Trafficking in Counterfeit Goods or Services

Defined under 18 U.S. Code § 2320, intentionally trafficking goods or knowingly using a counterfeit mark is a felony. This includes the repackaging of genuine goods or services with the intent to deceive or confuse. However, it is not necessary for the end user to be deceived into believing the product is genuine or authorized by a trademark owner to constitute trafficking in counterfeit goods or services.

Commonly counterfeited goods include pirated CD’s, fake money, fake ID’s, fake bonds and securities and copies of works of art.

Trafficking in counterfeit goods is a very serious charge and, if found guilty, a defendant faces a fine of up to $2,000,000, a prison sentence of up to 10 years, or both. Moreover, the financial damages that come with a counterfeiting conviction can be tremendous as the trafficker will be liable for the market cost of the genuine goods or services to the trademark owner at the rate they would have received if sold at retail price through authorized channels. This amount may in all likelihood be much higher than the trafficker actually received. In fact, even if a defendant didn’t profit from counterfeiting, he or she can still be liable for massive restitution to the trademark holder. Counterfeiters can be liable for the retail price of the goods and services that the trafficker was reasonably likely to receive and not just what was actually received or sold.

Trafficking in counterfeit goods becomes more serious if the goods cause harm to their users. For example, if a defendant knowingly or recklessly causes serious bodily injury by counterfeiting, he or she could be sentenced to up to 20 years in prison and fined $5 million. Likewise, if a defendant knowingly or recklessly causes death resulting from counterfeiting, he or she could be punished by life in prison and fines of up to $5 million.

​Examples of Defenses Against Trafficking in Counterfeit Goods or Services

​Naturally, the most common defense strategies revolve around issues such as the absence of proper venue or jurisdiction. However, there is an “overrun goods defense” which applies to an otherwise authorized manufacturer or producer who makes and sells goods on the side without the mark-holder or licensor’s knowledge or approval. For example, this might be a trademark licensee who is authorized to make 20,000 t-shirts bearing the licensor’s trademark but who manufactures without authorization an additional 10,000 shirts bearing that mark during the course of the license. In this case, the t-shirts would not be considered counterfeit.

Moreover, any “parallel goods” i.e., any trademarked goods legitimately manufactured and sold overseas, and then imported into the United States through channels outside the trademark owner’s traditional distribution channels are not considered counterfeit because the trademarks on such goods are placed there with the mark-holder’s authorization.

As mentioned, a crucial element of trafficking in counterfeit goods or services is the intention to deceive the public or damage the mark-owner’s goodwill. This is particularly important in situations where somebody repackages genuine goods for the purpose of reselling them. If the defendants do so without deceiving or confusing others, trafficking in counterfeit goods has not occurred.