Criminal Prosecution

Brand-name manufacturers may feel like there is very little they can do to stop the tidal wave of counterfeit trafficking. They should, however, keep in mind that advocating for, and actively assisting, the criminal prosecution of traffickers could dissuade would-be counterfeiters.

As victims of counterfeiting, brand owners have a right to participate in counterfeit prosecutions in the State of California, including by conferring with prosecutors regarding the charges filed, expressing their views to the court, and being informed of the conviction and sentencing of counterfeiters. See, e.g., Cal. Const., Art. 1, Sec. 28. Victims also can file impact statements that more formally set forth the victim's views on the counterfeiting and the injuries that it causes.

In addition, as the victim, brand owners are entitled to restitution from convicted counterfeiters. Cal. Const., Art. 1, Sec. 28(b)(13). A restitution award includes the victim's actual economic losses and investigative costs. People v. Garcia, 194 Cal. App. 4th 612 (Cal. Ct. App. 2011).' Thus, mark holders who assist law enforcement in the identification and apprehension of counterfeiters and counterfeit goods may be entitled to recover the costs associated with such investigations. Furthermore, attorneys' fees incurred by the victim in its efforts to collect restitution from a criminal counterfeiter may also be recoverable. See, e.g., People v. Fulton, 109 Cal. App. 4th 876 (2003). The brand holder can convert the restitution award into a civil judgment and collect against the counterfeiter as though it had prevailed in a civil action.'

Victim Restitution

Even though collection may at times be difficult, payment of victim restitution is generally a condition of probation. So, even if payment is not made, the restitution award will keep the defendant on probation for up to five years. This should act as a deterrent to future counterfeit trafficking and will generally enable peace officers to conduct warrantless searches of the defendant, which could aid in future apprehension of counterfeit goods.

Participation by mark owners in criminal prosecutions communicates to the prosecuting agencies that these crimes are by no means victimless and that they warrant serious attention. It also conveys to retailers and importers, and through them to their suppliers overseas, that mark holders are actively pursuing criminal prosecutions and will not idly stand by as shipment after shipment of phony goods enter the country. By asserting these rights, brand owners highlight the harms of counterfeiting and begin the process of shifting the crime from a relatively risk-free venture to one with meaningful consequences.

Commitment of Resources

Achieving these results requires a commitment of resources on the part of the brand owner. For example, brand owners are frequently the only ones that can tell genuine articles from fakes, and they must be prepared and available to assist prosecutors in that aspect of the case. In that regard, even though many cases are resolved early in the proceedings, brand owners must be willing to provide testimony regarding authenticity at a preliminary hearing and trial. This will require an expert, often a company representative, to inspect the alleged counterfeit goods, make a determination of their authenticity, and testify about his conclusions and the methodology he used to reach those conclusions.

Revealing some of this information in a public forum may raise concerns that can be addressed through appropriate protective orders. In addition, given that brand owners retain the investigators that oftentimes conduct the pre-arrest investigations, brand owners are usually far more familiar with the details of an arrest.' They must, accordingly, be available to answer any questions that the prosecutors may have regarding everything from quantities of seized goods to the nature of pre-arrest investigations.'

All such engagements must be informed by a keen understanding of the difference between assisting a prosecutor with the preparation of a case, and the improper control of traditional law enforcement and prosecutorial functions. People v. Kent, No. B164196, 2004 WL 575957 (Cal. Ct. App. Mar. 24, 2004) (unpublished).'

Advice for Counsel

Counsel for brand owners can navigate this process by training investigators on permissible activities in field investigations and in communicating with law enforcement; regularly attending hearings; coordinating key witnesses; preparing investigators and experts who are called on to testify; and generally serving as a central point of contact for owners, prosecutors and investigators.

In the end, participation in counterfeit trafficking prosecutions is an investment worth making because it sends the message that counterfeiting is not a high-reward/low-risk endeavor. Reinforcing these points will help deter counterfeit trafficking.'

E. Alex Beroukhim is a partner and Emilia P. E. Morrisis an associate in Arnold & Porter LLP's Los Angeles office. Mr. Beroukhim's practice focuses on intellectual property brand protection, complex litigation, and data privacy. Ms. Morris has represented numerous intellectual property owners in civil and criminal matters in both state and federal courts.' They can be contacted at [email protected] and [email protected], respectively.

With the dramatic influx of counterfeit goods in the marketplace, brand name manufacturers now, more than ever, have their work cut out for them as they seek to protect the reputation and value of their trademarks. For example, in February of this year, U.S. Customs and Border Protection seized 1,500 counterfeit Hermes' leather handbags at the Los Angeles/Long Beach seaport that had been shipped from China and would have had an estimated retail value of $14.1 million.

