State v. Troisi, 2008 Ohio 6062 (Ohio Ct. App., Lake County, Nov. 18, 2008)

At first glance, the case of State v. Troisi appears to be a blip on the radar – a simple matter of failing to properly introduce the evidence required for a conviction of the crime charged. Reviewing the Ohio trademark counterfeiting statute as a case of first impression, the Eleventh Appellate District (Lake County) determined that without a trademark registration properly introduced into evidence (or at least testimony to what this registration contains) there could be no conviction of trademark counterfeiting or the ancillary charge of possessing “criminal tools.” No remand, do not pass go, conviction reversed.

This decision deserves closer inspection for a two reasons: (1) the enormity of the problem for which the statute was designed to combat and (2) the lack of interpretative case law in Ohio guiding prosecutors on the statute’s meaning. Below we review what went wrong in Troisi, examine the elements of a successful trademark counterfeiting case and consider the related crime of criminal simulation.

Counterfeiting in Context

While the alleged crime in this case seems petty – a small time operator selling knock off designer handbags – the aggregate problem of trademark counterfeiting is a very large, world-wide problem. For example,according to “McCarthy on Trademarks,” in 1982 counterfeiting and piracy cost U.S. businesses an estimated $5.5 Billion per year; this number rose to $200 Billion by 1996. By 2004 the impact world-wide was an estimated $512 Billion. Moreover, it’s not just about knock-off designer handbags. Counterfeit airplane parts are alleged to have caused the crash of the Concord in 2000. Counterfeit labeled birth control pills, baby formula and toothpaste have all caused serious public health issues. And who reaps the benefit of these illicit sales? Criminals, of course. Indeed, links have been made to organized crime syndicates and to the financing of terrorist organizations.

The Facts of Troisi

The case against Juanita Troisi certainly appeared to be “in the bag.” Troisi organizes a so-called “purse party.” An invitee tips off the police. An investigation proceeds, which leads to a raid of the premises on the day of the event. Troisi confesses that the bags were counterfeit designer merchandise and that she knew “it was error to sell them.” The State brings charges against Troisi for criminal simulation and trademark counterfeiting, each a third-degree felony, and possessing criminal tools, a fifth-degree felony. The simulation charge is dismissed before trial (discussed below). No Fourth Amendment issues remain on appeal, so we’ll assume that none were raised below. Therefore, it’s really just a matter of properly introducing the necessary evidence of trademark counterfeiting, which is where our cautionary tale begins…

Elements of a Trademark Counterfeiting Conviction

Ohio’s trademark counterfeiting statute, R.C. § 2913.34, proscribes a variety of activities designed to reach multiple links in the economic chain of a trademark counterfeiting enterprise, including those who affix the counterfeit marks to goods or services, those who possess or sell tools designed to affix counterfeit marks, those who acquire goods or services with knowledge that a counterfeit mark is attached with intent to resell them, and those who sell or give away goods or services with knowledge that a counterfeit mark is attached.

Under the Ohio statute, a “counterfeit mark” is “a spurious trademark or a spurious service mark” in which the following essential elements are all present:

(1) The accused mark is identical with or substantially indistinguishable from a mark registered at the federal or state level,

(2) The accused goods or services are the same as those for which the mark is registered,

(3) The owner of the registration actually uses the registered mark on the genuine goods,

(4) The accused mark is likely to cause confusion or mistake or to deceive other persons, and

(5) A holder of the right to use the mark has not authorized a manufacturer, producer, or vendor of the goods or services to use the mark with accused goods.

The Evidentiary Failure in Troisi

Rather than following the statute, the State relied upon the testimony of their expert to define the meaning of a counterfeit mark, which he did imprecisely. The expert’s testimony included a multi-factor comparison of the marks used on the accused goods with the marks used on their genuine counterparts. Notably, the State’s expert admitted that he had never obtained the trademark registration records for the marks used on the genuine products and had never personally viewed these registrations to support his testimony that the accused products contained counterfeit marks. Indeed, the State never submitted any evidence of the trademark registrations or what they contained.

