Opinion
2008NY034664.
Decided August 11, 2008.
For the Defendant: For the Defendant: Steven Banks, Esq., The Legal Aid Society (Erin Darcy of counsel).
For the People: Robert M. Morgenthau, District Attorney, New York County (Carolina Holderness of counsel).
Defendant moves to dismiss a charge of trademark counterfeiting in the third degree on the ground that the accusatory instrument is facially insufficient. Because the information sufficiently alleges the sale of goods bearing a counterfeit trademark, the motion must be denied.
In order to be sufficient on its face, an information must provide reasonable cause to believe that the defendant has committed the crime charged and contain nonhearsay allegations that, if true, establish every element of the crime and its commission by the defendant ( see CPL 100.40 [1] [b], [c]).
This court previously rendered an oral decision denying defendant's motion to dismiss. This opinion serves to explain the basis for the court's prior ruling.
I.
Trademarks, a type of intellectual property, are affixed to goods and services for purposes of advertisement, identification, and warranty, all for the benefit of the consumer, the producer, and the government. A mark is the virtual signature of a corporation. Conceptually, trademarks are not physical objects, like leather tags or stickers, but representations. They may be words, symbols, or devices — used primarily to identify the origin of the product, while also serving as a repository of customer goodwill toward the company. The mark reflects a conversation with the consumer, who often has had no more than a brief encounter with the trademarked item before having to make a purchasing decision. A trademark can be anything from "Chanel" (word mark), to Nike's "swoosh" (design mark), to MGM's lion roar (sound mark). Trademarks are serious business: in 2007 the Coca-Cola brand was valued at more than $65 billion ( see Rankings, The 100 Top Brands, Bus Wk, Aug. 6, 2007, at 59).
Trademark law simultaneously shields against consumer deception resulting from the purchase of goods that are not what the consumer intended to buy, and protects the producer's investments in goodwill and publicity against imitation goods over which the trademark holder has no quality control ( see Weil Ceramics and Glass, Inc. v Dash, 878 F2d 659, 672 [3d Cir 1989]).
Louis Vuitton, at issue in this case, was worth more than $20 billion in 2007 — the 17th most valuable brand in the world ( see id. at 60).
The United States Patent and Trademark Office (USPTO) is the Department of Commerce agency empowered to register eligible trademarks. Registration requires a highly detailed description of the proposed mark, which may be composed of a drawing, a sound, a scent, a three-dimensional object, a motion, or, most commonly, standard characters ( see 15 USC § 1052; United States Patent and Trademark Office, Trademark Manual of Examining Procedure §§ 807, 808). Upon meeting various criteria for registration — including ownership of the mark; its use in commerce; the absence of similarity to existing marks; and that the mark is not merely descriptive or generic — the proposed trademark is registered under a unique number ( see United States Patent and Trademark Office, Trademark Manual of Examining Procedure §§ 1201 et seq., 1601.01 [a]).
"If a mark (in either an application or a registration) is presented in standard characters, the owner of the mark is not limited to any particular depiction. The rights associated with a mark in standard characters reside in the wording (or other literal element, e.g., letters, numerals, punctuation) and not in any particular display" (United States Patent and Trademark Office, Trademark Manual of Examining Procedure § 1207.01 [c] [iii] [5th ed]).
By registering its trademark, the owner gains a number of valuable benefits, including constructive notice to the public of the registrant's claim of ownership of the mark ( see 15 USC § 1072); a legal presumption of the registrant's ownership and exclusive right to use the mark in connection with the goods or services listed in the registration ( see 15 USC §§ 1057 [b], 1115 [a]); and the ability to bring an action concerning the mark in federal court ( see 15 USC § 1121 [a]).
When a major port like New York City becomes overrun by counterfeit merchandise, the civil law, which may deter legitimate businesses from contemplating trademark infringement, does not afford sufficient remedy against wholly illicit enterprises engaged in black-market importation, distribution, and sale of fraudulent goods. For this reason, and at the urging of a group of aggrieved trademark holders, the Legislature in 1992 enacted, among others, Penal Law §§ 165.70 and 165.71 ( see New York Anti-Counterfeiting Task Force Mem in Support, Bill Jacket, L 1992, ch 490 [explaining difficulty of enforcing federal law because of complexity of illicit distribution system and unavailability of federal marshals to effectuate seizures, and identifying need for state criminal-law scheme to combat trademark counterfeiting]).
