1. 1
Cracking down on Counterfeit Couture: Why Courts Should Start Taking the Crime of
Counterfeiting Seriously
Introduction
“[W]e’re going to aggressively protect our intellectual property. Our single greatest asset is the
innovation and the ingenuity and creativity of the American people. It is essential to our
prosperity and it will only become more so in this century.” -President Barack Obama, March
11, 20101
Intellectual property is one of the biggest contributors to the continued growth of the
American economy; 2 protecting its industry will stimulate our currently rocky economy.3
However, the current level of intellectual property protection is not enough; staggering statistics
prove that the black market industry of counterfeit goods is at an all time high.4 With advances
in technology, and an increasing demand for luxury goods for less,5 counterfeit goods traffickers
are taking advantage of the slumping economic market and mass producing cheap luxury.
Although Congress has gone through great pains to implement a criminal counterfeit
statute, 6 the problem of counterfeiting still exists at all time highs.7 Congressional intentions to
thwart the counterfeit industry have been hindered by the government’s reluctance to bring
charges under 18 USC §23208 due to lenient sentencing.9 It is necessary for courts to start crack
down on counterfeiters when they are convicted under § 2320.
Confusing Sentencing Guidelines (the Guidelines) are the culprit in allowing
counterfeiters to escape criminal liability. By basing punishment on the counterfeit good’s retail
1 "2010 IPEC Annual Report on Intellectual Property Enforcement." 1 Feb. 2011. Web. Last
accessed: 13 Apr. 2011.
http://www.whitehouse.gov/sites/default/files/omb/IPEC/ipec_annual_report_feb2011.pdf
[hereinafter, IPEC Report]
2 Lauren E. Abolsky, Note: Operation Blackbeard: Is Government Prioritization Enough to Deter
Intellectual Property Criminals?, 14 Fordham Intell. Prop. Media & Ent. L.J. 567, Winter 2004
[hereinafter, 14 Fordham Intell. Prop. Media & Ent. L.J. 567]
3 Id. at 567
4 Fakes Are Never in Fashion." Editorial. Harper's Bazaar 2011. Fakes Are Never in Fashion.
Harper's Bazaar. Web. 13 Apr. 2011. <http://fakesareneverinfashion.com/summits.asp>.
5 Nicole Giambarrese, Intellectual Property Comment: The Look for Less, A Survey of
Intellectual Property Protections in the Fashion Industry, 26 Tuoro L. Rev. 243, 2010
[hereinafter, 26 Tuoro L. Rev. 243]
6 18 U.S.C §2320
7 Id.
8 IPEC Report
9 IPEC Report

2. 2
value, rather than the genuine good’s retail value,10 courts not only create a market norm for
counterfeit goods, but devalue the impact that counterfeit goods have on the legitimate market.
Some courts11 are perplexed by the Guidelines interpretation of determining the infringement
value on which to base a sentence.12 The distinction between “infringed” and “infringing” goods
is not necessarily that clear. Additionally, courts may be reluctant to impose sentences based on
the “infringed” good’s retail value as there is an extensive list of scenarios in which the infringed
value may apply.13 The current Guidelines also place a further burden on the prosecution. By
having to prove that the counterfeit good was ‘likely to cause confusion’ with and ‘substantially
indistinguishable from’ the genuine goods at trial, the prosecution is duly burdened by having to
reprove this element at sentencing in order to secure a worthwhile punishment.14
By using the retail value of the infringed15 good, and by eliminating the duplicative
requirement of proving that the good was ‘likely to cause confusion’ and ‘substantially
indistinguishable’, courts will find it easier to determine a sentence for 18 USC § 2320 violators.
In Part I of this Article, I will discuss the history of the counterfeiting in general and
Congress’ decision to create a criminal counterfeiting act. In my discussion of subsequent
amendments to the criminal act, I will note the implications of this decision. In Part II, I will
discuss how the criminal counterfeiting act is prosecuted and sentenced. In addition to this, I
will also demonstrate that lenient sentencing is the true culprit in the continuation of the
counterfeit epidemic, and finally, offer my solutions on how to effectuate Congress’ intent by
providing for more effective sentencing.
Part I: History of Trademark Counterfeiting and the Need for Criminalization and
Punishment
10 Jana Nicole Checa Chong, Note: Sentencing Luxury: The Valuation Debate in Sentencing
Traffickers of Counterfeit Luxury Goods, 77 Fordham L. Rev. 1147, Dec. 2008 [hereinafter, 77
Fordham L. Rev. 1147]
11 United States v. Chnag Ho Kim, 963 F.2d 65, 66-70 (5th Cir. Tex. 1992)
12 U.S. Sentencing Guidelines Manual § 2B5.3 [hereinafter § 2B5.3]
13 Id., note that the Guidelines clearly show the use of “infringed” value is permissive if any of
the named scenarios apply, however, some courts look at the list as a ‘totality of the
circumstances’ test and will not impose a sentence based upon the “infringed” value unless
several of the factors are met. United States v. Alim, 256 Fed. Appx. 236, 240-241 (11th Cir.
Ala. 2007)
14 § 2B5.3
15Id., cmt.

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A. History of Trademark Counterfeiting Statutes
It has always been easier to copy someone else’s well-known name than to start from the
bottom and produce your own. People began using trademarks in the days of antiquity.16 As
time went on and trademarks became more popular, trademark jurisprudence appeared. 17The
earliest recorded case of trademark jurisprudence was decided in 1584 in Great Britain,18 where
the plaintiff won his case by proving to the court that his former customers now refused to buy
his product because of the defendant’s poor quality cloth.19 Even at an earlier time, the need for
retribution for trademark infringement was necessary to ensure the quality of well-known
marks.20
In the United States, trademark infringement civil actions were being brought in state
courts as early as 1837,21 and began in federal courts in 1844.22 Because of the obvious need to
provide remedies to those feeling the economic impact of trademark infringement, 23 Congress
enacted the first federal trademark statute in 187024 by employing the Commerce Clause’s
power.25
In 1947, President Truman signed the Lanham Act26 into law, which is a more
comprehensive act protecting sellers and producers of goods and services from competitors.27
Although the Lanham Act provides injunctive relief from those who use an owner’s trademark,28
it is not an effective tool to combat counterfeiting.29 Under the Lanham Act, a trademark owner
can only recover treble damages at the court’s discretion in cases of “willful and intentional
16 At least 3500 years ago, potters’ marks on clay pots to identify the potter and the quality of his
good. Gilson on Trademarks, 1-1 Gilson on Trademarks § 1.01, 2010; n1.1
17 Id. n4.1
18 Id.
19 Id.
20 Id. n11
21 Id.
22 Id. n13
23 62 TM cases in US by 1870, at least forty of them decided in state of NY, Thomas Jefferson
encouragement. Id. n14
24 Id., n15
25 Id., n11. Note also, that Congress may find power to regulate trademark infringement through
Article 1, Section 8, Clause 8. This is the “Intellectual Property” clause to the constitution,
giving Congress the power to “promote the progress of science and useful arts, by securing for
limited times to authors and inventors the exclusive right to their respective writings and
discoveries.” U.S. Const. art. I, § 8, cl. 8.
26 15 U.S.C. § 1051
27 1-1 Gilson on Trademarks § 1.01, n21
28 Id., n22
29 Gilson on Trademarks, 2-5 Gilson on Trademarks § 5.19, 2010. n366.

