Counterfeit Law Blog

At her testimony before the Committee on House Judiciary Subcommittee on Courts, The Internet, and Intellectual Property during hearings on the PRO-IP bill last December, Sigal P. Mandelker, the Deputy Assistant Attorney General responsible for the Criminal Division of the Department of Justice (DOJ), touted the DOJ's increased efforts and successes in prosecuting counterfeiters.  According to Mandelker, DOJ filed 217 intellectual property cases in fiscal year 2007, a 7% increase over the 204 cases filed in 2006 and a 33% increase over the 169 filed in 2005. Mandelker reported that 287 defendants were sentenced in fiscal year 2007 on IP-related charges.  This is a 35% increase over 2006 and a whopping 92% increase over 2005.   Mandelker noted that, in fiscal year 2006, 187 defendants were convicted of criminal copyright and trademark offenses, an increase of 57% over 2005.  Of these, 39 were sentenced to 25 months or more.

Some of the highlights cited in Mandelker's testimony include:

• The October 12, 2007 sentencing, in the Eastern District of Virginia, of Abbas Chouman to  57 months in prison on one count of conspiracy to commit criminal copyright infringement.  Chouman was also ordered to forfeit $7 million. Chouman had pleaded guilty after being charged with operating a store that sold more than $7 million worth of counterfeit clothing.
• On August 6, 2007, two individual were sentenced in the Northern District of California to 37 months in prison for conspiracy to commit copyright infringement and trafficking in counterfeit goods and labels. The sentences were the result of Operation Remaster, an undercover FBI  investigation which resulted in seizure of approximately 494,000 pirated music, software, and movie CDs and DVDs, and more than 6,135 stampers for production of counterfeit optical disks.
  
• On June 22, 2007, the federal court for the Eastern District of Virginia sentenced Hew Raymond Griffiths to 51 months in prison for running an Internet software piracy operation known as DrinkOrDie out of his home in Australia.  The group was involved in the reproduction and distribution of pirated software, movies, games and music worth more than $50 million.  Griffiths' extradition from Australia to the US was one of the first extraditions for an intellectual property offense.
• On June 22, 2007, the last of nine defendants pleaded guilty in the District of Wisconsin to felony copyright infringement charges arising out of their involvement in eBay auctions of counterfeit Rockwell Automation software. The software had a combined retail value of approximately $30 million.
  
• On August 25, 2006, the Eastern District of Virginia sentenced the operator of piracy website BUYUSA.com to six years in prison and ordered him to pay $4.1 million in restitution. The forfeiture order in the case included a helicopter, two Cessna airplanes, a Lamborghini, a Hummer, a boat, and an ambulance.

WWD reports today that six individuals were arrested Tuesday in what may be the first New York City criminal counterfeiting case involving fragrances. The arrests resulted from an NYPD raid on Price Right Perfume and Watches, located at 1205 Broadway in Manhattan. According to WWD, more than 600 bottles of counterfeit fragrances with a retail value of $36,000 were seized including fakes labeled Armani, Ralph Lauren, Chanel, Kenneth Cole, Liz Claiborne and Davidoff. The report quotes an unidentified source as estimating that the store’s inventory had a retail value of close to $3 million, although the portion of this that is counterfeit remains to be determined. The raid was preceded by an investigation sponsored by the Fragrance Foundation and several leading fragrance companies, according to WWD. The industry may have been aided in their efforts to interest law enforcement in the case by the concern that counterfeit fragrances may contain ingredients that are irritating or harmful to consumers.

