destruction of


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Act that, “[a]lthough it is not clear from the face of [15 U.S.C. § 1118],” the

Act’s legislative history suggested that the plaintiff should be entitled to

destroy the counterfeit goods.272

[vii] – Recall

Among other remedies, courts may also order a defendant to recall

counterfeit goods from consumers.273 In determining whether or not to grant

a motion to recall counterfeit goods from purchasers, courts may look at three

factors: (1) whether defendant’s infringement was willful; (2) whether the risk

of public confusion and injury to the trademark owner is greater than the

burden on the defendant of conducting the recall; and (3) whether there is a

substantial risk of danger to the public from the defendant’s infringement.274

all counterfeit auto parts, citing 15 U.S.C. § 1118). 272 Fendi S.A.S. Di Paola Fendi E Sorelle v. Cosmetic World, Ltd., 642 F. Supp. 1143, 1146-47, 1 U.S.P.Q.2d 1508 (S.D.N.Y. 1986). 273 See Theodore C. Max, “Total Recall: A Primer on a Drastic Form of Equitable Relief,” 84 T.M.R. 325, 325 (1994) (stating that “recall is recognized as a remedy within the court's equity powers `to mold each decree to the necessities of the particular case.’ ” ). See also Pepsico, Inc. v. California Security Cans, 2002 U.S. Dist. LEXIS 22404 (C.D. Cal. 2002) (ordering recall of counterfeit soda cans containing simulated beverages, directing defendants to send letters by U.S. mail to each of their customers instructing them not to sell the counterfeit products, and requiring them to return the products to defendant at defendant’s expense; noting that all recalled items will be turned over to plaintiffs and destroyed under 15 U.S.C. § 1118); Pepsico, Inc. v. Plank, 2002 U.S. Dist. LEXIS 14378 (C.D. Cal. 2002) (same). 274 Gucci Am., Inc. v. Daffy’s, Inc., 354 F.3d 228, 233, 69 U.S.P.Q.2d 1321 (3d Cir.


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In one case, luxury goods seller Gucci America sought a court order requiring

a retailer to contact 588 consumers who had purchased counterfeit Gucci

handbags and offer them a refund in exchange for the bags.275 The Third

Circuit ultimately upheld a district court denial of the motion where the

defendant was an innocent infringer unaware that the bags were counterfeit

and where the benefit to the public of a recall did not outweigh the equities

weighing against it. A recall, found the court, would harm the defendant by

injuring its good will with customers but would not benefit Gucci as the

counterfeit bags were “virtually indistinguishable” from genuine bags.

[c] – Contributory Counterfeiting

Landlords or flea market operators that allow vendors to sell

counterfeit goods on their premises may be contributorily liable for

counterfeiting.276 Courts that have so held have declared that the property or

market owner does not have an affirmative duty to seek out and deter

infringement, but will be liable if it induces the vendor to sell counterfeit

goods or knew or had reason to know of such sales. 2003), citing Max, 84 T.M.R. at 327. 275 Id. 276 See Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 37 U.S.P.Q.2d 1596 (9th Cir. 1996); Hard Rock Cafe Licensing Corp. v. Concession Servs., Inc., 955 F.2d 1143, 21 U.S.P.Q.2d 1764 (7th Cir. 1992). Contributory infringement is discussed at LaLonde, 3 Trademark Protection and Practice, § 11.02[2][h].


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Luxury goods manufacturer Louis Vuitton Malletier obtained an Order

for Permanent Injunction on Consent against the landlords of various New

York City properties used to sell counterfeit goods.277 The order enjoined the

landlords from selling or offering to sell any counterfeit Louis Vuitton

product, but it also compelled them to (1) post for two years “in a highly

visible and public location . . . a sign notifying potential patrons that the sale

and purchase of counterfeit Louis Vuitton items at that premises is prohibited

and punishable by law . . .”; (2) evict tenants upon proof of sale of counterfeit

Louis Vuitton goods; (3) require in future leases that the tenants shall not sell

or offer for sale any counterfeit Louis Vuitton goods; and (4) pay for a

monitor to inspect and investigate the properties weekly for two years to

determine if there is any sale of counterfeit Louis Vuitton goods.

In a possibly parallel case, luxury goods seller Tiffany & Company has

sued online auction site eBay for a failure to police sales on its site for

counterfeit items. In early 2004, Tiffany & Co. secretly ordered around two

hundred alleged Tiffany items from various eBay sellers and, after inspecting

277 Louis Vuitton Malletier v. Canal Associates, L.P., 06-CV-00306 (TPG) (S.D.N.Y. Jan. 17, 2006) (order for permanent injunction on consent).


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them, found that three-quarters were fakes. It sued in June 2004.278 In its First

Amended Complaint, Tiffany & Co. claimed that eBay sellers sell tens of

thousands of counterfeit Tiffany items each year and alleged that eBay’s

conduct in facilitating those sales was both direct and contributory trademark

infringement involving counterfeit trademarks, among other claims. eBay

responded in the press that the sheer number of auctions (1.25 billion per year)

prevents it from policing each item offered by its sellers. In its answer filed

with the court, eBay listed several affirmative defenses, including the argument

that plaintiff’s damages were not the result of acts or omissions by eBay and

that eBay did not know the marks at issue were counterfeit. The case is

pending.

A similar copyright claim against eBay, claiming that the site should be

held liable for facilitating the sale of pirated DVDs, failed when the court

determined that eBay met the “safe harbor” provisions of the Digital

Millennium Copyright Act.279

278 Tiffany (NJ), Inc. v. eBay, Inc., 04-Civ-4607 (NRB) (S.D.N.Y.) (complaint filed June 18, 2004). 279 Hendrickson v. eBay, Inc., 165 F. Supp. 2d 1082, 60 U.S.P.Q.2d 1335 (C.D. Cal. 2001). See 17 U.S.C. § 512(c) (limitations on service providers’ liability for copyright infringement).


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VI United States Criminal Counterfeiting Law

The threat counterfeiting poses to public safety and U.S. businesses

spurred Congress to criminalize counterfeiting in 1984280 and to strengthen the

criminal laws considerably in 2006.281 The 2006 Stop Counterfeiting in

Manufactured Goods Act, signed into law on March 16, 2006, enhances

criminal penalties for trafficking in counterfeit goods. A counterfeiter must

forfeit not only the goods bearing counterfeit marks but also any proceeds of

the crime, any property derived from those proceeds, and any property used or

intended to be used to commit the crime, such as equipment used to

manufacture and package the counterfeit goods.282 It must also pay restitution

to the trademark owner.283 The Act also expands the definition of counterfeit

goods to include labels, containers, and all other forms of packaging not

actually attached to the goods.284

280 As a Senate Report on S. 875, one of the precursors to the Trademark Counterfeiting Act of 1984, Pub. L. No. 98-473, 98 Stat. 2178 (October 12, 1984), stated: “Under Federal law today, there are virtually no criminal penalties for the sale of goods and services through the use of false trademarks. The absence of such penalties . . . has emboldened counterfeiters, who now defraud consumers out of billions of dollars each year in the United States alone.” S. Rep. 98-526, at 1 (1982), reprinted in LaLonde, 8 Trademark Protection and Practice, at p. 34-528. 281 Pub. L. No. 109-181. 282 18 U.S.C. § 2320(b)(1), (3). 283 18 U.S.C. § 2320(b)(4). 284 18 U.S.C. § 2320(a).


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Criminal counterfeiting laws are an important adjunct to the civil laws

that require private enforcement. Enforcement of the criminal laws is the

province of the United States government; it is the only entity that can

prosecute criminal counterfeiting cases. The government may depend upon

the trademark owner to inform it of the counterfeiting and for factual

information and other cooperation if the prosecution proceeds. The federal

government has a broad range of remedies it can obtain if successful.

Counterfeiting can have very serious consequences for those who violate the

law, and particularly after the 2006 amendments, consequences that

counterfeiters cannot ignore.

Practice Tip

Companies faced with counterfeiting of their products should consider

notifying a local Assistant United States Attorney to determine whether the

government would be able to prosecute the counterfeiter. This could be done

in place of a civil case or in addition.

Courts hearing criminal counterfeiting cases have found Lanham Act

precedent to be of little value in deciding whether there has been a criminal


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violation.285 They reason that the criminal statute is to be interpreted narrowly,

whereas there is no such requirement in a civil action.

[a] – Required Showings

Section 2320 of Title 18 of the United States Code provides criminal

sanctions for intentional trafficking in goods or services with the knowledge

that the goods or services are counterfeit. In order to convict, the prosecution

must prove that the defendant “(1) trafficked or attempted to traffic in goods

or services; (2) did so intentionally; (3) used a counterfeit mark on or in

connection with such goods and services; and (4) knew the mark was

counterfeit.”286 The following subsections discuss each of these elements.

[i] – Traffic or Attempt to Traffic

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

285 United States v. Giles, 213 F.3d 1247, 1250, 54 U.S.P.Q.2d 1919 (10th Cir. 2000) (“While the court below relied heavily on [a Lanham Act case], we believe that case to be of limited value for several reasons, [including that] it dealt with civil liability, while Mr. Giles was convicted of violating the criminal version of the statute, which we must construe narrowly.”); United States v. Hanafy, 302 F.3d 485, 489, 64 U.S.P.Q.2d 1050 (5th Cir. 2002) (following Giles and finding that “Lanham Act precedent is of little value in a § 2320 case because the Lanham Act deals with civil liability”). 286 United States v. Habegger, 370 F.3d 441, 444 (4th Cir. 2004); United States v. Giles, 213 F.3d 1247, 1249, 54 U.S.P.Q.2d 1919 (10th Cir. 2000); United States v. Sultan, 115 F.3d 321, 325, 43 U.S.P.Q.2d 1276 (5th Cir. 1997).