4. 4
infringement.”30 For trademark owners, the Lanham Act makes it difficult to prove a
counterfeiter’s intent31 and hinders suits where there are many counterfeiters in a vast geographic
area, selling only a portion of any particular trademark owner’s goods.32 In these cases, the
Lanham Act is not able to provide any remedy.33 Although civil suits can be brought under the
Lanham Act, it alone is not enough to combat counterfeiting as many counterfeiters consider a
possible suit as the cost of doing business.34
B. Criminalization
a. 1984 Act
After realizing the ineffectiveness of civil suits deterring the growing counterfeiting
industry,35 Congress enacted 18 U.S.C. § 2320, the Trademark Counterfeiting Act, in 1984. §
2320 criminalizes intentional trafficking or intentional attempts to traffic counterfeit goods and
services and provides for a maximum prison sentence of 10 years and a maximum fine of
$2,000,000.36
b. Criminalizing Counterfeit Couture: Why Congress Made Counterfeiting a
Crime
The economic impact that counterfeiting has on American and world industries is
undeniable. Counterfeiting became a lucrative business in the United States throughout the years
as certain trademarked goods became recognizable and gained popularity.37 Widely popular
television shows and movies,38 with characters sporting stylish “it” brands created a demand for
less expensive look-alikes.39 In the American fashion capital, New York City, consumers spend
an estimated $23 billion on counterfeit goods per year.40
30 Id., n376
31 Id.
32 Id., n373
33 Id.
34 David J. Gladstone and Peter J. Toren, Article: The Criminalization of Trademark
Counterfeiting, 31 Conn. L. Rev. 1, 5. Fall 1998 [herein after, 31 Conn. L. Rev. 1],
35 2-5 Gilson on Trademarks § 5.19, n366-373
36 18 USCS § 2320
37 2-5 Gilson on Trademarks § 5.19, n373-377
38
39 26 Tuoro L. Rev. 243, 260
40 "Media Kit | International AntiCounterfeiting Coalition." Homepage | International
AntiCounterfeiting Coalition. Web. 14 Apr. 2011. <http://www.iacc.org/news-media-
resources/media-kit.php>.

5. 5
The counterfeit industry has grown vastly as demand for inexpensive luxury continues
to increase. In 1982, the International Trade Commission (ITC) estimated a loss of $5.5 billion
from counterfeiting and piracy.41 Four years after the Trademark Counterfeiting Act went into
law, the ITC estimated that counterfeiting and piracy cost an average loss of $60 billion to
American companies.42 By 1996, an estimated $200 billion loss to the United States was blamed
on the counterfeit and piracy industry.43 Most current estimates place the counterfeit trade alone
in the United States at $287 billion,44 with a loss to American companies at $20 billion. 45
Counterfeit products gross an estimated annual of $600 billion in sales each year, worldwide.46
a. The Fight against Fakes: The Importance of 18 USC § 2320
By criminalizing trademark counterfeiting, Congress demonstrates the gravity of
the offense. Prior to criminalization, counterfeiters simply considered the possibility of a civil
suit of the cost of doing business47 and did not think anything of their crime, neither did average
citizens.48 Currently, the Trademark Counterfeiting Act serves four important purposes in its
criminalization of trademark counterfeiting. 49
41 International AntiCounterfeiting Coalition, comp. THE NEGATIVE CONSEQUENCES OF
INTERNATIONAL. Publication. International AntiCounterfeiting Coalition, Jan. 2005. Web. 11
Apr. 2011.
<http://4356049642aa3c99a6e91c99180a8219894d6198.gripelements.com/pdf/member-
resources/iacc_whitepaper.pdf>. See S. Rep. No. 104-177, 104th Cong., 1st Sess. 1-2 (1995). See
also The Effects of Foreign Product Counterfeiting on U.S. Industry, Final Report on
Investigation No. 332-158 Under Section 332(b) of the Tariff Act of 1930 (USITC Publication
1479) at xiv & 24(January 1984)(Copy on file with IACC).
42Id., citing Foreign Protection of Intellectual Property Rights and the Effect on U.S. Industry
and Trade, Report to the United States Trade Representative, Investigation No. 332-245, Under
Section 332(g) of the Tariff Act of 1930 (USITC Publication 2065) at App. H (February
1988)(copy on file with the IACC).
43 Id., citing S. Rep. No. 104-177, 104th Cong., 1st Sess. 1-2 (1995).
44 New York City Comptroller, comp. Bootlegging Billions. Publication. New York City
Comptroller. Web. 11 Apr. 2011.
<http://www.comptroller.nyc.gov/bureaus/bud/04reports/Bootleg-Billions.pdf, p 17>.
45 Fakes Are Never in Fashion. Harper's Bazaar.
46 Id.
47 31 Conn. L. Rev. 1, 6
48 Even a Senator, during discussions of the subsequent amendments to the Trademark
Counterfeiting Act and correlating Copyright Act was unaware that it was illegal to download
songs from Napster. 14 Fordham Intell. Prop. Media & Ent. L.J. 567, 571
49 United States. Department of Justice. Prosecuting Intellectual Property Crimes. Department of
Justice. Web. Last visited: 11 Apr. 2011.
<http://www.justice.gov/criminal/cybercrime/ipmanual/03ipma.pdf>.

6. 6
First, it protects a trademark holder’s intellectual property from theft of dilution.50 In
creating §2320, Congress was concerned that counterfeiters were taking undue credit a
trademark holder’s good will, reputation and honest services to earn a quick profit.
51Additionally, the counterfeiter selling the inferior, but similar looking counterfeit product
devalues the trademark holder’s product. 52 Direct purchasers, while perhaps aware of the
counterfeit nature of the good, spotted on the street, fashioning their famous maker look-alikes,
may cause confusion amongst the public admiring a particular accessory.53 A torn strap on a
fake Louis Vuitton handbag, particularly a well made one, may deter a potential purchaser
interested in the quality of Louis Vuitton handbags. This deterrence will in turn hurt Louis
Vuitton by costing them a would-be loyal customer. The loss of sales results in a price decrease
of the legitimate good that additionally harms the trademark holder directly, affecting that
holder’s profits.54 By criminalizing intellectual property theft, Congress protects the value of the
trademark holder’s good. 55
Second, the Trademark Counterfeiting Act protects consumers from fraud.56 Not only
can a consumer be misled into thinking that the counterfeit good he takes home is authentic,57
that same consumer could also be taking home a serious health or safety hazard.58 These safety
hazards are present in anything from fake handbags and perfume to counterfeit prescription
drugs.59
While the most discerning of shoppers may be aware of all authorized retailers selling
their favorite designer fragrances, the majority of the shopping public would likely believe a
store, with retail space, selling perfumes would be true to the ingredients posted on the package
the perfume came in.60 What a big surprise these consumers receive when they dab a bit of
perfume on their neck and break out in a rash because of the toxic chemicals, gasoline or rat
urine contained in the beautiful bottle. 61
50 Id.
51 Id.
52 Id.
53 United States v. Foote, 2003 U.S. Dist. LEXIS 19312, 16-25 (D. Kan. July 31, 2003)
54 31 Conn. L. Rev. 1, 10-12
55 109 P.L. 181, 1; 120 Stat. 285
56 Prosecuting Intellectual Property Crime. Department of Justice.
57 Id.
58 Id.
59 Id.
60 Fakes Are Never in Fashion. Harper's Bazaar.
61 Id.

