Criminal Counterfeiting in Indiana

By Darlene R. Seymour

The Indiana Supreme Court heard oral argument yesterday as to whether an Indiana criminal court has jurisdiction over a defendant that, while not physically present in the state, allegedly committed an act that constitutes a crime inIndiana.  The case also involves the application of Indiana criminal statutes in instances where the defendant is alleged to be selling counterfeit goods. The decision will have a huge impact on Indiana criminal cases, especially those implicating the misuse of intangible property such as trademarks and copyrights.

In Yao and Lin v. State, No. 35A02-1006-CR-678 (Ind.Ct.App. 2011), the Defendants were charged with theft, corrupt business influence and counterfeiting.  [Webcast] The undisputed facts before the Court were that Defendants, employees of the Texas company, Generation Guns, communicated via telephone and internet with Indiana residents regarding sales of certain airsoft “BB” guns.  Unbeknownst to Defendants, the Indiana residents were actually investigators working for the Indiana consulting firm, Continental Enterprises, along with the assistance of a local Huntington County, Indiana detective. The Defendants referred to the airsoft guns as “HK” guns (aka Heckler & Koch) during their communications. Two orders were placed with Generation Guns, and Defendants shipped the airsoft guns to Huntington, Indiana.  The guns sent fromTexas into the state of Indiana were replicas of actual HK firearms and thus contained trademarks owned by Heckler & Koch.  The State of Indiana alleged in the charges against Defendants that these actions violated various Indiana laws that essentially prohibit the unauthorized use of a third party’s trademarks, markings and/or symbols of identification.

Specifically, the charging information alleged that Defendants committed acts of Counterfeiting under Indiana law by knowingly or intentionally uttering “a written instrument, namely: an airsoft gun, in such a manner that it purported to have been made by another person or by the authority of one who did not give authority, namely Heckler & Koch, Inc.”  The State of Indiana further charged Defendants with Theft for knowingly or intentionally exerting “unauthorized control over property belonging to Heckler & Koch, Inc., with the intent to deprive the owner of any part of its value use, namely: trademarks and/or markings or symbols of identification.” Lastly, the Defendants were charged with corrupt business influence but that charge has not been a focal point of this case.

Defendants filed a Motion of Dismiss with the trial court arguing that: (1) the Indiana Court lacks jurisdiction because none of the elements of the crimes charged occurred in the state; and (2) the facts stated in each charging information do not constitute a criminal offense.  The trial court granted the Motion to Dismiss as to the counterfeiting charges, but denied it as to the theft and corrupt business influence charges.  The trial court made no findings on the jurisdictional claim.  Both the State and Defendants appealed the trial court’s decision on these issues.

On appeal to the Indiana Court of Appeals, the panel of Judges found the jurisdictional question to be dispositive and thus did not address any issues related to the crimes charged.  Rather, the Court held that the charges against Defendants should be dismissed as a matter of law because of a lack of territorial jurisdiction.  The State of Indiana filed a Petition to Transfer, asking the Indiana Supreme Court to accept transfer of the case.  Transfer was granted and the Appellate opinion vacated.

In its presentation to the Supreme Court, the State of Indiana took issue with the standard used by the Appellate Court to evaluate territorial jurisdiction and asked the Court to reverse the prior ruling.  In doing so, the State addressed the incredibly adverse effect the decision could have on criminal cases in general. For example, a resident of another state could mail an illegal substance to an Indiana resident, but not be subject to the jurisdiction of an Indiana court.  Thus, the State’s focus in pursuing this issue appears to be two-fold: (1) to obtain a clear delineation of the proper standard for assessing territorial jurisdiction; and (2) to ensure that such a standard allows Indiana prosecutors to charge criminals with crimes that affect the state, even when each and every element did not occur within Indiana’s borders.

During the oral argument, the parties also debated the issue of whether Defendants’ shipment of unlicensed goods from Texas to Indiana via UPS could constitute the crimes of theft and counterfeiting according to Indiana law.  The goods involved in this case were airsoft guns made in the design and shape of Heckler & Koch firearms.  The State contended that the “utterance” required by the counterfeiting statute was Defendants’ delivery and conveyance of the guns to Indiana buyers and that the “written instruments” were the actual airsoft guns.  The State also argued that Defendants’ conduct in conveying the unlicensed guns to residents of Indiana amounted to the exercise of “unauthorized control” mandated by the theft statute.

While there have been a few recent decisions wherein the federal civil courts of Indiana have attempted to interpret these statutes, the Yao and Lin case was initiated by a criminal prosecution.  Consequently, the Indiana Supreme Court will evaluate the issues under the criminal laws and standards of the state.  Historically, the Indiana courts and legislature have included intellectual property and other intangibles as items of value that can be subject to prosecution.  Ultimately, this decision could end up reinforcing the idea that trademark owners can use the criminal process as a tool for protecting their IP.

Continental will be anxiously awaiting the conclusion of this case, so stay tuned for the final update…

The Importance of Defining Trade Dress

One of the first steps any individual or business should take in establishing a brand is to create and define the trade dress that will represent that brand.  Unfortunately, this concept is often overlooked simply due to a lack of understanding of the meaning and/or value of trade dress.  However, without an established trade dress, your brand could be copied, imitated, or even declared part of the public domain.

 

            Trade dress refers to the overall appearance of a product, including characteristics such as size, shape, color, textures and graphics. Trade dress can be your product’s packaging or the product design itself.  For example, trade dress has been found in the colors and patterns on a cheerleading uniform; the shape of various beverage containers; the layout of printed items like greeting cards and a restaurant menus; and the design of products like barbecue grills, firearms, cars, watches, shoes and lighters.

 

            Trade dress should be consistent and distinctive so as to foster consumer recognition.  Protection for trade dress arises when your product is set apart from others in the same industry.  When more than one product exists within a brand, the trade dress features should be consistently displayed on each product as reinforcement of your trade dress. 

 

            In order to qualify for protection, your trade dress must also be nonfunctional. This does not mean that a product that performs a function cannot be protected.  It simply means that the product should not only have a purpose but some kind of unique appearance that is identifiable to consumers.  Keep in mind that trade dress is a collection of features viewed as a whole, and not as to each individual part.  Therefore, even if one part of your product is functional, the entire design as a whole can be recognizable trade dress.    

 

            Trade dress must also acquire secondary meaning among consumers before it will be recognized as protectable.  Secondary meaning simply suggests that your product is understood by consumers to originate from a single source.  The easiest way to establish secondary meaning is through advertising and promotion of the product.  These types of materials should emphasize the product’s appearance and design and should remain consistent with your product’s trade dress.  Media coverage is another means of promoting your products for the purposes of establishing secondary meaning and should also focus on the distinctive elements of your trade dress.           

           

            Once you have conquered the hurdle of defining a nonfunctional trade dress that has established secondary meaning, you will have the tools necessary to prevent infringement by competitors.  In this regard, you will be rewarded with a shield of protection for all of the time, effort, creativity and resources that were expended in developing your brand.

 

Hello world!

Continental Enterprises is very happy to launch its IP blog. We will be updating from time to time with articles that we hope you will find interesting!