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transport, transfer, or dispose of.”287 It encompasses a wide range of conduct,

from manufacturing the product, importing or exporting it, holding it and

selling it to another party to selling it to the ultimate consumer. It even

includes trafficking in a single counterfeit good.288

Section 2320 also provides for the punishment of any person who

attempts to traffic in counterfeit goods.289 An attempt is punishable at the same

level as a completed offense. Additionally, through 18 U.S.C. § 371, conspiracies

to commit an offense under Section 2320 are prohibited.290

[A] – Trafficking in Counterfeit Packaging, Labels or

Symbols

Where a defendant “intentionally traffics or attempts to traffic 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,” he

may be in violation of the criminal counterfeiting law.291

287 18 U.S.C. § 2320(d)(2). 288 United States v. Foote, 413 F.3d 1240, 1246-47, 75 U.S.P.Q.2d 1353 (10th Cir. 2005) (sale of single counterfeit Mont Blanc pen sufficient to violate criminal counterfeiting law). 289 18 U.S.C. § 2320(a). 290 18 U.S.C. § 371. 291 18 U.S.C. § 2320(a), as amended by Pub. L. No. 109-181 (2006). See also 18


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Before the Stop Counterfeiting in Manufactured Goods Act of 2006,

the statute criminalized intentional trafficking only in goods or services and

knowingly using a counterfeit mark in connection with those goods or

services. The 2006 Act added penalties for trafficking in “labels, patches,

stickers, wrappers, badges, emblems, medallions, charms, boxes, containers,

cans, cases, hangtags, documentation, or packaging.”292 The impetus behind

this change was to overrule the Tenth Circuit’s holding in United States v. Giles.

In that case, the court found under the old law that an individual who sold

patches with a counterfeit trademark for placement on counterfeit products to

make them appear genuine was not guilty of criminal counterfeiting because he

did not traffic in “goods.”293 The court found that the defendant trafficked

only in “labels” and his conduct did not confuse consumers about the origin

of any “goods” because he did not sell any “goods,” such as the baggage to

which his labels were to be affixed. The U.S. Congress considered this holding

too restrictive and thus amended the statute to overrule Giles and close a

U.S.C. § 2320(e)(1)(A) (new definition of “counterfeit mark” that includes a spurious mark used in connection with trafficking in labels, wrappers, containers, etc. or that is applied to or consists of a label, wrapper, container, etc.). 292 Pub. L. No. 109-181 (2006). 293 Giles, 213 F.3d 1247.


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loophole for criminal liability for counterfeiting.294

Giles is distinguishable from United States v. Hanafy, in which the Fifth

Circuit upheld a district court finding that attaching an unauthorized trademark

to a shipping tray that truthfully stated the contents —; genuine cans of infant

formula, perhaps stolen —; also did not; violate the criminal counterfeiting

statute.295 It found that the shipping tray was not a “counterfeit good” for

purposes of § 2320(a), rejecting civil Lanham Act precedent holding

repackagers liable for failing to disclose that the products had been repackaged

as inapplicable in a criminal case. The holding in this case was affirmed by the

2006 legislation, which clarifies that the bill “was not intended to allow

criminal actions against persons who repackage genuine goods or services with

no intent to deceive or cause confusion as to the authenticity of the products

294 See H.R. Rep. 109-68, at 7 (2005) (“This modification is intended to overrule the holding in the case United States v. Giles, . . . where the court of appeals overturned a conviction under 18 U.S.C. Sec. 2320, holding that, based on the current language of the statute, no criminal liability could attach to trafficking in labels, patches, medallions, boxes, containers, cases, documentation, packaging and the like bearing registered marks, where the item[s] bearing the registered marks were not attached to the goods.”); id. at 19 (“This bill closes a loophole that has allowed counterfeiters to avoid prosecution. Current law does not prohibit trafficking in counterfeit labels, so many counterfeiters simply ship fake brand name labels to a warehouse and then affix them to a product to avoid prosecution. H.R. 32 strengthens the sanctions against those who traffic in counterfeit labels.”) (Markup Transcript, prepared statement of Rep. Lamar Smith). 295 United States v. Hanafy, 302 F.3d 485 (5th Cir. 2002).


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therein.”

The legislative change is also consistent with United States v. Guerra, a

2002 case from the Eleventh Circuit. That case held that where a defendant

manufactures labels that are used to make goods counterfeit, he or she may be

guilty of conspiring to traffic in counterfeit goods or may be liable as a

principal for aiding and abetting the substantive offense of trafficking in

counterfeit goods.296

[B] – For Financial Gain

The Stop Counterfeiting in Manufactured Goods Act substituted the

phrase “for purposes of commercial advantage or private financial gain” for

the phrase “as consideration for anything of value.”297 Under either definition,

the phrase limits the scope of the law to commercial activities, and cases under

the earlier version of the statute are still good law on this point. Therefore, if

an individual knowingly purchases goods bearing counterfeit marks, it is not a

crime provided that the purchase is for the individual's personal use.298

Where a defendant provided counterfeit goods to another party as

“samples” for which no payment was expected, the court reversed his

296 United States v. Guerra, 293 F.3d 1279, 1287 and n.4 (11th Cir. 2002). 297 Pub. L. No. 109-181. 298 See § IV[c][iii].


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conviction under the prior statutory language, requiring “consideration for

anything of value.”299 The new statutory language – “for purposes of

commercial advantage or private financial gain” – would likely change the

result in this case, as sending counterfeit samples would be an attempt to gain

a commercial advantage.

[ii] – Mental State Requirements

Section 2320 includes two distinct mental state requirements. The

prosecution must first show the defendant to have “intentionally” trafficked; in

goods or services, and second, to have “knowingly” used a counterfeit mark in

connection with those goods or services.300

[A] – Intent to Traffic

In order to be convicted, the defendant must have intentionally

trafficked in goods or services. The requirement that the defendant's

trafficking be “intentional” is intended to ensure that the law will reach only

persons who traffic in counterfeit goods or services deliberately. Put another

way, the defendant's use of a counterfeit mark or designation must be more 299 United States v. Habegger, 370 F.3d 441, 444-45 (4th Cir. 2004). Compare with United States v. Koehler, 24 F.3d 867, 870-71 (6th Cir. 1994) (finding that although the defendant did not receive a monetary payment in exchange for his counterfeit labels and containers, the “good will” and the promise of a continued supply of counterfeit goods from the undercover agent was a “thing of value”). 300 18 U.S.C. § 2320(a).


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than merely “voluntary”; such use must be the defendant’s “conscious

objective.”301

The defendant need not be aware that his trafficking in counterfeit

goods is a crime.302 It is not a “specific intent” crime where the government

must show that the defendant purposefully intended to violate the statute.303

Similarly, there is no requirement that the defendant intend to deceive the

purchaser.304 Even if the defendant has told the purchaser that the counterfeit

item is not genuine, he may still be convicted of counterfeiting.

[B] – Knowing Use of a Counterfeit Mark

The defendant must have “knowingly” used a counterfeit mark on or

in connection with the goods or services he or she traffics in.305 “Knowledge”

is a question of fact in each individual case.306 The government will have to

301 H.R. Rep. No. 98-997, 98th Cong., 2d Sess. 10 (1984). 302 United States v. Gantos, 817 F.2d 41, 42-43, 2 U.S.P.Q.2d 1536 (8th Cir. 1987). 303 Id. at 43; United States v. Baker, 807 F.2d 427, 428, 1 U.S.P.Q.2d 1485 (5th Cir. 1986) (holding that knowledge of illegality is not an element of the crime; “The defendant must intentionally deal in goods and he must knowingly use a counterfeit mark in connection with those goods. There is no ambiguity in this language and nothing in the statute suggests that any other mental state is required for conviction.”). 304 Gantos, 817 F.2d at 43. 305 18 U.S.C. § 2320(a). 306 S. Rep. No. 98-526, 98th Cong., 2d Sess. 11 (1984).


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prove such knowledge beyond a reasonable doubt;307 however, the government

need not prove that it was the defendant's “purpose” or “objective” to use

counterfeit marks. The government's only burden is to prove that the

defendant knew that he or she was doing so.308 If the prosecution proves that

the defendant was “willfully blind” to the counterfeit nature of the mark, it will

have met its burden of showing “knowledge.”309 The defendant need not

know that the trademark at issue is registered on the principal register of the

USPTO.310

307 Id. 308 See United States v. Sultan, 115 F.3d 321, 330, 43 U.S.P.Q.2d 1276 (5th Cir. 1997) (insufficient evidence to support verdict that government proved that defendant knew he was dealing in counterfeit parts; “In sum, we hold that the evidence presented by the government on the issue of knowledge falls short of the requisite evidence from which a conviction could be sustained beyond a reasonable doubt. The government’s case against Sultan goes beyond making reasonable inferences and requires making unreasonable leaps to bridge the gaps in the evidence.”); United States v. Infurnari, 647 F. Supp. 57, 59, 2 U.S.P.Q.2d 1072 (W.D.N.Y. 1986) (holding that “in a prosecution under 18 U.S.C. § 2320, the government must prove that defendant knew the mark is counterfeit: that he knew that the mark is spurious, that it is used in connection with trafficking in goods or services, that it is identical to or virtually indistinguishable from another mark, and that it is likely to cause confusion, mistake, or to deceive”). 309 United States v. Guerra, 293 F.3d 1279, 1287 (11th Cir. 2002) (finding that the defendant continued to produce labels for Cuban cigars knowing that those purchasing the labels were not authorized representatives of the trademark owners). 310 18 U.S.C. § 2320(e)(1)(A)(ii) (defining a counterfeit mark as “a spurious mark . . . that is identical with, or substantially indistinguishable from, a mark registered on the principal register . . . whether or not the defendant knew such mark was so registered”); Guerra, 293 F.3d at 1287 (“[I]t is irrelevant that [the defendant] did not know the marks were registered in the United States, or thought the marks were only


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In any criminal prosecution under the Trademark Counterfeiting Act,

the defendant's “knowledge” that the mark at issue was counterfeit will depend

on whether he or she had an “awareness or a firm belief” to that effect.311 The

Senate Judiciary Committee emphasized in 1984 that a “suspicion” that the

mark might be counterfeit would not constitute “knowing” within the meaning

of the Act.312 Also, the mere fact that a trademark owner makes an

unsubstantiated allegation to the defendant that the mark is counterfeit will be

insufficient to generate a “firm belief or awareness” on the part of the

defendant that the goods are counterfeit.313

[iii] – Use of a Counterfeit Mark

Under the criminal code, it is unlawful to use a counterfeit mark “in

connection with trafficking in any goods, services, labels, patches, stickers,

unprotectable Cuban marks.”).

