Fourth Circuit Rains on Appeal of Convicted Burberry Counterfeiters

A split panel of the U.S. Court of Appeals for the Fourth Circuit has affirmed counterfeiting convictions despite the defendants’ claim that numerous prosecutorial misstatements at the trial were prejudicial, requiring a new trial.

The majority’s April 16 ruling upheld the convictions of Chong Lam and Siu Yung Chan on counterfeiting charges related to fake Burberry Ltd. goods. In June 2010, they were convicted in the Eastern District of Virginia of conspiracy to traffic in counterfeit goods, trafficking in counterfeit goods and smuggling goods into the United States.

In December of that year, Chief Judge James Spencer denied their motions for a new trial. Spencer ruled that the government presented enough evidence for the jury to find that the mark on the defendants’ goods was “substantially indistinguishable” from the relevant Burberry mark.

According to the Fourth Circuit decision in U.S. v. Lam, Spencer ruled that, although “the government’s comments were misleading and extensive,” the defendants weren’t entitled to new trial for three reasons: The government didn’t’ intend to mislead the jury; the government presented enough evidence; and the district court’s curative remarks removed any prejudice.

The misstatements at issue were that the jurors should consider a hypothetical “average person on the street” rather than their own judgment to determine whether the mark on the defendants’ goods was a counterfeit.

On appeal, the defendants argued that the misstatements were sufficiently prejudicial to warrant a new trial. They also challenged the lower court’s application of counterfeiting law.

Judge Allyson Duncan wrote the majority opinion, joined by Dennis Shedd. Judge Henry Floyd dissented.

Duncan noted that the defendants’ argument that there was insufficient evidence for counterfeiting was primarily based on the fact that their products had a plaid background with an equestrian knight overlay but the Burberry mark at issue does not have an equestrian knight.

She found that the marks are similar enough to allow a reasonable jury to conclude that the defendants’ goods were fake, particularly in light of evidence demonstrating that Burberry often sells goods that contain both the mark in the case and its Burberry equestrian mark.

Duncan observed, “our case law suggests that a good displaying an allegedly counterfeit trademark must possess pronounced differences from a legitimate trademarked good for us to declare that no rational jury could find that it was a counterfeit.”

Duncan also rejected the defendants’ argument that the law concerning trafficking in counterfeit goods or services is unconstitutionally vague: “We believe that [the law] is sufficiently clear to allow an ordinary person to understand what conduct it punishes. Appellants take particular issue with the statute’s use of the phrase ‘substantially indistinguishable’ in the definition of a counterfeit mark. We find, however, that considered in its proper context, the meaning of this term is plain.”

Duncan determined that Spencer did not abuse his discretion in denying a retrial because curative instructions ensured a fair trial for the defendants: “At trial, the district court instructed the jury twice — including immediately following the government’s allegedly improper closing argument — that it was required to apply the law as the district court described it, not as the lawyers stated it.…We do not believe it was an abuse of discretion for the district court to presume the jury followed these detailed instructions — a presumption our precedent requires.”

Floyd opened his dissent by noting that the government misstated the legal standard eight times during closing and rebuttal arguments for determining whether the genuine and allegedly counterfeit marks were ‘substantially indistinguishable.’ He noted that six of those misstatements were after the district court sustained the first of four defense objections

Floyd wrote that the government’s repeated misstatements about the key legal standard in the case deprived the appellants of a fair trial. He also said that the district court abused its discretion in finding that its curative instructions to the jury counteracted the prejudice caused by the prosecutors’ remarks.

“To be clear, I do not disturb the district court’s finding that, when the prosecutor began to speak, he believed that his statements accurately reflected the law,” Floyd wrote. “But a prosecutor’s refusal to acknowledge his error after multiple sustained objections should be viewed as deliberate, and a court should deduce from his decision to soldier on a deliberate attempt to mislead the jury.”

Floyd also found that the district court’s instructions “failed to counter several of the serious errors” in the prosecutor’s statements: “And I do not think that the district court was within the bounds of its proper discretion to find that the limited guidance it provided to the jury was sufficient to counter the strong evidence of prejudice established by the remaining factors.”

John Zwerling of Zwerling, Moseley & Sears in Alexandria, Va., who represented Lam and Chan, said, “We’re reviewing the decision with an eye towards filing a motion for rehearing en banc.” Andrea Moseley of Zwerling Moseley also represented the defendants.

The issues highlighted by the dissent “clearly need to be considered for an en banc review for the reasons stated in the dissent,” Zwerling said. The trademark law questions are “a little trickier.…We have to determine whether there are grounds that merit a rehearing [on those issues].”

The Justice Department, which represented the government in the case, declined to comment, according to spokesperson Alisa Finelli.

Sheri Qualters can be contacted at [email protected].