The recent sentencing of Mamdou Diallo illustrates that many members of the federal judiciary are unsympathetic to Government requests for stiff sentences for counterfeiters.  Federal prosecutors asked for a sentence of 33 to 41 months in prison for Diallo, who was was found guilty of trafficking in goods bearing counterfeit trademarks in April 2006 after a trooper found counterfeit Louis Vuitton, Prada, Coach, Kate Spade, Bluberry and Chanel handbags, clothing and jewelry in his van.  A similar sentence was also recommended by the probation officer who prepared Diallo's presentence report.  Both relied on the cost of the genuine versions of the goods that Diallo sold -- approximately $215,000 -- in assessing the seriousness of Diallo's crime.  In contrast, Diallo's lawyers argued that the sentence should be based on what Diallo would have sold the counterfeits for -- around $10,000.  U.S. District Court Judge Nora Barry Fischer, of Pittsburgh, accepted the defense's argument, sentencing Diallo to 6 months’ home detention, 3 years’ probation and restitution of $2,600. According to The Herald of Sharon, PA, Judge Barry felt that the value of a genuine item does not provide an accurate assessment of the harm to a trademark or copyright caused by counterfeiting, reflecting a fairly sanguine view of the harms caused to brand-owners by counterfeiting.  Judge Barry reportedly also adopted the lower value because the goods “would not appear to a reasonably informed purchaser to be identical” to genuine items and the defendant intended to sell them at a flea market for prices significantly below the prices of the genuine versions.

In what ICE is touting as the largest national enforcement action targeting electronics counterfeiting, ICE agents executed 32 federal search warrants in 16 states last week, raiding businesses and residences suspected of involvement in the importation, sale distribution and installation of illegal modification chips for gaming consoles. The counterfeit components and software targeted by the investigation are used to circumvent IP protections and allow users to play pirated or illegally obtained video games on Sony, Microsoft and Nintendo gaming consoles.

According to the U.S. Attorney’s Office for the District of Arizona, Wei Tung Lam and Sau Kuen Chan pled guilty May 29 to charges of conspiracy to bribe a public official and to traffic in counterfeit merchandise.  Lam also pled guilty to trafficking in counterfeit goods.  Both defendants were being prosecuted for their role in a counterfeiting operation that allegedly imported more than $69 million of fake Nike shoes into the United States from China.  The U.S. Attorney's press release states that Lam and Chan were the last to plead guilty of five individuals who were arrested in August 2006 in what has been described as one of the largest counterfeiting operations in U.S. history. A conspiracy conviction carries a maximum penalty of five years in prison, a $250,000 fine or both. A conviction on charges of trafficking in counterfeit goods carries a maximum of 10 years imprisonment, a $2 million fine or both.

The investigation leading to the arrests was conducted by U.S. Immigration and Customs Enforcement (ICE) and U.S. Customs and Border Protection (CBP) and culminated in the seizure of 78 sea cargo containers bearing over $69 million of counterfeit merchandise.  According to the indictment, the defendants attempted to bribe an undercover federal agent posing as a CBP officer to falsify records so that it would appear as if the shoes were re-exported to Mexico, when, in fact, they were intended for sale in the U.S.

The 10th Circuit Court of Appeals reversed a $321,663 restitution award to Microsoft April 17 after concluding that the government had failed to prove that Microsoft would have sold genuine software to the defendant's customer if the customer had not purchased the defendant's counterfeit software. United States v. Hudson, 2007 WL 1128895 (10th Cir. Apr. 17, 2007).  The restitution had been awarded to Microsoft after the defendant pled guilty to the federal crimes of conspiracy to infringe a copyright in violation of 17 U.S.C. § 506(a)(1) and 18 U.S.C. §§ 371 and 2319(b)(1). The defendant's one-year prison sentence was not challenged in the appeal.

Hudson and his co-conspirators had sent faxes to various businesses offering Microsoft software at large discounts. In response to this fax, a Maryland company, Builder’s FirstSource (“BFS”), ordered 537 copies of Microsoft Office 2000 Professional Edition for a price of $85,383. Almost immediately after receiving the software, BFS grew suspicious that it was

Dover, Delaware police have arrested a man after allegendly making two purchases of cocaine and heroin from him.  According to WBOC, a search of the man's home revealed 15 bags of heroin, 7 grams of cocaine, 5 grams of marijuana, several items of drug paraphernalia and counterfeit clothing, movie DVDs and music CDs. The counterfeit items represent 28 different companies, including the National Football League, Major League Baseball, National Basketball Association and various clothing manufacturers, according to the police.  The man was charged with two counts of delivery of cocaine, two counts of delivery of heroin, possession with the intent to distribute cocaine, possession with the intent to distribute heroin, possession of marijuana, three counts of possession of drug paraphernalia, three counts of maintaining a dwelling, 28 counts of trademark counterfeiting and two counts of transfer of recorded sounds.

