Opinion
2007KN069938.
Decided June 27, 2008.
Charles J. Hynes, District Attorney (Natasha Rossell, Esq., of counsel), for the People.
Daniel C. Moore, Esq., for the Defendant.
This case is about the allegations required to establish trademark counterfeiting, and specifically whether a Complaint merely alleging that the recordings recovered from the Defendant were inferior in quality and bore names such as "G-Unit," "50 Cent," and "BMG" is sufficient to establish that these recordings were counterfeit. Our research reveals a lack of appellate precedent on this issue in the Second Department, and we therefore rely on appellate cases from the First Department and trial court precedent to find that the Complaint is insufficient to allege counterfeiture. Defendant's motion to dismiss the Complaint is therefore granted, with leave to supersede in accordance with the requirements set forth below.
Legal and Factual Background
The Defendant is charged with Trademark Counterfeiting in the Third Degree (PL § 165.71), a class A misdemeanor. A felony count of Trademark Counterfeiting in the Second Degree PL § 165.72 was dismissed, on motion of the People, on November 29, 2007. Defendant seeks dismissal of the accusatory instrument for facial insufficiency pursuant to CPL §§ 170.30(1)(a), 170.35(1)(a)-(b), 100.15, and 100.40.
In order to be sufficient on its face, an accusatory instrument must allege facts sufficient to provide reasonable cause to believe that the Defendant committed the offenses charged. CPL § 100.40(4)(b); People v. Dumas, 68 NY2d 729, 497 NE2d 686, 506 NYS2d 319 (1986). These allegations must be non-hearsay. CPL § 100.40(1)(c).
The Complaint, signed by Kings County District Attorney's Office Paralegal Devin James states, in relevant part:
The Deponent is informed by Detective Andre Smith . . . that, at the above time and place, Informant purchased a counterfeit Compact Disc for a sum of USC from Defendant.
Deponent is further informed by Informant that Informant recovered 33 music DVD's, 600 counterfeit CD's and 171 pirated CD's bearing various names such as G-Unit, 50 Cent, BMG and Def Jam from inside of the above mentioned location.
The Deponent is informed by the supporting deposition of William Ortiz that the above mentioned DVD's and CD's were printed with blurry inserts, the CD's were recorded on CD-R recordable discs, displayed in improper CD jewel case and plastic wrap, had inferior insert paper quality and different legitmate [sic] graphics.
Deponent is further informed by the above mentioned supporting deposition that the above mentioned DVD's listed unfamaliar [sic] manufacturing names, did not disclose copyright information, had inferior quality print inserts and the DVD's were recorded on DVD-R discs.
Deponent is further informed by the above-mentioned supporting deposition that Informant has received training from member companies of the Recording Industry Association of America and the above mentioned DVD's are counterfeit.
Deponent is further informed by Detective Andre Smith that the value of the above mentioned DVD's and CD's is in excess of 1,000 dollars USC.
In addition to this Complaint, the People have served and filed a corroborating affidavit signed by Detective Smith, and a number of supporting depositions signed by William S. Ortiz, who is listed on them as "Investigative Consultant" for the Recording Industry Association of America (RIAA). These depositions state that the DVDs and CDs seized are counterfeit based on the same reasons identified in the Complaint, such as the use of different jewel cases and blurriness of the paper labels or inserts. The case file also contains photographs, presumably taken by Detective Smith, which show what appear to be hundreds of CDs and DVDs stacked on shelves.
Defendant argues that this Complaint is insufficient because it fails to establish either that the items seized contained marks substantially similar to genuine trademarks, or that these trademarks were registered and in use. He cites a number of cases for this proposition, including People v. Cheng, 4 Misc 3d 377 , 777 NYS2d 895 (Crim.Ct. N.Y Co. 2004). He asserts, by way of illustration, that one of the trademarks mentioned in the Complaint, BMG, was registered twice with the United States Patent and Trademark Office, and that one of its incarnations, though registered, is no longer in use. (Def's Aff. 12).
The People counter that People v. Cheng, supra, is not binding on this Court, and that the law articulated in that case has, in any event, "been undercut by subsequent New York decisions." (People's Aff. 6). They further argue that allegations that the trademarks allegedly imitated were registered and in use are unnecessary under the statute. We disagree.