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Third, the Trademark Counterfeiting Act also serves to protect the safety of the non-
purchasing public.62 Third party users are harmed when direct purchasers unknowingly buy
counterfeit products for someone else’s use, such as heart pumps or airplane parts.63 § 2320
provides criminal penalties and additional remedies to victims of counterfeit goods, both the
holder of the infringed trademark as well as the consumers suffering from faulty products.
Fourth, the Trademark Counterfeiting Act enforces market rules.64 Counterfeiting
trademarks weakens modern commercial systems. 65 Because of the gross economic harm
counterfeiting trademarked goods causes to American industries,66 criminal deterrence is
necessary to decrease the desire to enter into the counterfeit industry. Yale School of Law and
School of Economics Professor Klevorik argues that the counterfeiter attempts to gain an unfair
advantage in attempting to undermine the traditional structure in place to obtain a trademark or
service mark.67 He argues that criminalizing counterfeiting is necessary to deter the desire to
create a business based on someone else’s reputation.68 Klevorik maintains that society’s
decision to implement the structures for trademarks proves that society places a value on these
structures; those that attempt to gain deceitful economic benefit by undermining societal
structures should be punished. 69
While not specifically discussing criminal trademark counterfeiting, Judge Posner argued
that counterfeiting was the equivalent of theft by false pretenses.70 He observed that the “social
cost measured by the resources consumed in counterfeiting and in trying to prevent
counterfeiting and…the social costs of inflation caused by counterfeiting”71 harms society
greatly.72 Judge Posner also remarked that when counterfeiters simply by-passing market
norms,73 there will be fewer incentives to invest in a reputation for quality work.74
62 Prosecuting Intellectual Property Crimes. Department of Justice.
63 31 Conn. L. Rev. 1, 10-12
64 Prosecuting Intellectual Property Crimes. Department of Justice.
65 Id.
66 Id.
67 31 Conn. L. Rev. 1, 18 n75
68 Id.
69 Id.
70 Id.
71 Id.
72 Id.
73 Id.,“the major function of criminal law in a capitalist society is to prevent people from
bypassing the system of voluntary, compensated exchange-the ‘market,’ explicit or implicit-in
situations where, because transaction costs are low, the market is a more efficient method of
allocating resources than forced exchange”
74 Id.

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Clearly, the need to criminalize counterfeiting was dire. In order to protect the integrity
of trademark holders, enforce market rules, and protect consumers and third-party users from
economic fraud and bodily harm,75 criminal sanctions against counterfeiters were necessary.
Congressional action, coupled with alarming statistics about counterfeit goods, points to the need
for harsher punishments for offenders of the Trademark Counterfeiting Act.
i. Subsequent Amendments
The impetus for Congress to continue to increase penalties for traffickers of counterfeit
goods was a result of several things coming into light. First, Congress noted the economic
impact of counterfeit goods, namely, the fact that counterfeit goods were costing the United
States millions of dollars in tax revenue and tens of thousands of jobs in the manufacture,
distribution and sale industries. 76Secondly, the steady invasion of counterfeit products into
numerous industries alerted Congress to the need for a change.77 Among other things, Congress
cited established ties between terrorist organizations and counterfeit sales to raise and launder
money. 78
In 2006, Congress amended the 1984 Act to enhance criminal penalties for trademark
counterfeiters.79 In addition to the criminal penalties provided in the 1984 version of the
Trademark Counterfeiting Act, the 2006 Stop Counterfeiting in Manufactured Goods Act
requires a criminal counterfeiter to pay restitution to the trademark owner and forfeit the
counterfeit goods, the proceeds derived from those goods and any manufacturing equipment to
manufacture the counterfeit goods.80
Congress subsequently amended the 1984 Act in 2008 to increase maximum penalties for
trafficking in counterfeit goods.81 Congress believes that by providing strong criminal penalties
against counterfeiting, it will not only combat the problem nationally, but will also strengthen
ties internationally with trading partners, enabling them to create more powerful anti-
counterfeiting agreements to fight this international problem.82
b. Terrorism, Drugs, and Louis Vuitton: The Need for Increased Penalties on
Counterfeiters
75 109 P.L. 181, 1
76 Id.
77 Id.
78 Id.
79 2-5 Gilson on Trademarks § 5.19, n386-389
80 Id.,The 2006 Act also criminalized the trafficking of counterfeit labels, containers, patches,
stickers, wrappers, badges, emblems, medallions, and any other packaging.
81 109 P. L. 181, 1
82 Id.

9. 9
Hard economic times should be reason enough for the United States to crack down more
harshly on counterfeit goods traffickers. The counterfeit industry costs New York City alone $1
billion in tax revenues.83 The counterfeit industry also causes a major detriment to American
jobs; 750,000 jobs are lost each year to intellectual property theft.84 The counterfeit industry has
grown vastly as demand for inexpensive luxury continues to increase. Two years before the
enactment of the Trademark Counterfeiting Act, the International Trade Commission (ITC)
estimated a worldwide loss of $5.5 billion from counterfeiting and piracy.85 Most current
estimates place the counterfeit trade in the United States alone at $287 billion, with a loss of $20
billion to American companies.86
However, the economy is not the only area on which the counterfeit industry is having an
impact. In a country dealing with economic turmoil, not many of our nation’s citizens would be
willing to waste too many resources on going after traffickers of counterfeit luxury goods to
benefit the fat cats of the fashion industry. Further, many believe these fashion industry giants
are being greedy in not allowing the general population the chance to afford the couture featured
on runways and sported by their favorite celebrities. While many criminals and average citizens
alike view counterfeiting as a victimless crime, 87 counterfeit goods have been linked to
egregiously dangerous criminal endeavors.88
The effect of counterfeit goods has a bigger impact than the average citizen might think.
While the actual sale of the counterfeit luxury good may not be harmful, its underlying effects
reach human trafficking, child labor, drug trafficking, money laundering, and terrorism.89
Because of the low risk of prosecution90 and potential for a massive profit91, criminal
counterfeiting is an attractive enterprise for organized crime groups.92 This “high-return, low-
risk” business93 allows organized criminals to fund their illicit activities, virtually under the
police radar.94 Selling fake handbags from a Canal Street stand seems much more innocent than
doing back alley drug deals. Trafficking counterfeit luxury goods actually yields higher profit
margins than the sale of illicit drugs, 95 a far more risky business. With a high demand for
83 Id., See also Fakes Are Never in Fashion. Harper's Bazaar.
84 Fakes Are Never in Fashion. Harper's Bazaar.
85 IPEC Report
86 Id.
87 77 Fordham L. Rev. 1147, 1157
88 Id.
89 Id.
90 International AntiCounterfeiting Coalition. Facts about Fakes. Web. 14 Apr. 2011.
<http://www.iacc.org/about-counterfeiting/>.
91 Id.
92 Id.
93 77 Fordham L. Rev. at 161
94 Id.
95 26 Touro L. Rev. 243, 278