“In a criminal prosecution for counterfeiting, or in the civil proceedings that are affected by this act, it is irrelevant whether the defendant knew that the mark in question is registered on the principal register in the Patent and Trademark Office. For that reason, the definition of “counterfeit mark” makes clear that it need not be shown that the defendant was aware of a mark’s status at the Patent and Trademark Office.” 130 Cong. Rec. H. 12077 (joint statement on 1984 counterfeiting legislation), reprinted in LaLonde, 8 Trademark Protection and Practice, at p. 34-615. 311 H.R. Rep. No. 98-997, 98th Cong., 2d Sess. 10 (1984) S. Rep. No. 97-307, 97th Cong., 1st Sess. 67-68 (1981); 130 Cong. Rec. H. 12076 (joint statement on 1984 trademark counterfeiting legislation), reprinted in LaLonde, 8 Trademark Protection and Practice, at p. 34-615. 312 S. Rep. No. 98-526, 98th Cong., 2d Sess. 12 (1984). 313 Id.


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wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases,

hangtags, documentation, or packaging of any type or nature.”314 Thus, a label,

package, container or hangtag alone bearing a counterfeit mark constitutes a

counterfeit “good” under the criminal statute.

[iv] – “Likely To Cause Confusion, To Cause Mistake, or

To Deceive”

In order for the use of a “counterfeit mark” to constitute criminal use,

it must be “likely to cause confusion, to cause mistake, or to deceive.”315 This

phrase also appears in the remedial section of the Lanham Act. Its inclusion in

the criminal code means that any conduct that does not constitute trademark

infringement under the Lanham Act will not be considered criminal conduct.

Because only likelihood of confusion is the test, there is no requirement that

purchasers would actually be confused, mistaken or deceived.316

Because the marks at issue must be identical or “substantially

indistinguishable” to result in a criminal counterfeiting violation, it is extremely

314 18 U.S.C. § 2320(a), as amended by Pub. L. No. 109-181 (2006). See § IV[b] for a full discussion of the elements of a counterfeit mark. 315 18 U.S.C. § 2320(e)(1)(A)(iv). 316 United States v. Brooks, 111 F.3d 365, 372 (4th Cir. 1997) (“The government did not have to prove either actual confusion or an intent to mislead. Rather, the government was required to prove that the defendant knowingly used a counterfeit mark that was likely to cause confusion or to mislead.”).


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likely that there will be a likelihood of consumer confusion.

[v] – Post-Sale Confusion and Confusion of Non-

Purchasers

The statutory test is not limited to likely confusion of direct purchasers

of counterfeit goods.317 A defendant cannot, then, escape liability where

purchasers who buy cheap replicas know from their price that they are

counterfeit and thus are not deceived; 318 deception of direct purchasers is not

required. Even if the actual purchaser of the good is aware that it is a fake,

perhaps because of the circumstances of the sale or because of the low price,

point of sale confusion is not the only relevant confusion. Post-sale confusion 317 United States v. Yamin, 868 F.2d 130, 132, 10 U.S.P.Q.2d 1300 (5th Cir. 1989) (holding that “the statute’s application is not restricted to instances in which direct purchasers are confused or deceived by the counterfeit goods.”); United States v. Gantos, 817 F.2d 41, 43, 2 U.S.P.Q.2d 1536 (8th Cir. 1987) (finding that a defendant may be convicted of counterfeiting even if his immediate customer is not deceived). 318 An older decision from the Southern District of Florida makes this point very well:

The Trademark Counterfeiting Act and its civil kindred, the Lanham Act, are not just designed for the protection of consumers. They are likewise fashioned for the protection of trademarks themselves and for the prevention of the cheapening and dilution of the genuine product. When courts find that selling an item at an excessively cheap price precludes a finding that such an item is “counterfeit” . . . in that the use of the goods is not likely to cause confusion, to cause mistake, or to deceive, they are, in effect, thwarting the purposes behind such legislation. But beyond that, such a finding is tantamount to sanctioning the very introduction into commerce of fakes that are sold at low prices.

United States v. Gonzalez, 630 F. Supp. 894, 896, 229 U.S.P.Q. 396 (S.D. Fla. 1986).


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is also actionable.

The statutory confusion test also encompasses the situation where

potential purchasers would be likely to be confused if they encounter the

counterfeit goods in the possession of someone who bought them from the

counterfeiter. For example, someone bends down to admire her friend’s new

ROLEX, which is in fact a counterfeit of poor quality, and believes that

ROLEX has manufactured and sold this product. Lanham Act authority

under Section 32(1) in the post-sale context is applicable,319 and one of the

policy goals is to protect trademark owners identifying their products to their

customers and maintaining their reputations for quality. The Tenth Circuit

sums up the state of the law:

Courts that have applied the concept of post-sale confusion

have held that the counterfeiting statute’s “application is not

restricted to instances in which direct purchasers are confused

or deceived by the counterfeit goods.” Instead, these courts

hold that the statute “is satisfied by a showing that it is likely

that members of the public would be confused, mistaken or

deceived should they encounter the allegedly counterfeit goods

319 See LaLonde, 2 Trademark Protection and Practice, § 5.01[3][c][iv].


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in a post-sale context.”320

Thus, the likely confusion standard is even met where the non-purchasing

public is likely to be confused.321 Likely confusion by potential purchasers

would also clearly meet the test.322

[vi] – Exception: Genuine Repackaged Goods

The 2006 Stop Counterfeiting in Manufactured Goods Act added the

following provision to the criminal law: “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

320 United States v. Foote, 413 F.3d 1240, 1245, 75 U.S.P.Q.2d 1353 (10th Cir. 2005) (citations omitted). 321 United States v. Hon, 904 F.2d 803, 806, 14 U.S.P.Q.2d 1959 (2d Cir. 1990) (“[A]n interpretation of section 2320's confusion requirement to include the non-purchasing public advances the important purpose underlying the trademark laws of protecting the trademark owner’s investment in the quality of the mark and his product’s reputation, one that is independent of the goal of preventing consumer deception.”); United States v. Torkington, 812 F.2d 1347, 1352, 2 U.S.P.Q.2d 1166 (11th Cir. 1987) (holding that “the likely to confuse test of section 2320(d)(1)(A)(iii) . . . is satisfied by a showing that it is likely that members of the public would be confused, mistaken or deceived should they encounter the allegedly counterfeit goods in a post-sale context”). 322 Id. at 1349 (holding that the confusion standard “is satisfied where it is shown that members of the purchasing public would be likely to be confused, mistaken or deceived”); United States v. Infurnari, 647 F. Supp. 57, 59-60, 2 U.S.P.Q.2d 1072 (W.D.N.Y. 1986) (holding that the defendant must know that goods bearing a counterfeit mark would cause confusion in “either the immediate purchaser or prospective purchasers who would later view the product”).


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confuse.”323 According to the House Report from the Committee on the

Judiciary, this language is meant to “ensure that a criminal cause of action will

not be brought against an individual or business that repackages genuine goods

or services without deception . . . [and] clarify that this section was not

intended to allow criminal actions against persons who repackage genuine

goods or services with no intent to deceive or cause confusion as to the

authenticity of the products therein.”324

The definition of a counterfeit mark includes packaging and labeling,325

but various businesses may lawfully use packages and labels with other

companies’ trademarks. The statutory language declaring that repackaging of

genuine goods with no intent to confuse is not criminal permits these

businesses to continue with their activities. It clarifies “that repackaging

activities such as combining single genuine products into gift sets, separating

323 18 U.S.C. § 2320(f). For more on repackaging under the Lanham Act, see LaLonde, 2 Trademark Protection and Practice, § 5.09[3]. 324 H.R. Rep. 109-68, at 8 (2005). See also id. at 26 (“It is important that it is clear that the intent of H.R. 32 is to put an end to counterfeit traffic and target falsely labeled products, not honest and legitimate repackaged goods, as part of secondary discount or parallel market trade. This bill is not intended to jeopardize repackaging of genuine goods by parties other than the product manufacturers, third-party repackagers of gift sets, or downstream wholesalers or discount traders who may affix unique tags or labels to original boxes to identify and track consumer goods.”) (Markup Transcript, statement by Rep. Wexler). 324 United States v. Hanafy, 302 F.3d 485 (5th Cir. 2002). 325 18 U.S.C. § 2320(e)(1)(A)(i), (iii).


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combination sets of genuine goods into individual items for resale, inserting

coupons into original packaging or repackaged items, affixing labels to track or

otherwise identify genuine products, removing genuine goods from original

packaging for customized retail displays are not intended to be prosecuted as

counterfeiting activities . . . .”326

The House Committee on the Judiciary, after hearings on the

counterfeiting bill that became the Stop Counterfeiting in Manufactured

Goods Act, made the following suggestions to federal prosecutors deciding

whether or not to bring a cause of action in cases involving repackaging

genuine goods:327 They should consider evidence that tends to show the

repackager’s intent to deceive or confuse, such as:

• altering, concealing, or obliterating expiration dates or other

information important to the consumer use of the product such as

safety and health information about the quality, performance or use of

the product or service;

• statements that a used, discarded, or refurbished product is new;

• statements that the product meets testing and certification

326 H.R. Rep. 109-68, at 8 (2005). 327 Id. at 8-9.


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requirements;

• a meaningful variance from product testing and certification

requirements;

• placing seals on product containers that have been opened and the

original manufacturer’s seal has been broken; or

• altering or otherwise adulterating the genuine product

The Act can be used to prevent re-assembled genuine parts from being

passed off as the mark owner's product. For example, the Second Circuit held

in United States v. Milstein that it is counterfeiting to repackage medication in

forged packaging so that consumers would believe the drugs were FDA-

approved, when in fact, they were not.328 Nevertheless, attaching an

unauthorized trademark to a shipping tray that truthfully stated the contents

— possibly stolen but genuine cans of infant formula — did not violate the

criminal counterfeiting statute.329 The Fifth Circuit in United States v. Hanafy

found in that case that the shipping tray was not a “counterfeit good” for

purposes of § 2320(a), rejecting Lanham Act precedent holding repackagers

328 United States v. Milstein, 401 F.3d 53, 62-63 (2d Cir. 2005). 329 Hanafy, 302 F.3d 485. 18 U.S.C. § 2320(f), added by the Stop Counterfeiting in Manufactured Goods Act, “is consistent with the court of appeals decision in United States v. Hanafy . . . .” H.R. Rep. 109-68, at 8 (2005).


