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In a case of first impression, the 10th U.S. Circuit Court of Appeals held May 19 that an individual who traffics in trademarks that are not attached to any goods or services does not violate the federal criminal trademark infringement statute, 18 U.S.C. � 2320 ( U.S. v. Giles, 10th Cir., No. 99-6036, 5/19/00). Donald Ralph Giles operates a business called “Fabulous Fakes” which sells “designer look-alikes,” such as handbags, belts, watches, and accessories in designer styles. In 1994, Giles was caught in a Federal Bureau of Investigation “sting” operation and was indicted on one count of trafficking in counterfeit goods in violation of Section 2320. Giles unsuccessfully moved to dismiss the indictment, and was subsequently convicted and sentenced to imprisonment and a fine. On appeal, Giles argued that the indictment was defective because if failed to allege the elements of a Section 2320 offense. Specifically, Giles said that he could not be found guilty because the statute requires that a defendant both traffic in goods and knowingly use a counterfeit mark on or in connection with the goods. In the incident for which he was indicted, Giles sold “patch sets” to an informant. The patch sets consisted of a leather patch and gold medallion bearing logos belonging to Dooney & Burke, a maker of high quality handbags, luggage, and accessories. Once a patch set was applied to a generic handbag, the bag would appear to have been made by Dooney & Burke. Giles did not, however — at least in this instance — sell any goods to which the patch sets were attached. Thus, he contended, he could not be convicted for trafficking in counterfeit goods. Section 2320 requires the government to prove that a defendant: (1) trafficked in or attempted to traffic in goods or services; (2) did so intentionally; (3) used a counterfeit mark on or in connection with such goods and services; and (4) knew the mark was counterfeit. To determine whether the government succeeded in proving these elements against Giles, the court “must answer a series of questions addressing the relationship between Mr. Giles’ activities and the statute at hand,” according to the opinion by Chief Judge Stephanie K. Seymour. SERIES OF QUESTIONS The first question for the court was whether the patch sets are “goods.” The government argued that because the patch sets are sold for a price, they are merchandise; merchandise, by definition, is goods; therefore, the patch sets qualify as goods under Section 2320 and Giles can be criminally liable for trafficking in them. However, the court was not “convinced the inquiry is so simple.” Neither Section 2320 nor the Lanham Act defines the term “goods.” Other definitions within the statutes, however, indicate that “goods” were intended to be viewed as separate and distinct from the marks they carry, the court said. For example, the Lanham Act defines “trademark” as “any word, name, symbol, or device, or any combination thereof used � to identify and distinguish � goods.” “The issue is made complex,” the court wrote, “because a trademark is easily conceived of as an abstract symbol or design which is carried by the tangible goods at issue. In reality, this mark itself often consists of a tangible item such as a label, a patch, or a medallion. � The question comes down to whether this label can be considered a good if it is disconnected from its host good and sold for a profit.” The 5th U.S. Circuit Court of Appeals looked at this problem in Boston Prof’l Hockey Ass’n v. Dallas Cap & Emblem Mfg. Inc., 510 F.2d 1004 (5th Cir. 1975). There, the National Hockey League and several of its teams brought suit against a company that made and sold embroidered cloth patches bearing the teams’ registered trademarks. In a civil trademark infringement suit, the court concluded that the goods and the trademarks were “coextensive; the patch was the actual ‘good’ and the trademark was the thread design embroidered upon it.” Trafficking in the patches, therefore, violated the Lanham Act. In so concluding, the Fifth Circuit acknowledged that it was “slightly tilting the trademark laws from the purpose of protecting the public to the protection of the business interests of the plaintiff.” Later, the 9th U.S. Circuit Court of Appeals criticized the decision, noting that “this tilt was not slight but an extraordinary extension of the protection heretofore afforded trademark owners.” International Order of Job’s Daughters v. Lindeburg & Co., 633 F.2d 912 (9th Cir. 1980). The Fifth Circuit itself backed away from the decision, rejecting in Kentucky Fried Chicken Corp. v. Diversified Packaging Corp., 549 F.2d 368 (5th Cir. 1977), “any notion that a trademark is an owner’s �property’ to be protected irrespective of its role in the protection of our markets.” The Tenth Circuit declined to follow Boston Prof’l Hockey Ass’n in the present case, reasoning that the “goods” at issue here were the purses and handbags to which the patch sets could be applied. The patch sets themselves were “labels,” not “goods.” The court’s next question was whether Section 2320 prohibits trafficking in counterfeit labels. On its face, the court noted, the statute does not contain such a provision. Absent such, the court was convinced that Section 2320 does not prohibit trafficking in labels unattached to goods. Moreover, the court said, the statute specifically limits the marks it protects to those that are “identical with, or substantially indistinguishable from, a mark registered for those goods or services on the principal register in the United States Patent and Trademark Office.” Here, Dooney & Burke’s registration gives the company the exclusive right to use its trademark on handbags, briefcases, luggage, tote bags, ties, belts, leather key fobs, wallets, shoes, slippers, gloves, hats, and suspenders. The company’s rights do not extend to using the marks on leather patches or medallions, the court observed. Thus, if the leather patches were attached to unregistered items — like blue jeans — it would not constitute a trademark violation. Case law under the Lanham Act supports the conclusion that Giles’ action did not violation Section 2320, the court added. The purpose of a trademark is to identify the source of the goods so that a customer will not be confused as to the source. Thus, under the Lanham Act, the question for determining infringement is whether the defendant’s use of the mark is likely to confuse consumers into believing that the plaintiff is the source of the goods. In this case, the court said, Giles’ conduct did not confuse any consumer about the origin of goods because there were no goods involved in the transaction. The court refused to “stretch the trademark statute” to encompass this action. Therefore, it held that the allegations in the indictment failed to state an offense under Section 2320.

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