Trademarks are utilized to represent products and brands, with popular trademarks creating instant brand recognition without needing to see additional information.  For example, the Nike swoosh and the slogan “Just Do It” is recognizable and associated with athletic products without needing it to say Nike explicitly.

The Definition of Trademark Counterfeiting Under New York Law

Trademark counterfeiting is defined by New York Penal Law.[1] There are three degrees of severity for trademark counterfeiting crimes.  The following elements need to be proven in order to prosecute a charge of trademark counterfeiting:

1.   Intent
2. Action to further the counterfeit trademark business
3. Counterfeit trademark

All three of the elements above must be proven for any degree of trademark counterfeiting.  In addition, charges in the first and second degree require a certain threshold of retail value for the goods that have a counterfeit trademark.

Element #1: Intent

Intent refers to the mental state of the defendant at the time the alleged crime was committed.  In order to be convicted, a certain level of carelessness or malicious will must be proven.  Generally, the intent is proven by presenting evidence of the circumstances and drawing inferences about the mental state from those circumstances.

In order to be convicted for trademark counterfeiting, a person must have a purposeful action that is meant to fool others or avoid following the law.  There are three types of intent that can satisfy this element:

1.  Intent to deceive
2. Intent to defraud another person
3. Intent to circumvent or avoid a restriction legally placed on the offering, sale, resale, or other distribution of goods

Element #2: Action to Further the Counterfeit Trademark Business

The second element of trademark counterfeiting requires an action that helps support or advance the business of trading in goods that have the counterfeit mark.  A person needs to be an active participant in the business involving a counterfeit trademark.  Specifically, either of the following actions would satisfy this element:

1. With goods already bearing a counterfeit trademark, if a person manufactures, distributes, offers to sell, or sells.
2. If a person possesses a trademark that he or she knows is counterfeit and possesses it for the purpose of putting it on goods.

Element #3: Counterfeit Trademark

The trademark represents a company or a brand, distinguishing that product from others like it.  A symbol, name, word, device, or any combination of those can be a trademark.  Also, the mark needs to qualify for trademark protection through the appropriate state laws or through the U.S. Patent and Trademark Office.

In order to be a counterfeit trademark and satisfy this element, the definition of a trademark must be met first.  Then, a fake version of that trademark must be used in connection with:

1.  Trafficking in goods, and
2. Sale, offering for sale or distributing goods that cannot be meaningfully distinguished from or are identical to the trademark’s goods.

By definition, it is not a counterfeit trademark if there is authorization to use the mark.  It is also not a counterfeit trademark if there are imitations of components of the trademark such as shape or color.  For the components to be protected, they need to be registered trademarks separate from the primary trademark.

Related Offenses 

Trademark counterfeiting is not the only criminal charge you may face.  Here are some offenses that are related to trademark counterfeiting.

Trafficking in Counterfeit Goods or Services

The federal corollary to New York’s trademark counterfeiting law is trafficking in counterfeit goods or services. The federal law makes it a crime to do any of the following:

1.  Trafficking in goods or services using a counterfeit trademark.
2.  Trafficking in anything that would be used to package or label in some way a product with a trademark, including patches, emblems, boxes, and documentation.
3. Trafficking in a drug using a counterfeit trademark.
4.  Trafficking in counterfeit military goods or services, that can cause some significant harm through use, malfunction, or failure.

The federal law contains areas that may be more suitable for federal jurisdiction, such as drugs and military goods.  Under this statute, the counterfeit trademark may be on the item being trafficked or just used in conjunction with the trafficking.  Like the New York statute, this law requires the person to act intentionally and knowing the counterfeit status.

Enterprise Corruption

A counterfeit trademark business may be run by an individual that is trading in counterfeit goods on a small scale.  On the other hand, it could be a large-scale criminal enterprise.  If that is the case, participation in the larger enterprise is also a crime.  Under New York Penal Law, the crime of enterprise corruption[3] requires the following elements:

1. The knowledge that a criminal enterprise exists
2. Knowledge of the nature of the criminal enterprise’s activities
3. Association with or employment by the criminal enterprise; and
4. Participation in, ownership interest in, control of, or investment of the proceeds from the criminal enterprise.

Important Cases in New York on Trademark Counterfeiting 

In understanding how trademark counterfeiting charges are prosecuted, prior court cases offer insight on what is necessary to prove elements.  The cases also offer potential defenses or areas of vulnerability for the prosecution.  Here are some key cases.

There are three degrees of charges for trademark counterfeiting.  The degree of the charges is determined by the value of the counterfeit goods.

• People v. Kim is a critical case for understanding valuation.  In that case, a total of 1,600 bags with counterfeit trademarks were discovered in two locations. The bags bore the trademarks of Chanel, Louis Vuitton, Fendi, and Dooney & Bourke.