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liable for failing to disclose that the products had been repackaged as

inapplicable in a criminal case. In Milstein, there was no liability because the

repackaging of the infant formula contained the same information for the

consumer as the original packaging and did not confuse or deceive consumers,

unlike the misleading repackaging in Hanafy that deceived consumers into

believing that the medications were approved by the FDA. Similarly, filling

genuine Coca-Cola bottles with a “cola like” carbonated beverage that is not

Coca-Cola and selling it as Coca-Cola is attaching a genuine mark to a

counterfeit product and is thus counterfeiting.330

Where genuine goods are not subject to quality control inspections by

the trademark owner, they may also be counterfeit.331 The Fourth Circuit

summarizes why:

It is easy to see as a practical matter why trademark holders . . .

330 United States v. Petrosian, 126 F.3d 1232, 1234 (9th Cir. 1997) (“When a genuine trademark is affixed to a counterfeit product, it becomes a spurious mark.”). See also General Electric Co. v. Speicher, 877 F.2d 531, 11 U.S.P.Q.2d 1125 (7th Cir. 1989) (use of boxes bearing plaintiff’s genuine mark and supplied by plaintiff to sell non-genuine goods that did not originate with plaintiff was counterfeiting); § IV[b][i]. 331 United States v. Farmer, 370 F.3d 435, 440-41 (4th Cir. 2004) (criminal defendant found in violation of 18 U.S.C. § 2320(a) where he affixed trademark owners’ logos to shirts according to his own quality control standards and not those of the trademark owners). See also Taylor Made Golf Co. v. MJT Consulting Group, LLC, 265 F. Supp. 2d 732, 741-42 (N.D. Tex. 2003) (re-shafted golf clubs were not subject to quality standards and inspection and were thus counterfeit).


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are accorded the right to control the quality of their goods: [the

defendant’s] shirts were almost certainly of inferior quality. Indeed, the

government even presented evidence that [the defendant] had shoddily

screen-printed and embroidered [the trademark owners’] logos.

Regardless, it is no defense . . . to claim that his shirts were of the same

quality as shirts assembled under [the trademark owners’] control: the

whole point is that deciding whether shirts pass muster is reserved to

[the trademark owners], not to [the defendant].332

[b] – Criminal Penalties

[i] – Fines and Imprisonment

The maximum criminal penalties for counterfeiting are 10 years

imprisonment and/or a $2 million fine in the case of an individual, and a $5

million fine in the case of a “person” other than an individual.333 The law

includes an additional provision with increased penalties for recidivists: In the

case of a second counterfeiting conviction, the person convicted, if an

individual, faces a maximum potential fine of $5 million and prison sentence

of 20 years. The maximum fine for a repeat offender other than an individual

332 Farmer, 370 F.3d at 441. 333 18 U.S.C. § 2320(a).


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rises to $15 million.334 The enhanced penalties may be imposed only where the

second violation occurs after the prior conviction.335

[ii] – Forfeiture and Destruction

When sentencing an individual convicted of an offense under 18

U.S.C. § 2320, a court shall order the forfeiture of the following: (1) any

proceeds from the offense or any property derived from proceeds from the

offense, obtained directly or indirectly; (2) any of the individual’s property used

or intended to be used “to commit, facilitate, aid, or abet” commission of the

offense; and (3) any article that bears a counterfeit mark or consists of such a

mark that was used in committing the offense.336 The following sections

describe these forfeiture categories.

Seizure, forfeiture and disposition of those items is governed by 21

U.S.C. § 853, “Criminal Forfeitures.”

[A] – Counterfeit Articles

The United States may obtain an order seeking the destruction of any 334 18 U.S.C. § 2320(a). 335 18 U.S.C. § 2320(a). “[T]hese enhanced penalties may be imposed only when the second violation occurs after the defendant has committed and been convicted of a prior violation. Thus, a defendant who violates section 2320 on two separate instances, but who is not convicted of the first violation until after the second one has occurred, is not subject to the enhanced penalties.” H.R. Rep. 98-997, at 11 (1984), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. IV-362. 336 18 U.S.C. § 2320(b)(3)(A).


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counterfeit articles in the possession of a defendant.337 No longer in the

statute is the requirement that the Government must prove by a

preponderance of the evidence that the goods actually bear counterfeit marks

before a court will issue such an order. Once a court grants a destruction

order, the defendant should not be allowed to retain any goods that are in fact

counterfeit, even if the defendant is eventually acquitted of the criminal

charge.338 Section 2320(b) gives courts the same options they have in ordering

civil destruction pursuant to 15 U.S.C. § 1118.339

337 “The following property shall be subject to forfeiture to the United States and no property right shall exist in such property: (A) Any article bearing or consisting of a counterfeit mark used in committing a violation of subsection (a) [18 U.S.C. § 2320(a)].” 18 U.S.C. § 2320(b)(1)(A). “At the conclusion of the forfeiture proceedings, the court, unless otherwise requested by an agency of the United States, shall order that any forfeited article bearing or consisting of a counterfeit mark shall be destroyed or otherwise disposed of according to law.” 18 U.S.C. § 2320(b)(2). In addition, in sentencing a person convicted of an offense under 18 U.S.C. § 2320, the court shall order that the person forfeit to the United States “any article that bears or consists of a counterfeit mark used in committing the offense.” 18 U.S.C. § 2320(b)(3)(A)(iii). 338 H.R. Rep. No. 98-997, 98th Cong., 2d Sess. 12 (1984) (“Even if the defendant is ultimately acquitted of the criminal charge, there is no valid public policy reason to allow the defendant to retain goods which are in fact counterfeit.”), reprinted in LaLonde, 9 Trademark Protection and Practice, at p. IV-382. 339 Id. (“The [House] Committee [on the Judiciary] intends that the court exercise the same options it has in ordering destructions pursuant to 15 U.S.C. § 1118.”).

That provision declares that where a court has established a violation of 15 U.S.C. § 1114, “the court may order that all labels, signs, prints, packages, wrappers, receptacles, and advertisements in the possession of the defendant, bearing the registered mark . . . shall be delivered up and destroyed,” and where there has been a violation of 15 U.S.C. § 1125(a) or a willful violation of 15 U.S.C. § 1125(c), “the


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While the legislative history of the original 1984 criminal counterfeiting

law suggests that courts order counterfeit articles be given to charitable

institutions or the federal government after removal of the counterfeit mark,340

the 2006 legislation makes clear that after the forfeiture proceedings, the court

must order the destruction of any forfeited article or part of an article that

contains or consists of a counterfeit.341

[B] – Property Used in Counterfeiting

The criminal counterfeiting law now provides that a convicted

defendant must forfeit any property or equipment used or intended to be used

in relation to the criminal offense.342 This requirement was added by the 2006

word, term, name, symbol, device, combination thereof, designation, description, or representation that is the subject of the violation, or any reproduction, counterfeit, copy, or colorable imitation thereof, and all plates, molds, matrices, and other means of making the same, shall be delivered up and destroyed.” 15 U.S.C. § 1118, discussed more fully at § V[b][vi] supra. 340 H.R. Rep. No. 98-997, 98th Cong., 2d Sess. 12 (1984) (“In practice, and in appropriate circumstances, the courts have ordered that counterfeit articles be given to charitable institutions or to the Federal Government. Rather than destroying goods that may have value, and that pose no threat to health or safety, the Committee believes that these goods should be preserved whenever possible, so long as the offending mark or designation is removed.”). 341 18 U.S.C. § 2320(b)(3)(B). The counterfeiting statute explicitly exempts counterfeit articles from 21 U.S.C. § 853(h), which allows forfeited property to be sold or disposed of by “any other commercially feasible means.” 342 “The following property shall be subject to forfeiture to the United States and no property right shall exist in such property: (A) Any property used, in any manner or part, to commit or to facilitate the commission of a violation of subsection (a) [18 U.S.C. § 2320(a)].” 18 U.S.C. § 2320(b)(1)(B). In sentencing a person convicted of an


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Act, the legislative history of which found that the old statutory language was

“simply inadequate for domestic enforcement purposes.”343

[C] – Proceeds and Property Derived from

Proceeds

Those convicted under 18 U.S.C. § 2320 must forfeit any property

derived, either directly or indirectly, from the proceeds of the violation.344 The

defendant must forfeit “any assets traceable to illegal counterfeiting activities,”

under the legislative history of the law.345 The Stop Counterfeiting in

Manufactured Goods Act amended the law to add this provision in 2006, with

the change “intended to provide forfeiture and destruction provisions similar

to those already enjoyed by copyright and trade secret holders.”346

[iii] – Restitution

When a person is convicted of an offense under 18 U.S.C. § 2320, the

offense under 18 U.S.C. § 2320, the court shall order that the person forfeit to the United States “any of the person’s property used, or intended to be used, in any manner or part, to commit, facilitate, aid, or abet the commission of the offense.” 18 U.S.C. § 2320(b)(3)(A)(ii). 343 H.R. Rep. 109-68, at 7 (2005). 344 In sentencing a person convicted of an offense under 18 U.S.C. § 2320, the court shall order that the person forfeit to the United States “any property constituting or derived from any proceeds the person obtained, directly or indirectly, as the result of the offense.” 18 U.S.C. § 2320(b)(3)(A)(i). 345 H.R. Rep. 109-68, at 7 (2005). 346 Id.


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court shall order him or her “to pay restitution to the owner of the mark and

any other victim of the offense . . . .” in addition to any other penalty

imposed.347 According to the counterfeiting statute, the order of restitution

shall be made pursuant to 18 U.S.C. §§ 3556, 3663A and 3664.348 Under the

criminal code, a “victim” is “a person directly and proximately harmed as a

result of the commission of an offense for which restitution may be

ordered.”349 The requirement of restitution was included by the Stop

Counterfeiting in Manufactured Goods Act of 2006.

[iv] – Jail Sentence

Of course, a conviction of criminal counterfeiting may also bring jail

time.350 The statute provides that an individual may be imprisoned “not more

347 18 U.S.C. § 2320(b)(4). 348 18 U.S.C. § 2320(b)(4). 349 18 U.S.C. § 3663A(a)(2). 350 See, e.g., United States v. Guerra, 293 F.3d 1279, 1286 (11th Cir. 2002) (finding that district court erred in relying in part on value of genuine product for sentencing purposes where there was sufficient evidence of the value of the counterfeit items); United States v. Bao, 189 F.3d 860 (9th Cir. 1999) (holding that “retail value” of counterfeit software manuals is proper measure for sentencing); United States v. Sung, 87 F.3d 194, 39 U.S.P.Q.2d 1221 (7th Cir.), enforced, 940 F. Supp. 172, 40 U.S.P.Q.2d 1367 (N.D. Ill. 1996) (where government unable to establish defendant's intent to sell additional large quantity of counterfeit goods, sentence reduced); United States v. Arman, 2006 U.S. Dist. LEXIS 4592 (N.D. Ill. 2006) (finding that trafficking in counterfeit cameras is “of the less serious offenses involving trafficking in counterfeit goods”; ordering resentencing after sentencing guidelines found to be advisory and not binding); United States v. Chatoor, 921 F. Supp. 453, 39 U.S.P.Q.2d


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than 10 years” and for a second offense that occurs after the first conviction,

the defendant may be imprisoned “not more than 20 years.”351

[v] – Criminal Fines

In addition to restitution, the government could request that the court

impose a criminal fine on a convicted counterfeiting defendant.352 Fines differ

from restitution in that they are a punishment and not a form of damages and

are payable to the government rather than the trademark owner.