II.
"A person is guilty of trademark counterfeiting in the third degree when, with the 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, or possesses a trademark knowing it to be counterfeit for the purpose of affixing it to any goods" (Penal Law § 165.71).
"Trademark" means "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" (Penal Law § 165.70 [a]). A "counterfeit trademark" is "a spurious trademark or an imitation of a trademark that is . . . used in connection with trafficking in goods; and . . . 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" (Penal Law § 165.70 [a], [b]).
Although the statutory language thus appears to require that the distributed goods be compared to the registered trademark, in fact, the definition of a counterfeit trademark, properly understood, mandates that the real and spurious marks themselves be identical (or nearly so) ( see People v Yue Lin , 11 Misc 3d 1091[A], 2006 NY Slip Op 50821[U], *2 [Crim Ct, NY County 2006]).
"In matters of statutory construction, legislative intent is the great and controlling principle, and [the] proper judicial function is to discern and apply the will of the Legislature" ( People v Allen, 92 NY2d 378, 383 [citations and internal quotation marks omitted]). "[C]ourts normally accord statutes their plain meaning, but will not blindly apply the words of a statute to arrive at an unreasonable or absurd result" ( People v Santi , 3 NY3d 234, 242 [citations and internal quotation marks omitted]). To compare goods to trademarks is as absurd as comparing pianos to picture frames.
Although the statute defines "counterfeit trademark" as one "used in connection with . . . goods that are identical with or substantially indistinguishable from a trademark," it is plain that the Legislature actually meant "used in connection with . . . goods bearing trademarks that are identical with or substantially indistinguishable from a trademark." After all, the very purpose of the legislation was to stop the sale of "goods which bear a counterfeit trademark" (Senate Introducer Mem in Support, Bill Jacket, L 1992, ch 490).
The Legislature intended that the definition of counterfeit trademark be "taken from federal law" (Donnino, Practice Commentary, McKinney's Cons Laws of NY, Book 39, Penal Law § 165.70; cf. L 1996, ch 319, § 1 [enacting General Business Law art 24, "Trademarks"] ["The intent of this act is to provide a system of state trademark registration and protection substantially consistent with the federal system of trademark registration and protection under the Trademark Act of 1946, as amended. To that end, the construction given the federal act should be examined as persuasive authority for interpreting and construing this act"]).
Under the definitional provision of the Trademark Act of 1946 ("Lanham Act") in effect when Penal Law § 165.70 was adopted in 1992, a "counterfeit mark" means "a spurious mark — (i) that is used in connection with trafficking in goods or services; (ii) that is identical with, or substantially indistinguishable from, a mark registered for those goods or services on the principal register in the United States Patent and Trademark Office and in use, whether or not the defendant knew such mark was so registered; and (iii) the use of which is likely to cause confusion, to cause mistake, or to deceive" (former 18 USC § 2320 [d] [1] [A]).
In 2006 this definition was amended to, among other things, add a fourth element (renumbered as clause iii) ( see Pub L 109-181, § 1 [b] [3] [A]). Under current law, a "counterfeit mark" is a spurious mark "(iii) that is applied to or used in connection with the goods or services for which the mark is registered with the United States Patent and Trademark Office, or is applied to or consists of [certain enumerated items], documentation, or packaging of any type or nature that is designed, marketed, or otherwise intended to be used on or in connection with the goods or services for which the mark is registered" ( 18 USC § 2320 [e] [1] [A]).
Plainly, the drafters of the New York statute inadvertently dropped a semicolon from the definition of "counterfeit trademark." The 1992 federal definition envisioned a spurious mark that passed a three-pronged test — i.e., a mark "that is used . . .; that is identical . . .; and the use of which is likely to cause confusion." In other words, each of the essential characteristics making up a counterfeit trademark was defined in terms of the mark itself, as logic dictates. The state statute, however, describes "a [spurious or imitation] 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 [registered] trademark." The New York statute would be analogous to the federal, and sensible, had the Legislature simply broken clause (b) into two distinct clauses: A counterfeit trademark is "a [spurious or imitation] trademark that is: . . . (b) used in connection with the sale, offering for sale or distribution of goods; and (c) identical with or substantially indistinguishable from a [registered] trademark."
