WHY CRIMINALIZE COUNTERFEITING IF YOU’RE NOT GOING TO PROSECUTE?
Student Legal Intern, Center for Anti-Counterfeiting and Product Protection
2L, College of Law
Michigan State University
Student Legal Researcher, Center for Anti-Counterfeiting and Product Protection
3L, College of Law
Michigan State University
Assistant Director of Education and Outreach, Center for Anti-Counterfeiting and Product Protection
Michigan State University
In country after country and in the U.S. in all fifty states, we see trends towards criminalizing trademark counterfeiting, starting in the 1980s up to the present. The A-CAPP Center recently explored the criminalization of trademark counterfeiting on a global scale and resulting evidence of prosecutions–if any (Kammel, 2022). In our exploration of this topic a few years ago at the U.S. state level, we struggled to find concrete reasons why the phenomenon of such a disparity between criminalization and prosecutions is happening, and now we are seeing the same on a global scale (Kammel, Sullivan, Young, 2019).
The question is: why is there such a strong movement globally to pass anti-counterfeiting legislation when there is no correlating movement to prosecute criminals using these laws? This is not the case in other areas of illicit trade—such as drug trafficking, weapons trafficking, human trafficking and others. There, we see a much larger breadth of how these issues are criminalized and which countries have stronger enforcement than others.
Interestingly, on the civil and administrative side, we do see a wider range of how intellectual property is enforced either through civil lawsuits, injunctions, customs seizures and others, but this does not translate neatly into criminal prosecutions.
A few common trends exist when looking at the lack of IP enforcement across various countries. Firstly, often issues arise between the organization and operation of IP enforcement bodies in these countries. A lack of coordination between ministries and agencies, an inability or unwillingness to create a clear and centralized national enforcement strategy, and a failure to provide key agencies with the requisite authority all contribute to a failure to properly enforce the IP laws set forth by these countries (Office of the US Trade Representative, 2021). Additionally, these agencies and the prosecutorial system are often held back by a lack of resources, as well as proper training in the technical expertise needed for managing IP cases—a lack of political will.
The complicated judicial systems, and difficult legal and administrative processes a prosecutor must contend with in order to pursue a case in many countries, also act as a barrier to successfully prosecuting intellectual property crimes. Several countries report burdensome court procedures, difficulty meeting the thresholds for criminal enforcement, onerous authentication and other evidentiary requirements, and more. Furthermore, even when these prosecutions are seen through to the end, the level of criminal penalties are not enough to act as a deterrent to future crimes (WIPO Member Profile).
Anti-counterfeiting laws tend to lack any real deterrence capability, with prison time rarely exceeding a year, and diversions, like probation, being the norm.
For example: in the U.S., with only around 200 people a year being prosecuted under counterfeiting laws, the risk of being caught and punished is extremely low (CBP, 2020). Serious counterfeiters, or individuals involved in organized crime, who governments want to put in prison will likely have additional charges brought against them, like mail and wire fraud, which carry sentences twice as long as counterfeiting. Crimes with low sentences are frequently dropped in guilty pleas–such as counterfeiting.
A reduction in prosecutions in the global north could be explained by a progressive shift towards alternative punishments. A nation trying to reduce their prison populations could use laws similar to civil asset forfeiture (DOJ Justice News, 2012), seizing counterfeit goods and the proceeds from them (INTA, 2021). Counterfeiters exist because it is profitable to do so. Law enforcement seizures reduce those margins and asset forfeiture could take years of profits away from an individual.
Finally, another significant factor in the lack of prosecutions is the lack of political will in regard to combating intellectual property crimes. Without the political will to actually act on the many anti-counterfeiting laws that exist around the world, there will continue to be a shortage in the number of trademark counterfeiting prosecutions. Many countries seem to be suffering from the failure of those in power to pursue such prosecutions.
The lack of political will to enforce counterfeiting laws can partially be explained by the context in which a nation’s anti-counterfeiting laws appear. Many laws appear in a context emphasizing consumer protection, rather than the enforcement of intellectual property rights. This distinction means that prosecution will arise from dangerous counterfeit goods, but not from benign goods. A counterfeit medicine causing hospitalizations and deaths will grab headlines and be acted upon by law enforcement universally, while action is not as urgently needed with other counterfeit products such as apparel.
The lack of prosecutions has been a widespread problem since anti-counterfeiting laws were passed, but there are some recent trends in the data that explain why prosecution is getting even harder. While there is lack of prosecution for trademark counterfeiting, there is still enforcement. Customs seizures of counterfeit goods are the main method of stopping counterfeit goods from entering the marketplace. The number of global seizures has remained constant, slowly increasing each year as the share of counterfeit goods in the global market increases (OECD, 2019). Prosecutions have not kept pace with seizures, and the United States has even seen a steady decline in prosecutions over the last 5 years (CBP, 2020). During the same time period counterfeiters changed tactics, and goods which were traveling by sea began traveling by mail, which can pose challenges for prosecutors (OECD, 2019).
We hear similar reasons in anecdotal stories from brands, government officials, and investigators, but it seems sui generis to see the same phenomenon across almost all barriers—North/South, Developing/Most Developed, Common Law/Civil, and others. Most note a lack of political will by prosecutors, lack of funding or other resources, no deterrent-level penalties, difficulty proving intent or obtaining evidence for law enforcement and prosecutors, lack of cooperation by law enforcement, and lack of intellectual property knowledge by judges.
The lack of counterfeiting prosecutions is a multifaceted problem and global data is not comprehensive enough to draw any definitive conclusions as to the root causes. What can be discerned is stronger counterfeiting laws do not equate to stronger IP enforcement. A change in tactics should be considered because the enforcement of criminal IP laws will likely never reach the level where they are an effective tool in reducing the trade of counterfeit goods. Because the heart of this issue is a financial one, we urge that to be a focus for enforcement efforts.
Learn more about the A-CAPP Student authors of this article!