Tuesday, January 03, 2006

Counterfeit Goods—American and British Operations

There are three counterfeiting stories that made the news in the past couple of days. In one story, there are fears that fake Tamiflu is hitting the US market as fears of the Avian Flu begin to rise. The other two stories, one from Britain, and the other from Miami, concern the seizure of counterfeit goods.

Fake Tamiflu
Over the past month, “[h]undreds of fake Tamiflu pills sold to US consumers by Asian online entrepreneurs have been seized in South San Francisco.”[1] The pills were in containers marked “generic Tamiflu” which was an immediate tip-off since no generic version of the primary treatment available for combating the avian flu virus’s symptoms has been produced.[2] Some internet sites are selling the fake Tamiflu for two to three times the ordinary cost for a 10-pill treatment.[3] The federal government is concerned that organized crime may be behind the counterfeit drugs, because some organizations “already make other counterfeit drugs … often [using] sophisticated packages and labels, making it hard to distinguish their fakes from the real thing.”[4]

At this time, the FDA claims that they are “powerless to prosecute Internet purveyors based overseas,” often relying on “foreign counterparts to crack down on such abuses.”[5] Now that Congress has held hearings on counterfeit Tamiflu and other drugs in November, we expect that US federal will be officially expanded to cover these activities.[6]

British Seizures
In East Lothian, British trading standards officers and police seized more than 1000 counterfeit DVDs and roughly 100 items of clothing from local pubs and markets during the run-up to Christmas.[7] The DVDs, some of which were hard-core pornography, were made in China, and the clothing bore counterfeit trademarks from Lacoste, Nike, Timberland, and Ralph Lauren.[8] In addition to clothing and DVDs, there are reports that even Vodka is being counterfeited.[9] Counterfeit Stolichnaya vodka traced to Bulgaria has appeared at a local market which, like flea markets in the US, is increasingly becoming the target of counterfeiting investigations.[10]

Miami
According to Immigration and Customs Enforcement [hereinafter ICE], five individuals were indicted on three separate charges of conspiring to .[11] The individuals are alleged to have imported counterfeit goods into the United States from China.[12] The goods, which included electrical cords, batteries, handbags, wallets, sunglasses, shoes, hats, sunglasses, watches, key holders, umbrellas, and different articles of clothing and accessories which bore counterfeit trademarks such as Underwrites Laboratories (better known as simply UL), Duracell, Louis Vuitton, Rolex, Prada, Gucci, Coach, Disney, Nike, Major League Baseball, Oakley, and others.[13] The individuals allegedly sold the items directly from their warehouses in the US, as well as from booths at a flea market in Florida.[14] Flea Markets seem to be becoming a major site of ICE investigations; a couple of months , we mentioned that a flea market in Brownsville, Texas had been raided by ICE agents. The items seized from the Miami individuals’ homes, warehouses, and flea market booths “filled several tractor trailers.”[15]

The individuals in Miami were charged under 18 U.S.C. §§ (conspiracy), (a) (trafficking in counterfeit goods), and (concealing and selling imported counterfeit goods).

Under 18 U.S.C. § 545, it is a crime for a person to fraudulently or knowingly import into the United States any merchandise contrary to law, or to conceal or sell any merchandise brought into the United States contrary to law. The punishment for doing so is a fine, imprisonment for up to 5 years, or both.

Under 18 U.S.C. § 2320(a), it is a crime for a person to intentionally traffic in goods and that bear a counterfeit mark. The punishment for doing so is a fine up to US$2 million, imprisonment for up to 10 years, or both.

We have covered a great deal in the past.

If the Miami defendants' trial ever goes to a jury, the jury can only convict if certain things are proven by the government. Based on the pattern jury instructions for an alleged violation of the first paragraph of section 545 promulgated by the 11th Circuit,[16] the instructions to the jury would read something like this:
Title 18, United States Code, Section 545, makes it a Federal crime or offense to fraudulently or knowingly import or bring into the United States any merchandise contrary to law, or receive, conceal, buy, sell, or facilitate the transfer any of those acts after importation.

The Defendant can be found guilty of that offense only if all of the following facts are proved beyond a reasonable doubt:
First: That the Defendant brought or imported into the United States, any merchandise contrary to law, or received, concealed, bought, sold, or facilitated any of the previous after importation;
Second: That the Defendant knew that the merchandise was brought or imported into the United States contrary to law; and
Third: That the Defendant acted knowingly with an intent to defraud.

The word "knowingly" means that the act was done voluntarily and intentionally and not because of mistake or accident.

The words "contrary to law" means contrary to any existing law.

To act "with intent to defraud the United States" means to act with the specific intent to deceive or cheat the Government; however, it is not necessary to prove that the Government was in fact deceived or defrauded.[17]


[1] Steve Johnson, , San Jose Mercury News, Jan. 3, 2006.
[2] Id.
[3] Id.
[4] Id.
[5] Id.
[6] Id.
[7] , The Scotsman, Jan. 3, 2006.
[8] East Lothian Courier, Dec. 29, 2005.
[9] Id.
[10] Id.
[11] ICE, , Dec. 29, 2005.
[12] Id.
[13] Id.
[14] Id.
[15] Id.
[16] 11th Circuit, , 2003. (PDF)
[17] Id. at 172.

posted by McNabb Associates, P.C. @ 12:27 PM