BILL ANALYSIS
SB 324
Page 1
Date of Hearing: June 16, 2009
Counsel: Gabriel Caswell
ASSEMBLY COMMITTEE ON PUBLIC SAFETY
Juan Arambula, Chair
SB 324 (Cedillo) - As Amended: June 11, 2009
SUMMARY : Authorizes lawfully registered owners of intellectual
property to consent to the donation of seized counterfeit goods
to charity. Specifically, this bill :
1)States that upon request of any law enforcement agency and
consent from the lawful registrants, a court may consider a
motion to have seized counterfeit goods donated to nonprofit
organizations.
2)Specifies that the purpose of distributing the goods to
charity is to benefit persons living in poverty and that no
charge shall be rendered upon the persons served by the
charitable organization.
3)Excludes recordings and audiovisual works.
EXISTING LAW :
1)States that any person who willfully manufactures,
intentionally sells, or knowingly possesses for sale any
counterfeit of a mark registered with the California Secretary
of State or registered on the United States Patent and
Trademark Office shall be punishable as follows [Penal Code
Section 350(a)]:
a) If the offense involves less than 1,000 of the articles
with a total retail value less than the standard for grand
theft (over $400 to $487), the defendant is guilty of a
misdemeanor, punishable by a fine of not more than $5,000,
imprisonment in a county jail for up to one year, or by
both. If the defendant is a corporation, by a fine of not
more than $100,000.
b) When the crime involves 1,000 or more articles, or has a
total retail value that meets the standard for grand theft
SB 324
Page 2
(over $400 to $487), the crime is an alternate
felony-misdemeanor, punishable by imprisonment in a county
jail for up to one year, or in the state prison for 16
months, 2 years or 3 years, by a fine not to exceed
$250,000, or both. If the defendant is a corporation, the
maximum fine is $500,000.
2)Provides that a repeated violation of the counterfeit
trademark statute is an alternate felony-misdemeanor,
punishable by a fine of not more than $50,000, imprisonment in
a county jail for not more than one year, or in the state
prison for 16 months, or 2 or 3 years, or both. If the
defendant is a corporation, the maximum fine is $200,000.
[Penal Code Section 350(b).]
3)Provides that where a defendant is convicted of a trademark
counterfeiting, the court shall order the forfeiture and
destruction of all of counterfeit marks and all counterfeit
items. The court, with specified exceptions for community
property vehicles, shall also order forfeiture and destruction
or other disposition of all means of making the marks, and all
other devices for making or transporting the marks used in
connection with the violation. [Penal Code Section 350(d).]
4)Describes "fair use" of a trademark, which is not subject to
prosecution or a civil action, as any of the following
(California Business and Professions Code Section 14247):
a) Advertising or promotion that permits consumers to
compare goods or services;
b) Identifying and parodying, criticizing, or commenting
upon the famous mark owner or the goods or services of the
famous mark owner;
c) Non-commercial use of the mark; and
d) All forms of news reporting and news commentary.
5)Provides that it is a crime to "traffic" or "attempt to
traffic" in counterfeit goods, punishable by a fine of up to
$2 million, imprisonment for up to 10 years, or both. The
maximum fine for a corporation or an entity other than an
individual is $5 million. Repeated convictions are punishable
by imprisonment for up to 20 years, a fine of up to $5
SB 324
Page 3
million, or both. Where the convicted defendant of repeated
violations is other than an individual the maximum fine is $15
million. (18 United States Code Section 2320.)
6)Provides the following property is subject to forfeiture
following a defendant's conviction for trafficking in
counterfeit goods: the proceeds of the crime, any of the
defendant's property used or intended to be used in the crime,
and any article bearing a counterfeit mark. [18 United States
Code Section 2320 (b).]
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Statement : According to the author, "The underground
market of counterfeit goods is sizable and growing rapidly.