Thus, the critical flaw in the State’s case was its failure to make the link between the marks used on genuine products and the marks actually registered. In the Appellate Court’s view, all the impressive expert testimony in the world is beside the point if you haven’t first established that the marks at issue are actually registered. Presumably, this same rationale explains why the majority was unmoved by Defendant’s own admission that she knew she was selling “copy bags” that were “not authentic.”

In his dissent of the majority’s opinion, Judge Cannon cites United States v. Guerra, for the proposition that federal courts have more flexibly construed the analogous federal criminal statute, 18 U.S.C. § 2320(e)(1). However, in Guerra the government did actually introduce evidence of the registered designs for the trademarks at issue. Indeed, the Guerra court actually rejected any requirement that indistinguishability determinations be based on the marks as affixed to the actual goods and further rejected any requirement for testimony from the trademark owner or the agent who conducted the investigation. Therefore, Guerra is not inconsistent with the majority’s holding.

While Judge Cannon’s point doesn’t appear to be well made by Guerra, his underlying concern is shared by several federal courts, at least in the context of civil trademark counterfeiting statutes. Like the Ohio and federal criminal statutes discussed above, the federal Lanham Act defines “counterfeit mark” as “a spurious mark which is identical with, or substantially indistinguishable from, a registered mark.” Despite this apparent requirement for a “registered mark,” at least two federal circuit courts of appeal have actually voiced a preference for evidence of the mark as used on actual goods, rather than relying solely upon the registration information. As explained by the Second Circuit Court of Appeals in Montres Rolex, S.A. v. Snyder, “counterfeiters copy actual merchandise, not registration certificates.” Thus, the Court concludes, if comparison must always be made to the registration certificate “infringing merchandise with three-dimensional marks could rarely, if ever, be deemed counterfeit.”

Criminal Simulation

Whereas Ohio’s trademark counterfeiting statue focuses on the use of phony labels on counterfeit goods, criminal simulation, under R.C. §2913.32, addresses the making and selling of the knock off goods themselves. This statute is therefore available even where the maker of the genuine goods has not taken the step of registering his trademark or where the trademark used on the phony goods is not sufficiently close to qualify as “substantially indistinguishable.” The catch? Specific intent to defraud is required for simulation whereas counterfeiting only requires knowingly affixing the marks where there is a likelihood of confusion.

In Troisi the simulation charge was dismissed by the lower court before trial; we are not told in the opinion the reason why. One can speculate that the court did not find the necessary specific intent to defraud. For example, during the controlled buy leading to her arrest, Troisi apparently haggled with the undercover agent, asking at one point: “Do you know how much that purse would cost if it were real?”

Under similar facts, the Seventh Appellate District (Mahoning County) in State v. Demos overturned the conviction of the seller of counterfeit CDs where the evidence tended to show that the seller disclosed to his buyers that the merchandise was fake. At least one Ohio court has questioned whether Demos is still good law, noting that since this decision was handed down in 1988 no other court has cited it approvingly. Indeed, the Seventh Appellate District itself has limited Demos to its facts, upholding a conviction for the same type of counterfeit sales where the evidence did not include express representations to sellers that the goods were fake. Under this more recent precedent, it appears clear that exculpatory arguments based upon imperfections in the goods or their low price will fail. It remains an open question whether anecdotal evidence that some buyers were informed that the goods are non-genuine would prevent a conviction. Logically, circumstantial evidence of intent to defraud downstream purchasers should overcome such evidence, allowing courts to further narrow and distinguish Demos.

Perhaps the Seventh Appellate District summed it up best when it complained in State v. Joseph, “There is little authority to guide us in the application of Ohio’s criminal simulation statute. Interpretations of comparative regulations outside this jurisdiction are equally unhelpful.” As we have shown, the same is true of Ohio’s trademark counterfeiting statute. Therefore, courts should interpret the language of these statutes by keeping in mind the problem sought to be addressed by the legislature when they were adopted. Prosecutors should cover their bases and introduce evidence of each element of the crime so as to avoid putting the court in the position of tossing out good solid convictions. Let’s not over think this thing. Clearly Juanita did something wrong, even she admits that…