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March 11, 2005

The Honorable Howard Coble
Chairman
Subcommittee on Crime, Terrorism, and Homeland Security
Committee on the Judiciary
House of Representatives
Washington, DC 20515-6223

Dear Chairman Coble:

     I am writing to you on behalf of the American Intellectual Property Law Association (AIPLA) to express our support for H.R. 32, the “Stop Counterfeiting in Manufactured Goods Act.” 

     AIPLA is a national bar association whose more than 16,000 members are primarily lawyers in private and corporate practice, in government service, and in the academic community.  AIPLA represents a wide and diverse spectrum of individuals, companies and institutions involved directly or indirectly in the practice of patent, trademark, copyright, and unfair competition law, as well as other fields of law affecting intellectual property.  Our members represent both owners and users of intellectual property.

     Strong federal laws that provide effective deterrents against trafficking in counterfeit trademarks are essential to protect consumers and trademark owners.  While 18 U.S.C. § 2320 criminalizes intentional trafficking in goods or services bearing a counterfeit trademark, a new technique has undercut its effectiveness.  Counterfeiters are employing this new technique, sometimes referred to as the counterfeit-labeling loophole, to avoid criminal prosecution. Under this scheme, a counterfeiter “legally” ships or imports the counterfeit labels to warehouses where unlabeled goods are stored, applies the labels to such goods, and distributes the resulting counterfeit products to retailers or consumers.

     The existence of such a loophole was confirmed by the Tenth Circuit in United States v. Giles, 213 F.3d 1247, 1250-51 (10^th Cir. 2000). In that case, the Tenth Circuit reversed the conviction of an individual who sold patches and medallions bearing the trademark of a manufacturer of high quality handbags and luggage. The Tenth Circuit ruled that section 2320 does not prohibit trafficking in counterfeit labels which are not attached to any goods. H.R. 32 would close this loophole. AIPLA strongly believes that the proposed amendment to Section 2320 of Title 18 is warranted to protect trademark owners against counterfeiters using this loophole.

     H.R. 32 would also effect a needed and desirable strengthening of the sanctions for trafficking in counterfeit goods and labels. Currently section 2320 does not require mandatory seizure of such counterfeits or the machine tools used to produce them. We believe that not only should there be mandatory destruction of seized counterfeit goods and labels, but that the machine tools used to produce them must be forfeited or destroyed in order to provide an effective deterrent to combat counterfeiting.

     We offer one final but important observation. While AIPLA supports H.R. 32 in its current form, we believe that consideration also should be given to adding enhanced civil remedies to Section 2320 to aid in civil enforcement against counterfeiters. In this regard, we would look, by way of example, to the types of civil remedies added to section 2318 by Public Law No. 108-482 with respect to counterfeit labels designed to be affixed to phonorecords, computer programs, and motion pictures. Provisions allowing trademark owners injured by a violation of section 2320(a) to obtain civil seizures, temporary or permanent injunctions, attorney fees and actual or statutory damages, and treble damages for willful offenders would allow trademark owners to better protect their marks against counterfeiters.

     We appreciate the opportunity to offer these comments and hope that our views will aid the Subcommittee in its consideration.  We stand ready to give assistance to the Committee in any manner which may be beneficial.                                                                   

Sincerely,

Michael K. Kirk
Executive Director

cc:    Hon. Robert C. Scott
          Hon. Joe Knollenberg

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