The applicable case law reveals some inconsistencies as to the requirements for a Complaint charging PL § 165.71. The Appellate Term, First Department has consistently upheld the sufficiency of Complaints which allege that the defendant displayed and offered infringing products, and "identifies and distinguishes the characteristics of the genuine and counterfeit trademark and states that the. . .trademark is registered and in use." People v. Guan, 2003 NY Slip Op. 50878 (U). See also People v. Lynch, 8 Misc 3d 126(A), 2005 NY Slip Op. 50894(U); People v. Reyes, 9 Misc 3d 136(A), 2005 NY Slip Op. 51699(U). A number of trial courts have found Complaints alleging violation of PL § 165.71 to be facially insufficient for failing to allege that counterfeit marks were identical with or substantially indistinguishable from the registered marks. People v. Ismael, N.Y.L.J., April 28, 2006, at 19, col. 3 (Crim.Ct. Kings Co.); People v. Cheng, supra; People v. Ensley, 183 Misc 2d 141, 702 NYS2d 752 (Crim.Ct. NY Co. 1999) (also finding other defects in the Complaint). One trial court has held that a deposition from a trained investigator may substitute for a detailed description of the mark and the alleged infringement. People v. Lin, 11 Misc 3d 1091 (A), 819 NYS2d 850, 2006 NY Slip Op. 50821(U) (Crim.Ct. NY Co. 2006).
The Complaint Insufficiently Alleges PL § 165.71
A person is guilty of trademark counterfeiting under PL § 165.71, when "[w]ith intent to deceive or defraud some other person or with the intent to evade a lawful restriction on the sale, resale, offering for sale or distribution of goods, he or she manufactures, distributes, sells or offers for sale goods which bear a counterfeit trademark."
PL § 165.71, like the other statutes in this section, is governed by definitions based on Federal Trademark law, and which are set out in PL § 165.70. William C. Donnino, 1998 Practice Commentaries, McKinney's Cons. Laws of NY PL § 165.71. Under PL § 165.70, a trademark is defined as:
(a) any word, name, symbol, or device, or any combination thereof adopted and used by a person to identify goods made by a person and which distinguish them from those manufactured or sold by others which is in use and which is registered, filed or recorded under the laws of this state or of any other state or is registered in the principal register of the United States patent and trademark office. [emphasis added].
The term "counterfeit trademark" is defined under PL § 165.71(2) as "a spurious trademark or an imitation of a trademark that is (a) used in connection with trafficking in goods; and (b) used in connection with the sale, offering for sale or distribution of goods that are identical with or substantially indistinguishable from a trademark as defined in subdivision one of this section." [emphasis added].
The statute does not criminalize all acts of counterfeiting or piracy, but only those involving trademarks which are both in use and registered with the United States Patent and Trademark Office (PTO). Thus, it is not a violation of PL § 165.70 to copy marks which are not both active and duly registered, notwithstanding that the copies (or "knock-offs," as they are more commonly known), may be of a quality inferior to the products containing the original, albeit unregistered or inactive marks, from which copies were made. However, such copying, or "palming off" may nevertheless give rise to civil liability under theories of unfair competition. Neva-Wet Corporation of America v. Never Wet Processing Corporation, 277 NY 163, 13 NE2d 755 (1938); ITC Ltd. V. Punchgini, Inc., 9 NY3d 467, 880 NE2d 852, 850 NYS2d 366(2007).
In order to sustain a count of trademark counterfeiture under these statutes, a Complaint must therefore establish that the goods allegedly possessed for sale were substantially similar to a trademark that is both registered and in use. People v. Cheng, 4 Misc 3d at 379 ("a sufficient accusatory instrument charging Trademark Counterfeiting in the Third Degree must . . . identify and distinguish the characteristics of the genuine and counterfeit trademarks . . . [and] state that the trademark is registered and in use"); People v. Niang, 160 Misc 2d 500, 609 NYS2d 1017
(Crim.Ct. NY Co. 1994) ("trademark counterfeiting cannot be established in the absence of proof that the offending mark was . . . substantially indistinguishable from a trademark which is in use and registered").
This requirement parallels that contained in Federal Trademark Law for infringement. In simple terms, in order to prove either criminal or civil liability there must first be a valid trademark. (The requirement that the mark not only be registered, but currently in use, appears to be related to the concept of abandonment of the mark by the registered owner, which is a defense to a civil infringement action. 15 U.S.C.A. § 1127 (2006); See, e.g. Saratoga Vichy Spring Co. v. Lehman, 625 F. 2d 1037 (2d Cir. 1980)).