In December 2012, as a part of the third annual Operation Holiday Hoax, federal authorities seized a wide variety of suspected counterfeit merchandise, including sports jerseys, athletic shoes, designer jewelry and leather goods at mail processing and express cargo facilities in Los Angeles and the San Francisco Bay Area, among other locations. Nationally, U.S. Customs and Border Protection reports that the manufacturer's suggested retail price of seized counterfeit goods increased from $1.11 billion in FY 2011 to $1.26 billion in FY 2012.

Can It Be Stopped?

Brand-name manufacturers may feel like there is very little they can do to stop the tidal wave of counterfeit trafficking. They should, however, keep in mind that advocating for, and actively assisting, the criminal prosecution of traffickers could dissuade would-be counterfeiters.

As victims of counterfeiting, brand owners have a right to participate in counterfeit prosecutions in the State of California, including by conferring with prosecutors regarding the charges filed, expressing their views to the court, and being informed of the conviction and sentencing of counterfeiters. See, e.g., Cal. Const., Art. 1, Sec. 28. Victims also can file impact statements that more formally set forth the victim's views on the counterfeiting and the injuries that it causes.

In addition, as the victim, brand owners are entitled to restitution from convicted counterfeiters. Cal. Const., Art. 1, Sec. 28(b)(13). A restitution award includes the victim's actual economic losses and investigative costs. People v. Garcia , 194 Cal. App. 4th 612 (Cal. Ct. App. 2011).' Thus, mark holders who assist law enforcement in the identification and apprehension of counterfeiters and counterfeit goods may be entitled to recover the costs associated with such investigations. Furthermore, attorneys' fees incurred by the victim in its efforts to collect restitution from a criminal counterfeiter may also be recoverable. See, e.g., People v. Fulton , 109 Cal. App. 4th 876 (2003). The brand holder can convert the restitution award into a civil judgment and collect against the counterfeiter as though it had prevailed in a civil action.'

Victim Restitution

Even though collection may at times be difficult, payment of victim restitution is generally a condition of probation. So, even if payment is not made, the restitution award will keep the defendant on probation for up to five years. This should act as a deterrent to future counterfeit trafficking and will generally enable peace officers to conduct warrantless searches of the defendant, which could aid in future apprehension of counterfeit goods.

Participation by mark owners in criminal prosecutions communicates to the prosecuting agencies that these crimes are by no means victimless and that they warrant serious attention. It also conveys to retailers and importers, and through them to their suppliers overseas, that mark holders are actively pursuing criminal prosecutions and will not idly stand by as shipment after shipment of phony goods enter the country. By asserting these rights, brand owners highlight the harms of counterfeiting and begin the process of shifting the crime from a relatively risk-free venture to one with meaningful consequences.

Commitment of Resources

Achieving these results requires a commitment of resources on the part of the brand owner. For example, brand owners are frequently the only ones that can tell genuine articles from fakes, and they must be prepared and available to assist prosecutors in that aspect of the case. In that regard, even though many cases are resolved early in the proceedings, brand owners must be willing to provide testimony regarding authenticity at a preliminary hearing and trial. This will require an expert, often a company representative, to inspect the alleged counterfeit goods, make a determination of their authenticity, and testify about his conclusions and the methodology he used to reach those conclusions.

Revealing some of this information in a public forum may raise concerns that can be addressed through appropriate protective orders. In addition, given that brand owners retain the investigators that oftentimes conduct the pre-arrest investigations, brand owners are usually far more familiar with the details of an arrest.' They must, accordingly, be available to answer any questions that the prosecutors may have regarding everything from quantities of seized goods to the nature of pre-arrest investigations.'

All such engagements must be informed by a keen understanding of the difference between assisting a prosecutor with the preparation of a case, and the improper control of traditional law enforcement and prosecutorial functions. People v. Kent, No. B164196, 2004 WL 575957 (Cal. Ct. App. Mar. 24, 2004) (unpublished).'

Advice for Counsel

Counsel for brand owners can navigate this process by training investigators on permissible activities in field investigations and in communicating with law enforcement; regularly attending hearings; coordinating key witnesses; preparing investigators and experts who are called on to testify; and generally serving as a central point of contact for owners, prosecutors and investigators.

In the end, participation in counterfeit trafficking prosecutions is an investment worth making because it sends the message that counterfeiting is not a high-reward/low-risk endeavor. Reinforcing these points will help deter counterfeit trafficking.'

E. Alex Beroukhim is a partner and Emilia P. E. Morrisis an associate in Arnold & Porter LLP's Los Angeles office. Mr. Beroukhim's practice focuses on intellectual property brand protection, complex litigation, and data privacy. Ms. Morris has represented numerous intellectual property owners in civil and criminal matters in both state and federal courts.' They can be contacted at [email protected] and [email protected], respectively.