Buying Counterfeit Goods: Laws and Resources

Chances are you've probably seen a counterfeit good at one time or another. Maybe you even inadvertently purchased one, only to find out later that it wasn't the brand name product at an incredible price as advertised. With increased globalization spreading the manufacturing and sale of goods throughout the world and with the appeal of cheaper prices, counterfeiting has become a major industry. This is particularly true in the United States which has one of the largest markets for consumer goods. In 2013, the U.S. Department of Homeland Security reported seizing over $1.7 billion in counterfeit goods, and those were just the goods that were discovered.

Counterfeit goods pose significant dangers that aren’t just limited to corporate profits. Defective counterfeit goods, including electronics, have been sold to U.S. government agencies, including the military, possibly putting the lives of service members at risk. Another case involved a teenager in New York who, after undergoing a liver transplant, was taking prescription medications that were purchased from a reputable pharmacy. After a series of extremely painful spasms in his legs, it was discovered that the medications he bought were counterfeit and were putting his health at risk. His case inspired anti-counterfeiting legislation in Congress.

What Is a Counterfeit Good?

Counterfeit goods are typically inferior quality products that are sold under another company's trademark. A trademark is a company’s legally recognized logo which is normally attached to the products it sells. Trademarks protect a company's reputation and allow consumers to distinguish between products in the marketplace. Trademarks do not expire and, once a company registers their trademark with the U.S. Patent and Trademark Office, it can use its mark exclusively in the U.S. and can legally prevent other companies from using even similar looking marks if they would confuse consumers.

Counterfeit goods are different from "knock off" goods which involve similar looking products but don’t have labels that would violate another company’s trademark. Counterfeit goods exist in nearly every industry and can include:

• Clothing, apparel, and accessories (especially shoes, sunglasses, handbags, wallets or jewelry)
• Pharmaceuticals
• Electronics (including cell phones and computers)
• Toys
• Baby food/formula
• Automotive parts
• Cigarettes

Is it Illegal to Buy Counterfeit Goods?

In the U.S., federal law protecting trademarks makes it illegal to knowingly traffic counterfeit goods, which includes the production, sale and transport of such goods. The U.S. Department of Justice, however, has stated that federal law doesn’t prohibit an individual from buying a counterfeit product for personal use, even if they do so knowingly.

The maximum penalty for first-time offenders trafficking in counterfeit goods is 10 years in prison and a $2 million fine. For second-time offenders, the penalty is 20 years and a $5 million fine. In addition, if a corporation traffics in counterfeit goods, it can be subject to a fine of $15 million.

Why Should You Care?

Aside from the direct harm to companies and their employees, counterfeit goods also:

• Introduce dangerous products into the market
• Weaken environmental, health, and safety regulations
• Diminish tax revenues
• Support organized crime
• Promote child labor

How Can You Identify and Report Counterfeit Goods?

Often a telltale sign of a counterfeit good is the unreasonably low price. Counterfeit goods can also be identified by the quality of their packaging and by the location where they are being sold. If you suspect that someone is producing or selling counterfeit goods, you can submit a report online to the National Intellectual Property Rights Coordination Center. Other federal agencies that investigate reports of counterfeit goods include:

• The U.S. Consumer Product Safety Commission
• The Food and Drug Administration
• The Office of Intellectual Property Rights
• The Federal Bureau of Investigation
• U.S. Customs and Border Protection

In dealing with counterfeit goods on the Internet, the International Trademark Association also provides a helpful list of best practices for search engines, companies with websites, credit card companies (payment service providers) and trademark owners to help identify counterfeit goods and prevent their distribution.

Additional Resources:

For additional information on trademarks and your rights as a consumer, see FindLaw's "Trademarks," and "Consumer Protection” sections. For information on other forms of intellectual property, see FindLaw's "Intellectual Property" section. If you believe that you’ve been the victim of a counterfeit goods scheme or you simply have questions about counterfeit goods, you should consult with a consumer law attorney.