Yes. Penal Code section 350 makes it a separate crime to willfully manufacture, intentionally sell, or knowingly possess for sale goods bearing a counterfeit of a registered trademark. Whether the charge can be a felony depends on how many counterfeit items are involved, their value measured by the genuine product’s price, any earlier conviction under the section, and whether anyone was killed or seriously injured.

The offense

Section 350(a) applies to any person who “willfully manufactures, intentionally sells, or knowingly possesses for sale any counterfeit mark registered with the Secretary of State” or registered on the Principal Register of the United States Patent and Trademark Office. A counterfeit mark is a spurious mark that is identical with, or confusingly similar to, a registered mark and is used, or intended to be used, on the same type of goods or services. “Knowingly possess” means the person knew or had reason to believe the item was spurious or was reproduced without the registrant’s authorization. A sale includes a resale. The section covers manufacturing, selling, and possessing for sale; it does not list buying or owning a counterfeit item for your own use.

Misdemeanor or felony: the thresholds

  • Misdemeanor (350(a)(1)). Fewer than 1,000 counterfeit articles and a total retail or fair market value below the amount required for grand theft. For most property, grand theft under Penal Code section 487(a) means a value over $950. An individual faces a fine of up to $10,000, up to one year in county jail, or both; a business entity faces a fine of up to $200,000.
  • Wobbler (350(a)(2)). 1,000 or more articles, or a total value at or above the grand-theft level; either one is enough. An individual faces up to one year in county jail, or 16 months, two, or three years under Penal Code section 1170(h), or a fine of up to $500,000, or both; a business entity faces a fine of up to $1,000,000.

Section 1170(h) felony time is normally served locally in county jail. That section sends it to state prison instead only in the situations it lists, which include a serious or violent felony record and sex offender registration.

How value is measured. For a counterfeit article, “retail or fair market value” means the retail price or fair market value, as of the last day of the charged crime, of “a completed similar genuine article containing a genuine mark.” A single fake designer handbag is therefore valued at the genuine bag’s price, not at what the fake sold for. Loose counterfeit components, such as labels, patches, hangtags, and packaging, are counted as the number of completed articles they could have made.

Repeat and injury tiers.

  • Subdivision (b). After a prior conviction under 350(a)(1) or (a)(2), a later conviction under (a)(1) is punished, for an individual, by a fine of up to $100,000, up to one year in county jail or 16 months, two, or three years under section 1170(h), or both; for a business entity, by a fine of up to $400,000.
  • Subdivision (c). If the conduct behind a 350(a) conviction directly and foreseeably caused death or great bodily injury to another person through reliance on the counterfeit item for its intended purpose, an individual faces a fine of up to $100,000, a term of two, three, or four years under section 1170(h), or both; a business entity faces a fine of up to $400,000.

What happens to the goods and the proceeds

On a conviction or a no-contest plea, the court “shall order the forfeiture and destruction of all of those marks and of all goods, articles, or other matter bearing the marks,” along with the forfeiture and destruction or other disposition of the means and devices used to make, reproduce, transport, or assemble the marks in the violation. On a law enforcement agency’s request and with the specific trademark registrant’s consent, the court may consider a motion to donate the items, other than recordings and audiovisual works, to a nonprofit that gives goods at no charge to people living in poverty.

Forfeiture of the crime’s proceeds is handled under a separate Penal Code forfeiture chapter that section 350 cross-references, and some vehicles cannot be forfeited under the section, such as a car or motorcycle that is the only one available to the defendant’s immediate family. On conviction, the court must also order restitution to the trademark owner and any other victim of the offense.

Federal law separately makes it a crime to intentionally traffic in goods while knowingly using a counterfeit mark on them (18 U.S.C. section 2320).

What to gather

  • The number of items involved, including any loose labels, tags, or packaging, and whether any were for your own use rather than for sale.
  • What you knew about where the goods came from: the supplier, what you were told, and what you paid. “Knowingly possess” includes having reason to believe the goods were fake.
  • Your purchase and sales records as they exist now. Do not relabel, move, sell off, or dispose of inventory once you learn of an investigation.

Talk to a lawyer about the specifics of your case

Whether a counterfeit-goods case is a misdemeanor or a wobbler often comes down to how many items were involved and how their value is calculated, questions worth reviewing with counsel before you speak with investigators. For related fraud charges, see white collar crimes. The Law Offices of David S. Chesley can look at the facts of your case. Call (800) 755-5174.