NAM PING HON, PETITIONER V. UNITED STATES OF AMERICA No. 90-5756 In The Supreme Court Of The United States October Term, 1990 On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Second Circuit Brief For The United States In Opposition OPINION BELOW The opinion of the court of appeals (Pet. App. A803-A810) is reported at 904 F.2d 803. JURISDICTION The judgment of the court of appeals was entered on May 21, 1990. A petition for rehearing was denied on August 6, 1990. The petition for a writ of certiorari was filed on September 17, 1990. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). QUESTION PRESENTED Whether the "likely to confuse" element of the crime of trafficking in counterfeit goods under 18 U.S.C. 2320 may be satisfied by a showing of a likelihood of confusion among members of the non-purchasing public in a post-sale context. STATEMENT Following a jury trial in the United States District Court for the Southern District of New York, petitioner was convicted on two counts of trafficking in counterfeit goods, in violation of 18 U.S.C. 2320. He was sentenced to five months' imprisonment, to be followed by five months in a community treatment center, a $3000 fine, and a $100 special assessment. 1. The evidence at trial showed that petitioner trafficked in watches bearing counterfeit trademarks. Early in 1988, undercover agents of the Customs Service made contact with petitioner and his wife to negotiate the purchase of counterfeit watches. Petitioner advised the agents that he and his wife could supply imitation Rolex, Gucci, Piaget and Movado watches at prices ranging between $13 and $17. The watches generally bore a close resemblance to the genuine article and carried an identical or nearly identical trademark, but the quality of their manufacture was poor. Pet. App. A804. On January 25, 1988, the undercover agents purchased eight counterfeit watches at petitioner's place of business in New York City. The agents told petitioner that the eight watches would be examined by an expert and, if the quality was good, they would purchase a much larger quantity. Through the spring and summer, the agents made sporadic contact with petitioner and his wife to negotiate a larger purchase. At a meeting on August 23, petitioner's wife agreed to sell 1,200 counterfeit watches at a total price of $17,200 to one of the agents on August 25. Petitioner's wife gave the agent a list of the styles and prices of the watches to be delivered, and she said that petitioner would be with her at the time of the sale. Pet. App. A804. On the morning of August 25, 1988, one of the agents met petitioner and his wife outside their place of business. Petitioner was carrying two shopping bags that he had removed from his car. Petitioner and his wife separately indicated that the counterfeit watches were in the shopping bags. When the agent remarked that the police might be nearby, petitioner and the agent separately went to another nearby location, where petitioner's wife informed the agents that the deal was off. Pet. App. A804. Petitioner was arrested a short time later at a nearby diner. A surveillance agent then seized petitioner's parked car and opened the trunk. Inside the trunk were three boxes, a gym bag and the two shopping bags, which together contained 889 counterfeit watches. Shortly thereafter, Customs agents executed a search warrant for petitioner's place of business, and they also searched petitioner's home and a second place of business pursuant to petitioner's consent. The agent seized 2,600 counterfeit watches from those three locations, along with $68,000 in cash found in petitioner's bedroom closet. Pet. App. A804. 2. At trial, the government called an expert witness from each of the watch companies whose counterfeit watches were sold by petitioner. They testified about the similarities and differences between their legitimate watches and the corresponding counterfeits. The experts also testified to the confusion engendered among members of the public by counterfeit watches. Their opinions were based not only on the physical similarities between the watches but also on the fact that purchasers of counterfeit watches often brought them to the watch companies for repair and replacement. Gov't C.A. Br. 9-10. 3. In discussing the "likely to confuse" element of an offense under 18 U.S.C. 2320 in its final charge, /1/ the district court instructed the jury that it could consider whether members of the non-purchasing public, as well as members of the purchasing public, were likely to be confused by petitioner's watches (Pet. App. A805 n.1) (emphasis added): (T)he government does not have to prove that the direct purchasers, in this case the undercover agents, were confused, mistaken or deceived when they bought the watches from (petitioner). Rather, the government must establish a likelihood of confusion either among members of the purchasing public or among the members of the non-purchasing public in the post-sale context. Putting it differently, thus, to assess this likelihood of confusion, you can consider the potential for confusion, mistake, or deception among purchasers and potential purchasers of counterfeit and authentic watches, as well as among persons who have no intention of purchasing a watch, such as the recipient of a gift or someone who simply views the watch. Petitioner objected to the underlined portions of the district court's jury instruction. Pet. 4 n.2. 