U.S. v. Diallo: Defining “Use” in the Context of Counterfeiting

The U.S. Court of Appeals for the Third Circuit determined that “use,” in the context of federal trademark laws, does not require active employment of a counterfeit mark by displaying or offering an item bearing the mark for sale. In United States of America v. Mamadou Diallo, 575 F.3d 252 (3rd Cir. 2009), the Third Circuit found that it was reasonable for a jury to determine that Diallo had “used” the counterfeit marks by purchasing items bearing the mark and transporting them for the ultimate purpose of selling them, even though he had not yet actually displayed or sold them.

BACKGROUND

In 2005, a Pennsylvania state trooper stopped Mamadou Diallo, a native of Guinea, West Africa, on the highway because the license plate of Diallo’s van was not illuminated. The trooper noticed sealed bags and boxes in Diallo’s van and asked him what was in them – Diallo responded that they contained clothes. Another occupant of the van gave the trooper permission to search the bags and boxes, which contained, among other knockoffs, about $200,000 in counterfeit Louis Vuitton handbags.

Diallo admitted that the bags were his and produced a business license from Indianapolis, but the trooper arrested Diallo. Apparently Diallo had purchased the bags in New York, knowing that they were counterfeit goods, and was taking them to Indianapolis, where he intended to sell them at his flea market stall. Diallo was indicted for trafficking in counterfeit goods in violation of 18 U.S.C. section 2320(a).

At trial, Diallo claimed that although he had knowingly purchased counterfeit goods with the intent to sell them, he had not actually “used” the counterfeit marks as defined by United States v. Bailey, 516 U.S. 137 (1995), a firearms case. In that case, the Supreme Court found that “use” for purposes of a federal criminal statute, meant more than mere “possession” of the firearm – it required displaying it, firing it, etc. Diallo claimed that similarly, the mere fact that the sealed bags of bags were in his van and in his possession should not be enough to determine that he was “using” the mark, and that prosecutors should have to show that he was displaying or selling the items in order to prove that he was “using” the mark.

Prosecutors argue: “use begins when [Diallo] bought them in New York, carried them along the highway for purposes of using them at his commercial venture to sell.” The district court’s jury instruction did not include a definition of “use,” and when asked for such a definition by the jury, the court distinguished Bailey and instructed the jury using dictionary definitions – “to make use of, to put into action or convert to one’s service, to avail oneself of, to have recourse to or enjoyment of, to employ.” U.S. v. Diallo, 476 F. Supp.2d 497, 499 (W.D. Pa. 2007). The jury subsequently found Diallo guilty, and Diallo appealed. United States of America v. Mamadou Diallo, 575 F.3d 252 (3rd Cir. 2009).

In counterfeit law, “Use” references the entire stream of illegal activity

On appeal, the Third Circuit focused on the meaning of the word “use” in 18 U.S.C. section 2320(a), which that statute fails to define. The Court looked at Congressional intent driving the enactment of section 2320, finding that Congress intended to prevent trafficking and use of counterfeit goods, and thus a broader interpretation of “use” is appropriate here than was appropriate in Bailey, which dealt with a completely different statute involving multiple types of conduct. Due to the differences between the facts and statute at issue in Bailey and those before the court in Daillo, the Court deemed it “unnecessary, therefore, to restrict the meaning of the expansive term ‘uses’ in section 2320 as occurred in Bailey.” 575 F.3d at 259.

The Court specifically determined that limiting its interpretation of “uses” to only uses connected with the actual sales transaction would undermine Congressional intent regarding the statute. “In our view, an ordinary and natural reading of ‘uses’ gives effect to Congress’s intent ‘to control and prevent commercial counterfeiting’ by reaching a stream of illegal commerce and not simply its point of sale.” Id. at 260. The Court determined that this broader interpretation of “use” was “reasonable and normal” and entirely consistent with trademark law. Id. at 261. On this basis, the Court upheld the district court’s instruction to the jury on this point.

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Olivier A. Taillieu

Jeffrey J. Zuber

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