[c] – Defenses to Criminal Counterfeiting

Section 2320(c) provides that “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.”353 In a

civil proceeding for trademark infringement, the Lanham Act specifies a

number of defenses, affirmative defenses and limitations on remedies.354

1379 (S.D. Tex. 1996) (value of goods and separate infringing logos used to calculate value of infringing items for sentencing purposes). 351 18 U.S.C. § 2320(a). 352 United States v. Foote, 413 F.3d 1240, 1252-53, 75 U.S.P.Q.2d 1353 (10th Cir. 2005) (upholding imposition of criminal fine in counterfeiting case but remanding for district court to review amount of fine, taking into account defendant’s ability to pay). 353 18 U.S.C. § 2320(c). 354 See generally LaLonde, 3 Trademark Protection and Practice, § 11.08. “ ‘Defense’ means any issue as to which the plaintiff has the burden of proof in a Lanham Act case, and ‘affirmative defense’ refers to matters as to which the defendant bears that burden…By ‘limitation on relief,’ this Act incorporates the protections for innocent


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Statutes of limitations used in civil Lanham Act trademark cases are

not relevant to criminal prosecutions.355 Instead, because the criminal

counterfeiting statute and the Lanham Act each lack its own express statute of

limitations, the criminal catch-all period of five years applies.356 Laches is also

not available as a defense to criminal counterfeiting charges.357

Under Subsection 2320(c), allocations of burdens of proof will be

identical to those in a comparable Lanham Act case. Placing the burden of

proof as to affirmative defenses on the defendant is not unconstitutional

because the government must still prove every element of its charge beyond a

reasonable doubt.358

The trademark owner's failure to mark its products with the ® symbol

is not a defense to a criminal counterfeiting prosecution.359 Lack of knowledge

printers and publishers that are contained in 15 U.S.C. § 1114(2), and any other limitations on relief that may be applicable under the Lanham Act.” 130 Cong. Rec. H. 12078 (joint statement on 1984 trademark counterfeiting legislation), reprinted in 8 Trademark Protection and Practice, at p. 34-617 to 34-618. 355 Foote, 413 F.3d at 1247 (refusing to overturn conviction on grounds that prosecution did not begin until after an analogous state-law statute of limitations). 356 18 U.S.C. § 3282. 357 United States v. Milstein, 401 F.3d 53, 63 (2d Cir. 2005) (“Because laches may not be asserted against the United States in a civil matter, it seems that it is equally inapplicable against the Government in a criminal prosecution.”) (citation omitted). 358 United States v. McEvoy, 820 F.2d 1170, 1173, 3 U.S.P.Q.2d 1399 (11th Cir. 1987). 359 United States v. Sung, 51 F.3d 92, 93-94, 34 U.S.P.Q.2d 1407 (7th Cir. 1995).


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that the mark is registered is not a defense under the Lanham Act’s civil

provisions,360 and it is irrelevant in a criminal prosecution whether the

defendant knew the mark was registered.361

VII Practical Steps for Trademark Owners

Besides initiating costly civil lawsuits against known counterfeiters,

what can a trademark owner do to protect itself and its valuable marks?

[a] – Register Trademarks with USPTO

Because infringers can only be liable for counterfeiting where the

genuine mark they are copying is registered on the principal register with the

USPTO,362 trademark owners should register marks that are likely to attract

counterfeiters, including trade dress.

[b] – Register Trademarks With Customs

Among many other duties, the United States Immigration and

Customs Enforcement (“ICE”) investigates violations of trademark rights by

merchandise that is imported into the U.S. Such violations include pirated

computer software, bootlegged music and videos, and counterfeit designer

clothing and pharmaceuticals. ICE and the FBI cooperatively staff the

360 15 U.S.C. § 1116(d)(1)(B)(i). 361 18 U.S.C. § 2320(e)(1)(A)(ii). 362 See § IV[b][iv].


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Intellectual Property Rights Center in Washington, DC, which handles U.S.

government enforcement of intellectual property rights. U.S. trademark

owners should record their marks with U.S. Customs and educate Customs’

representatives and inspectors about their goods.363

[c] – Make Goods Difficult to Counterfeit

There are multiple methods of making a product or package difficult

to imitate and several companies offer such technology, along with anti-

counterfeiting expertise. Holograms, difficult-to-replicate labels that display

different images when the angle of view changes, have been used for years to

foil counterfeiters, and may even include wireless tracking devices.364

Companies may also use security inks on their product or package that change

color when tilted or are visible only under UV light to authenticate the

product. (Some security inks are even food grade and may be used on

pharmaceuticals.) Bar codes of various types, both invisible and detectable by

the naked eye, can also be used to identify genuine goods, and one company 363 For a general overview of U.S. Customs enforcement and recordation of marks, see LaLonde, 1 Trademark Protection and Practice, § 4.05 and for forms and checklists for recordation with Customs, see 5 Trademark Protection and Practice, Chapter 29. 364 See Christina Passariello, “Trying to Fight Luxury Fakes,” Wash. Post , Feb. 22, 2006, at D1 (noting that Italian fashion house Fendi “has slowly been introducing holograms into the lining of its handbags, boots, suits and even $44,000 mink coats”; “The holograms also have a wireless tracking device that allows Fendi to monitor whether a genuine product is being sold in non-authorized stores.”).


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even offers coding that consumers can instantly validate online or with their

cell phone to be sure the product is real.

To protect the medication supply from counterfeiting, the Federal

Food and Drug Administration has recommended use of certain technologies,

including radio-frequency identification tagging that would track and trace

every package of drugs “from production to dispensing.”365 Pfizer Inc.

includes such tags on all packages of its Viagra pills to verify their

authenticity.366

[d] – Educate the Public

Let potential consumers of your product know how to spot a fake and

where you sell your authorized goods and where you do not. Posting such

information on the product web site is a relatively inexpensive means of

communication with the consumers.

365 “Combating Counterfeit Drugs: A Report of the Food and Drug Administration,” Feb. 18, 2004, available at www.fda.gov/oc/initiatives/counterfeit/report02_04.html. The Reducing Fraudulent and Imitation Drugs Act of 2006 would, if enacted, require the use of counterfeit-resistant technology into the packaging of prescription drugs. The bill, H.R. 4829, was introduced in the House of Representatives on March 1, 2006 and was referred to the Subcommittee on Health of the House Committee on Energy and Commerce on March 17, 2006. 366 “Viagra Packages to Include Anti-Counterfeit Tags,” Jan. 6, 2006, available at www.msnbc.msn.com/id/10739919/.


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[e] – Join the International Trademark Association or An

Industry Coalition

Gather and share information about counterfeiters with others in your

industry. The International Trademark Association makes anti-counterfeiting

activities a priority. It works extensively with foreign governments and

intergovernmental organizations to eliminate the threat of counterfeiting and

also has an active Anti-Counterfeiting and Enforcement Committee.367 There

are multiple coalitions united against counterfeiting, including Business Action

to Stop Counterfeiting and Piracy established by the International Chamber of

Commerce with members like Microsoft, Nestle, and GE368 and the Coalition

Against Counterfeiting and Piracy established by the U.S. Chamber of

Commerce and including over 130 businesses and associations.369

[f] – Monitor eBay and Other Auction Sites

Trademark owners need to monitor online auction sites, which often

contain infringing materials. The auction site eBay lists these examples to

explain to its sellers what types of postings are prohibited: “A purse that has

the Chanel® name on it, but which was not made by Chanel,” “Sunglassses

367 See www.inta.org. 368 See www.iccwbo.org/bascap/. 369 See www.thecacp.com.


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bearing the Oakley® name, but which are a style never made by Oakley,” and

“Replacement parts for an HP® printer which use HP's parts number and

name, but were not made by HP.”370

eBay has developed the Verified Rights Owner program (called VeRO)

where intellectual property owners register with eBay and can quickly request

removal of infringing listings on the site. eBay's Notice of Infringement can

be faxed to the site371 and subsequent complaints of infringement can be

handled by e-mail. The site also offers automatic searches for potentially

infringing items with which trademark owners can be notified daily of any

posted auctions containing specified search terms. Beginning in the Spring of

2006, eBay will add a “report this item” button on each listing.372

In addition, there are watch services that will use automated systems to

monitor online auctions and issue reports to trademark owners on their

findings. They may even send warning letters to sellers and initiate requests to

pull goods from the auction site.

370 Yahoo! Auctions simply notes that sellers are not allowed to offer “fake brand-name goods.” 371 See LaLonde, 5 Trademark Protection and Practice, at Form 30-15. 372 Hafner, “Let the Buyer Be Wary: Tips to Spot Knockoffs,” N.Y. Times (Jan. 29, 2006).


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[g] – Hire an Investigator

If you suspect that your company’s goods are being counterfeited, hire

a private investigator right away to ensure you have solid evidence on the

counterfeit goods and their location. It is best to have a third party like an

investigator make purchases of the counterfeit goods as evidence rather than

having a representative of the company or its attorney make such purchases; if

testimony is required in court about the counterfeit goods, the client or its

lawyer should not be put in the position of having to take the witness stand.