4. The court of appeals affirmed. Pet. App. A803-A810. It ruled that the district court properly allowed the jury to consider whether petitioner's counterfeit watches were likely to confuse not only purchasers and potential purchasers but also members of the non-purchasing public. Id. at A804-A808. The court rejected petitioner's contention that the confusion requirement under Section 2320 should be read more narrowly than its counterpart in the Lanham Act. /2/ It noted that "(t)here is no doubt that Congress wished to incorporate the Lanham Act's confusion requirement into 18 U.S.C. 2320 and did so." Id. at A805. The court also agreed that Congress intended that Section 2320 be narrower in scope than the Lanham Act and prohibit only "egregious" instances of the conduct prohibited by the Lanham Act. Ibid. The court explained, however, that "(e)gregiousness is grounded not upon whether the person deceived is a purchaser or potential purchaser but (upon) whether the mark is a counterfeit and is knowingly used as such." Id. at A804-A805. It pointed out that the scope of Section 2320 is narrower than the Lanham Act because it "proscribes only the use of counterfeits * * * while Lanham Act liability may rest upon not only a 'counterfeit' but also a 'reproduction,' 'copy' or 'colorable imitation.'" Id. at A806. It also noted that Section 2320 is narrower than the Lanham Act because it has a dual mens rea requirement: "the defendant must intend to traffic or attempt to traffic in goods and services and knowingly use a counterfeit mark on or in connection with such goods or services." Ibid. The court found support for its view that the confusion requirement of Section 2320 includes members of the non-purchasing public in the legislative history of that Section. It observed that "Congress was concerned not only that '(t)rademark counterfeiting . . . defrauds purchasers, who pay for brand-name quality and take home a fake,' but also that 'counterfeiters (can earn) enormous profits . . . by capitalizing on the reputation, development costs, and advertising efforts of honest manufacturers at little expense to themselves.'" Id. at A806 (quoting S. Rep. No. 526, 98th Cong., 2d Sess. 4-5 (1984)). The court pointed out that "an interpretation of section 2320's confusion requirement to include the non-purchasing public advances the important purpose underlying the trademark laws of protecting the trademark owner's investment in the quality of the mark and his product's reputation, one that is independent of the goal of preventing consumer deception." Ibid. After distinguishing cases under the Lanham act on which petitioner relied, the court concluded that "(w)here the products are identical and the jury has concluded that the defendant has met the two-pronged mens rea standard of Section 2320, a requirement that confusion among actual or potential purchasers be shown is unnecessary." Id. at A808. "Because the purposes of the trademark laws include protection of the integrity of the mark itself, as well as prevention of consumer fraud," the court held that "the 'likely to confuse' standard of 18 U.S.C. 2320 is not limited to purchasers or potential purchasers." Ibid. ARGUMENT 1. There is no merit in petitioner's claim (Pet. 9-11) that the decision of the court of appeals conflicts with decisions of other courts of appeals on the scope of the "likely to confuse" standard of 18 U.S.C. 2320. As petitioner acknowledges (Pet. 11), the Fifth Circuit, like the court below, has concluded that Section 2320's confusion requirement reaches members of the non-purchasing public in the post-sale context. In United States v. Yamin, 868 F.2d 130 (5th Cir.), cert. denied, 109 S. Ct. 3258 (1989), the district court had instructed the jury that "(t)he Government simply has to show that the use of the spurious trademark is likely in the future to cause either confusion, mistake, or deception of the public in general." 