In People v. Fattah, 2007 WL 1018573 (Cal App. 5 Dist. Apr. 5, 2007), the California Fifth District Court of Appeals upheld an award to the RIAA of $150,001 in restitution for lost profits in a state criminal counterfeiting prosecution. The State charged Fadel Ahmad Abdel Fattah and his wife with selling or possessing for sale counterfeits of a registered mark in violation of California Penal Code Section 350(a)(2) and with failing to disclose the origin of a recording or audiovisual work in violation of Penal Code Section 653w(b)(1). Fattah pled no contest to the counterfeiting count and admitted a $150,000 loss enhancement under a provision of the Penal Code which requires the court to impose an additional sentence of two years in cases in which the loss exceeds $150,000. At the restitution hearing, the Government and Fattah agreed that he had engaged in the business of distributing CDs and cassette tapes to various stores, that law enforcement officers seized 19,700 cassettes and 22,160 CDs from his garage and van, and that investigators for the RIAA examined 13,881 of the

Police in Moscow seized more than 1.2 million bottles of counterfeit perfume and eau de toilette worth $5.7 million that apparently were imported from Poland, The Moscow Times reported today.

A Russian businesswoman who continued to use counterfeit Microsoft and Autodesk software despite law enforcement warnings that she cease doing so has been given a one year suspended sentence, according to CNews.

The Times Union reports that six men were charged with selling unauthorized Evanescence T-shirts near the Glens Falls, New York Civic Center on April 5.

Vancouver police recently seized pirated DVDS of the films The Departed, Blood Diamond, The Last King of Scotland and Charlotte's Web at a music store.  Also found were 800 game titles, more than 1,000 Asian movie/music videos, six DVD burners and packaging equipment, reports 24 hours.

NY1 reports that 12 shoppers who were herded into a store's basement during a Chinatown raid last week were trapped there for hours after police raided the store, arresting the merchants on trademark counterfeiting charges and seizing hundreds of counterfeit bags, sunglasses and wallets.  Three of the five arrested will be facing unlawful imprisonment charges as well trademark counterfeiting charges.  The raid was part of an NYPD crackdown on piracy and counterfeiting.

A New York man and his co-conspirators were arrested March 7 and charged with conspiracy and trafficking in counterfeit clothing.  According to the U.S. Attorney, Abbas Chouman, and his co-conspirators operated a wholesale counterfeit clothing business out of a store in Astoria, New York.  The group's customers were asked to pay C.O.D. for their purchases.  From December 1, 2004 through September 1, 2006, UPS collected and deposited almost $19 million dollars into the business's bank account from such sales.  The Government is seeking to forfeit the contents of the account.  The multi-state investigation that led to these arrests was conducted by the FBI, the Virginia State Police, Defense Criminal Investigative Service, the Henrico County Police Department, the Chesterfield County Police Department and the Richmond Police Department.

An Indiana man was sentenced March 28 to 27 months in federal prison for his eBay sales of counterfeit copies of expensive industrial process software made by Wisconsin-based Rockwell Automation Inc. After pleading guilty to one count of trafficking in copyright-infringing software, the man, Courtney Smith, was also was fined $2,000, ordered to pay $5,200 in restitution and sentenced to two years of supervised release after his sentence ends, reports the Associated Press at law.com. Smith sold the software in 2004 for around $4,000.  An equivalent amount of genuine Rockwell software would have been worth $700,000 according to the report.  Smith's attorney is quoted as saying that his client, was the "least egregious" of several people who will be either going to trial or sentenced soon in similar cases.

The case was prosecuted by federal prosecutors in Indianapolis in cooperation with the Justice Department's Computer Crime and Intellectual Property Section.

An eBay trader was arrested in London yesterday after an extensive investigation by the Federation Against Copyright Theft.  The Metropolitan Police also seized hundreds of pirated DVDs that were awaiting shipment to customers.  Click here for more information.

A dozen police and probation officers in Harrisburg, Pennsylvania arrested at least 12 people and seized about $300,000 in counterfeit clothing from local stores last Friday, according to the Patriot-News.