In that case, the prosecutors presented testimony attesting to the total value of the legitimate trademarks and their domestic sales.  However, the court noted that the valuation should be limited to the incremental value of the counterfeit goods. If the state does not provide such evidence, the charges will be limited to trademark counterfeiting in the third degree.

A counterfeit trademark can either be identical to the legitimate trademark or virtually indistinguishable. Cases have explored this concept, underlining the importance and what makes a counterfeit mark “substantially indistinguishable” from the original.

•  The case of People v. Thiam noted that the prosecution has a basic obligation to show that the counterfeit mark is indistinguishable from the original.  In that case, there was the use of counterfeit Oakley and Kate Spade trademarks, which were not affixed to their products in the same way as the legitimate marks would have been.  However, this was still considered substantially indistinguishable.
• In People v. Ensley, the court noted that simply saying that the product at issue was an inferior product was insufficient to demonstrate that there was a counterfeit trademark.
• The case of People v. Cisse explored trademark counterfeiting and other charges related to intellectual property in the context of videotapes.  A videotape on its own cannot be a considered a forged instrument.

In addition, the mere existence of a video recording is insufficient to demonstrate that there is a counterfeit trademark.  The charging instrument or the owner of the trademark must allege there is a registered trademark that has been counterfeited.

The intent element requires a certain malicious purpose with the trademark counterfeiting.  As discussed, the intent is generally proven by inference based on the circumstances surrounding the actions.

• The case of People v. Niang involved a defendant that had been accused of offering counterfeit trademarked watches for sale.  Allegations were stating that were sufficient to satisfy the intent element of the crime.  The court reasoned that if a person knows that they are selling counterfeit goods, their intent to evade legal restrictions can be properly inferred from those circumstances.

Fictional Examples

The following actions and scenarios could lead to charges of trademark counterfeiting:

• Mark decides to open a burger shop called Mark’s Burgers.  He wants to put up a sign that is visible from far away without needing to spell out the whole name.  Since the first letter of his first name is M, he figures the famous McDonald’s arches also work for him.  He also assumes that he will get a business boost from folks stopping for McDonald’s. Mark could face trademark counterfeiting charges.
• Jean worked for a clothing line whose distinguishing feature is a patch with her logo.  The patch with the logo and the logo alone are both registered trademarks.  After being terminated from her position, Jean decides to create a patch with a logo that, while not identical, is virtually indistinguishable from her former employer’s.

She places that patch on clothing for her own company.  Jean could be charged with trademark counterfeiting.

• Greg creates emblems that imitate the emblems found on handbags from well-known luxury brands, including Prada, Louis Vuitton, and Gucci.  He sells these to others to affix on their own handbags but does not personally sell the handbags. Greg can still be charged with trademark counterfeiting.

Detection, Investigation, and Prosecution 

Trademark counterfeiting may be detected in a number of ways.  Depending on where the goods bearing counterfeit trademarks are being sold, local police may be the first ones involved. For example, if there is an unauthorized vendor selling counterfeit sunglasses on the street, patrol officers will be most likely to become aware of the situation first.

Once potential criminal actions have been detected, the appropriate investigators would become involved.  Depending on the scope, this may require detectives, or it would go to the Investigators from the Attorney General’s Investigations Bureau for further information gathering in support of a prosecution effort.

The prosecution would be handled by the appropriate district attorney or deputy attorney general, depending on the nature and scope of the case.

What is an IP Task Force?

At the federal level, the Department of Justice has an IP Task Force that works to protect all types of intellectual property and prevent theft of it.  The IP Task Force pursues coordination across law enforcement partners at all levels and helps with enforcement of the laws through civil and criminal channels.

What is the U.S. Patent and Trademark Office?

The U.S. Patent and Trademark Office is the body that registers trademarks.  The work of the U.S. PTO is important for establishing cases and can help support the work of law enforcement in detecting, investigating, and prosecuting trademark counterfeiting.

In addition, there is a National Crime Prevention Council focused on preventing the purchasing of counterfeit goods through consumer education.

Statutory Penalties for Trademark Counterfeiting

The statutory penalties for trademark counterfeiting include fines and imprisonment, varying by the degree of the charge.  The degree of the charge depends on the cumulative value of the goods and services with the counterfeit trademark.  The possible penalties under New York Penal Law are:

• Trademark counterfeiting in the third degree applies at any value and is a class A misdemeanor. This carries a prison sentence of up to one year and a fine of up to $1000.
• Trademark counterfeiting second degree applies when the value exceeds $1000 and is a class E felony. This carries a prison sentence of up to four years and a fine of $5000 or double the profit.
• Trademark counterfeiting in the first degree applies when the value exceeds $100,000 and is a class C felony. This carries a prison sentence of at least three and up to 15 years and a fine of $5000 or double the profit.

