(US law and generally) Branding is an important part of any business strategy. Building a brand requires a sophisticated marketing campaign and a dedication to quality, which takes time and money. Purveyors of counterfeit goods will often target companies that build reputations on high quality products, as high quality branded goods are often expensive, and inexpensive knockoffs produced in third world countries can have high margins. Counterfeit goods comprise five to seven percent of global trade, costing manufacturers hundreds of billions of dollars. Unfortunately for aspiring criminals, crime rarely pays in the long run.
Civil Penalties for Counterfeit Merchandise
Knowingly producing, distributing, or selling counterfeit merchandise can expose the actor to civil liability. A civil action may enjoin the actor from continuing his or her actions, may result in an award for compensatory damages, and may result in an award for punitive damages. Our VA criminal attorney warns any hapless counterfeiter that civil lawsuit will often eliminate all identifiable proceeds from such an operation, as disgorgement of profits is a common feature in cases where one party unjustly enriches himself or herself at the expense of another.
Trading on another company’s brand name constitutes trademark infringement, as the actor has violated the trademark holder’s exclusive right to that trademark. The nature of counterfeit goods offers little defense to the counterfeiter, as someone trafficking in counterfeit goods will attempt to have duplicated the product as closely as possible.
Knowingly trafficking in counterfeit goods will also constitute fraud. A fraud occurs where one knowingly misrepresents a material fact in order to induce the victim to act and where the victim acts in reliance upon that misrepresentation and in ignorance of the truth. A victim who detrimentally relies upon the misrepresentation and suffers an injury, like with a business that buys a shipment of counterfeit goods at full retail or a consumer who buys a defective counterfeit good, may sue for damages. Fraud is both a tort and a crime.
Criminal Penalties for Counterfeit Merchandise
Criminal charges for fraud come in multiple forms. For example, when one commits a fraud through the mail, one commits mail fraud. When one communicates through wire, radio, or television in order to facilitate a fraudulent act, the defendant may be guilty of wire fraud. Wire fraud and mail fraud are federal crimes in the United States, punishable by up to 30 years if the fraud affects a financial institution and up to 20 years otherwise. It is difficult to knowingly traffic in counterfeit goods without committing one of these fraudulent acts. It is also difficult to operate an illegal business without committing a variety of other offenses.
Manufacturing or reselling counterfeit goods will normally entail illicit gains. Failing to report income can constitute tax evasion, and attempts to legitimize illicit funds will constitute money laundering, both of which are felonies. In addition, fraudulent goods may violate laws regulating imports and exports. Importers of counterfeit goods often misrepresent the nature of the goods on customs forms and provide false identification, both of which are unlawful. In an investigation into a counterfeit goods operation, the prosecution may also be able to prove conspiracy charges to any of the above offenses, and conspiring to commit a criminal act is a crime in itself.
With counterfeit goods comprising a significant percentage of commerce, it is possible for innocent businesses and resellers to be victimized by counterfeiters and viewed with suspicion by law enforcement. The laws surrounding international trade and counterfeit goods are numerous and the penalties for violating them are harsh. Anyone under investigation for allegedly trafficking in counterfeit goods should contact a defense attorney with expertise in handling such cases.
A former television news reporter, Ann Bailey researches criminal cases of all manner of torts and civil and criminal fraud. The VA criminal attorney offices of Price Benowitz, LLP represent clients who have been charged with any offenses of counterfeiting, and need the professional legal help of qualified, aggressive defense attorneys to guide their case and protect their rights.
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