New York State Police charged two Bronx men with trademark counterfeiting and failure to disclose the origin of a recording after they pulled the men over for making unsafe lane changes and found over 530 counterfeit CDs and DVDs in duffel bags inside a suitcase in their car, reports midhudsonmostwanted.com.

A Tallahassee optometrist's report that his patients were purchasing contact lenses from unlicensed sources resulted in an investigation in which more than 500 pairs of counterfeit Nike shoes and more than 4,000 pirated CDs and DVDs valued at more than $150,000 were seized February 28, reports tallahassee.com.

Yahoo News reports that a Mumbai court has jailed a Mumbai-based wholesaler of pirated movies pirate for seven months and fined him 55,000 rupees ($1,250) afer finding him guilty under the Indian Copyright Act. The pirate was arrested October 27, 2005  and several thousand pirated DVDs of movies like "Fantastic 4," "Rush Hour," "Troy" and "Mr. & Mrs. Smith" were seized from him after authorities received a complaint from the Motion Picture Association.

Three people were arrested and approximately $250,000 in counterfeit clothing, Nike shoes and jewelry was seized on February 27 from two stores in Columbus, Georgia, reports the Ledger-Enquirer.   

The New York Sun reports that a Queens man, Julio Quevedo, was arrested for selling counterfeit costumes of children's television characters, after selling a  $250 Bob the Builder costume to an investigator for the Queens district attorneys office who posed as an adult film maker looking for costumes for the cast of a pornographic film.  Police found dozens of other counterfeit costumes in the man's self-storage unit in the Jamaica section of Queens, including Dora the Explorer, Scooby Doo, and Barney, the district attorney's office said. Mr. Quevedo was arraigned on February 25 for trademark counterfeiting in the second degree at Queens Criminal Court. If convicted he faces up to four years in prison.

A routine traffic stop of a rental truck by Bridges and Tunnels Officers working for New York's Metropolitan Transportation Authority resulted in seizure of $36,000 worth of counterfeit Nike Air Jordan sneakers, reports playful.com.  The officers stopped the truck for a traffic violation outside the Queens Midtown Tunnel on February 25.  The driver's suspicious demeanor led them to check the back of the truck where they found 246 boxes of phony Air Jordans.  Both the driver and his passenger were charged with trademark counterfeiting and the passenger was charged with giving the officers a fake name.

Fox News reports that a raid on a warehouse located in City of Industry, California resulted in the seizure of counterfeit clothing and shoes worth up to $25 million.  The raid was conducted by the Sheriff's Special Problems Team from La Puente  acting on a tip.  The seized items are labeled with brand names including Abercrombie and Fitch, Nike, RocaWear and Enyce. Authorities 

The FBI has taken down the web site L2Extreme.com, which provided subscribers with fraudulent access to NCSoft's multiplayer online role-playing game Lineage II and pirated copies of the game. L2Extreme used NCSoft's own bandwidth to download stolen copies of its game client. NCSoft's losses to NCSoftin bandwidth costs alone are estimated at nearly a million dollars.

The Cebu Sun Star reports that the Philippine National Bureau of Investigation-Intellectual Property Rights Division (NBI-IPRDR) has raided three stores engaged in software piracy, seizing several computers and CD-ROM installers as well as various versions and editions of Microsoft Windows and Office.

South Carolina news station WLTX reports that authorities in Columbia, South Carolina seized $127,679 in counterfeit goods yesterday. The seized items include jeans, hats, jackets, shirts, shoes, jewelry, watches and sunglasses. The counterfeited brands include Bape, Burberry, Chanel, Coach, Evisu, Fendi, Lacoste, LRG, Nike, Phat Farm, Playboy, Prada, Ralph Lauren, Red Monkey, Roca Wear and Timberland. Rafia Rehmani of Columbia has been charged with trafficking in counterfeit merchandise at Cuz Fashions at the Dutch Square Mall in Columbia. Under South Carolina law, trafficking in counterfeit goods is a felony with a fine up to $25,000 and/or five years in prison.

According to the Orange County Register, police in Huntingdon Beach, California seized 800 pairs of counterfeit Oakley sunglasses valued at about $81,000 on November 1st. No arrests have been made pending completion of forensic tests.