The recently added fourth characteristic is also defined in terms of the mark itself: "that is applied . . ." ( 18 USC § 2320 [e] [1] [A] [iii]).
III.
To avoid criminalizing lawful sellers of used items; unauthorized sellers of authentic merchandise; or, for that matter, sellers of stolen merchandise guilty of theft crimes but not of counterfeiting, the statute proscribes only the sale of goods bearing someone else's registered trademark. That is the crux of the crime — an attempt to pass fake goods as real by means of attaching a counterfeit trademark.
Thus, in order to be facially sufficient, an information charging trademark counterfeiting must allege that (1) a spurious or imitation trademark is affixed to goods; (2) the real trademark is registered and in use; (3) the goods are trafficked or offered for sale; and (4) the defendant acted with proscribed intent.
At the outset, of course, there must be evidence that a real trademark, allegedly misappropriated by the defendant, is extant, registered, and in use. Thus, the information must sufficiently reference the infringed mark that has been replicated by the fake. To be sure, most companies own a portfolio of trademarks — frequently including the words making up the company's name, as well as a variety of logos. But the Appellate Term has repeatedly determined that informations failing to describe which of a company's various marks have been fraudulently replicated are nonetheless sufficient ( see e.g. People v Jian Guan, 2003 NY Slip Op 50878[U], *2 [App Term, 1st Dept 2003] [allegations of sale of "15 pairs of Oakley sunglasses" and that "the Oakley trademark is registered and in use" held facially sufficient]; People v Guo Zhang , 14 Misc 3d 82, 83 [App Term, 1st Dept 2007] [genuine and counterfeit trademarks sufficiently "identified and distinguished" where information alleged sale of "Louis Vuitton" handbags; dismissal reversed]; People v Reyes, 9 Misc 3d 136[A], 2005 NY Slip Op 51699[U], *1 [App Term, 1st Dept 2005] [" Burberry' and related trademarks"]; see also People v Casey, 95 NY2d 354, 360 ["So long as the factual allegations of an information give an accused notice sufficient to prepare a defense and are adequately detailed to prevent a defendant from being tried twice for the same offense, they should be given a fair and not overly restrictive or technical reading" (citations omitted)]). Thus, in order to sufficiently reference the genuine mark at the pleading stage, the People need only to identify the company whose registered mark has allegedly been infringed.
Louis Vuitton, for example, has many live trademarks ( see United States Patent and Trademark Office, Trademark Electronic Search System [TESS], http://tess2.uspto.gov/bin/gate.exe?f=searchss state=e61m9a.1.1 [select "All" in "Field" and search "Search Term" for "Louis Vuitton"] [accessed Aug. 11, 2008]), including the word mark "Louis Vuitton" ( see US Reg No. 1,045,932); the logo ( see US Reg No. 2,909,002); and the design ( see US Reg No. 2,378,388).
Of course, while the identification of the trademark or trademarks at issue may thus be sufficiently pleaded by identifying the registered trademark holder, the People must nevertheless, upon request, provide a bill of particulars specifying the individual trademarks allegedly infringed, including their registration numbers. In this case, the People are directed to supply defendant with such bill of particulars forthwith.
Plainly, a successful prosecution for trademark counterfeiting requires evidence that the trafficked goods are not the product of the legitimate trademark holder — in other words, that the goods to which the purportedly spurious trademark is affixed are, indeed, imitations. The spurious nature of the trademark can be shown in a variety of ways — some emphasizing the trademark itself, and some, the goods.
To be sure, the statute does not criminalize the selling of mere knock-offs — that is, cheap imitations of designer goods not bearing counterfeit trademarks. Moreover, certain buyers actively seek counterfeit goods, giving rise to the argument that selling ersatz wares to knowing buyers should be permitted on the ground that the real trademark owner suffers no damages when the buyer is not deceived. But inasmuch as the very reason for the illicit transaction is, in that circumstance, to provide the unscrupulous buyer with a cheap ticket to a sharper image, the owner may still lose brand value after other consumers observe the poorly made fakes, identify the trademark holder as their source, and lose goodwill toward the company.