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counterfeit luxury goods and low risks involved in selling them, gang members quickly jumped
on the counterfeit goods train in order to fund their illicit activities.96
The drug trade is also implicated in the sale of counterfeit luxury goods. In 1993, a New
York warehouse was raided by law enforcement officials.97 They discovered numerous fake
handbags, however, the real shock came when the discovered illicit drugs sewn into the lining of
these handbags. The smugglers intended to sell both forms of contraband.98 More recently, a
man in Florida was convicted of conspiracy to distribute and possession of cocaine and crack
cocaine.99 He was also convicted of 18 U.S.C. §2320 when police found thousands of dollars of
fake handbags in his trunk.100 In July 2002, police found 5,000 fake Rolex watches and Mount
Blanc pens during a drug operation raid of a home in Queens.101 The defendants sold counterfeit
goods to launder drug money.102
Demand for cheap luxury creates a demand for a huge illicit job market in Third World
countries in Asia to mass produce counterfeit luxury goods.103 Because of the heightened
popularity and a craving for a fast profit, counterfeiting results in sweatshops with workers being
paid unfair wages, receiving little to no benefits, and working in harsh conditions.104 In addition
to the inequitable working conditions for adults, counterfeiting also results in increased forced
child labor.105
Perhaps the most egregious connection between counterfeit goods and other illicit
activities is terrorism. An Al Qaeda terrorist training manual stated that the organization
recommends the sale of counterfeit goods as one of the means to raise funds in support of
96 77 Fordham L. Rev. at 161. A Fukienese gang, convicted of a series murders in the 1990s,
used proceeds from counterfeit luxury goods to fund their illicit operations.
97 International AntiCounterfeiting Coalition. Facts about Fakes.
98 Id.
99 John Tuohy, Testimony from Felons Help Convict Cocoa Man, Florida Today, (November 27,
2001).
100 Id.
101 Scott Shifrel, 3 Charged in Money Laundering, Daily News (New York), July 11, 2002, at 4
102 Id.
103 26 Tuoro L. Rev. at 280
104 Id.
105 Id.

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terrorist operations.106 Al Qaeda itself has been the culprit of sending counterfeit perfumes and
colognes to consumers in the UK.107
Heinous crimes tied to counterfeiting.108 The impact of counterfeits on the economy is
undeniable. While Congress has attempted to stop the problem by criminalizing
counterfeiting109 and enhancing penalties,110 this is simply not enough, without the support and
enforcement from sentencing judges.
Part II: Crime, Punishment, and Why Courts Just can’t get it Right
A. Prosecuting Counterfeit Goods Traffickers
“The Department of Justice will continue aggressively to prosecute intellectual property crimes
and to protect business and consumers alike from those looking to cheat their way to a quick
profit.”-Assistant Attorney General Lanny A. Breuer111
In order to prove that a defendant violated the Trademark Counterfeiting Act, the
government has to prove that (1) the defendant intentionally trafficked or attempted to traffic in
goods, services, packaging or labels; (2) the defendant used a counterfeit mark on or in
connection with those goods, services, labels, documentation, or packaging for those goods or
services; and (3) the defendant knowingly used the mark and knew that the mark was
counterfeit.112 To prove the second element, the prosecution also has to show that:
(a) The counterfeit mark was not authentic or genuine;
(b) The counterfeit mark was identical to or indistinguishable from a genuine mark owned by
another;
(c) The genuine mark was registered on the principal register in the United States Patent and
Trademark Office;
(d) The genuine mark had been in use by the mark-holder or its licensee;
(e) The counterfeit mark was used on or in connection with the defendant’s goods, services,
labels, documentation, or packaging;
106 John von Radowitz, Fake Internet Goods ‘Linked to Terrorists’, Press
Association, June 25, 2002.
107 Al-Qa’idah Trading in Fake Branded Goods, BBC Monitoring Reports (September 11, 2002);
Lenore Taylor, Big Business Targets Terrorist Pirates, Australian Financial Review, January 29,
2003, at 9.
108 International AntiCounterfeit Coalition. Facts about Fakes.
109 Id.
110 109 P.L. 181, 1
111 IPEC Report
112 Prosecuting Intellectual Property Crimes. Department of Justice.

12. 12
(f) The counterfeit mark was used in connection with the type of goods, services, packages,
documentation or labels for which the protected mark were designed, marketed, or
otherwise intended to be used on or in connection with; and
(g) The counterfeit mark was used in a manner “likely to cause confusion, to cause mistake,
or to deceive.”113
Proving that a defendant violated §2320 is relatively simple. The defendant may be found
guilty of this felony even if he only actually trafficked one item.114 The defendant need not
know that counterfeiting was illegal.115 When proving the counterfeit good was “likely to cause
confusion” with the genuine good, it is sufficient to show that the general public might believe
the counterfeit good was the genuine item.116 Additionally, the United States Trademark and
Patent Office provides supplementary resources for local, state, and federal prosecutors to make
bringing a §2320 charge much less difficult than it was under the civil statute.117
If the prosecution successfully proves these elements, a defendant can be subject to fines
of up to $2,000,000,118 a maximum prison sentence of ten years,119 restitution where there is an
identifiable victim,120 and forfeiture of all counterfeit items.121
B. Sentencing
a. Considerations and Reasons for Sentencing
In sentencing counterfeiters, courts are directed to consider the “nature and circumstances
of the offense.”122 Counterfeiting is a form of fraud and theft. Because of the counterfeit
113 Id.
114 Foote, 2003 U.S. Dist. LEXIS 19312, 16-25. Defendant trafficked one fake Mont Blanc pen
for $50
115 United States v. Baker, 807 F. 2d 427 (holding that showing a defendant trafficked
deliberately was enough to prove intent); United States v. Gantos, 817 F. 2d 41 (upholding lower
court’s decision refusing to instruct jury that §2320 required proof that defendant knew he was
violating the law)
116 The direct purchaser does not need to believe that the item was counterfeit for the prosecution
to prove “likelihood of confusion.” United States v. Yamin, 868 F.2d 130 (5th Cir.)
117 IPEC Report
118 18 USC § 2320(a)
119 Id.
120 18 USC § 3663A(c)(1)(A)(ii); See also United States v. Lexington, 71 Fed. Appx. 507 (6th
Cir. 2003)
121 18 USC § 3663A(c)(1)(A)(ii)
122 United States v. Song Wu Jiang, 2009 U.S. Dist. LEXIS 94417, 4-5 (E.D.N.Y. Oct. 5, 2009)
citing 18 U.S.C. § 3553(a)(1)

