The Internet has opened up a wealth of possibilities for new businesses. Its speed, connectivity, and anonymity make it possible to sell nearly anything to anyone at any time. Unfortunately, that can include the sale of fake products as well. Everything from counterfeit handbags to knockoff clothes to fake medications appear for sale online. Although selling fakes online can be big business, it also amounts to a common online scam.
Counterfeit items that copy a company trademark may look like the real thing, but they defraud legal businesses and consumers. Knockoff items may not violate trademark law when the smart consumer can spot the difference. Fake drugs can bring real danger to the unknowing consumer.
Depending on the kind of counterfeit goods a scammer may try to sell, different sets of laws, both civil and criminal, may apply. Read on to learn more about the law, the agencies that investigate the sale of counterfeit goods, and what consumers can do to address fake products.
Selling Fakes Online: Trademark Fraud
A trademark can be a word, name, slogan, or symbol that businesses use to distinguish their goods or services from those of others. By registering a trademark, businesses can prevent others from using their name, image, or catchphrase to sell products.
Counterfeiters sometimes steal the designs or trademarks of others in order to dupe customers into buying fake products. Common examples of trademark fraud include counterfeit purses bearing the trademark logo of brand names like Louis Vuitton or Gucci.
People who use counterfeit trademarks to sell fakes can be penalized in two ways. First, the rightful owner can sue the person using their trademark falsely. They may recover ill-gotten profits, damages, and attorney fees. Second, the government can prosecute a seller under the Trademark Counterfeiting Act of 1984. The Act makes it illegal for individuals to knowingly use a counterfeit trademark to sell goods or services. A counterfeit mark is one that:
- Is used to sell items or services
- Is very similar to or the same as a registered trademark
- Is likely to confuse the public or cause the public to buy goods or services marketed under the false trademark
Counterfeit trademarks can appear on labels, stickers, packaging, tags, signs, and more. If a company or retailer violates the Act, it could be fined up to $15 million. Individuals who are convicted under the Act can face up to a $2 million dollar fine and 10 years in prison. Individuals who are charged more than once for trademark infringement may be fined up to $5 million or imprisoned for up to 20 years. Counterfeiters who sell safety-sensitive products, such as pharmaceuticals, generally receive the maximum penalty.
Selling Fakes Online: Pharmaceuticals
The Food and Drug Administration (FDA) is responsible for ensuring that all the food, beverages, and drugs on the marketplace are safe. In the case of drugs, the FDA must also verify the effectiveness of treatment. Like fake consumer products, knockoff food and medications might fail to comply with all legal safety standards or contain harmful chemicals.
Individuals who distribute counterfeit drugs can face criminal charges under federal law (21 U.S.C. Sections 331-337a). They may receive a prison sentence of up to 10 years.
As the threat posed by selling counterfeit drugs online increases, both states and the federal government look for more ways to enforce the law. The FDA keeps consumers and companies aware of active recalls and safety alerts. It also welcomes contact from consumers who need to report a problem with a product that falls under their jurisdiction.
Selling Fakes Online: Consumer Safety
Congress passed the Consumer Product Safety Act in 1972 and has amended it since that time. This federal law can be found at 15 U.S.C. Sections 2051-2084. The Act set up an independent federal government agency called the Consumer Product Safety Commission (CPSC). The CPSC has the power to regulate consumer products to protect consumers from injury.
Counterfeit products sold online often don't comply with CPSC guidelines. The CPSC can sue people who manufacture for sale, sell, distribute, or import products that do not comply with CPSC rules and can seek civil penalties of $100,000 per violation. Civil penalties may go up to $15 million for any related series of violations.
The law includes federal crimes. If a vendor knows their product violates CPSC rules or the CPSA but sells or distributes it anyway, criminal penalties can include a fine and up to five years in prison.
Have More Questions About Selling Fakes Online? Talk to an Attorney
Selling fakes online seems like a victimless crime, but you might be surprised how seriously it's taken by law enforcement agents and courts. If you think someone is selling counterfeit goods, you can report this information to the government. Contact the National Intellectual Property Rights Coordination Center and make an online report.
Companies place pressure on law enforcers and prosecutors to take their complaints seriously. If someone has accused you of trademark infringement or selling counterfeit merchandise, you may need someone in your corner too. Consider getting in touch with a local criminal defense attorney to discuss your situation.