Joint StatementParts C and D. Definitions --
C. DEFINITION OF "TRAFFICKING"|
Subsection 2320(d) provides a definition of the term "trafficking."
This definition is derived from a related, recently enacted statute, the
and Counterfeiting Amendments Act of 1982, now codified at 18 U.S.C.
Under this definition, the scope of the act is limited to commercial
Thus it is not a crime under this act for an individual knowingly to
goods bearing counterfeit marks, if the purchase is for the individual's
The "for value" clause in the definition of trafficking means
without consideration of goods or materials bearing counterfeit marks are
covered by this section. Of course, consideration can take many forms, and
courts should analyze transactions based on their substance and not on their
form. The definitions of "Lanham Act" and of "Olympic Charter Act" in
2320(d) are self-explanatory.
D. DEFINITION OF "COUNTERFEIT MARKS"
The proposed act defines "counterfeit marks" in two places--in the
criminal code amendment, proposed 18 U.S.C 2320(d), and in the Lanham Act
amendment, proposed 15 U.S.C. 1116(d)(1)(B). This definition is important
three reasons. First, it helps to define the conduct for which the criminal
penalties of this act may be imposed. See proposed 18 U.S.C.
Second, it identifies the cases in which ex parte seizures are authorized by
act. See proposed 15 U.S.C. 1116(d)(1)(A). Finally, it helps to
the circumstances in which treble damages or profits and attorney's fees are
be awarded in Lanham Act cases, absent extenuating circumstances.
proposed 15 U.S.C. 1117(b).
For technical reasons, the two definitions of "counterfeit mark"
slightly in their terms, but they are identical in substance. The Lanham
already contains a definition of the term "counterfeit": a "spurious mark
is identical with, or substantially indistinguishable from, a registered
15 U.S.C. 1127. Because it is part of the Lanham Act, the definition of
"counterfeit mark" contained in proposed subsection 1116(l)(B) incorporates
section 1127 definition. By contrast, existing Federal criminal laws
no definition of "counterfeit" with respect to trademarks; the amendment to
18 therefore spells out the elements that are included in the section 1127
definition of "counterfeit." (As the Senate bill indicated, "spurious" means
genuine or authentic.")
Under this act, there are two types of "counterfeit marks." The
is counterfeits of marks that are registered on the principal register of
Patent and Trademark Office and in use, and that are used by the defendant
connection with the same goods or services for which the mark is registered.
See proposed 18 U.S.C. 2320(d)(1)(A); proposed 15 U.S.C.
The second is spurious designations that are substantially indistinguishable
Olympic designations protected under 36 U.S.C. 380. See proposed 18 U.S.C.
2320(d)(1)(B); proposed 15 U.S.C. 1116(d)(1)(B)(ii). Under this act,
symbols will receive the same protection as will federally registered
subject to the limitations specified in 36 U.S.C. 380 concerning the
afforded those symbols.
Proposed subsection 18 U.S.C. 2320(d)(1)(A)(iii) states that a
"counterfeit mark" must be one the use of which is likely "to cause
to cause mistake, or to deceive." This is the key phrase in the remedial
of the Lanham Act, 15 U.S.C. 1114, and its inclusion here is intended to
that no conduct will be criminalized by this act that does not constitute
trademark infringement under the Lanham Act. As a practical matter,
this element should be easily satisfied if the other elements of a
mark" have been proven--since a counterfeit mark is the most egregious
of a mark that is "likely to cause confusion."
Under both the criminal and civil definitions, the term
mark" refers to a mark or designation that is "identical with or
indistinguishable from" a genuine mark or designation. The definition of
"substantially indistinguishable" will need to be elaborated on a
basis by the courts. See e.g., Montres Rolex S.A. v.
Snyder, 718 F.2d 524, 530-32 (2d Cir. 1983), 104 S. ct. (sic) 1594
Obviously, a mark need not be absolutely identical to be a genuine mark in
to be considered "counterfeit." Such an interpretation would allow
to escape liability by modifying the registered trademarks of their honest
competitors in trivial ways. However, the sponsors do not intend to treat
counterfeiting what would formerly have been arguable, but not clear-cut,
of trademark infringement.
For example, a manufacturer may adopt a mark for its goods that is
reminiscent of, although certainly not "substantially indistinguishable
a trademark used by the "name-brand" manufacturer of the product. Thus,
"Prastimol" might be used as the mark for a medication that is the
equivalent of a product sold under the trademark "Mostimol." Whether or not
sort of imitation violates the Lanham Act or other provisions of law, it
constitute use of a "counterfeit mark" for purpose of the (sic) bill.
The definition of "counterfeit mark" in this Act (other than in
involving protected Olympic symbols) reaches only instances in which the
used in connection with goods or services for which the mark is registered
principal register of the U.S. Patent and Trademark Office and in use.
this act has no impact on cases in which the allegedly infringed mark is
unregistered. In addition, because this act is intended to reach only the
egregious forms of trademark infringement, it does not affect cases in which
defendant uses a [H 12079] registered mark in connection with goods and
for which the mark is not registered. Under the Lanham Act, a plaintiff can
sometimes obtain relief against a defendant who uses a mark in connection
goods or services that are "related" to those for which the mark is
For example, a plaintiff with a federal registration for use of the mark
"Hopscotch" on typewriters might have a Lanham Act remedy against a
used that mark to identify typing paper, even though the plaintiff had not
registered that mark for use in connection with typing paper. Under the
act, however, the use of the mark "Hopscotch" on typing paper would not
the use of a "counterfeit mark."