13. 13
market’s impact on American economy,123 it is necessary to ensure that the punishment equates
to the harm124 caused.125
Counterfeiting is punished to achieve specific and general deterrence.126 When a severe
sentence is imposed, general deterrence is accomplished.127 A sentence of a substantial prison
term will send a “clear message” to other counterfeiters that trafficking in counterfeit goods will
be punished severely.128 Specific deterrence will be attained when the defendant is imprisoned
and upon his release, he is unable to obtain employment and has a criminal record.129 Because of
the harsh reality a prison sentence will impose, it is highly unlikely that the sentenced
counterfeiter will “engage in further criminal activity”.130
In order to ensure that the crime of counterfeiting is taken seriously, courts should not be
lenient with sentencing these trademark infringing felons. As the majority of counterfeiters
sentenced will not be able to afford stiff fines and restitution,131 it is necessary to punish them
with prison terms and probation. If courts find leniency absolutely essential and impose a
probation term rather than imprisonment, they must impose a fine, restitution, community
service along with a probationary term of not less than one year.132 Courts need to recognize and
punish counterfeiting as a felony133 so the general public will finally be aware of the dire
consequences that result from trademark infringement.
b. The Sentencing Guidelines
123 IPEC Report
124 United States of America. Department of Justice. Criminal Division. Criminal Resource
Manual. DOJ. Web. Last visited: 13 Apr. 2011.
<http://www.justice.gov/usao/eousa/foia_reading_room/usam/title9/crm01701.htm>.
The USA Manual describes four general types of harm that intellectual property crimes cause:
(1) Fraud on consumers who were deceived into purchasing an inauthentic item, (2)
legitimate income lost by the trademark holder, (3) the inability of the trademark
holder to control the use of his property, and (4) the defendant’s unjust enrichment by
unlawfully using the trademark holder’s property
125 Id.
126Song Wu Jiang, 2009 U.S. Dist. LEXIS 94417 at 4-5
127 Id.
128 Id.
129 Id.
130 Id.
132 United States v. Hanna, 2003WL 22705133 (S.D.N.Y. Nov. 17, 2003), citing 18 U.S.C.
3561(c)(1)
133 Id.

14. 14
In applying an appropriate sentence, courts are directed by the Guidelines.134 Although
the Guidelines are not mandatory,135 federal courts are encouraged to follow them for continuity
amongst the circuits.136 In terms of sentencing, counterfeiting trademarked goods is a class C
felony; there is no possibility of charging this crime as a misdemeanor.137
The base offense level of criminal infringement of a trademark is 8;138 a defendant with
no criminal history is likely to receive 0-6 months of imprisonment. 139 This base offense level
was increased from a level of 6 to a level of 8 in 2000140 to take into account that the majority of
intellectual property offenses involve more than “minimal planning”. 141
If the infringement amount exceeds $2,000, but is under $5,000, the Guidelines instruct
to increase the base offense by one level. 142 If the infringement amount exceeds $5,000, the
Guidelines suggest increasing the offense by the number of levels in the 2B1.1 table143 that
correspond to the infringement amount.144
Since the crime of counterfeiting is treated similarly to offenses of theft and fraud, the
Guidelines suggest that sentencing for trademark counterfeiting should “reflect the nature and
magnitude of the pecuniary harm caused by their crimes.”145
Courts are then guided to calculate the infringement amount. In determining the
infringement amount, the Guidelines direct courts to multiply the number of infringing goods by
the goods’ retail value.146 In determining the retail value, 147 courts can determine whether the
sentence should be based on the retail value of either the infringed item or the infringing item.
134 § 2B5.3
135 United States v. Booker, 543 U.S. 220 (2005)
137 Foote, 2003 U.S. Dist. LEXIS 19312, 16-25
138 § 2B5.3
139 Table, 18 USCS Appx. 2B1.1
140 § 2B5.3
141 Prosecuting Intellectual Property Crimes. Department of Justice.
142 § 2B5.3
143 §2B5.3. This table is used for determining the level of criminal punishment in cases of theft,
property destruction, and fraud.
144 § 2B5.3(b)(1)(B)
145 Id., cmt. Backg’d.
146 Id., cmt. n.2(A),(B)
147 Id., cmt.

15. 15
While the Guidelines may appear to be simple, some courts struggle to correctly apply
them to a counterfeit conviction. The words “infringed” and “infringing” commonly cause
problems with sentencing judges.148 According to the Guidelines, an “infringed item” means the
trademarked item with respect to which the crime against intellectual property was committed.149
The “infringing item” is the item that violates trademark laws.150
The definitional difference offered by the Guidelines is confusing. An “infringed item” is
the genuine good; for example, where a defendant traffics counterfeit Kate Spade handbags, the
“infringed item” is the genuine Kate Spade handbag that is legally authorized to use the Kate
Spade trademark. In the same example, the “infringing item” is the counterfeit Kate Spade
handbag, illegally using the Kate Spade trademark. When calculating the “infringement
amount,” courts can either use the value of the counterfeit good, or the value of the genuine
good, to determine sentencing.151
The manner in which the guidelines are written have been interpreted to suggest that only
in extreme cases should the courts use the retail value of the infringed item to determine
sentencing.152 However, by determining a value akin to the manufacturer’s suggested retail
price, courts will be able to stay true to Congress’ intent when it created 18 USC § 2320.153
Congress’ intent was that copyright and trademark violations be treated like fraud or theft.154
Therefore, it is necessary for the infringement amount to “serve as the principal factor in
determining the offense level.”155
C. Why the Problem is Not Getting Better: Courts Need to Embark upon a Counterfeit
Crackdown
a. Making Faux Luxury a Risky Business
It is necessary to harshly punish counterfeiters so that the business of faux luxury is so
risky that counterfeiters have to increase the price of their goods so high that they are run out of
the market.156 The demand for luxury goods drives the counterfeit market,157 however, if
148 Kim, 963 F.2d 65, 66-70
149 §2B5.3, Cmt. App.1
150 Id.
151 Id., App.2
152 See Kim, 963 F.2d 65, 66-70; see also United States v. Cho, 136 F.3d 982, 982-986 (5th Cir.
Tex. 1998)
153 77 Fordham L. Rev. at 1170
154 §2B5.3, Cmt. Bkg’d
155 Id.
156 77 Fordham L. Rev. at 1170, Jonathan Barnett argues that “prosecution of counterfeiting may
reduce socially excessive consumption by increasing the cost of acquiring counterfeit fashion
goods.”

16. 16
counterfeit goods are priced equally or substantially equivalent to the genuine goods, the
counterfeit market will lose its luster and customers will turn to purchasing the genuine good.158
In order to create a higher risk when entering into a counterfeit business, it is necessary to deter
counterfeiters with the high likelihood of punishment, whether it is imprisonment or steep
fines.159
Critics of harsh sentences for counterfeiters propose that counterfeit goods actually make
the genuine goods more desirable to the general public.160 Giorgio Armani even believes that
counterfeit goods show his popularity, and he expressed his approval for counterfeit Armani
styles.161 Intellectual property attorney, Jonathan M. Barnett,162 follows Armani’s belief, stating
that legitimate trademark holders may even “benefit from the existence of counterfeits in the
market.”163 Barnett maintains that rather than prosecuting and sentencing counterfeiters more
harshly,164 we should leave them alone, as they may create an incentive for buyers to one day be
able to purchase the “real stuff”.165
Barnett underscores the importance of the larger impact that counterfeit goods have on
the economy as a whole. Even if the effect of a counterfeit goods market increases name
recognition of the genuine good,166 the multi-billion dollar deficit the counterfeit industry causes
legitimate trademark owners,167 the billions of dollars in tax revenue forgone,168 and the
thousands of jobs in manufacturing and sales lost to the counterfeit industry169 strongly outweigh
any positive effects the presence of counterfeit goods may have in the economy.
Barnett also ignores the small likelihood that the consumers purchasing counterfeit
luxury goods will actually purchase the genuine product. In various surveys, the likely
157 26 Tuoro L. Rev. 243
15877 Fordham L. Rev at 1165, n139, discussing the “Incentive Theory” as coined by Professor
Mark A. Lemley of Stanford Law School (the idea that consumers believe ownership of a luxury
item will denote status); Lemley argues that as long as the price of a counterfeit good remains
above the marginal cost, counterfeiters will continue to produce the goods
159 Id.
160 Id.
161 26 Tuoro L. Rev. 243
162 Jonathan M. Barnett, Essay: Shopping for Gucci on Canal Street: Reflections on Status
Consumption, Intellectual Property, and the Incentive Thesis, 91 Va. L. Rev. 1381, October 2005
163 77 Fordham L. Rev at 1167
164 77 Fordham L. Rev at 169 (“the fashion industry does not need anticounterfeiting protection,
and the laws that inhibit counterfeiters are actually ‘detract[ing] from intellectual property
protections’”)
165 Id., at 1169
166 Id., at 1170
167 IPEC Report
168 Id., Tax revenues lost to counterfeit retailers not charging a sales tax on goods.
169 IPEC Report

