USA v. Bryant CR-93-31-B 10/29/93 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

United States of America

v. _________________________ Criminal No.93-31-01 & 03-B

James L. Bryant, Herbert Chihlun Wang, and Bohai Trading Company, Inc. a/k/a/ Bravco International Corporation

O R D E R

James Bryant, Bohai Trading Company, Inc. ("Bohai") a and

Herbert Chihlun Wang ("Wang"), have been charged in a five count

indictment with trafficking in counterfeit goods (

), conspiracy to traffic in counterfeit goods (

), importation of goods by means of false or fraudulent

practices (

), conspiracy to import goods by means

of false or fraudulent practices (

), and engaging

in a monetary transaction in property derived from unlawful

activity (

). Bryant and Bohai have moved to

dismiss the indictment on the grounds that: (i) two of the five

counts are based on a statute that did not give them

constitutionally adeguate notice that their conduct was criminal

(ii) all five counts fail to allege criminal conduct; and (ill)

the government violated defendants' egual protection rights by

impermissibly selecting this case for prosecution. For the reasons that follow, I reject these arguments and deny the motion

to dismiss.

FACTS1

Beginning in August 1989, Bryant, Wang, various Bohai

employees, and other unnamed parties knowingly and intentionally

engaged in a conspiracy to manufacture and sell women's sneakers

bearing a counterfeit "KEDS" trademark. The conspirators had the

sneakers manufactured at a factory in the People's Republic of

China and then shipped to the United States where they were sold

to a national department store chain. A number of steps were

taken by the conspirators to conceal the fact that counterfeit

trademarks had been applied to the sneakers without the knowledge

or permission of the trademark owner:2 false dates of manufacture

were applied to the sneakers; documents were backdated; and an

1In considering a motion to dismiss challenging the sufficiency of an indictment, I accept the truth of the indictment's factual allegations. United States v. National Dairy Products Corp.,

, 33 n.2 (1963); United States v. Barker Steel Co.,

(1st Cir. 1993).

2Although it is not alleged in the indictment, the government concedes that the defendants were at one time authorized to apply the KEDS trademark to other sneakers manufactured at a factory in the Peoples Republic of China. However, the government contends that this authority was terminated prior to the time that the goods in guestion were manufactured.

2 invoice was fraudulently obtained from the trademark owner.

Defendants then used this invoice and knowingly and intentionally

made other false statements to make it appear to the United

States Customs Service and to the buyer of the sneakers that the

trademark owner had authorized the trademarks to be applied to

the sneakers. Eventually, proceeds from the sale of the sneakers

were knowingly and intentionally deposited in a financial

institution.

DISCUSSION

I. Vagueness

The Fifth Amendment guarantee of due process reguires that

criminal statutes be sufficiently definite to notify persons of

reasonable intelligence that their planned conduct is criminal.

Barker Steel Co .,

; United States v. Anzalone,

(1st Cir. 1985). In cases such as the present,

where First Amendment freedoms are not implicated, an allegation

that a criminal statute is unconstitutionally vague must be

evaluated "in light of the facts of the case at hand." United

States v. Buckalew,

(1st Cir. 1988) (guoting

United States v. Powell,

(1975) (guoting United

States v. Mazurie,

(1975))). Thus, in

3 evaluating defendants' vagueness argument, I must determine

whether a person of ordinary intelligence would understand from a

reading of the statute at issue that the conduct described in the

indictment is a crime.

The statute challenged by defendants,

("§ 2320"), provides that "whoever intentionally trafficks or

attempts to traffic in goods or services and knowingly uses a

counterfeit mark on or in connection with such goods or services

. . ." commits a crime. The statute defines the term

"counterfeit mark" to include:

(A) a spurious mark -

(i) that is used in connection with trafficking in goods or services;

(ii) that is identical with, or substantially indistinguishable from, a mark registered for those goods or services on the principal register in the United States Patent and Trademark Office and in use, whether or not the defendant knew such mark was so registered; and

(iii) the use of which is likely to cause confusion, to cause mistake, or to deceive

2 0 (d). An exception exists under the statute for

"any mark or designation used in connection with goods or services of which the manufacturer or producer was, at the time of the manufacture or production in guestion authorized to use the mark for designation for the type of goods or services so manufactured or

4 produced, by the holder of the right to use such mark or designation."