In 2007, United States Customs Officials seized $197 million
in counterfeit goods, up 27% from the previous year. The
county Economic Development Corporation estimates about $2
billion worth of counterfeit goods are sold annually in Los
Angeles alone.
"Yet, in our state there are over 150,000 individuals and
families who are homeless on any given night. This number of
homeless Californians will likely grow in the next two years
because of job loss and the impact of home foreclosures.
"SB 324 provides for a practical method in aiding our state's
homeless by repurposing counterfeit shoes and clothes after
their confiscation and with the trademark owner's consent.
The donation of these items to non profit agencies will fill
the paucity of public funding created by budget cuts homeless
and women's shelters face. This bill is also an
environmentally sound fit to non-commercial redistribution of
the items. Landfills are already at capacity and the
destruction of goods adds to the immense waste in our
communities.
"Under current law, upon conviction and confiscation of
counterfeit items, such items must be destroyed. In some
instances items have been donated by the Los Angeles City
Attorney's office to organizations serving the homeless with
the permission of the trademark owners. The organizations
taking possession of counterfeit goods go to great lengths to
SB 324
Page 4
ensure the items do not re-enter commerce by removing tags and
imprinting the pieces with an indelible stamp. However, there
is a reluctance to continue this practice because the statute
calls for destruction regardless of trademark owner's consent
and there is not sufficient case law to guide the protocol for
donating goods.
"SB 324 will take an existing problem and transform it into a
transparent solution for non profit agencies that serve the
homeless and indigents in our communities."
2)Background : According to the background provided by the
author, "SB 324 would change existing law [Penal Code Section
350 (d)] requiring the destruction of counterfeit goods to
allow for their donation to homeless and indigent people in
cases where the trademark owner provides their consent.
"Every year, United States Customs Officials alone seize
millions of dollars worth of counterfeit goods. In 2007,
there was a $197 million of counterfeit goods seized, up 29%
from the previous year. According to the Los Angeles County
Economic Development Corporation, approximately $2 billion
worth of counterfeit goods are sold annually in the Los
Angeles alone.
"Current law requires that in the case of a conviction or a plea
of nolo contendere of trademark violations, the court orders
the forfeiture and destruction of any goods that are found to
be counterfeit. Presently, there are no alternative forms of
disposing of these articles in the Penal Code.
"On any given night, there are over 150,000 Californians who are
homeless, the number will likely increase in the next two
years due to job loss and the impact of home foreclosures.
There is a paucity of public funding to provide housing and
services to these individuals and front-line providers
including drop in centers, emergency shelters and transitional
housing providers. These agencies are often strapped for
financial resources to adequately serve their clients and
funding for basic items like clothing and shoes are often
difficult.
"SB 324 will allow for a more efficient way for law enforcement
to dispose of counterfeit goods while helping overcome the
obstacles non-profit agencies face in providing services and
SB 324
Page 5
articles for the needy residents of our state.
"In some instances, items have been donated by the Los Angeles
City Attorney's office to organizations serving the homeless
with the permission of the trademark owners. However, there
is a reluctance to continue this practice because of the
statue and the lack of case law.
"This bill will provide the relief homeless agencies are in need
of by donating goods such as apparel and shoes to persons in
our state, while providing an environmental relief by reducing
the amount of waste added to our state landfills."
3)Consent of the Intellectual Property Owner/Registrants : This
bill requires the owner of a registered intellectual property
to consent to the donation to charity. The value of
intellectual property is generally found in its desirability.
Generally, a trademark owner attempts to prevent the wide
distribution of counterfeit versions of the trademark at
diminished value to preserve the perceived value of the actual
mark. By increasing the number of trademarks through
counterfeit goods, the value of trademarks are often
diminished. Therefore, permitting a court or law enforcement
to distribute counterfeit goods to charity would potentially
harm a legitimate registrant. By requiring the consent of the
lawful registrant, this bill provides the owner with the
ability to manage the distribution of the mark and make the
decision based upon the facts and circumstances of the case.