The term "counterfeit mark" in this bill also excludes the marks on
so-called "parallel imports" or "gray market" goods--that is, trademarked
legitimately manufactured and sold overseas and then imported into the
States outside the trademark owner's desired distribution channels. (See
generally Bell & Howell: Mamiya Co. v. Masel Supply
719 F.2d 42 (2d Cir. 1983). Current Treasury Department regulations permit
importation of such goods when the foreign and domestic owners of the
are under common ownership and control. See 19 C.F.R. 133.31(c). This
regulation is now being challenged in the courts. (See, e.g.,
Corp. v. United States, No. 84-1-00067 (U.S. Court of International
slip. op., Aug. 20, 1984); Osawa & Co. v. B & H Photo, No.
(S.D.N.Y., slip op., May 24, 1984); Coalition to Preserve the Integrity
American Trademarks v. United States, No. 84-0390 (D.D.C., filed Feb. 5,
1984).) Regardless of the status of "parallel imports" or "gray market"
under the Treasury regulations, however, the sponsors do not consider such
to bear "counterfeit" marks for purposes of this legislation, since the
these goods are placed there with the consent of the trademark owner or of a
person affiliated with the trademark owner.
The bill also does not extend to imitations of "trade dress," that
the color, shape, or design of a product or of its packaging, unless those
features have been registered as trademarks. For example, generic drugs may
manufactured in pills or capsules that resemble the chemically equivalent
brand-name product. This practice has generated litigation under the
provisions of the Lanham Act. See, e.g., Inwood Laboratories v.
Laboratories, 456 U.S. 844 (1982). Provided that such goods are not
through use of a counterfeit of a registered trademark, they will not be
by this legislation. The sponsors do not intend, however, to exempt generic
drugs entirely from the scope of this bill. If such a drug were to be
through use of a counterfeit mark, this Act would make available the same
remedies that would exist in any other counterfeiting case.
Third, the definition of "counterfeit mark" follows the House bill
explicitly excluding marks that are used in connection with so-called
goods--that is, certain goods produced without authorization by a current
licensee of a trademark owner. In this Statement the term "licensee" will
used to describe a person who has been authorized by a trademark owner to
particular mark in connection with certain goods or services, whether or not
agreement between the trademark owner and the authorized party is formally
"license." The exclusion would cover a case, for example, in which a
authorized to make 500,000 umbrellas bearing a trademark owner's mark, and
licensee without authorization manufactured an additional 500,000 umbrellas
bearing that mark during the course of the license. The exemption is not
to "manufacturing," but extends to any type of production of goods or
including, for example, agricultural production. The House Report explained
reasoning behind the overrun provision in H.R. 6071 as follows:
The trademark owner has put the wheels in motion for the
to make the overruns, and has the means to protect himself or herself. For
example, the trademark owner can specify in the contract that the making of
overruns shall constitute a breach of contract, and that the manufacturer
be liable for liquidated damages if overruns are made. The contract might
specify that the trademark owner has the right to inspect the manufacturer's
facilities to ensure that overruns are not being made . . . The
other civil remedies already existing make it inappropriate to criminalize
practices. (H. Rept. 98-997, 98th Cong., 2d Sess. 13 (1984).
The overrun provision contained in the compromise draft has been
from the provision in the House bill. First, the compromise bill does not
a grace period for persons dealing with former licensees--that is, licensees
whose right to manufacturer goods bearing a particular mark has been
at the time of manufacture. Correspondingly, the language of the House bill
concerning the knowledge of the user about the termination of the
between the trademark owner and the licensee has been omitted. Finally, the
phrase "contractual" or other "relationship" has been replaced by the phrase
"authorized by." This last change in wording is simply intended to clarify
precise nature of the relationship between the trademark owner and the
that was described in the House bill.
If a licensee manufacturers overruns during the course of a valid
license, the marks on those goods will remain noncounterfeit for purposes of
act, whatever changes may later occur in the relationship between the
owner and the licensee. Thus, if goods are manufactured during the course
valid license, and sold after the termination of the license, the marks of
goods remain noncounterfeit. In addition, if one purchases goods or
produced by a former licensee in the good faith belief that the licensee is
authorized to produce that type of goods, one will not know that the goods
counterfeit and will thus not be liable under proposed 18 U.S.C. 2320(A) or
As the House report made clear, the burden will be on the defendant
prove that the goods or services in question would fall within the overrun
exclusion, under both the criminal and civil provisions. (This allocation of
burden of proof is indicated in both the House bill and the compromise draft
the phrase introducing the overrun exemption: "but such terms does not
. . .") The compromise bill also follows the House bill in that the overrun
exemption does not apply if a licensee produces a type of goods in
with which he or she was not authorized to use the trademark in question.
if a licensee is authorized to produce "Zephyr" trenchcoats, but without
permission manufacturers "Zephyr" wallets, the overrun exception would not
The overrun exclusion in the legislation does not in any way alter
affect any remedy that may now exist under the Lanham Act or other
law for the manufacturer or sale of overrun goods. The exclusion is
simply to exempt those goods from the special penalties available under this
At the suggestion of the Justice Department, neither the Senate nor
House bill included an explicit effect on interstate commerce element. The
Department argued that the explicit inclusion of this element was
since a Federal nexus exists because the marks protected are federally
trademarks or Olympic symbols protected by a Federal statute. However, the
is intended to reach all trafficking in counterfeits that affects interstate
commerce, including trafficking that is discovered in its incipiency, such
before counterfeit merchandise has left the factory.