Failure to allege that the false trademarks were substantially similar to the genuine article, and that the trademarks imitated were registered and in use requires dismissal of the Complaint. People v. Ensley, 183 Misc 2d 141, 702 NYS2d 752 (Crim.Ct. NY Co. 1999) (dismissing count of PL § 165.71 where the Complaint failed to allege that the mark on the CDs recovered was substantially indistinguishable from a registered trademark); People v. Cisse, 171 Misc 2d 185, 653 NYS2d 1017 (Crim.Ct. Queens Co. 1996) (dismissing Complaint alleging recovery of video recordings with titles including "Free Willy produced by Warner Brother [sic]," where the Complaint failed to describe the trademarks allegedly imitated, and failed to establish that the trademarks imitated were registered and in use).
The Complaint before us alleges only that the recordings seized were of poor quality, and were "bearing various names such as "G-Unit, 50 Cent, BMG and Def Jam." The Complaint before us is substantially similar to that dismissed in People v. Ensley, supra . The Complaint therefore lacks several necessary elements of the crime. First, as Defendant correctly notes, although the Complaint several times concludes that the recordings were "pirated" and "counterfeit," it is devoid of allegations that either the original or the copies seized from Defendant even bore trademarks. Second, the Complaint necessarily fails to allege that any trademarks were both registered and in use. Finally, the Complaint does not allege that any trademarks on the pirated goods were substantially similar or indistinguishable from the registered marks. Without these necessary allegations, the Complaint merely establishes that low quality counterfeit recordings, some of which bear the names of well-known artists, were recovered. These allegations are insufficient to establish PL § 165.71. People v. Ensley, supra . See also People v. Rosenthal, N.Y.L.J., March 24, 2003, at 21, col. 4 (Crim.Ct. NY Co.) (allegations that handbags bore a counterfeit trademark belonging to Coach or Burberry were insufficient, requiring dismissal, absent allegations that the bags bore trademarks substantially similar to those belonging to those companies, and that the trademarks were in use); People v. Ismael, supra (dismissing count of PL § 165.71 where there were no allegations that the purported imitation trademarks on the clothing seized were similar to genuine registered trademarks).
The People argue that the law articulated in People v. Cheng, supra, has been undercut by subsequent decisions. (People's Aff. 6). The cases they cite for this proposition, however, People v. Reyes, supra, and People v. Lin, supra, are unavailing to the People's argument. In People v. Reyes, supra, the Complaint alleged that the Defendant offered for sale 10 scarves bearing marks belonging to Burberry and other brands, identified the differences and substantial similarities between the trademarks displayed on the scarves and their genuine counterparts, and further stated that the trademarks imitated were in use. People v. Lin, supra, held that a trained investigator could assert that the counterfeit goods were identical to the genuine trademarked articles without setting forth a description of the genuine marks, and may appear to be in conflict with the holdings of some of the cases cited by Defendant. We find Judge Gibbons' reasoning persuasive, and were this the only defect alleged in our Complaint, we would follow Lin and find the Complaint sufficient. In many cases, the registered trademark is simply a name. It would not appear to serve any purpose to require a detailed presentation in the complaint of similarities and differences between the trademarked original and the allegedly infringing copy, beyond the conclusion of a properly trained expert that the copy infringes on the registered mark. However, People v. Lin is not controlling in our case, where the People failed to allege that the articles allegedly knocked off or copied were in fact trademarked, and that the marks were properly registered and in use. The Court's finding of facial sufficiency in Reyes and Lin does nothing to "undercut" the requirement in the case law and in the statute that the alleged false mark be a copy of a registered trademark that is currently in use.
We therefore find that the Complaint before us is insufficient. Nevertheless, it appears that all of the defects in this Complaint may be cured by a proper accusatory instrument. Defendant's motion to dismiss the accusatory instrument is accordingly conditionally granted, to allow the People to supersede, in accordance with this opinion, prior to the expiration of speedy trial time pursuant to CPL § 30.30. Should the People fail to supersede within that time, the Complaint is dismissed.
The foregoing constitutes the decision and order of the Court.