This bill preserves the rights of an intellectual property
registrant to control and manage their copyrights and
trademarks within the stream of commerce.
4)Current Law Requires Destruction of all Counterfeit Goods :
Under current law, courts are required to order the
destruction of all seized counterfeit items. Statutes state
that the court "shall" order destruction of all counterfeit
goods. Upon the request of law enforcement and with the
consent of the trademark registrant, this bill gives a court
the discretion to distribute the trademarked goods to
impoverished people through a charitable organization.
Granting a court the discretion to distribute counterfeit
goods to charity provides an alternative to destruction of the
goods in every case.
5)Federal Legislation : The Trademark Counterfeiting Act of 1984
SB 324
Page 6
amended the federal criminal code, establishing penalties of
up to five years in prison and/or a $250,000 fine ($1 million
fine for corporations or other business entities) for selling
or attempting to sell counterfeit goods or services.
Penalties for subsequent violations were also increased.
6)Argument in Support : According to the Los Angeles Mission ,
"SB 324 will help California's homeless and indigent citizens
by allowing for the donation of confiscated counterfeit goods,
such as clothes and shoes with permission of the trademark
owner.
"There are 150,000 homeless individuals and families homeless on
any given night in California. This staggering number will
likely grow within the next two years given the increasing
number of home foreclosures. Currently, there is a paucity of
public funding to provide housing and services to these
individuals and front-line providers, including drop-in
centers, emergency shelters and transitional housing
providers. These agencies are often strapped for financial
resources to adequately serve their clients, let alone provide
them with essential goods, such as clothing and shoes.
"The underground market for counterfeit goods is sizable and
growing rapidly. In 2007, United States Customs Officials
alone seized $197 million in counterfeit goods, up 27% from
the previous year. The County Economic Development
corporation estimates about $2 billion worth of counterfeit
goods are sold annually in Los Angeles County alone.
"SB 324 will allow for a transparent and efficient way for law
enforcement to dispose of confiscated counterfeit goods while
providing necessary items to agencies that serve our state's
most needy."
7)Argument in Opposition: According to the Motion Picture
Association of America , "This bill would permit the courts to
distribute to charities trademarked counterfeit goods seized
by law enforcement.
"SB 324 would create legitimate use, despite the ability of the
trademark owner to withhold, for recovered counterfeit motion
picture and television programs on digital video discs (DVDs).
This bill also violates the distribution clause of the United
States Copyright Act.
SB 324
Page 7
"MPAA's member companies suffer an estimated $6 billion annually
lost revenue worldwide to motion picture counterfeiting and
theft annually. We are concerned that this legislation would
create a state-sanctioned use for counterfeit DVDs that
undermine legitimate copyrighted motion pictures that were
created by hard-working men and women, the majority of whom
live in the Los Angeles area.
"Moreover, the federal Copyright Act provides in Title 17,
Section 106(3), that the owner of a copyright had the
exclusive right to distribute copies of the work 'to the
public by sale or other transfer of ownership.' Any
individual or entity, including California state
instrumentalities, that distribute counterfeit copies of
motion pictures to the public, regardless of whether a fee is
charged, is in violation of this statute."
8)Prior Legislation : AB 1394 (Krekorian), Statutes of 2008,
Chapter 431, modifies the system of penalties and fines
related to criminal counterfeit trademark infringement.
REGISTERED SUPPORT / OPPOSITION :
Support
Community Action Partnership of San Bernardino
David and Margaret Youth and Family Services
Fred Jordan Mission
Los Angeles Mission
Minister of God and Christ Jesus Foundation
Substance Abuse Foundation of Long Beach, Inc.
Taxpayers for Improving Public Safety
Union Rescue Mission
Western Center on Law and Poverty
Opposition
District Attorney, County of Los Angeles
Motion Picture Association of America
Analysis Prepared by : Gabriel Caswell / PUB. S. / (916)
319-3744