VIII A Brief History of United States Counterfeiting Law

Commercial counterfeiting became a widespread and lucrative business

in the United States for several reasons.373 First, due to the increasing

recognition and popularity of certain trademarked goods, unscrupulous

companies found it easier to market counterfeit goods than to market their

own goods under less well-known trademarks.374 Second, modern technology

373 Trademark Counterfeiting Act of 1983: Hearing before the Subcommittee on Patents, Copyrights and Trademarks of the Senate Committee on the Judiciary, 98th Cong., 1st Sess. 16 (Sept. 14, 1983) (statement of Gerald J. Mossinghoff, Assistant Secretary and Commissioner of Patents and Trademarks, United States Patent and Trademark Office). 374 “The availability of trademarks to stimulate consumer demand across previously insurmountable barriers of distance, culture, and language . . . created the economic incentive to siphon some of that demand through counterfeiting.” Curtis Krechevsky, “INTA and the Battle Against Counterfeiting,” 93 T.M.R. 145, 147


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made it easier to “reproduce” popular goods and their trademarks. Third,

counterfeit goods can be produced at much lower cost than the original

product, hence, the profit margin for counterfeit goods can be quite attractive.

Fourth, and perhaps most significantly, sanctions against counterfeiters were

either non-existent or ineffective. Outside of a civil action for trademark

infringement under the Lanham Act, no comprehensive federal statute existed

that was primarily aimed at commercial counterfeiting.

Before 1984, United States courts dealt with this increasingly serious

problem by applying traditional Lanham Act theories and remedies.375 On

occasion, certain other federal statutes could be used to reach product

counterfeiting. For example, the Food, Drug and Cosmetic Act made it a

crime to counterfeit food, drugs or cosmetics with intent to defraud.376 In

addition, the Piracy and Counterfeiting Amendments Act of 1982 to the

(2003). 375 See, e.g., Matter of Vuitton et Fils S.A., 606 F.2d 1, 204 U.S.P.Q. 1 (2d Cir. 1979) (finding likelihood of confusion with counterfeit items and approving ex parte temporary restraining orders); Playboy Enterprises, Inc. v. Baccarat Clothing Co., 692 F.2d 1272, 216 U.S.P.Q. 1083 (9th Cir. 1982) (overturning refusal to award profits and attorneys’ fees in counterfeiting case); Polo Fashions, Inc. v. Branded Apparel Merchandising, Inc., 592 F. Supp. 648, 225 U.S.P.Q. 480 (D. Mass. 1984) (finding “a clear and substantial likelihood that prospective consumers would be confused” in counterfeiting case). 376 21 U.S.C. §§ 331, 333. See, e.g., United States v. Jamieson-McKames Pharmaceuticals, Inc., 651 F.2d 532 (8th Cir. 1981); United States v. Cerrito, 413 F.2d 1270 (7th Cir. 1969).


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Copyright Act substantially toughened the criminal penalties for those found

guilty of pirating and counterfeiting copyrighted records, tapes and films and

made record piracy a five-year federal felony.377 In addition, the mail and wire

fraud statutes are federal criminal statutes of more general applicability that

can reach commercial counterfeiting.378 Finally, Section 5 of the Federal Trade

Commission Act prohibits unfair trade practices generally, including

counterfeiting.379

Nonetheless, prior to October 12, 1984, the Lanham Act was the

principal United States federal statute dealing with counterfeiting. The

Lanham Act, though, was not originally designed to combat counterfeiting. It

imposed only limited civil sanctions and no criminal penalties, even in

377 Pub. L. No. 97-180, codified in relevant part at 17 U.S.C. § 506(a) and 18 U.S.C. § 2319. See United States v. Smith, 686 F.2d 234, 215 U.S.P.Q. 846 (5th Cir. 1982). These provisions are still valid. In addition, under current United States copyright law, where a party holds a valid copyright in a work and another party distributes unauthorized copies of that work, the distributor may be found liable for copyright infringement. Island Software & Computer Serv., Inc. v. Microsoft Corp., 413 F.3d 257, 261, 75 U.S.P.Q.2d 1290 (2d Cir. 2005) (distribution of counterfeit and partially counterfeit copies of computer software was unrebutted “prima facie case of infringement through unauthorized distribution”). 378 18 U.S.C. §§ 1341, 1343. For example, in 1982 the United States Attorney's Office in New York prosecuted a seller of counterfeit jeans under these statutes, which resulted in a seven-year jail sentence. Justice Department Supports Criminal Penalties for Trademark Counterfeiting, 25 Pat. Trademark & Copyright J. 352 (Feb. 24, 1983). See also, e.g., United States v. Munchak, 443 F.2d 531 (2d Cir. 1971); Greenberg v. Cutler-Hammer, Inc., 452 F. Supp. 1387 (E.D. Wisc. 1978). 379 15 U.S.C. § 45.


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instances where the counterfeiter flagrantly violated the law. Although it had a

successful track record for resolving trademark disputes between honest

businesspeople, the Lanham Act was an ineffective tool for stemming the

counterfeiting tide.380 Its failure in this regard can be traced to its lack of

effective remedies.381

Before the Trademark Counterfeiting Act of 1984 was signed into law,

there were no specific criminal counterfeiting penalties in the United States

Code.382 Hence, a counterfeiter did not risk his personal freedom by

trafficking in counterfeit goods. Moreover, although the Lanham Act did

provide, at the court's discretion, for treble damages in cases of “willful and

intentional infringement,”383 such penalties were rarely imposed. Often, it was

not only difficult for a plaintiff to prove the intent of the counterfeiter, but it

380 130 Cong. Rec. H. 9253, 9256 (daily ed. Sept. 10, 1984) (statement of Rep. Shaw); Text of H.R. 6071 and Floor Remarks, 28 Pat. Trademark & Copyright J. (BNA) 582, 586 (Sept. 13, 1984). 381 Trademark Counterfeiting Act of 1984: Hearings before the Subcommittee on Crime of the House Committee on the Judiciary, 98th Cong., 1st Sess. 13 (Oct. 20, 1983); House Subcommittee on Crime Holds Hearing on Trademark Counterfeiting, 27 Pat. Trademark & Copyright J. (BNA) 13 (Nov. 13, 1983). 382 See J. Joseph Bainton, “Reflections on the Trademark Counterfeiting Act of 1984: Score a Few for the Good Guys,” 82 T.M.R. 1, 5 (1992) (“Although Congress had not criminalized the act of trademark infringement, there were bases for prosecuting counterfeiters under various state and federal statutes; but these laws were rarely applied.”). 383 15 U.S.C. § 1117 (1983); Deering, Milliken & Co. v. Gilbert, 269 F.2d 191, 122 U.S.P.Q. 355 (2d Cir. 1959).


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was equally, if not more, difficult to provide an accurate accounting of actual

damages.384

As a result, when a trademark owner tried to protect its mark in court,

it could rarely recoup the cost of trying the suit, let alone the damages actually

suffered.385 Even if a court issued a temporary restraining order to prevent the

continued sale of bogus goods, counterfeiters would simply ignore and violate

the order by destroying or hiding the property in question and subsequently

denying that it ever existed.386 Alternatively, upon learning that litigation was

imminent, counterfeiters would immediately transfer their inventory to another

384 See, e.g., In re Vuitton et Fils S.A., 606 F.2d 1, 2, 204 U.S.P.Q. 1 (2d Cir. 1979) (“[I]n most Vuitton cases defendants maintain few, if any, records. The now-too-familiar refrain from a `caught counterfeiter' is `I bought only a few pieces from a man I never saw before and whom I have never seen again. All my business was in cash. I do not know how to locate the man from whom I bought and I cannot remember the identity of the persons to whom I sold.'”); Attorneys Identify Practical Problems With Anticounterfeiting Legislation, 27 Pat. Trademark & Copyright J. (BNA) 380 (Feb. 16, 1984) (Richard A. Wallen, Los Angeles trademark attorney) (“Since counterfeiters keep no business records, the evidence as to the existence of counterfeit goods would be reduced to a swearing contest.”). 385 130 Cong. Rec. H. 9253, 9256 (daily ed. Sept. 10, 1984) (statement of Rep. Shaw); Text of H.R. 6071 and Floor Remarks, 28 Pat. Trademark & Copyright J. (BNA) 582, 584 (Sept. 13, 1984). 386 Attorneys Identify Practical Problems With Anticounterfeiting Legislation, 27 Pat. Trademark & Copyright J. (BNA) 380 (Feb. 16, 1984) (Richard A. Wallen, Los Angeles trademark attorney). See also 130 Cong. Rec. H. 9253, 9256 (daily ed. Sept. 10, 1984) (statement of Rep. Shaw); Text of H.R. 6071 and Floor Remarks, 28 Pat. Trademark & Copyright J. (BNA) 582, 584 (Sept. 13, 1984).


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counterfeit seller whose identity would be unknown to the trademark owner.387

Prior to passage of the 1984 Act, most courts would grant an ex parte

seizure order in a trademark counterfeiting case.388 Still, requests for seizure

orders were not granted uniformly. Some courts refused to grant seizure

orders, believing that they were without the authority to do so.389 Courts that

did order ex parte seizures relied upon a variety of existing laws to do so.390

Unfortunately, none of these other statutes specifically conferred on the courts

the power to order seizures of counterfeit goods.391

In 1984, the United States Congress created legislation aimed at

eliminating counterfeit goods and services.392 The legislative history reveals

387 E.g., Matter of Vuitton et Fils S.A., 606 F.2d 1, 2, 204 U.S.P.Q. 1 (2d Cir. 1979). 388 Fimab-Finanziaria Maglificio Biellese Fratelli Fila S.p.A. v. Kitchen, 548 F. Supp. 248, 249, 219 U.S.P.Q. 40 (S.D. Fla. 1982) (“The weight of authority around the country appears to favor the granting of ex parte seizure orders in trademark counterfeiting cases.”). 389 Trademark Counterfeiting Act of 1984: Hearings on H.R. 2447 Before the Subcommittee on Crime of the House Committee on the Judiciary, 98th Cong., 1st Sess. 181 (Nov. 3, 1983) (statement of Robert W. Sacoff, on behalf of the Section of Patent Trademark and Copyright Law of the American Bar Association). 390 Some relied on Rule 65 of the Federal Rules of Civil Procedure (relating to injunctions). Other courts relied on the All Writs Act, 28 U.S.C. § 1651, while still others derived such authority from Section 34 of the Lanham Act, 15 U.S.C. § 1116. Bainton, “Seizure Orders: An Innovative Judicial Response to the Realities of Trademark Counterfeiting,” 73 T.M.R. 459 (1983). 391 130 Cong. Rec. H. 12080 (joint statement on 1984 trademark counterfeiting legislation). 392 Original drafts of what was eventually to become the Trademark Counterfeiting Act of 1984 emphasized “counterfeit marks” as opposed to “counterfeit goods and


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that Congress's primary goals in crafting the Trademark Counterfeiting Act of