17. 17
purchasers of counterfeit goods were those that claimed the price of the genuine article was
simply to extravagant for their budgets.170 If these purchasers had enough disposable income,
they would not have purchased the counterfeit good in the first place.171
b. Congress’ efforts to combat counterfeiting seem to be in vain.
Trafficking counterfeit goods results in such dire consequences, but why are we not
prosecuting and sentencing 18 U.S.C. § 2320 violators more vigorously? 18 U.S.C. § 2320 is
relatively easy to prove.172 However, courts are reluctant to impose harsh sentences with unclear
Guidelines that appear to only permit using the retail value of an infringed item in rare cases.173
In 2010, courts sentenced 207 defendants of convicted counterfeit goods trafficking.174
Almost sixty percent of those defendants received no prison term at all.175 Of the few that were
imprisoned, the majority received less than two years in prison.176 Ten convicted defendants
were sentenced to 25-36 months in prison, seven received a sentence of 37-60 months in prison,
and only four of the defendants convicted were handed prison sentences of more than 60
months.177 Surprisingly, fewer defendants were sentenced to prison for trademark infringement
in 2010 than in 2009,178 although data shows that counterfeit goods are trafficked at higher rates
each year.179
In order to help eliminate the problems that trafficking counterfeit goods brings to our
nation’s economy, courts need to use the retail value of the infringed item to determine
sentencing. By employing retail value of the infringed, rather than infringing, items, defendants
170 COUNTERFEIT AND LOOK-ALIKE PRODUCTS – SOCIAL AWARENESS. Publication.
Rapport. Web. 11 Apr. 2011.
<http://www.iccwbo.org/uploadedFiles/BASCAP/Pages/promarka_raport_ang(2).pdf>.
171 Alexander Nill "The scourge of global counterfeiting". Business Horizons. FindArticles.com.
13 Apr, 2011. http://findarticles.com/p/articles/mi_m1038/is_n6_v39/ai_19125124/
COPYRIGHT 1996 JAI Press, Inc. ,COPYRIGHT 2004 Gale Group (consumers purchase
counterfeit luxury goods because they cannot afford the high price tag that the ‘greedy’
corporations place on the genuine good, but still want to be fashionable and reflect a certain
social status that the luxury goods imply)
172 IPEC Report. In 2010, out of the 259 defendants that Assistant United States Attorneys
charged with copyright or trademark infringement, 207 of those defendants were convicted and
sentenced.
173 77 Fordham L. Rev. at 1170
174 IPEC Report
175 Id., 121 out of 207 defendants received no prison term after being convicted of counterfeiting
176 Id., 38 defendants received prison sentences of 1-12 months in prison and 27 were sentenced
to prison for 13-24 months
177 Id.
178Id., 97 defendants were given prison terms 2009 while only 86 were sentenced to prison in
2010.
179 Id.

18. 18
will be subject to a harsher sentence for trademark counterfeiting. Not only will this change
provide a general deterrent for the masses of counterfeiters, but the specific deterrence for each
defendant will be extremely effective.
In most cases, there are huge price disparities between infringed and infringing item.180
Perhaps this price difference has to do with the various courts’ reluctance to impose harsh
penalties. Some may argue this is an unfair valuation.181 The counterfeiter is only likely to
profit marginally in comparison to the trademark holder, and the trademark holder is not likely
losing out on direct purchases because those who purchase counterfeit goods are not likely to pay
the retail price tag. However, counterfeiting is a problem that needs to be taken seriously
because of its grave impacts and those who violate §2320 should be subject to harsh penalties.
c. Confusion with “Infringed” versus “Infringing” Retail Value Leads to Inconsistent
Sentences
The Guidelines provide that the infringement amount is to be calculated by the retail
value of the infringed item, multiplied by the number of infringing items, in a case involving any
of the following:182 (1) the infringing item is, or appears to a reasonably informed purchaser to
be, identical or substantially equivalent to, or likely to cause confusion with, the infringed
item,183 or (2) the retail price of the infringing item is not less than 75% of the retail price of the
infringed item,184 or (3)the retail value of the infringing item is difficult or impossible to
determine without unduly complicating or prolonging the sentencing,185 or (4) the retail value of
the infringed item provides a more accurate assessment of the pecuniary harm to the trademark
owner.186 After considering all of the possibilities with which to calculate the infringement
180 Id. CBP and ICE HSI had 19,959 intellectual property seizures in FY 2010.The domestic
value of the seized goods—i.e., the value of the infringing goods, not the manufacturer’s
suggested retail price (MSRP) for legitimate product—was $188.1 million. The estimated
MSRP of the seized goods—i.e., the value the infringing goods would have had if they had been
genuine—was $1.4 billion.
18177 Fordham L. Rev. 1163. If the value was based primarily on retail value, the valuation
“would overstate substantially the pecuniary harm caused to…trademark owners.”
182 Note that these are only the applicable factors to luxury goods; 18 USCS Appx. 2B5.3 is used
as a guideline for sentencing in copyright cases as well not applicable to this paper
183 United States v. Alim, 256 Fed. Appx. 236, 240-241 (11th Cir. Ala. 2007) (Defendant’s
stepson testified that he could not tell the difference between the infringing items and the
genuine items, even though he worked in the business of counterfeit goods)
184 United States v. Larracuente, 952 F. 2d 672, 674-75 (2nd Cir. 1992) (high quality counterfeits
should be valued at the retail price of the genuine items they are infringing)
185. Cho, 136 F. 3d 982 (holding that it is “not clear error” for the district court to use the retail
value of the genuine items to calculate the retail value of the counterfeit items, especially when it
is difficult to calculate the counterfeit price)
186 §2B5.3, cmt., Application Note

