Each year, anti-counterfeiting initiatives occupy a greater role in intellectual property portfolio strategy—but what are counterfeits, again?

In the context of trademarks, the Lanham Act defines “counterfeit” as a product that is “identical with, or substantially indistinguishable from,” a registered trademark. 15 U.S.C. § 1127. This definition aside, distinguishing a counterfeit from a mere infringing product is not always clear cut. At its core, a counterfeit is a copy of another product, which tricks a consumer into thinking the product is something it is not. An infringing product is merely similarto another product, in a way that confuses a consumer. Many counterfeits are infringing, but not all infringing products are counterfeits.

A trademark infringement case recently decided by the Southern District of New York had to draw the very thin line between trademark infringement and trademark counterfeiting. In Coty, Inc., et. al. v. Excell Brands, LLC, a high-end fragrance company sued an all-but-dissolved manufacturer of knockoff fragrances for trademark infringement, trademark dilution and false advertising. Excell identified high-end fragrances to style themselves after, and then sold nearly identical-looking fragrances at retailers such as Dollar General and Walmart. Excell used plaintiffs’ exact house and product trademarks, similar bottle colors and sizes and gave their fragrances related names. The infringement was blatant.

However, the Excell fragrances’ packaging included a disclaimer. For example, a front label of an Excell fragrance would read, “Our Version of — Eternity, by Calvin Klein.” The back label read, “Not Associated with the Makers of — Eternity, by Calvin Klein.” Both labels included the plaintiff’s registered trademarks, in addition to Excell’s own brand name in smaller lettering.

Unsurprisingly, the plaintiffs prevailed on the merits of their claims. The court then turned to plaintiffs’ request for treble damages. Under the Lanham Act, a court may treble damages when a defendant “intentionally uses a mark or designation, knowing such mark or designation is a counterfeit mark.” 15 U.S.C. § 1117(b).

The court found that while “Excell’s imitation crossed the line from flattery to infringement,” it “did not cross the line far enough to constitute counterfeiting within the meaning of federal law.” The court pointed out that even though Excell used the plaintiffs’ trademarks, the Excell fragrances did not use identical names and designs as the plaintiffs’ products. Further, the court found that Excell’s disclaimers demonstrated that Excell did not intend to trick consumers into believing they were purchasing the plaintiffs’ products. The disclaimers ultimately created “enough of a contextual difference” to prevent the products from being counterfeits.

As with all trademark disputes, the precise facts and context of a dispute matters a great deal. This case makes clear that even when a trademark is blatantly copied, the underlying product may not be a counterfeit.

This case is available on WestLaw: Coty Inc., et al. v. Excell Brands, LLC, 2017 WL 4155402 (S.D.N.Y., Sept. 18, 2017).