As discussed, a counterfeit trademark must be "identical with or substantially indistinguishable from" a genuine registered trademark (Penal Law § 165.70 [b]). When the trademarks are alleged to be "substantially indistinguishable" — albeit not identical — a description of minor differences between the marks may itself provide reasonable cause to believe that the seized goods are fraudulent.
On the other hand, when the marks are allegedly identical, there is, by definition, no difference between them. In that circumstance, the People must supply independent proof that the marketed goods are inauthentic. And since the marks themselves are identical, such proof must of necessity pertain to the goods to which the marks are affixed. This, too, may be evidenced in a variety of ways, dependent primarily on the nature of the trademark holder's business. Thus, for example, the allegation that a defendant was selling books containing a Lamborghini trademark may suffice to establish that the trademark is spurious when coupled with an allegation that Lamborghini does not publish books. Similarly, an allegation that Scholastic, owner of the Harry Potter franchise, does not publish the title "Harry Potter and the Spoiler of Spurious Spells" — offered for sale with a Scholastic trademark — sufficiently demonstrates spuriousness. By contrast, when counterfeit luggage is sold with a Gucci trademark, the spuriousness of the mark must be shown by differentiating the characteristics of the fraudulent goods from the genuine, such as by describing observable differences in the packaging, quality of workmanship, manner of sale, price point, or means by which the trademarks are affixed.
The mere assertion that the marks are identical will suffice to allege identity. After all, "[i]t is not immediately apparent why one who is familiar with something may not competently assert that another thing is identical to it even without describing the particular features the two have in common" ( Yue Lin, 11 Misc 3d 1091[A], 2006 NY Slip Op 50821[U], *2; cf. Allen, 92 NY2d at 385 [allegation that defendant "did solicit" a marihuana sale is "sufficiently evidentiary in character" and nonconclusory]).
Here, the information — consisting of the misdemeanor complaint, the supporting deposition of the arresting officer, and a supporting deposition of a representative of the trademark holder (denominated "Trademark Counterfeiting Manufacturer's Affidavit") — alleges that a named police officer observed defendant "display and offer for sale fourteen (14) Louis Vuitton handbags." Upon examination of the merchandise, the officer concluded, "based on his training and experience," that "the merchandise bears a counterfeit Louis Vuitton trademark. It is substantially the same as the genuine trademark except that the counterfeit has: plastic stitching, poor quality construction, felt interior, low [price point], and the genuine trademark has: cotton stitching, high quality construction, canvass interior, and high [price point]." According to the representative of trademark holder Louis Vuitton North America (L.V.N.A.), "the Louis Vuitton . . . trademark is currently in use and registered at the United States Patent Trademark Office in Washington, D.C."
Giving these allegations "a fair and not overly restrictive or technical reading" ( Casey, 95 NY2d at 360), defendant stands accused of selling handbags to which were affixed representations of registered marks belonging to Louis Vuitton ( see People v Lynch, 8 Misc 3d 126[A], 2005 NY Slip Op 50894[U], *2 [App Term, 1st Dept 2005] ["sworn allegation that defendant displayed and offered for sale more than 10 jackets is sufficiently evidentiary in character to support the sale or offer for sale element of the charged offense" (internal quotation marks and citation omitted)]). The officer concluded that defendant was not selling genuine Louis Vuitton bags, however, because, although the marks looked like actual Louis Vuitton marks, the goods to which they were affixed did not. In other words, although the complaint, as drafted, inartfully alleged that the "counterfeit . . . trademark" had certain enumerated characteristics, whereas the "genuine trademark" had certain other identified characteristics, it is plain that what was meant is that the goods to which the marks were affixed were distinct in terms of their stitching, quality, materials, and price point. Indeed, each of these examples of difference pertains logically to goods, and not to trademarks.
Accordingly, defendant's motion to dismiss must be denied.