868 F.2d at 132. It had also instructed the jury that "(t)he public in general includes persons who have no intent to purchase such as the recipient of a gift or the guest in the house who simply views goods as well as purchasers and potential purchasers." Ibid. The Fifth Circuit held that the district court's jury instructions did not amount to plain error. Like the court of appeals here, the Fifth Circuit based its ruling on the purposes of the statute: "Section 2320(a) is not just designed for the protection of consumers. (It is) likewise fashioned for the protection of trademarks themselves and for the prevention of the cheapening and dilution of the genuine product." Id. at 132-133 (quoting United States v. Gantos, 817 F.2d 41, 43 (8th Cir.), cert. denied, 484 U.S. 860 (1987), and United States v. Gonzalez, 630 F. Supp. 894, 896 (S.D. Fla. 1986)). Contrary to petitioner's contention (Pet. 10), the decision of the court of appeals does not conflict with United States v. Torkington, 812 F.2d 1347 (11th Cir. 1987). The issue in Torkington was whether the "likely to confuse" element of 18 U.S.C. 2320 is satisfied by a showing of a likelihood of confusion among potential purchasers in the post-sale context as well as potential direct purchasers. After concluding that the "likely to confuse" test of Section 2320 was the same as the test under the Lanham Act -- the same conclusion reached by the Second Circuit in this case -- the Eleventh Circuit noted that "(u)nder section 1114(1) of the Lanham Act, the likely to confuse test is satisfied when potential purchasers of the trademark holder's products would be likely to be confused should they encounter the allegedly counterfeit goods in a post-sale context -- for example, in a direct purchaser's possession." 812 F.2d at 1352. It therefore held that "the likely to confuse test of section 2320(d)(1)(A)(iii) also is satisfied by a showing that it is likely that members of the public would be confused, mistaken or deceived should they encounter the allegedly counterfeit goods in a post-sale context." Ibid. Thus, although Torkington held that the "likely to confuse" element may be satisfied by a showing of likely confusion among potential purchasers in the post-sale context, nothing in Torkington suggests it may not also be satisfied -- as the Second Circuit held here -- by confusion among non-purchasers. Indeed, the "members of the public" language quoted above -- as well as the court's rationale based on the trademark holder's interest in protecting the trademark, see 812 F.2d at 1353 -- suggests, if anything, that the Eleventh Circuit would have agreed with the Second Circuit had it considered the issue in this case. /3/ Because the Fifth Circuit's decision in Yamin was decided under the plain error standard and because the Eleventh Circuit's decision in Torkington does not directly address the issue presented in this case, the court of appeals' decision essentially resolves an issue of first impression. Further review is therefore unwarranted. 2. There is likewise no merit in petitioner's contention (Pet. 11-15) that the decision of the court of appeals conflicts with the decisions of other courts of appeals construing the confusion requirement of the Lanham Act in civil cases. It has long been recognized that under some circumstances the likely confusion of members of the non-purchasing public may be sufficient to satisfy the "likely to confuse" test of the Lanham Act. See, e.g., Mastercrafters Clock & Radio Co. v. Vacheron & Constantin-Le Coultre Watches, Inc., 221 F.2d 464, 466 (2d Cir.), cert. denied, 350 U.S. 832 (1955); 2 J.T. McCarthy, Trademarks and Unfair Competition Section 23:1 at 46-47 & n. 3 (2d ed. 1984) (citing cases). Petitioner cites no cases that cast doubt on this conclusion. Each of the Lanham Act decisions alleged by petitioner to conflict with the Second Circuit's holding here simply adjudicated claims that a particular use of a trademark would be likely to cause confusion, generally to a direct or potential purchaser. /4/ None of them addressed -- much less rejected -- a contention that the Lanham Act can under certain circumstances be violated where likely confusion extends to members of the general public who are neither purchasers nor potential purchasers. Therefore, none of the civil decisions on which petitioner relies has any bearing on the legal issue in this case. The only civil appellate decision cited by petitioner (Pet. 14) that does address the issue of whether a Lanham Act violation may be based on likely confusion among members of the general public reached a result entirely consistent with Mastercrafters' Clock and the court of appeals' decision here. See Polo Fashions, Inc. v. Craftex, Inc., 816 F.2d 145, 148-149 (4th Cir. 1987). /5/ 3. Finally, there is no merit in petitioner's contention (Pet. 15-16) that the court of appeals' decision contravenes the principle of lenity. That contention is based on the claim (Pet. 16) that "the government should properly have been assigned the burden of showing that a broad interpretation of * * * 18 U.S.C. Section 2320 is the only possible interpretation." As this Court recently noted, however, "(b)ecause the meaning of language is inherently contextual, we have declined