Using the Fair Use Defense Against Counterfeit Trafficking

Using the Fair Use Defense Against Counterfeit Trafficking

Counterfeit trafficking can be a tricky issue. On one hand, counterfeit goods violate trademarks and copyrights. On the other hand, some counterfeit goods may qualify as “fair use” under copyright law. This article examines when and how someone accused of counterfeit trafficking might use the fair use defense.

What is Counterfeit Trafficking?

Counterfeit trafficking refers to the manufacturing, importation, distribution, or sale of goods that infringe on a trademark, patent, or copyright. This includes making exact copies of brand-name items or making products that bear a brand name without authorization. It’s a big business too; estimates suggest the global trade in counterfeit goods is worth nearly half a trillion dollars annually.

Trafficking counterfeits can get you in legal trouble. The U.S. Department of Justice takes counterfeiting seriously and pursues criminal charges for trademark counterfeiting, trafficking, or intentional copyright piracy. Penalties can include fines up to $2 million and 10 years imprisonment.

When Can You Claim Fair Use?

Fair use is a defense under U.S. copyright law that permits limited use of copyrighted material without the copyright holder’s permission. To qualify, the use must pass a balancing test based on these four factors:

1. The purpose and character of the use
2. The nature of the copyrighted work
3. The amount used
4. The market effect of the use

Parody is a classic fair use example. Using part of a copyrighted work for commentary or criticism may also qualify. Noncommercial uses tend to have an easier time meeting the test. And taking just a small amount favors fair use. But every case depends on its own facts. There’s no bright line rule.

Using Fair Use Against Trafficking Claims

Can fair use apply to counterfeit trafficking? Possibly. But defendants seldom raise a fair use argument. The federal criminal law against trafficking requires acting “intentionally” and “knowingly.” That suggests bad faith. So fair use may not get very far.

Civil lawsuits might present more fair use chances. Copyright owners often send cease & desist letters threatening to sue for damages. Some letters accuse fairly benign conduct of being illegal counterfeiting. Recipients could raise fair use before getting sued, arguing their use causes no economic harm. But fighting in court still takes money few defendants have.

Most fair use wins involve unpublished works or transformative new works of authorship. Counterfeits that merely copy popular brands don’t have an obvious fair use argument. Still, some scenarios merit consideration:

Parody Counterfeits

Parodies that mimic a brand’s trademark or packaging for humor may qualify as fair use. But the law tolerates little copying beyond what’s needed for the parody. And confusion risks remain. For example, a “Mom Jeans” skit on Saturday Night Live poked fun at Gap’s products. But Gap’s parent company objected because it also sold jeans under the name “GapMom.”

Unofficial Fan Merchandise

Diehard sports fans, concertgoers, and convention attendees often create custom gear showing their passion. This “fan fiction” occupies a legal gray area. Technically it violates trademarks and copyrights. But rights owners tolerate some unofficial items, especially if not sold for profit. Additionally, depictions of copyrighted characters may qualify as fair use if sufficiently transformed in the new work.

3D Printed Replacement Parts

Durable goods manufacturers use patents, trademarks, trade dress, and copyrights to control replacement parts markets. This frustrates consumers who can’t fix broken items cheaply. 3D printing enables homemade parts. Depending on the product, scanned and printed substitutes could be legal under fair use. But the law remains unsettled in this emerging area.

Imported Gray Market Goods

A gray market arises when branded goods produced for sale overseas get imported without permission and sold domestically. This diverts sales from authorized distributors. Trademark law treats gray goods as counterfeits. But copyright fair use might exempt their import and resale if the foreign items are authentic and the copyright owner suffers no market harm.

Practical Realities

Very few criminal defendants can afford top lawyers to develop novel fair use arguments. And civil enforcement tends to target small-scale distributors with limited resources. Big companies do get sued for counterfeiting. But they usually settle disputes before raising a fair use defense.

Additionally, the U.S. legal system strongly favors copyright and trademark holders. Judges interpret fair use narrowly in practice. A typical court will likely view counterfeiting claims skeptically no matter what the facts are. Defending a lawsuit through trial can easily cost over $100,000 even if you win.

Finally, separate trademark and patent rules also apply besides copyright fair use. This guide does not discuss trademark nominative fair use or patent exhaustion. Different facts implicate different doctrines. It’s quite complicated.

The reality is: fair use rarely succeeds against civil counterfeiting cases, let alone criminal charges. Anyone dealing in counterfeits should beware of potential lawsuits or prosecution.

What This Means for You

Don’t assume fair use will automatically defeat a counterfeiting claim. Talk to a knowledgeable lawyer before trying to sell anything potentially infringing. They can review your specific situation and provide legal advice. If you get a cease & desist letter, take it seriously rather than ignoring it and hoping for the best. Fair use is no guarantee. But the right facts may persuade a court your activities cause no harm and deserve protection.

On the other hand, overly aggressive trademark and copyright enforcement does run rampant nowadays. Some rights holders play fast and loose accusing others of counterfeiting. They count on legal threats scaring people into submission. If you feel confident you acted legally, don’t back down easily. Fight back if you can. There’s a chance courts will agree your use was fair if you litigate the case on the merits. But pick your battles carefully.