The South African Broadcasting Association reports that five people suspected of manufacturing counterfeit DVDs and CDs were arrested and their equipment seized in Kempton Park, South Africa yesterday.

Federal court Judge Scott Coogler of the Northern District of Alabama sentenced Husain Abdul Alim on Nov. 9 to 37 months in prison for trafficking in goods bearing counterfeit trademarks. Earlier this year, ICE seized over 3,000 counterfeit items with a retail value of over $600,000 from Alim's store in Tuscaloosa, Alabama, including sports jerseys, shoes, sunglasses, and handbags bearing counterfeit trademarks owned by companies including Mitchell & Ness, Nike, Louis Vuitton, Lacoste and Burberry. In an ironic twist, a sign in Alim's store advertised that it sold "brands you trust." In addition to the prison sentence, Alim was fined $25,000. Click here for more info.

South Florida is a hotbed of counterfeiting activity. Fortunately, law enforcement officials here take counterfeiting fairly seriously and, over the last year, have had a series of successes against manufacturers, importers and wholesalers of counterfeit goods.

In the latest raid, the Broward Sheriff's Office (BSO) announced that it arrested Mantin Ng on Thursday after undercover detectives completed one of several buys of counterfeit watches from her. BSO seized 1,986 fake watches from Ng's storage lockers, including counterfeit Rolex, Gucci, Chanel, Cartier and Brietling brands, all made in China.

According to BSO, Ng has been wholesaling counterfeit watches for several years. Her retailer customers sell the fakes to consumers for about $300 each.

Ng, who is charged under Florida law with one count of vending goods or services with counterfeit trademarks was released on $1,000 bond. She faces a maximum jail sentence of five years.

The U.S. Sentencing Commission's emergency amendment to the sentencing guideline for criminal infringement of copyrights or trademarks went into effect on September 12. Enacted in response to the Stop Counterfeiting in Manufactured Goods Act (the "Act"), the guideline amendment changes the way in which courts determine an offense's "infringement amount," a factor that can result in a sentencing enhancement in federal counterfeiting cases. Under the amendment, in cases in which counterfeit labels are not affixed to goods, the "infringement amount" is to be based on "the retail value of the genuine goods that the counterfeit label would help imitate if the counterfeit goods appear to be identifiable, genuine goods."

Thus, in a case in which an offender trafficked counterfeit tags to be used on designer purses (as in the Giles case), the infringement amount would be based on "the value of the genuine designer purses, if they can be identified and would appear to a reasonably informed purchaser to be genuine."

To be made permanent, the emergency amendment must be re-promulgated on or before May 1, 2007.

The attorney for Doug Albers, a Kansas pharmacist accused of participating in a nationwide scheme to distribute and sell fake Lipitor and other drugs, announced that his client will plead guilty tomorrow to charges that he bought the drug Neupogen, used to increase white blood cells, through unlicensed brokers and that he distributed counterfeit drugs. The government will drop charges against Albers and his company, Albers Medical Distributors Inc., relating to the sale of counterfeit Lipitor.

Albers, his company and about a dozen others were indicted in August 2005 for conspiring to sell $42 million in counterfeit, stolen or illegally imported drugs, including fake Lipitor manufactured in Costa Rica.

Under the plea agreement, Albers can be sentenced for up to three years on each of two counts and fined up to $500,000. He has agreed to give up his pharmacist's license. Albers Medical Distributors will pay a civil forfeiture fine of $500,000.

Eleven men were arrested today in a raid on two warehouses at which federal and local authorities seized pirated CDs and DVDs valued at more than $14 million, disc burners and counterfeit designer sportswear.

According to Associated Press, ten of the men were found hiding in a bathroom. Police had to use stun guns against two of the men who tried to escape.

Pirated CDs and DVDs were apparently sold from rooms in the back of the warehouse.

The Department of Justice and the Department of Homeland Security announced today "the break up of one of the largest counterfeit merchandise smuggling schemes uncovered in recent U.S. history." The accused counterfeiters were indicted in Tuscon in August 2006 for conspiring to smuggle millions of dollars worth of phony merchandise, including Nike Air Jordan athletic shoes, from China into the United States. Authorities seized more than $16 million worth of counterfeit merchandise as part of the probe.