to deem a statute 'ambiguous' for purposes of lenity merely because it was possible to articulate a construction more narrow than that urged by the Government." Moskal v. United States, No. 89-964 (Dec. 3, 1990), slip op. 3-4. CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. KENNETH W. STARR Solicitor General ROBERT S. MELLER, III Assistant Attorney General JOSEPH C. WYDERKO Attorney DECEMBER 1990 /1/ Section 2320 provides in pertinent part (emphasis added): (a) Whoever intentionally traffics or attempts to traffic in goods or services and knowingly uses a counterfeit mark on or in connection with such goods or services shall (be punished according to law). * * * * * (d) For purposes of this section -- (1) the term "counterfeit mark" means -- (A) a spurious mark -- (i) that is used in connection with trafficking in goods or services; (ii) that is identical with, or substantially indistinguishable from, a mark registered for those goods or services on the principal register in the United States Patent and Trademark Office and in use, whether or not the defendant knew such mark was so registered; and (iii) the use of which is likely to cause confusion, to cause mistake, or to deceive * * *. /2/ The confusion requirement of the Lanham Act is contained in 15 U.S.C. 1114(1): (1) Any person who shall, without the consent of the registrant -- (a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or (b) reproduce, counterfeit, copy, or colorably imitate a registered mark and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive. shall be liable in a civil action by the registrant for the remedies hereinafter provided. Under subsection (b) of this section, the registrant shall not be entitled to recover profits or damages unless the acts have been committed with knowledge that such imitation is intended to be used to cause confusion, to cause mistake, or to deceive. Section 1114(1) was amended in 1962. Before the amendment, Section 1114(1) required that use of a counterfeit be "likely to cause confusion, or to cause mistake, or to deceive purchasers as to the source of origin of such goods or services." The 1962 amendment eliminated the underlined portion. The Senate Report states that "(t)he purpose of the proposed change is * * * to omit the word 'purchasers,' since the provision actually relates to potential purchasers as well as actual purchasers." S. Rep. No. 2107, 87th Cong., 2d Sess. 4 (1962). As the court of appeals noted, however, "nothing in the legislative history or the statute as amended excludes from its reach public, nonpurchaser confusion in the case of counterfeits." Pet. App. A807 n.2. /3/ Petitioner contends (Pet. 10) that the court of appeals' decision conflicts with the decision of a district court within the Second Circuit in United States v. Infurnari, 647 F. Supp. 57 (W.D.N.Y. 1986). The defendant in Infurnari argued that immediate purchasers were the only individuals whose confusion was relevant under 18 U.S.C. 2320. See 647 F. Supp. at 59. It was only in the context of rejecting that argument that the Infurnari district court observed that post-sale confusion among immediate or prospective purchasers would be sufficient to make out a violation of 18 U.S.C. 2320. As in Torkington and the civil cases cited by petitioner (see pp. 11-12, infra), the court did not address, much less decide, the question of whether confusion among members of the public who were not prospective purchasers was relevant. /4/ See American Home Products v. Barr Laboratories, 834 F.2d 368, 371 (3d Cir. 1987); Jordache Enterprises, Inc. v. Hogg Wyld, Ltd., 828 F.2d 1482, 1484-1488 (10th Cir. 1987); Calvin Klein Cosmetics Corp. v. Lenox Laboratories, Inc., 815 F.2d 500, 503-505 (8th Cir. 1987); Ziebart International Corp. v. After Market Associates, Inc., 802 F.2d 220, 225-228 (7th Cir. 1986); Induct-O-Matic Corp. v. Inductotherm Corp., 747 F.2d 358, 361 (6th Cir. 1984); Lindy Pen Co. v. Bic Pen Corp., 725 F.2d 1240, 1243 (9th Cir. 1984), cert. denied, 469 U.S. 1188 (1985); John H. Harland Co. v. Clarke Checks, Inc., 711 F.2d 966, 972-979 & n.22 (11th Cir. 1983); Pignons S.A. de Mechanique de Precision v. Polaroid Corp., 657 F.2d 482, 486-492 (1st Cir. 1981); Armstrong Cork Co. v. World Carpets, Inc., 597 F.2d 496, 500 & n.5 (5th Cir.), cert. denied, 444 U.S. 932 (1979). /5/ Petitioner also contends (Pet. 14-15) that the court of appeals' decision conflicts with some of the Second Circuit's own decisions in several civil cases under the Lanham Act. The court of appeals, however, examined its prior decisions under the Lanham Act and concluded that "(n)one hold that confusion among the general public is never relevant under the Lanham Act." Pet. App. A808. In any event, the existence of an intra-circuit conflict would not warrant further review in this case. See Wisniewski v. United States, 353 U.S. 901, 902 (1957).