Trademarks are protected in the US by both civil and criminal statutes. Civil lawsuits can be brought under the Lanham Act by private parties alleging trademark infringement. However, in appropriate circumstances, the government can bring criminal charges of trafficking the goods that infringe on protected trademarks. In this sense, trafficking is used in the same manner as trafficking in illegal drugs or similar criminal behavior.

Trafficking in trademarked goods is criminalized under the Trademark Counterfeiting Act. See 18 U.S.C. § 2320. Under subsection f(5), “trafficking” is defined to 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.”

To obtain a conviction for trademark trafficking, the government must prove beyond a reasonable doubt one of the following:

• The accused trafficked in goods or services and knowingly uses a counterfeit mark on or in connection with such goods or services OR
• The accused trafficked in labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hang tags, 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 OR
• The accused trafficked in goods or services knowing that such good or service is a counterfeit military good or service the use, malfunction, or failure of which is likely to cause serious bodily injury or death, the disclosure of classified information, impairment of combat operations, or other significant harm to a combat operation, a member of the Armed Forces, or to national security OR
• The accused trafficked in a drug and knowingly uses a counterfeit mark on or in connection with such drug OR
• Attempts or conspires to do any of the above in paragraphs (1) through (4)

As can be seen, the accused must KNOWINGLY engage in prohibited behavior. Thus, intent must be proven by the government. Further, that the trademark or service mark is a counterfeit. Note that because of how “trafficking” is defined, the sale of even one item that has a counterfeit trademark or service mark can be prosecuted.

The crime of trademark trafficking is a felony with a potential term of imprisonment and a $2 million fine for the first offense.

The Trademark Counterfeiting Act specifically allows an accused to defend against the charges by using any of the traditional defenses available under the Lanham Act.

Penalties and Sentencing: What Convicted Defendants Face

The criminal penalties under 18 U.S.C. § 2320 are severe and scale with the defendant’s history and the nature of the counterfeited goods. For a first-time offender, a conviction for trafficking counterfeit goods carries up to 10 years imprisonment and a fine of up to $2 million. For repeat offenders, the maximum imprisonment doubles to 20 years and the fine ceiling rises to $5 million. If the offense involves counterfeit military goods or pharmaceuticals — categories where counterfeiting can directly endanger lives — courts typically apply sentencing enhancements, and federal prosecutors prioritize these cases.

Organizations convicted under the Act face fines up to $5 million for a first offense and up to $15 million for subsequent offenses. Courts also routinely order forfeiture of all counterfeit goods, the equipment used to manufacture them, and any proceeds derived from the trafficking. Forfeiture can be the most financially devastating component of a criminal trademark counterfeiting conviction, wiping out all business assets associated with the counterfeit operation.

The Relationship Between Criminal and Civil Trademark Enforcement

Criminal prosecution under the Trademark Counterfeiting Act does not preclude parallel civil enforcement by the trademark owner. Under the Lanham Act, a trademark owner may sue for counterfeiting and, if successful, elect either actual damages (including the defendant’s profits) or statutory damages. For willful counterfeiting, statutory damages under 15 U.S.C. § 1117(c) range from $1,000 to $200,000 per counterfeit mark per type of goods or services, and up to $2 million per mark per type of goods if the court finds the use was willful. In practice, the existence of a criminal conviction — or even an ongoing criminal investigation — greatly strengthens the trademark owner’s civil case by establishing the defendant’s knowing and willful conduct.

Trademark owners confronting counterfeiting should coordinate with law enforcement early in the process. The National Intellectual Property Rights Coordination Center (IPR Center) is a US government interagency task force that coordinates federal counterfeiting investigations across the FBI, Homeland Security Investigations (HSI), US Customs and Border Protection, and other agencies. Referring a matter to the IPR Center can result in criminal prosecution at no cost to the trademark owner while the owner simultaneously pursues civil remedies.

Online Counterfeiting: The E-Commerce Challenge

The growth of e-commerce has created an explosion of trademark counterfeiting. Counterfeit goods are sold through third-party marketplace listings on Amazon, eBay, Alibaba, and dozens of smaller platforms. Under the Stop Online Piracy Act (SOPA) proposals that were debated in Congress and ultimately not passed, and under existing law, platforms retain significant immunity for third-party listings under Section 230. However, platforms that take active roles in fulfilling counterfeit orders or that are on notice of counterfeiting and fail to act may face contributory liability under trademark law, as established in Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d 93 (2d Cir. 2010).

Brand owners can use platform reporting mechanisms, US Customs and Border Protection’s e-Recordation program (which alerts CBP to watch for infringing imports), and domain name dispute proceedings under the Uniform Domain-Name Dispute-Resolution Policy (UDRP) to combat online counterfeiting on multiple fronts simultaneously.

Defenses Available to Accused Counterfeiters

While the Act is powerful, defenses exist. Common defenses in trademark counterfeiting cases include:

• Lack of knowledge — Because the statute requires knowing use of a counterfeit mark, a defendant who genuinely did not know the goods bore a counterfeit mark — for example, a retailer who purchased inventory from a supplier who misrepresented the goods — may have a viable defense. However, willful blindness to obvious red flags does not constitute a lack of knowledge.
• No likelihood of confusion — A defendant may argue that the mark used is not a “counterfeit mark” because it is not likely to cause consumer confusion with the registered mark.
• Invalidity of the registered mark — If the registered trademark being infringed is itself invalid — for example, because it was obtained by fraud or has been abandoned — that invalidity is a defense to both civil and criminal liability.
• First sale doctrine — Resale of genuine trademarked goods purchased through legitimate channels is not trademark infringement. However, this defense does not apply to goods that have been repackaged, relabeled, or materially altered.

Contact Revision Legal

Revision Legal’s trademark attorneys represent both brand owners pursuing counterfeiters and defendants facing trademark counterfeiting claims. If your brand is being infringed or if you are facing a criminal or civil counterfeiting investigation, contact us today.