Trademark CounterfeitingSpecific Exclusions
from Definition of "Counterfeit Mark"
There are two situations which the Congress intended to exclude from
the definition of "counterfeit mark." The first involves so-called
"overrun goods." The second involves so-called "parallel imports" or
gray market" goods. With respect to overrun goods, the statutory
definition explicitly excludes marks "used in connection with goods or
services of which the manufacturer or producer was, at the time of the
manufacture or production in question authorized to use the mark or
designation for the type of goods or services so manufactured or
produced, by the holder of the right to use such mark or designation."
18 U.S.C. § 2320(d). An example of this so-called "overrun
exemption" would be in a case in which a manufacturer is licensed by a
trademark owner to produce 500,000 umbrellas using the trademark owners
mark and the trademark licensee produces an additional 500,000 umbrellas
using that mark without authorization. See Joint Statement on Trademarking Counterfeiting
Legislation, 130 Cong. Rec. H12076, H12079 (daily ed. Oct. 10, 1984)
(hereinafter "Joint Statement"). Congress intended that the burden
be on the defendant to prove that the goods or services in question fall
within the overrun exemption. Id.|
Congress did not intend the criminal provisions to apply to marks on
so called "parallel imports" or "gray market" goods, in which both the
goods and the marks are genuine, but which are sold outside of the
trademarks owners authorized distribution channels. See Joint Statement, 130 Cong. Rec. H12077, H12079;
Subsequent legislative history appears to suggest, however, that these
exceptions should not necessarily be read to preclude prosecution of
cases involving factory "seconds" or "rejects" that are knowingly sold
as first quality goods. See H.R. Rep. No.
556, 104th Cong., 2d Sess. 3 (1996).
The following text is excerpted from the "Purpose and Summary"
section of a House of Representatives report that describes amendments
to 18 U.S.C. § 2320 resulting from the Anticounterfeiting Consumer
Protection Act of 1996, Pub. L. 104-153, 110 Stat. 1386 (1996). H.R.
Rep. No 556, 104th Cong., 2d Sess. 3 (1996).
Mr. Leonard S. Walton, the Deputy Assistant Commissioner of
Investigations for the United States Customs Service, compared the
pattern of criminal activity and organizational structure associated
with counterfeiting to that of drug trafficking. For three years, Mr.
Walton's agents investigated an expansive Korean crime syndicate that
operated an enormous counterfeiting operation throughout America. In
September 1995, that investigation culminated in coordinated raids in
New York City and Los Angeles that netted $27 million in counterfeit
merchandise and resulted in the indictments of 43 members of the crime
syndicate. Mr. Walton explained that Section 2 of the bill, which
applies RICO provisions in the criminal counterfeiting context, is
essential to allow law enforcement agents to take down the entire
criminal organization rather than merely react to each crime the
Organized crime is not the only source of criminal
commercial counterfeiting. In some cases, the source is an otherwise
legitimate manufacturer of goods. This category of counterfeiters
purchases "seconds" or "rejects" from a manufacturer, applies
counterfeit labels, and sells the products as first quality. Another
example is where the counterfeiter is a legitimate manufacturer of a
low-grade or generic product, but mislabels them as a high-grade brand
name product. The provisions of H.R. 2511 are directed toward this lower
level opportunistic criminal activity as well as the more egregious
cases involving organized crime syndicates.
H.R. Rep. No. 556, 104th Cong., 2d Sess. 3 (1996).
[cited in USAM 9-68.100]