1984 were:

(1) creation of criminal penalties for intentionally dealing in materials

that one knows to be counterfeit; (2) authorization for mandatory or

virtually mandatory awards of treble damages and attorney's fees in

civil counterfeiting cases; and (3) authorization for ex parte court

orders for the seizure of counterfeit materials when it can be shown

that the defendant would be likely to attempt to conceal or transfer the

materials.393

The Lanham Act amendment in fact added criminal penalties for

counterfeiting, created essentially mandatory awards of treble damages and

attorneys’ fees in cases of civil counterfeiting, and codified the procedural

services.” The final version of the Act adopted the “goods and services” language because American trademark law provides no right to a mark in gross. Trademark Counterfeiting Act of 1983: Hearing before the Subcommittee on Patents, Copyrights and Trademarks of the Senate Committee on the Judiciary, 98th Cong., 1st Sess. 18 (Sept. 14, 1983) (statement of Gerald J. Mossinghoff, Assistant Secretary and Commissioner of Patents and Trademarks, United States Patent and Trademark Office); Commerce Dept. Voices Support for Tougher Laws Against Counterfeiting, 26 Pat. Trademark & Copyright J. (BNA) 469 (Sept. 22, 1983). 393 130 Cong. Rec. H. 12076 (joint statement on 1984 trademark counterfeiting legislation), reprinted in LaLonde, 8 Trademark Protection and Practice, at p. 34-615. The Act was accompanied by a significant amount of legislative history, reprinted in 8 Trademark Protection and Practice, at pp. 34-11 to 34-620 and 9 Trademark Protection and Practice, at 34-621 to 34-631.


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requirements for ex parte seizures in trademark counterfeiting cases. The

Trademark Counterfeiting Act of 1984, P.L. 98-473, was signed into law by

President Reagan on October 12, 1984.

Unfortunately, counterfeiting continues to harm consumers, trademark

owners and the American economy generally. Thus, in 2006, Congress passed

the Stop Counterfeiting in Manufactured Goods Act,394 which increased the

criminal penalties for trafficking in counterfeit goods395 and expanded the

definition of counterfeit goods to include labels, containers, and all other

forms of packaging not actually attached to the goods.396

IX Conclusion

Despite the hard fact that counterfeiting continues worldwide, in the

United States the laws to combat it have never been stronger. Because the

federal government lacks the resources to prosecute more than a tiny fraction

of counterfeiters, Congress has placed serious enforcement weaponry in the

hands of trademark owners. Apart from the usual incentives to stamp out

infringement, trademark owners have financial incentives that are not

insubstantial: There are mandatory treble damages or profits available in cases

394 Pub. L. No. 109-181. 395 18 U.S.C. § 2320(b)(1), (3). See § VI[b]. 396 18 U.S.C. § 2320(a). See § VI[a][i][A].


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of intentional trafficking in counterfeit goods, and since 1996 statutory

damages are available as an alternative, ranging from $500 to more than

$100,000 per counterfeit mark per type of goods sold or distributed. Of

course, these rights are largely illusory if the counterfeiters are judgment-proof.

Nevertheless, they represent highly significant rights that are not available in

routine cases of non-counterfeit trademark infringement.

Why do United States trademark owners proceed under the counterfeit

laws so infrequently? After all, the line between counterfeit and some types of

trademark infringement is not exactly a gulf. There are probably numerous

cases of trademark or trade dress infringement involving wrongful intent

brought without relying on the counterfeiting laws that could well qualify for

enhanced damages or statutory damages. Indeed, anti-counterfeiting laws may

apply even where the infringement is unintentional. Are trademark owners

missing the boat? Proof of civil counterfeiting may not be much different in

some cases from proving trademark infringement, although both are a long

way from proving that the acts are criminal.

Congress continues in its efforts to thwart counterfeiting, most

recently enacting the 2006 Stop Counterfeiting in Manufactured Goods Act

with little fanfare. The law, signed by the President on March 16, 2006, marks


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a new era in the fight to eradicate counterfeiting. In it Congress gave the

government sweeping powers to obtain forfeiture of any property or

equipment used or intended to be used in criminal counterfeiting. As a

deterrent and to make counterfeiting unprofitable, the Act makes sense.


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Appendix A

Civil Counterfeiting Provisions in United States Law

Section 32 – 15 U.S.C. § 1114

(1) Any person who shall, without the consent of the registrant--

(a) use in commerce any reproduction, counterfeit, copy, or colorable

imitation of a registered mark in connection with the sale, offering for sale,

distribution, or advertising of any goods or services on or in connection with

which such use is likely to cause confusion, or to cause mistake, or to deceive;

or

(b) reproduce, counterfeit, copy, or colorably imitate a registered mark

and apply such reproduction, counterfeit, copy, or colorable imitation to

labels, signs, prints, packages, wrappers, receptacles or advertisements

intended to be used in commerce upon or in connection with the sale, offering

for sale, distribution, or advertising of goods or services on or in connection

with which such use is likely to cause confusion, or to cause mistake, or to

deceive

shall be liable in a civil action by the registrant for the remedies hereinafter


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provided. Under subsection (b) hereof, the registrant shall not be entitled to

recover profits or damages unless the acts have been committed with

knowledge that such imitation is intended to be used to cause confusion, or to

cause mistake, or to deceive.

As used in this paragraph, the term “any person” includes the United

States, all agencies and instrumentalities thereof, and all individuals, firms,

corporations, or other persons acting for the United States and with the

authorization and consent of the United States, and any State, and

instrumentality of a State, and any officer or employee of a State acting in his

or her official capacity. The United States, all agencies and instrumentalities

thereof, and all individuals, firms, corporations, other persons acting for the

United States and with the authorization and consent of the United States, and

any State, and any such instrumentality, officer, or employee, shall be subject

to the provisions of this Act in the same manner and to the same extent as any

nongovernmental entity.

Section 34 – 15 U.S.C. § 1116

(a) The several courts vested with jurisdiction of civil actions arising


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under this act shall have power to grant injunctions, according to the principles

of equity and upon such terms as the court may deem reasonable, to prevent

the violation of any right of the registrant of a mark registered in the Patent

and Trademark Office or to prevent a violation under subsection (a), (c) or (d)

of section 43 [15 U.S.C. § 1125(a), (c), (d)]. Any such injunction may include a

provision directing the defendant to file with the court and serve on the

plaintiff within thirty days after the service on the defendant of such

injunction, or such extended period as the court may direct, a report in writing

under oath setting forth in detail the manner and form in which the defendant

has complied with the injunction. Any such injunction granted upon hearing,

after notice to the defendant, by any district court of the United States, may be

served on the parties against whom such injunction is granted anywhere in the

United States where they may be found, and shall be operative and may be

enforced by proceedings to punish for contempt, or otherwise, by the court by

which such injunction was granted, or by any other United States district court

in whose jurisdiction the defendant may be found.

(b) The said courts shall have jurisdiction to enforce said injunction, as

herein provided, as fully as if the injunction had been granted by the district

court in which it is sought to be enforced. The clerk of the court or judge


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granting the injunction shall, when required to do so by the court before which

the application to enforce said injunction is made, transfer without delay to

said court a certified copy of all papers on file in his office upon which said

injunction was granted.

(c) It shall be the duty of the clerks of such courts within one month

after the filing of any action, suit, or proceeding involving a mark registered

under the provisions of this Act to give notice thereof in writing to the

Director setting forth in order so far as known the names and addresses of the

litigants and the designating number or numbers of the registration or

registrations upon which the action, suit, or proceeding has been brought, and

in the event any other registration be subsequently included in the action, suit,

or proceeding by amendment, answer, or other pleading, the clerk shall give

like notice thereof to the Director, and within one month after the judgment is

entered or an appeal is taken the clerk of the court shall give notice thereof to

the Director, and it shall be the duty of the Director on receipt of such notice

forthwith to endorse the same upon the file wrapper of the said registration or

registrations and to incorporate the same as a part of the contents of such file

wrapper.

(d)(1)(A) In the case of a civil action arising under section 32(1)(a) of


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this Act (15 U.S.C. § 1114) or Section 220506 of title 36, United States Code

with respect to a violation that consists of using a counterfeit mark in

connection with the sale, offering for sale, or distribution of goods or services,

the court may, upon ex parte application, grant an order under subsection (a)

of this section pursuant to this subsection providing for the seizure of goods

and counterfeit marks involved in such violation and the means of making

such marks, and records documenting the manufacture, sale, or receipt of

things involved in such violation.

(B) As used in this subsection the term “counterfeit mark” means--

(i) a counterfeit of a mark that is registered on the principal register in

the United States Patent and Trademark Office for such goods or services

sold, offered for sale, or distributed and that is in use, whether or not the

person against whom relief is sought knew such mark was so registered; or

(ii) a spurious designation that is identical with, or substantially

indistinguishable from, a designation as to which the remedies of this Act are

made available by reason of Section 220506 of title 36, United States Code;

but such term does not include any mark or designation used on or in

connection with goods or services of which the manufacturer or producer was,

at the time of the manufacture or production in question authorized to use the


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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 court shall not receive an application under this subsection

unless the applicant has given such notice of the application as is reasonable

under the circumstances to the United States attorney for the judicial district in

which such order is sought. Such attorney may participate in the proceedings

arising under such application if such proceedings may affect evidence of an

offense against the United States. The court may deny such application if the

court determines that the public interest in a potential prosecution so requires.

(3) The application for an order under this subsection shall--

(A) be based on an affidavit or the verified complaint establishing facts

sufficient to support the findings of fact and conclusions of law required for

such order; and

(B) contain the additional information required by paragraph (5) of this

subsection to be set forth in such order.

(4) The court shall not grant such an application unless--

(A) the person obtaining an order under this subsection provides the

security determined adequate by the court for the payment of such damages as

any person may be entitled to recover as a result of a wrongful seizure or


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wrongful attempted seizure under this subsection; and

(B) the court finds that it clearly appears from specific facts that--

(i) an order other than an ex parte seizure order is not adequate to

achieve the purposes of section 32 of this Act (15 U.S.C. § 1114);

(ii) the applicant has not publicized the requested seizure;

(iii) the applicant is likely to succeed in showing that the person against

whom seizure would be ordered used a counterfeit mark in connection with

the sale, offering for sale, or distribution of goods or services;

(iv) an immediate and irreparable injury will occur if such seizure is not

ordered;

(v) the matter to be seized will be located at the place identified in the

application;

(vi) the harm to the applicant of denying the application outweighs the

harm to the legitimate interests of the person against whom seizure would be

ordered of granting the application; and

(vii) the person against whom seizure would be ordered, or persons

acting in concert with such person, would destroy, move, hide, or otherwise

make such matter inaccessible to the court, if the applicant were to proceed on

notice to such person.


