U.S. to Counterfeiters: Stop It!
In February, President Bush approved a new anti-counterfeiting law, the "Stop Counterfeiting in Manufactured Goods Act" (H.R. 32). This law blocks loopholes in the current law and increases the criminal penalties for counterfeiting. The new law makes it illegal for someone to make or sell counterfeit labels or packages. Selling counterfeit goods has been unlawful for a long time. A gaping loophole allowed sellers of the labels (imprinted with the phony marks) to escape criminal liability, however - just because the labels had not yet been affixed to the fake products. That loophole has now been closed.
This new law is another step in the government's efforts to protect trademark owners and legitimate products. As President Bush commented when he signed the new law: "Counterfeiting hurts businesses. They lose the right to profit from their innovation. Counterfeiting hurts workers, because counterfeiting undercuts honest competition, rewards illegal competitors. Counterfeiting hurts consumers as fake products expose our people to serious health and safety risks."
Besides closing the loophole to expose makers of fake labels to criminal liability, the new act also strengthens the criminal penalties that can be imposed on counterfeiters. The new law directs courts to order destruction of the counterfeit products. Courts can also require convicted counterfeiters to turn over their profits and the equipment, and to pay restitution to the legitimate businesses. That means that the counterfeiters can be ordered to reimburse the businesses for the losses the legitimate businesses suffered due to the fake products.
Counterfeiting continues to be a severe problem--no surprise to companies in the professional beauty business. The U.S. Customs estimates that trafficking in counterfeit goods costs the United States about $200-$250 million each year. The U.S. loses millions of dollars in tax revenues from counterfeit goods, and counterfeit items manufactured overseas cost American workers tens of thousands of jobs.
Another government anti-counterfeiting program is the "Strategy Targeting Organization Piracy" program. This is an effort coordinated by several federal agencies trying to improve the protection for intellectual property - trademarks, copyrights and patents. As part of this program, Customs has increased its efforts to stop fakes at the United States borders; the Department of Commerce is encouraging companies to register their trademarks to increase publicity and enforcement; and the Federal Trade Commission continues to be on the lookout for false or fraudulent representations. A helpful website at www.stopfakes.gov gives more information about this program.
Trademark owners and legitimate businesses have responsibilities in the anti-counterfeiting wars as well. The first step should be for businesses to register their key trademarks. The new law reinforces the wisdom of registering trademarks -- although unregistered trademarks are sometimes counterfeited, the new law gives favored treatment to trademarks that have been registered with the U.S. Patent and Trademark Office. Another way for businesses to improve their vigilance against fake products is to make sure that contract provisions specify the authorized distribution channels: who you buy from and who can sell your products. Those measures will guard against fake goods being mingled with the legitimate merchandise. We are all soldiers in this battle to keep our marketplace clean of counterfeited goods!
Deborah M. Lodge is a partner at Patton Boggs LLP, a Washington, DC law firm with a reputation for working closely with Congress and regulatory agencies. Lodge specializes in intellectual property and Internet law. She represents a broad range of clients, including electronic publishers, retailers, trade associations, software developers, and other new technology pioneers. You can reach Lodge directly at dlodge@pattonboggs.com or 202-457-6030.