19. 19
amount based on the retail value of the legitimate good, the court is unable to determine that any
of the situations apply, it is then encouraged to use the retail value of the counterfeit item to
determine the infringement amount.187
The Guidelines appear to offer a straightforward application of the use of the retail value
of the infringed item when calculating the infringement amount. However, courts struggle with
the calculation of the infringement amount to determine sentencing.188 This difficulty in
calculation results in the courts only applying retail value of the genuine good in very rare
cases.189
Additionally, many courts are confused with the application of infringed or infringing
goods to determine infringement amount.190 In United States v. Kim,191 the district court
erroneously applied the phrase “retail value of infringing items” to mean the retail value of the
genuine (infringed) items.192 The circuit court then found that the Guidelines’ “clear and
unambiguous phrase” discussing the “retail value of the infringing items” obviously refers to the
value of the counterfeit merchandise.193 In a roundabout manner, the court eventually
determined that the district court’s use of retail value of the infringed item was relevant in
determining the retail value of the infringing counterfeit goods.194
Although Kim was decided before subsequent amendments,195 it created an authority that
the retail value of the counterfeit item was the appropriate measure for which to determine
187 Id., cmt. n.2(B)
188 77 Fordham L. Rev. 1170
189 Id.
190 Id.
191 Kim, 963 F.2d 65, 66-70
192 Id.
193 Id.
194 Id.
195 Prosecuting Intellectual Property Crimes. Department of Justice. Sentencing Guidelines
revised in 2000 to include sentencing determinations based on the amount of harm the defendant
caused, whether he displaced the victim’s legitimate sales, and the difficulties in calculating the
counterfeit’s value. Prior to the 2000 Amendments, the guidelines were silent as the legitimate
good’s retail value and simply referred to the retail value of the counterfeit goods. The current
guidelines instruct a court to apply the retail value of an authentic good if any of the factors listed
in the commentary apply.

20. 20
enhancement.196 Courts following the Kim line of reasoning provided that the proper way to
calculate loss was to determine the value of the counterfeit goods.197
Cases decided after the Guidelines were amended to allow for consideration of the value
of the infringed item still continue to employ the application of the infringing value in
determining the infringement amount.198 Courts believe that the Guidelines only permit the use
of the genuine good’s retail value in only very rare cases.199
In United States v. Foote,200 the court held that the offense level was to be calculated
based on the value of the infringing goods.201 Similarly, the court in United States v. Slater202
stated that courts should be given considerable leeway in determining the retail value of the
infringing items when calculating the infringement amount. Additionally, even after the
considerable flexibility the Guidelines offer to courts to utilize the retail value of the infringed
item,203 some courts simply refuse to even consider the genuine good’s value.204
By varying sentencing considerations, inconsistent penalties result based on jurisdiction,
or even sentencing judge. Defendants are left in the dark as to what kind of sentence they might
possibly face, as the value used could be the difference of a small fine to imprisonment. Not one
factor appears to be determinative in the post-2000 Amendment Guidelines era, although prior to
196 However, this reliance may be improperly placed. United States v. Bao, 189 F.3d 860, 867
(9th Cir. 1999) (It appears that the defendant misinterpreted what Kim had said, in that the value
of the infringing good should always be relied upon in determining the proper sentencing
enhancement.)
197 Cho, 136 F.3d 982-986 (“Kim squarely stands for the proposition that the retail value of the
infringing items determines the § 2F1.1 enhancement.”)
198 77 Fordham L. Rev. at 1170
199 Id.
200 Foote, 2003 U.S. Dist. LEXIS 19312, 16-25
201 Id., (holding that the offense level is to be determined based on the total retail value of all
counterfeit items sold by the defendant; the court looked at the defendant’s bank account records
to determine this as there was no evidence of the sales in the trial record)
202 348 F.3d 666, 670 (7th Cir. 2003)
203 §2B5.3 “The infringement amount is the retail value of the infringed item…in a case
involving any of the following…”
204 Hanna, 2003 U.S. Dist. LEXIS 20564 (neglecting to even take into consideration the value of
the genuine goods when attempting to determine the defendant’s sentence where the value of
counterfeit Coach handbags he sold was between $5,000-$10,000)

21. 21
the amendment, it appears that courts used price and quality as major factors in determining the
defendant’s sentence.205
d. Reluctance or Confusion?
It is possible that reluctance, rather than confusion, is the reason that the majority of
counterfeiters are not sentenced to prison. Several courts have made it clear that although
trademark infringement is against the law, it is not as serious of a felony as other crimes.206
In United States v. Arman, 207 the court held that the 63-month prison sentence
recommended by the Guidelines was “overly harsh” for a defendant who was convicted of
trafficking counterfeit goods.208 It notes that counterfeiting of any kind is a “serious offense and
warrants considerable punishment,” however, since Arman trafficked counterfeit cameras, his
penalty needed to be less severe.209 Some of the reasons the court cited for this departure from
the Guidelines were that fake “cameras, handbags, sunglasses and watches do not pose a serious
205 Larracuente, at 672 (high-quality fakes should be valued at the retail price of the genuine
good); Bao, 189 F. 3d 860 (retail value of the genuine items is a price ceiling in determining the
infringement amount)
206 United States v. Zheng Xiao Yi, 460 F. 3d 623(5th Cir. 2006) (the district court’s use of retail
value of infringed items to provide a more accurate assessment of pecuniary harm to trademark
owners was not based on any facts on record and the defendant’s sentence was remanded);
United States v. Diallo, 575 F. 3d 252 (3d Cir. 2009) (even though defendant was a repeat
offender, the court imposed a lenient sentence based on street value, rather than genuine, because
the court believed this reflected a more accurate assessment o the harm caused to the trademark
holder caused by counterfeiting. Amongst the vast amount of counterfeit items Diallo trafficked,
he had counterfeit Prada handbags (genuine retail value starting at $570-
http://usa.prada.com/en/US/e-store/) and Louis Vuitton handbags (genuine retail value starting at
$730-http://www.louisvuitton.com/us/flash/index.jsp?direct1=home_entry_us); United States v.
Kim, 2008 U.S. Dist. LEXIS 80043 (D. Idaho, Aug. 29, 2008) (A defendant selling counterfeit
Calvin Klein, Tommy Hilfiger, and Nike t-shirts at a flea market was unlikely “stealing sales”
from trademark holders. The court departed from the Sentencing Guidelines recommendations
of 10-16 months imprisonment and imposed a one month incarceration period, followed by nine
months home detention. The court reasoned that probation might be too lenient, but punishment
of one month in prison would be sufficient to “sent the message that taking advantage” of
trademark holders will be punished. The court here explained at great length its desire to not
even impose a criminal sentence; however, it begrudgingly concludes that it is “not the role of
the court to tell Congress how to protect the rights of trademark holders and the sanctity of
commerce.”
207 2006 U.S. Dist. LEXIS 4592, 4-6 (N.D. Ill. Feb. 2, 2006)
208 Id.
209 Id.