In their fair notice challenge to § 2320, defendants focus

on the statute's exception and argue that it is

unconstitutionally vague when read in light of a regulation

followed by the United States Customs Service at the time the

defendants allegedly violated § 2320. At that time,

(c)(3) ("regulation (c)(3)") specified that if "the

articles of foreign manufacture bear a recorded trademark or

tradename applied under authorization of the United States

owner," the Customs Service would not prevent importation of the

goods. Defendants contend that they did not receive fair notice

that their conduct was criminal because this regulation

authorized the very conduct that the government has attempted to

criminalize in the indictment.

Unfortunately for defendants, the central premise underlying

this argument is flawed. Regulation(c)(3) applied only to goods

that bore a trademark applied "under authorization" of its owner.

In the present case, the government has alleged that

defendants' violation of § 2320 by applying the KEDS trademark to

the goods in guestion was without the owner's authorization.

Thus, the government's theory of liability as charged in the

5 indictment is not inconsistent with regulation (c)(3) because the

conduct described in the indictment would have violated both the

regulation and § 2320. Accordingly, this case presents no danger

that a reasonably intelligent person would mistakenly conclude

that the conduct charged in the indictment was not a violation of

§ 2320 because it was authorized by Customs Service regulations.

Defendants also cite to the legislative history of § 2320

for the proposition that Congress did not intend to criminalize a

manufacturer's effort to import overruns of trademarked goods.

See, e.g.. Joint Statement on Trademark Counterfeiting

Legislation, U.S. Cong. Rec. 31673, 31676 (House, October 10,

1984). Defendants apparently rely on this legislative history to

argue that § 2320 would be impermissibly vague if it could be

used contrary to its legislative history to criminalize the

importation of overrun goods. In making this argument, however,

defendants overlook other portions of the same legislative

history that specify that the criminal sanctions contained in the

trademark counterfeiting laws were intended to apply in any case

where the goods in guestion were manufactured after the

termination of the relationship between the trademark owner and

the manufacturer. Id. ("[T]he compromise bill does not create a

grace period for persons dealing with former licensees -- that is

6 licensees whose right to manufacture goods bearing a partial mark

has been terminated at the time of manufacture"). In this case,

the indictment charges that the defendants were not authorized to

use the KEDS trademark on the sneakers at issue. If the evidence

produced at trial establishes that the sneakers were overruns

that were manufactured at a time when the defendants were

authorized to use the KEDS trademark, defendants will be

acguitted of the § 2320 violation. However, a statute is not

impermissibly vague merely because the defendants may have a

defense to the charged conduct which they intend to raise at

trial.

Defendants have confused the real issue here by basing their

fair notice challenge on their interpretation of other

regulations and the legislative history of § 2320. The language

of the statute clearly defines the type of conduct that is

subject to punishment, and the charged conduct plainly falls

within that definition. Defendants therefore cannot rely on

§ 2320's legislative history and on agency interpretations of

other regulations -- both extrinsic sources -- to create an

ambiguity of constitutional proportions. This is especially

true where, as here, these sources are consistent with the theory

of liability set forth in the indictment.

7 II. Sufficiency of the Indictment

Defendants argue that the indictment is defective because

each count fails to allege that a crime occurred. In assessing

this argument, I employ the following standard of review:

" [A]n indictment is sufficient if it, first, contains the elements of the offense charged and fairly informs a defendant of the charge against which he must defend, and second, enables him to plead an acguittal or conviction in bar of future prosecutions for the same offense."

