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Criminal Resource Manual

Criminal Resource Manual
CRM 1500-1999

1857. Trafficking In Counterfeit Labels -- 18 U.S.C. 2318

Section 2318 of Title 18 is closely related to, and complements, the criminal provisions of Title 17. Section 2318 enhances the integrity of the copyright system by prohibiting trafficking in counterfeit labels designed to be affixed to phonorecords, copies of computer programs, motion pictures or audiovisual works. It also contains a separate prohibition for trafficking in counterfeit documentation or packaging for computer programs. The section has been substantially amended by section 4 of the Anticounterfeiting Consumer Protection Act of 1996, Pub. L. No. 104-153, 110 Stat. 1386 (1996).

Section 2318 of Title 18 is not a copyright statute. The scope of the protections under the statute can actually be broader than those afforded under the Copyright Act. The predecessor to the current section 2318, for example, clearly encompassed trafficking in counterfeit labels on both copyrighted and uncopyrighted works. See United States v. Sam Goody, Inc., 506 F. Supp. 380, 386 (E.D.N.Y. 1981). Section 2318, as amended by section 4 of the Anticounterfeiting Consumer Protection Act of 1996, Pub. L. No. 104-153, 110 Stat. 1386 (1996), now provides:

  1. Whoever, in any of the circumstances described in subsection (c) of this section, knowingly traffics in a counterfeit label affixed or designed to be affixed to a phonorecord, or a copy of a computer program or documentation or packaging for a computer program, or a copy of a motion picture or other audiovisual work, and whoever, in any of the circumstances described in subsection (c) of this section, knowingly traffics in counterfeit documentation or packaging fora computer program, shall be fined under this title or imprisoned for not more than five years, or both.
  2. As used in this section--
    1. the term "counterfeit label" means an identifying label or container that appears to be genuine, but is not;
    2. the term "traffic" means to transport, transfer or otherwise dispose of, to another, as consideration for anything of value or to make or obtain control of with intent to so transport, transfer or dispose of; and
    3. the terms "copy", "phonorecord", "motion picture","computer program", and "audiovisual work" have, respectively, the meanings given those terms in section 101 (relating to definitions) of title 17.
  3. The circumstances referred to in subsection (a) of this section are--
    1. the offense is committed within the special maritime and territorial jurisdiction of the United States; or within the special aircraft jurisdiction of the United States (as defined in section 46501 of title 49);
    2. the mail or a facility of interstate or foreign commerce is used or intended to be used in the commission of the offense;
    3. the counterfeit label is affixed to or encloses, or is designed to be affixed to or enclose, a copy of a copyrighted computer program or copyrighted documentation or packaging for a computer program, a copyrighted motion picture or other audiovisual work, or a phonorecord of a copyrighted sound recording; or
    4. the counterfeited documentation or packaging for a computer program is copyrighted.
  4. When any person is convicted of any violation of subsection (a), the court in its judgment of conviction shall in addition to the penalty therein prescribed, order the forfeiture and destruction or other disposition of all counterfeit labels and all articles to which counterfeit labels have been affixed or which were intended to have had such labels affixed.
  5. Except to the extent they are inconsistent with the provisions of this title, all provisions of section 509, title 17, United States Code, are applicable to violations of subsection (a).

Thus, federal jurisdiction exists when one or more of the following "circumstances" enumerated in section 2318(c) are satisfied:

  1. the offense is committed within the special maritime and territorial jurisdiction of the United States, or within the special aircraft jurisdiction of the United States;
  2. the mail or a facility of interstate or foreign commerce is used in the commission of the offense;
  3. the counterfeit label is affixed to or encloses, or is designed to be affixed to or enclose, a copyrighted work; or
  4. the counterfeited documentation or packaging is itself copyrighted. NOTE: In cases when the fourth circumstance is clearly satisfied (e.g., when the documentation or packaging carries a prominent copyright notice independent of any notices appearing on the work with which it is sold), prosecutors may consider the propriety of bringing charges of criminal copyright infringement under 17 U.S.C. § 506(a) and 18 U.S.C. § 2319.

The maximum penalty for a violation of section 2318 is five years imprisonment, a $250,000 fine, or both. See 18 U.S.C. §  2318(a). For a more detailed discussion of the elements of this offense, prosecutors are encouraged to consult the Computer Crime and Intellectual Property Section's Intellectual Property Rights Prosecution Manual. Prosecutors are also urged to consult with the Computer Crime and Intellectual Property Section in conjunction with prosecutions under this newly revised statute.

PRACTICE TIP: Under the revised statutory scheme, it appears that prosecutors may prove the elements of the offense along two different "tracks," depending on the facts at hand. Under the conventional approach to section 2318 cases, the government can show that the defendant knowingly trafficked in counterfeit labels designed to be affixed to (a) a phonorecord; (b) a computer program (or computer documentation or packaging for a computer program); (c) a copy of a motion picture; or (d) an audiovisual work. Alternatively, the government can prove that the defendant knowingly trafficked in counterfeit documentation or packaging for a computer program. NOTE: In cases where the elements of this second track are clearly satisfied, and where the counterfeit packaging reproduces a registered trademark, prosecutors may consider the appropriateness of bringing charges under 18 U.S.C. § 2320, which prohibits trafficking in counterfeit trademarked goods. See JM 9-68.000 to 9-68.200.

Although it is not entirely clear from its plain language, the legislative history indicates that the statute is intended to be applied to violations involving documentation, packaging or labels for computer programs only when such are affixed or designed to be affixed to "copies of copyrighted computer programs." (Emphasis added.) The primary House Report states, in its section-by-section analysis:

Section 3 amends 18 U.S.C. § 2318 to criminalize trafficking in counterfeit copyrighted computer program documentation or packaging or labels affixed or designed to be affixed to copies of copyrighted computer programs. The current provisions of § 2318 are limited to the prohibition of trafficking in counterfeit phonorecord and video labels. While other industries have experienced problems with counterfeit labels being affixed to their products, it is the considered judgment of the Committee that 18 U.S.C. § 2318 should continue to apply exclusively to copyrighted materials. Unlike other goods, the act of copying a copyrighted product is nearly always a violation of federal law, even before a counterfeit label is affixed to the product. The provisions of 18 U.S.C.§ 2318 reflect this problem and recognize its unique occurrence within the copyright context. In addition, the Committee believes that the existence of 18 U.S.C. § 2318 should not preclude a court from imposing the penalties of 18 U.S.C. § 2320 to situations where a defendant is found to have trafficked in counterfeit labels that are to be affixed to otherwise legitimate goods.

H.R. Rep. No. 556, 104th Cong., 2d Sess. 6 (1996). Prosecutors should pay close attention to this requirement, not only in order to effectuate the will of Congress but to insure that a proper basis for federal jurisdiction exists for the government to investigate and prosecute such cases.

[cited in JM 9-71.001]