According to the indictment, between May 12 and July 25 of 2006, the six defendants attempted to illegally import 15 cargo containers containing approximately 135,000 pairs of counterfeit Nike Air Jordan athletic shoes with a retail value of more than $16 million. The indictment also alleges that three of the defendants sought to bribe an undercover agent posing as a Customs & Border Patrol ("CBP") officer to falsify government records to indicate that merchandise shipped from China to the United States was re-exported to Mexico, when, in fact, it was destined for the U.S. market. Two of the defendants are also accused of soliciting an undercover agent posing as a customs broker to facilitate the release of six containers of merchandise being held by CBP in Nogales. According to the indictment, several of the defendants met at least eight times with the undercover agent, giving Trial is scheduled for October 17. Click here for details from ICE.

Here's another counterfeiting case with a connection to terrorism.

According to an ICE press release, on August 23, 2006, Youssef Aoun Bakri, of Dearborn Heights, Michigan, pleaded guilty to charges of conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act (RICO). The indictment charged Bakri and other defendants with operating a criminal enterprise to traffic in contraband cigarettes and counterfeit goods, producing counterfeit cigarette tax stamps, and laundering money. According to the indictment, some of the profits made from the illegal enterprise were given to Hezbollah. Two other defendants, Imad Majed Hamadeh, of Dearborn Heights and Theodore Schenk, of Miami Beach, had already entered guilty pleas to the indictment.
The indictment charges that between 1996 and 2004, a group of individuals worked together in a criminal enterprise to traffic in contraband cigarettes, counterfeit Zig-Zag rolling papers and counterfeit Viagra, to produce counterfeit cigarette tax stamps, to transport stolen property, and to launder money. The enterprise operated from Lebanon, Canada, China, Brazil, Paraguay and the United States.
The indictment alleges that the defendants were involved with a multi-million dollar a year contraband cigarette-trafficking organization headquartered in the Dearborn, Michigan, area. The indictment charges that some members of the enterprise charged a "Resistance Tax," a set amount over black-market price per carton of contraband cigarettes which their customers were told would be going to Hezbollah. Members of the enterprise also solicited money from cigarette customers for the "orphans of martyrs" program run by Hezbollah in Southern Lebanon to support the families of persons killed in Hezbollah suicide and other terrorist operations. Click here for the complete press release.

On July 5, 2006, a Michigan man was sentenced to 18 months after pleading guilty to trafficking or attemting to traffic in counterfeit trademarked merchandise in violation of the federal counterfeiting statute. The merchandise seized from this man included counterfeits of bags produced by Prada, Kate Spade, Coach, Louis Vuitton, Burberry and Gudcci.

The press release issued by the U.S. Attorney for the Eastern District of Michigan states that, on the date of his arrest, Cousens possessed with the intent to sell handbags and other counterfeit items with a retail value of over $182,000, based on the discounted prices he charged for the counterfeits.

As is increasingly common, the initial investigation on this case was conducted by the local police department which obtained a search warrant and seized the counterfeit goods. The case was then turned over to ICE for further investigation and prosecution.

On May 24, 2006, a Texas jury convicted James George, a licensed pharmacist and owner of Lifeway Pharmacy in San Jacinto, Texas, of conspiracy to introduce in interstate commerce counterfeit and misbranded pharmaceutical drugs and trafficking in counterfeit drugs from China. The jury deliberated less than two hours before finding George guilty on all six counts alleged in the indictment. Evidence presented at trial showed that ICE inspectors at the Dallas Fort Worth Airport had found large quantities of Viagra and Cialis in a package shipped from China and addressed to George's home. The shipping documents identified its contents as health food. Pfizer and Eli Lily confirmed the drugs were counterfeit. On December 9, 2004, a controlled delivery of the package was made by an FDA agent posing as an employee of a delivery company. When confronted by the agent, George said, and later testified at trial, that he did not know the drugs were counterfeit and had planned to send the drugs to Nigeria.
Testimony showed that George ordered the drugs from China over the internet for 30 to 35 cents a tablet. Click here for more information.