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(5) An order under this subsection shall set forth--

(A) the findings of fact and conclusions of law required for the order;

(B) a particular description of the matter to be seized, and a description

of each place at which such matter is to be seized;

(C) the time period, which shall end not later than seven days after the

date on which such order is issued, during which the seizure is to be made;

(D) the amount of security required to be provided under this

subsection; and

(E) a date for the hearing required under paragraph (10) of this

subsection.

(6) The court shall take appropriate action to protect the person

against whom an order under this subsection is directed from publicity, by or

at the behest of the plaintiff, about such order and any seizure under such

order.

(7) Any materials seized under this subsection shall be taken into the

custody of the court. The court shall enter an appropriate protective order

with respect to discovery by the applicant of any records that have been seized.

The protective order shall provide for appropriate procedures to assure that

confidential information contained in such records is not improperly disclosed


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to the applicant.

(8) An order under this subsection, together with the supporting

documents, shall be sealed until the person against whom the order is directed

has an opportunity to contest such order, except that any person against whom

such order is issued shall have access to such order and supporting documents

after the seizure has been carried out.

(9) The court shall order that a United States marshal or other law

enforcement officer is to serve a copy of the order under this subsection and

then is to carry out the seizure under such order. The court shall issue orders,

when appropriate, to protect the defendant from undue damage from the

disclosure of trade secrets or other confidential information during the course

of the seizure, including, when appropriate, orders restricting the access of the

applicant (or any agent or employee of the applicant) to such secrets or

information.

(10)(A) The court shall hold a hearing, unless waived by all the parties,

on the date set by the court in the order of seizure. That date shall be not

sooner than ten days after the order is issued and not later than fifteen days

after the order is issued, unless the applicant for the order shows good cause

for another date or unless the party against whom such order is directed


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consents to another date for such hearing. At such hearing the party obtaining

the order shall have the burden to prove that the facts supporting findings of

fact and conclusions of law necessary to support such order are still in effect.

If that party fails to meet that burden, the seizure order shall be dissolved or

modified appropriately.

(B) In connection with a hearing under this paragraph, the court may

make such orders modifying the time limits for discovery under the Rules of

Civil Procedure as may be necessary to prevent the frustration of the purposes

of such hearing.

(11) A person who suffers damage by reason of a wrongful seizure

under this subsection has a cause of action against the applicant for the order

under which such seizure was made, and shall be entitled to recover such relief

as may be appropriate, including damages for lost profits, cost of materials,

loss of good will, and punitive damages in instances where the seizure was

sought in bad faith, and, unless the court finds extenuating circumstances, to

recover a reasonable attorney's fee. The court in its discretion may award

prejudgment interest on relief recovered under this paragraph, at an annual

interest rate established under section 6621(a)(2) of the Internal Revenue Code

of 1986 [26 U.S.C. § 6621(a)(2)], commencing on the date of service of the


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claimant's pleading setting forth the claim under this paragraph and ending on

the date such recovery is granted, or for such shorter time as the court deems

appropriate.

Section 35 – 15 U.S.C. § 1117 (excerpt)

(a) When a violation of any right of the registrant of a mark registered

in the Patent and Trademark Office, a violation under section 43(a) or (d) [15

U.S.C. § 1125(a), (d)], or a willful violation under section 43(c) [15 U.S.C. §

1125(c)], shall have been established in any civil action arising under this act,

the plaintiff shall be entitled, subject to the provisions of sections 29 [15

U.S.C. § 1111] and 32 [15 U.S.C. § 1114], and subject to the principles of

equity, to recover (1) defendant's profits, (2) any damages sustained by the

plaintiff, and (3) the costs of the action. The court shall assess such profits and

damages or cause the same to be assessed under its direction. In assessing

profits the plaintiff shall be required to prove defendant's sales only; defendant

must prove all elements of cost or deduction claimed. In assessing damages

the court may enter judgment, according to the circumstances of the case, for

any sum above the amount found as actual damages, not exceeding three times


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such amount. If the court shall find that the amount of the recovery based on

profits is either inadequate or excessive the court may in its discretion enter

judgment for such sum as the court shall find to be just, according to the

circumstances of the case. Such sum in either of the above circumstances shall

constitute compensation and not a penalty. The court in exceptional cases may

award reasonable attorney fees to the prevailing party.

(b) In assessing damages under subsection (a) of this section, the court

shall, unless the court finds extenuating circumstances, enter judgment for

three times such profits or damages, whichever is greater, together with a

reasonable attorney's fee, in the case of any violation of section 32(1)(a) of this

Act (15 U.S.C. § 1114(1)(a)) or section 220506 of title 36, United States Code

that consists of intentionally using a mark or designation, knowing such mark

or designation is a counterfeit mark (as defined in section 34(d) [15 U.S.C. §

1116(d)] of this Act), in connection with the sale, offering for sale, or

distribution of goods or services. In such cases, the court may in its discretion

award prejudgment interest on such amount at an annual interest rate

established under section 6621(a)(2) of the Internal Revenue Code of 1986 [26

U.S.C. § 6621(a)(2)], commencing on the date of the service of claimant's

pleadings setting forth the claim for such entry and ending on the date such


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entry is made, or for such shorter time as the court deems appropriate.

(c) In a case involving use of a counterfeit mark (as defined in section

34(d) (15 U.S.C. § 1116(d)) in connection with the sale, offering for sale, or

distribution of goods or services, the plaintiff may elect, at any time before

final judgment is rendered by the trial court, to recover, instead of actual

damages and profits under subsection (a), an award of statutory damages for

any such use in connection with the sale, offering for sale, or distribution of

goods or services in the amount of --

(1) not less than $500 or more than $100,000 per counterfeit mark per

type of goods or services sold, offered for sale, or distributed, as the court

considers just; or

(2) if the court finds that the use of the counterfeit mark is willful, not

more than $1,000,000 per counterfeit mark per type of goods or services sold,

offered for sale, or distributed, as the court considers just.

* * * * *

Section 36 – 15 U.S.C. § 1118


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In any action arising under this Act, in which a violation of any right of the

registrant of a mark registered in the Patent and Trademark Office, a violation

under section 43(a) [15 U.S.C. § 1125(a)] or a willful violation under section

43(c) [15 U.S.C. § 1125(c)] shall have been established, the court may order

that all labels, signs, prints, packages, wrappers, receptacles, and

advertisements in the possession of the defendant, bearing the registered mark

or, in the case of a violation of section 43(a) [15 U.S.C. § 1125(a)] or a willful

violation under section 43(c) [15 U.S.C. § 1125(c)], the word, term, name,

symbol, device, combination thereof, designation, description, or

representation that is the subject of the violation, or any reproduction,

counterfeit, copy, or colorable imitation thereof, and all plates, molds,

matrices, and other means of making the same, shall be delivered up and

destroyed. The party seeking an order under this section for destruction of

articles seized under section 34(d) (15 U.S.C. § 1116(d)) shall give ten days'

notice to the United States attorney for the judicial district in which such order

is sought (unless good cause is shown for lesser notice) and such United States

attorney may, if such destruction may affect evidence of an offense against the

United States, seek a hearing on such destruction or participate in any hearing

otherwise to be held with respect to such destruction.


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Appendix B

Criminal Counterfeiting Provisions in United States Law

18 U.S.C. § 2320

§ 2320. Trafficking in counterfeit goods or services (excerpt)

(a) Whoever intentionally traffics or attempts to traffic in goods or

services and knowingly uses a counterfeit mark on or in connection with

such goods or services, or intentionally traffics or attempts to traffic 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 shall, if an individual, 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, be fined not more than $ 5,000,000. In the case of an offense by

a person under this section that occurs after that person is convicted of

another offense under this section, the person convicted, if an individual,


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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.

(b)(1) The following property shall be subject to forfeiture to the

United States and no property right shall exist in such property:

(A) Any article bearing or consisting of a counterfeit mark used in

committing a violation of subsection (a).

(B) Any property used, in any manner or part, to commit or to

facilitate the commission of a violation of subsection (a).

(2) The provisions of chapter 46 of this title relating to civil forfeitures,

including section 983 of this title, shall extend to any seizure or civil forfeiture

under this section. At the conclusion of the forfeiture proceedings, the court,

unless otherwise requested by an agency of the United States, shall order that

any forfeited article bearing or consisting of a counterfeit mark be destroyed or

otherwise disposed of according to law.

(3)(A) The court, in imposing sentence on a person convicted of an offense

under this section, shall order, in addition to any other sentence imposed, that

the person forfeit to the United States--


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(i) any property constituting or derived from any proceeds the

person obtained, directly or indirectly, as the result of the offense;

(ii) any of the person's property used, or intended to be used,

in any manner or part, to commit, facilitate, aid, or abet the

commission of the offense; and

(iii) any article that bears or consists of a counterfeit mark used

in committing the offense.

(B) The forfeiture of property under subparagraph (A), including any

seizure and disposition of the property and any related judicial or

administrative proceeding, shall be governed by the procedures set forth in

section 413 of the Comprehensive Drug Abuse Prevention and Control Act of

1970 (21 U.S.C. 853), other than subsection (d) of that section.

Notwithstanding section 413(h) of that Act, at the conclusion of the forfeiture

proceedings, the court shall order that any forfeited article or component of an

article bearing or consisting of a counterfeit mark be destroyed.

(4) When a person is convicted of an offense under this section, the

court, pursuant to sections 3556, 3663A, and 3664, shall order the person to


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pay restitution to the owner of the mark and any other victim of the offense as

an offense against property referred to in section 3663A(c)(1)(A)(ii).

(5) The term `victim', as used in paragraph (4), has the meaning given

that term in section 3663A(a)(2).

(c) 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.

(d) (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-

-


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(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.

(e) 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


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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, hangtags, 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


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manufactured or produced, by the holder of the right to use such mark or

designation.

(2) 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;

(3) the term “financial gain” includes the receipt, or expected receipt, of

anything of value; and

(4) 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.).

(f) 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.

* * * * *

(Rel. 58-5/06 Pub.726)

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