United States v. McDonough,

(1st Cir. 1992)

(citations omitted). Applying this standard in the present case,

I conclude that each count sufficiently alleges the commission of

a crime.

A. Failure to Allege "Core Fact of Criminality"

Defendants argue that the indictment fails to allege a

§ 2320 violation because, when the indictment is read in its

entirety, it implies that the conduct at issue falls within the

"authorized use" exception discussed above. Defendants further

contend that because all of the other counts depend upon the

alleged § 2320 violation, the entire indictment must be dismissed

because of this alleged deficiency. I reject this argument

because it is based upon a fundamental mischaracterization of the

authorized use exception. A defendant may not rely on the

exception by claiming that he was authorized to use a trademark at some point before the goods in question were manufactured.

Rather, the exception can only be claimed if the manufacturer was

authorized to apply the mark to goods of that type "at the time

of the manufacture or production in question." In the present

case, the government alleges that the trademarks on the sneakers

were counterfeit and that defendants were not authorized to apply

the mark to the goods in question. This allegation is sufficient

to satisfy this element of the offense and it by no means implies

that the defendants were authorized to apply the mark to the

goods of that type at the time that the sneakers in question were

manufactured or produced. Defendants are free to avail

themselves of any available defense at trial. However, they may

not obtain a dismissal of the indictment simply by alleging that

they have a defense.

B. Materiality of the False Statements

Defendants also contend that Counts III and IV are defective

because the false statements alleged in Count III are not

material. In the present case, the indictment identifies the

alleged misstatements and further alleges that the misstatements

were material. Whether the government will be able to establish

the materiality of the statements to my satisfaction is a matter

that must be left for trial. All that I determine now is that the indictment is sufficient to allow the government to attempt

to prove its case at trial.

III. Selective Prosecution

In order to establish a selective prosecution claim, a

defendant must present evidence:

(1) [T]hat, while others similarly situated have not generally been proceeded against because of conduct of the type forming the basis of the charge against him, he has been singled out for prosecution, and (2) that the government's discriminatory selection of him for prosecution has been invidious or in bad faith, i.e., based upon such impermissible considerations asrace, religion or the desire to prevent his exercise of constitutional rights. . . . "

United States v. Union Nacional de Trabaiadores,

(1st Cir. 1978) (guoting United States v. Berrios,

(2d Cir. 1974); see also United States v. Saade,

(1st Cir. 1981). The Defendants in the present

case are unable to satisfy either part of this test.

Defendants attempt to satisfy the first part of the test by

claiming that no one in their position has ever been prosecuted

for a violation of § 2320. However, the first element of a

selective prosecution claim cannot be established merely by

alleging that no similar prosecutions previously have been

brought. Instead, a defendant must produce evidence that the

10 government has declined to prosecute others who were in a

situation similar to the defendants. Since they have failed to

produce any evidence that the government has declined to

prosecute other similarly situated parties, the defendants have

not met the first part of the test.

Defendants attempt to establish the second element of their

selective prosecution claim by arguing that the investigation

leading to the indictment was instigated by the owner of the KEDS

trademark and that the government has been used improperly to

protect the economic interests of the trademark owner. The mere

fact that a victim of a criminal conduct may have an economic

interest in the prosecution of a particular defendant does not

render the government's independent decision to prosecute the

defendant improper. The defendants have not alleged that any

improper influence has been brought to bear on the government to

induce it to prosecute the defendants. Accordingly, the

defendants have also failed to establish the second element of a

selective prosecution claim. Since defendants allege nothing

else in support of their selective prosecution claim, the claim

must necessarily fail.

11 CONCLUSION

Defendants' Motion to Dismiss (document #23) is denied.

SO ORDERED.

Paul Barbadoro United States District Judge

October 29, 1993

cc: Steven J. Brooks, Esq. United States Attorney United States Marshal United States Probation

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