Counterfeit Law Blog

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.

A federal judge in Massachusetts imposed significant sentences today on four individuals who had pled guilty to money laundering and to trafficking and conspiring to traffic in counterfeit luxury handbags and wallets worth more than $1 million at average counterfeit prices, and the materials required to manufacture them.  The trademarks involved include Louis Vuitton, Kate Spade, Prada, Gucci, Fendi, Burberry, and Coach. The defendants, who had been distributing the fakes at a Revere, Massachusetts flea market and at "purse parties" conducted in Massachusetts, were initially investigated by local authorities and the Suffolk County District Attorney’s Office, which referred the matter for federal prosecution.

According to a press release issued by the Office of the U.S. Attorney, the defendants admitted that they had used 13 rented self-storage units as the home base of their counterfeiting operation. Two of the storage units were set up as showrooms in which counterfeit items were on display.  Another held a work-table and tools that could be used to turn generic wallets and handbags into counterfeits. The other ten were used for storage.  At the time of the raid, the units contained approximately 12,231 counterfeit handbags and 7,651 counterfeit wallets, plus

What makes a product counterfeit?  Does it violate federal criminal anticounterfeiting laws to sell genuine Microsoft software that was intended for the academic or OEM market, but has been relabeled to appear to be the full retail product ?  Yes, under 18 USC 2318 which criminalizes knowingly trafficking in counterfeit or illicit labels and counterfeit documentation and packaging for copyrighted works.  A Washington man recently found this out the hard way.

Tacoma, Washington federal judge Franklin D. Burgess recently sentenced Scott Laney to five years in prison, three years of supervised release and $9.4 million in restitution for Conspiracy to Traffic in Counterfeit Labels and Computer Program Documentation, and Conspiracy to Engage in Money Laundering following a guilty plea entered on February 23, 2006.  According to the U.S. Attorney's Office, Laney and a co-conspirator obtained Microsoft (and other) software labeled for academic or OEM use, altered the labels and licenses to make the software appear to be a full retail product, and  resold it at prices approaching the retail value of the full retail product. They also altered the software licenses for server software products to allow for more users than originally provided for.  Some of the software had been diverted by Microsoft employees who took advantage of a glitch in Microsoft's internal ordering system. Laney admitted that he and his co-conspirators sold as much as $20 million worth of counterfeit labeled software or software licenses. Microsoft alone alleged that it lost at least $12.41 million as a result of the conspiracy. 

Section 2318 is a separate criminal statute from 18 USC 2320, which criminalizes the use of counterfeit trademarks.  Although counterfeit and illicit labels, documentation and packaging often contain counterfeit trademarks, this is not necessarily an element of a Section 2318 offense.  For more information about Section 2318 and the Department of Justice's approach to its enforcement, take a look at Prosecuting Intellectual Property Crimes, the enforcement manual of the Computer Crime and Intellectual Property Division of the U.S. Department of Justice.

In my June 2006 column for World City Magazine, Counterfeit Crackdown, I applauded the stiffer sentences that federal judges in South Florida have recently been giving to convicted counterfeiters. This trend continues with the 7+ year sentences handed down by South Florida federal judge Jose E. Martinez on August 25, 2006. The case involved counterfeit electrical cords, batteries, handbags, wallets, suitcases, shoes, hats, sunglasses, watches, key holders, umbrellas, clothing and accessories bearing the counterfeit trademarks of Underwriters Laboratories, Duracell, Louis Vuitton, Rolex, Prada, Gucci, Coach, Disney, Nike, Major League Baseball, Oakley, and others. Martinez sentenced convicted counterfeiter Ji Wu Chen to ninety-seven months and his co-conspirator Meihua Li to eighty-seven months in federal prison. Chen and Li were convicted on June 9, 2006. According to the evidence presented at trial, the defendants imported counterfeit branded goods from China to their home and warehouse. They then sold the counterfeits directly from their warehouse as well as from a booth at the Opa-Locka Flea Market. Click here for more information about this case.

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.