22. 22
threat to the health and safety of unwary consumers,” and the trademark holder’s revenue was
not threatened.210 The Arman court noted that harsh punishments for average street vendors who
sell fake purses, sunglasses and cameras was not what Congress intended when it created more
severe sentencing.211
Perhaps the courts reluctant to impose harsh sentences on traffickers of counterfeit luxury
goods are correct in their rulings. Why spend tax dollars putting a street vendor selling fake
Louis Vuitton purses in jail when we have rapists and murderers still on the streets? If, as the
Arman court suggests,212 Congressional intent in creating more severe sentencing guidelines was
not aimed at low level street vendors, we could be putting innocent criminals in jail.213
If Congress intended a disparity in the treatment amongst low level street vendors, just
trying to make an “honest” living, and hardened criminals using counterfeit luxury goods to fund
their illicit activities, it would have clearly done so. Mitigating factors are present in the
Guidelines,214 as well as departure considerations for particularly serious offenses.215
D. Solutions to Sentencing Problems: Consistent Use of “Infringed” Item’s Retail Value
210 Id., The court noted that since Arman’s goods were “obviously fake,” it was unlikely that the
customers would mistakenly purchase one of his cameras, believing them to be genuine. The
court continues, in stating that the cameras, like many of the “fake Louis Vuitton handbags and
Gucci sunglasses” were a mere “substitute for the genuine article that the purchases were unable
to afford.”
211 Id.
212 Id.
213Counterfeiting is a crime; a felony at that. 18 USC § 2320. Congress was clear that its
intention was to criminalize counterfeiting. There are no innocent counterfeit goods traffickers.
214§ 2B5.3, cmt. App. N2(B)
215 Id., at N4. The departure considerations also provide for departure from the Guidelines when
“the method used to calculate the infringement amount is based upon a formula or extrapolation
that results in an estimated amount that may substantially exceed the actual pecuniary harm
caused to the copyright or trademark owner.” While there are obvious important reasons for this
departure, the wide scope of the departure and deference given to the courts appears to go against
congressional intent in making counterfeiting a crime in the first place. In order to deter
criminals, it cannot be said that courts are given complete deference to decide what this
pecuniary harm might be. Since there is no guidance for determining the issue in the Guidelines,
it is necessary to note that this article would also argue to change the departure considerations.
This article would propose that courts may depart from the Guidelines only when the
infringement amount would egregiously exceed the actual pecuniary harm caused to the
copyright or trademark owner. It would also be necessary for Congress to cite examples in
which this would be an egregious overstatement of the pecuniary harm; this would ensure that
the Guidelines were adhered to in order to remain consistent throughout the circuits and that
counterfeiting is adequately deterred.

23. 23
In order to sufficiently deter counterfeit goods traffickers, it is necessary to implement
consistent use of the retail value of the infringed item in determining the infringement amount
for sentencing enhancements. Courts often cite that the infringing value more accurately
reflects the pecuniary harm to the trademark holder.216 Valuing the product at the infringing
value may seem fairer to the defendant, as he did not receive the benefit of the Coach or Louis
Vuitton price tag. However, this does not take into account that the defendant actually did
receive the benefit of the good will and reputation that Coach and Louis Vuitton have with the
defendant’s customers. Regardless of the discounted price tag, the only reason the customers
purchased the defendant’s products was because of the name attached to them, a name that was
not the defendant’s own, and not at his leisure to use.
Additionally, imposing a lighter sentence is obviously not serving the purpose of general
deterrence,217 as more counterfeiters are investigated each year.218 It simply makes more sense
for courts to implement sentences with the infringement amount based on the retail value of the
infringed item.
One of the factors that determine whether the court uses the infringed value is
determining if the counterfeit good was “substantially indistinguishable” from, or “likely to
cause confusion” to a reasonably informed purchaser, leading that person to believe the
counterfeit good was the genuine good.219 This factor is identical to one that must be proved at
trial.220 The government goes through great lengths to prove this confusion at trial.221
If the government sufficiently proved that the goods were “likely to cause confusion” to,
or “substantially indistinguishable” from, the genuine goods in the defendant’s trial, this proof
should be sufficient in sentencing as well. Sentencing is determined by preponderance of
216 Diallo, 575 F. 3d 252
217 Hanna, 2003 U.S. Dist. LEXIS 20564
218 IPEC Report
219 §2B5.3, cmt.
220 18 USC§ 2320
221 The government need not prove that the conduct results in actual confusion, because 2320
specifically requires only that the good causes a “likelihood of confusion.” (United States v.
Yamin, 868 F. 2d 130). A court will reject a defendant’s arguments that his products are not
likely to cause confusion because defendant disclosed the good’s counterfeit nature, (Foote, 2003
U.S. Dist. LEXIS 19312, 16-25); the fake goods were so low in price that a reasonable purchaser
would have known them to be fake, (United States v. Gonzalez, 630 F. Supp. 894, 896 (S.D. Fla.
1986)); or that the difference in quality was so obvious that a reasonable consumer would not
believe the good was actually genuine. (United States v. Farmer, 370 F. 3d 435 (4th Cir. 2004)).
Additionally, likelihood of confusion is satisfied if the good is likely to cause confusion in a
post-sale context. (Yamin, 868 F.2d 130).

24. 24
evidence, but beyond a reasonable doubt is a much higher standard that must be proved in a
criminal trial. By forcing the courts to take a second look at whether the good was “likely to
cause confusion” during sentencing,222 the government is faced with a duplicative burden of
proving the same element during trial and at sentencing.223 If the element of “likely to cause
confusion” is proved at trial, the sentencing judge should have no question that the proper retail
value by which to base the infringement amount is the infringed item.
The infringing value should only be taken into account on rare occasions. For example,
if the defendant only had a handful of counterfeit items to traffic, however, in that handful, he
had ten Louis Vuitton purses, with a genuine retail price starting at $730,224 the court could take
this mitigating factor into consideration. Considering that a counterfeit Louis Vuitton handbag
could retail for as low as $20 (giving the defendant a net infringement amount of $200, which
would subject him to a fine), courts will be able to take this factor into consideration to give a
break to a small-time counterfeit goods dealer.
Last, if courts believe a defendant is truly remorseful and a prison sentence would be
unnecessarily harsh,225 the courts could still use the infringed amount to determine probation226
plus a fine, restitution, or community service. Courts could ensure that counterfeiting was
adequately deterred, but spare the most repentant defendants a harsh prison sentence.
Conclusion
The counterfeit epidemic is not going to go away. Celebrities and notable figures
continue to flaunt the latest, most expensive fashions. It is human nature that those who cannot
afford a real Louis Vuitton will want to obtain something close to it, and if counterfeit goods are
readily available, people wanting to imitate the stars will do so, at a cheaper cost. Counterfeit
goods appear as if they are here to stay.
Links to terrorism, the illicit drug trade, human trafficking, and health and safety hazards
were reasons that Congress decided to get serious about counterfeiting. It is clear that the crime
of counterfeiting is not simply an innocent attempt to make cheap luxury attainable to the
masses.
222 Alim, 256 Fed. Appx. 240-241 (used the trial court records to determine whether the good was
likely to cause confusion and was substantially indistinguishable from genuine good)
223. Prosecuting Intellectual Property Crimes. Department of Justice. The burden is a great one
because this element is generally proved by an expert witness; this may prove to be costly.
224 http://www.louisvuitton.com/us/flash/index.jsp?direct1=home_entry_us
225 United States v. Song, 934 F.2d 105, 109 (7th Cir. Ind. 1991)
226 Hanna, 2003 U.S. Dist. LEXIS 20564

25. 25
While it is relatively easy to prosecute a violation of 18 USC §2320, courts reluctant to
impose meaningful sentences on clearly guilty defendants might deter the government from even
wasting resources in charging a counterfeit goods trafficker. The Sentencing Guidelines need to
be changed to encourage courts to punish counterfeit goods traffickers so that the entire market is
sufficiently deterred from committing the crime. It is necessary to amend the Guidelines to
allow courts to punish 18 USC §2320 violators to the fullest extent. By using the value of the
genuine, infringed good, rather than the counterfeit, infringing good, to determine the sentence.
Creating disincentives to engage in counterfeit trafficking is necessary if Congress and the courts
want to quell the epidemic that is infecting the economy, the fashion industry, and our everyday
lives.