What are the consequences of counterfeit charges?

This page explains what counts as a counterfeit mark, the California and federal penalties, forfeiture and restitution, and the defenses that commonly come up under Penal Code 350 and 18 U.S.C. § 2320. Federal cases are handled through our federal crimes defense practice; business-related cases are also covered on our white collar crimes defense page.

What is a counterfeit mark?

Under California law, a “counterfeit mark” is “a spurious mark that is identical with, or confusingly similar to, a registered mark and is used, or intended to be used, on or in connection with the same type of goods or services for which the genuine mark is registered” (Penal Code 350(e)(3)). Federal law uses a narrower test: a spurious mark “that is identical with, or substantially indistinguishable from, a mark registered on the principal register” (18 U.S.C. § 2320(f)). Registered marks are listed by the USPTO.

California: Penal Code 350

The statute applies to anyone who “willfully manufactures, intentionally sells, or knowingly possesses for sale any counterfeit mark registered with the Secretary of State or registered on the Principal Register of the United States Patent and Trademark Office” (Penal Code 350(a)). “Knowingly possess” means the person “knew or had reason to believe that it was spurious” (§ 350(e)(4)).

• Fewer than 1,000 items and below the grand theft value: for an individual, “a fine of not more than ten thousand dollars ($10,000), or by imprisonment in a county jail for not more than one year, or by both” (§ 350(a)(1)).
• 1,000 or more items, or value at or above the grand theft threshold: county jail up to one year, or 16 months, two or three years under Penal Code 1170(h), or “a fine not to exceed five hundred thousand dollars ($500,000),” or both (§ 350(a)(2)).
• Business entities: fines up to $200,000 or $1,000,000 depending on the tier (§ 350(a)).
• Repeat offenses: a person with a prior conviction under either tier who is convicted again under the lower tier faces “a fine of not more than one hundred thousand dollars ($100,000), or by imprisonment in a county jail for not more than one year, or pursuant to subdivision (h) of Section 1170 for 16 months, or two or three years” (§ 350(b)).
• Death or great bodily injury: if a person relied on the counterfeit item and was seriously hurt or killed, two, three or four years (§ 350(c)).

The grand theft value threshold is set by Penal Code 487. Value is “the retail price or fair market value, as of the last day of the charged crime, of a completed similar genuine article containing a genuine mark” (§ 350(e)(8)(C)). That means the price of the real product, not the counterfeit, is used, which often pushes a case into the felony tier.

Federal: 18 U.S.C. § 2320

Federal law makes it a crime to intentionally “traffics in goods or services and knowingly uses a counterfeit mark on or in connection with such goods or services,” and also covers labels, tags and packaging bearing a counterfeit mark (18 U.S.C. § 2320(a)). For a first offense, an individual “shall be fined not more than $2,000,000 or imprisoned not more than 10 years, or both”; a second offense carries up to $5,000,000 and 20 years (§ 2320(b)(1)). Higher penalties apply when the conduct causes serious bodily injury or death, and separate provisions cover counterfeit drugs and military goods (§ 2320(b)(2)–(3)).

Forfeiture and restitution

On a California conviction or no contest plea, “the court shall order the forfeiture and destruction of all of those marks and of all goods, articles, or other matter bearing the marks,” along with the means of making them (§ 350(d)(1)). The court must also order restitution “to the trademark owner and any other victim of the offense” (§ 350(i)). Upon request of law enforcement and with the brand owner’s consent, the court may instead allow seized goods to be “donated to a nonprofit organization for the purpose of distributing the goods to persons living in poverty at no charge” (§ 350(d)(2)). Forfeiture of proceeds follows Penal Code 186 and the following sections, and certain family vehicles are protected, including “the sole class C, M1, or M2 vehicle available to the immediate family” of the defendant (§ 350(d)(3)). Federal forfeiture and restitution are governed by 18 U.S.C. § 2323, which requires forfeiture of property used in or derived from the offense.

Defenses and issues that often decide these cases

• Knowledge. California requires that the person knew or had reason to believe the goods were spurious (§ 350(e)(4)); federal law requires knowing use of a counterfeit mark (§ 2320(a)).
• Registration. The mark must be registered with the Secretary of State or the USPTO (§ 350(a)); federal charges require registration on the principal register (§ 2320(f)).
• Prior lawful use and fair use. The statute does not apply to a party who lawfully used a similar mark before registration, or to fair uses under Business and Professions Code 14247 (§ 350(f), (h)).
• Landlords and property owners. A person who rents property where sales occur is not criminally liable unless that person sells or possesses the goods for sale (§ 350(g)).
• Lanham Act defenses. Federal law adopts “all defenses, affirmative defenses, and limitations on remedies that would be applicable in an action under the Lanham Act” (§ 2320(d)).
• Count and value. The number of articles and their value set the penalty tier, and unassembled components are counted as completed articles (§ 350(e)(1), (3)), so inventory counts are often contested.

Who can be charged

Under Penal Code 350, a “person” includes a business entity, and “business entity” includes “a corporation, limited liability company, or partnership” but “does not include a sole proprietorship” (§ 350(e)(2), (5)). “Sale” includes resale (§ 350(e)(7)), so resellers who buy inventory from someone else can be charged if the knowledge element is met. A mark does not have to appear on the outside of the product: “It is not necessary for the mark to be displayed on the outside of an article for there to be a violation” (§ 350(e)(3)).

Counterfeit cases often begin with a seizure at a port or warehouse, a store raid, or an online test buy. Searches and seizures are reviewed under the Fourth Amendment, and statements to investigators can be declined under the Fifth Amendment.

Talk with the office about counterfeit goods charges

If you have been charged or contacted by investigators about counterfeit goods, contact the office to talk with Vikas Bajaj, or call (619) 525-7005.

This page is attorney advertising and general information, not legal advice. Every case turns on its own facts.

Related guides: Federal crimes defense · White collar crimes defense · Open investigations