STOP Counterfeiting Act

On March 16, 2006, President Bush signed the Stop Counterfeiting In Manufactured Goods Act (“Stop Counterfeiting Act” or “SCA”), which expands current counterfeit law and is designed to target counterfeit labels and packaging, as well as equipment
used to make them.

Underpinning the SCA are the following findings by Congress: (1) counterfeiting is estimated to cost the U.S. $200 billion annually; (2) “counterfeit automobile parts, including brake pads, cost the auto industry alone billions of dollars in lost sales each year;” (3) “counterfeit products have invaded numerous industries, including those producing auto parts, electrical appliances, medicines, tools, toys, office equipment, clothing, and many other products; (4) counterfeiting is tied to terrorist activities; and (5) “counterfeiting of manufactured goods poses a widespread threat to public health and safety.”

Congress sought to address certain ambiguities in existing anticounterfeiting law, which helped counterfeiters avoid liability. For example, in United States v. Giles, 213 F.3d 1246 (10th Cir. 2000), the Tenth Circuit held that trafficking in counterfeit trademarks that are not actually attached to any “goods or services” was not a violation of the federal criminal infringement statute. Defendant Giles had been dealing in counterfeit “patch sets” of the Dooney & Bourke logo, which consisted of a leather patch and gold medallion bearing a logo and a leather strap used to attach the medallion to fake goods. The court noted that the statutory scheme indicated that “goods” were intended to be viewed as separate from the marks they carried. As a result, the statute prohibited trafficking in goods to which a counterfeit mark was attached, but it did not prohibit trafficking in counterfeit labels unattached to goods. Thus, under the old law counterfeiters were safe as long as they did not attach counterfeit marks to goods.

The Stop Counterfeiting Act closes the Giles loophole (and others) and expands the scope of protection and remedies available to trademark owners. The benefits to trademark owners are substantial. First, the SCA expands the definition of “counterfeit mark” to include goods and services as well as “labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags, documentation, or packaging of any type or nature” that is either applied to or used in connection with counterfeit goods. Thus, it is now a crime to traffic in labels and various forms of packaging bearing a counterfeit mark that is likely to cause confusion.

Second, the SCA makes counterfeiting less profitable by imposing harsher, mandatory forfeiture and destruction penalties, such as the forfeiture and destruction of counterfeit goods including labels), the forfeiture of equipment and materials used to make counterfeit goods, and the forfeiture of assets derived from counterfeiting. In addition, the SCA requires convicted counterfeiters to pay restitution to the mark owner. Under the new law, counterfeiters will have a much more difficult time resuming counterfeiting operations without the equipment and money to do so.

Third, the SCA now broadly defines “traffic” and “financial gain” in a manner that prohibits distributing (including importing and exporting), or intending to distribute, counterfeit goods in exchange for the receipt or expected receipt of anything of value. Under the SCA, it is now illegal to give away counterfeit goods in exchange for some future benefit—i.e., the bartering of counterfeit goods is prohibited.

In short, the Stop Counterfeiting Act removes ambiguity used by counterfeiters to evade legal consequences and strengthens trademark law. By doing so, it serves as a valuable new weapon, protecting intellectual property owners and consumers alike, in the battle against counterfeits.