In addition to the statutory prison terms and fines, New York Penal Law also specifies that the authorities can seize and destroy goods that are manufactured, distributed, offered, or sold in violation of the trademark counterfeiting statutes.

Additional Consequences of Conviction

If you are convicted of trademark counterfeiting, there will be the expected statutory penalties of imprisonment, fines, and having any relevant goods seized and destroyed.  However, the impacts of a conviction go beyond the statutory penalties you face.

Separation Anxiety

If you are imprisoned, your loved ones will be harmed by you being absent from their lives.  This separation will create stress in your relationships, which will likely extend beyond the time you are actually imprisoned.

Financial Loss

One of the other major consequences you face will be the financial loss.  You will have necessary expenditures in defending yourself, the costs of any fine included as part of your sentence, and a potentially large amount of lost income.

The time you spend defending yourself against the charges will require you to take time away from work, which is part of the lost income.  Then, any time spent locked up will also create lost income.  Finally, the damage to your reputation will also exacerbate this consequence.

Bad Reputation/ Professional Damage

If you have a criminal conviction, your reputation will be tarnished.  This means that, if you have your own business, you may lose clients or have trouble attracting new clients, especially after time in prison.  Also, if you are trying to find employment, this conviction is something that will come up on a background check and possibly prevent you from being hired.

Your reputation will be linked to this conviction and, in addition to professional damage, your personal reputation may suffer.  It may deter future personal connections.  Anyone who looks you up on the internet could see your conviction and prematurely judge you.

Legal Defenses to Trademark Counterfeiting

It may seem overwhelming to fight charges of trademark counterfeiting, but there are options for legal defenses to these allegations.  If you are charged, you will want to present a defense that raises doubts about any of the elements or demonstrates that the procedural requirements were not adequately met.

Demonstrate that goods are for personal use

While trafficking in goods with counterfeit trademarks is illegal, simply possessing such goods for your own personal use is not a crime under this statute.  One defense strategy, depending on the circumstances, is to argue that the goods are for personal use.  In order to demonstrate that goods are for personal use, there are two cases that should be considered together.

• In People v. Diouf, the court considered an individual with cassette tapes and stated that a few tapes would be personal use while cartons would indicate a commercial purpose.
• Following this case, an unlicensed vendor in People v. Abdul tried to claim that counterfeit watches for were for personal use.  However, the court held that it was unlikely a person would have multiple watches on them for personal use.

Attacking procedural failings

There are a number of cases that all address the procedural failings that prevented prosecution.  Attacking these aspects of the state’s case can be an important part of a defense strategy. For example:

• People v. Wu Cheng notes that the formal charges must have an identification of the trademark and establish that it is a genuine trademark with the requisite protection.  One argument for the defense would be to identify any missing elements, like establishing that there was, in fact, a genuine trademark to counterfeit.

Question the intent element

Another strategy for the defense is to question the intent element.  There is a presumption that trading in the goods with a counterfeit trademark means there is the requisite intent.  However, that does not mean that it has been proven beyond a reasonable doubt.

By presenting an alternative interpretation of the situation, or additional facts to provide further context, an argument could be made that the mental state at the time of the actions does not rise to intent to deceive, defraud, or evade legal restrictions.

Show that the defendant knew the counterfeit status of the trademark of goods 

The other aspect of mental state that must be proven is to show that the defendant knew the counterfeit status of the trademark on the goods.  If he or she did not actually know, then this would negate a necessary aspect of the crime that needs to be proven.  The defense could provide information that shows the defendant had other knowledge or assumptions.

For example:

• Take a scenario in which a salesperson working in a retail store was the face of counterfeit goods being sold.  However, she was not aware that some of the products in the store are not legitimate.  If the salesperson was just part of a storefront in what appeared to be normal business, she did not know of the counterfeit trademarks and could not be guilty under the statute.

Let Us Help You 

Trademark counterfeiting is a serious offense with possible long-term consequences.  There is no way to make the charges disappear magically, but you can have help fighting them.  An experienced criminal defense attorney can fight for you every step of the way.

Once you have a legal team, you will have help communicating with law enforcement, evaluating and negotiating plea deals, and presenting your case in court.  Every part of the process requires an understanding of the risks and benefits, and a lawyer can help you weigh those aspects to make the best choice for you and your loved ones.

The whole process is stressful, but it does not have to be something you face alone.  We have local criminal law offices ready to speak with you today.  Contact our team to get started with securing representation.  We are ready to fight for you.