U.S. v. Foote

• Decision Date: 06 July 2005
• Docket Number: No. 03-3263.,03-3263.
• Citation: 413 F.3d 1240
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Jerome Daniel FOOTE, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

413 F.3d 1240

UNITED STATES of America, Plaintiff-Appellee, v. Jerome Daniel FOOTE, Defendant-Appellant.

No. 03-3263.

United States Court of Appeals, Tenth Circuit.

July 6, 2005.

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Terrence J. Campbell, Barber Emerson, L.C., Lawrence, KS, for Defendant-Appellant.

Scott C. Rask, Assistant United States Attorney (Eric F. Melgren, United States Attorney, with him on the brief), Kansas City, KS, for Plaintiff-Appellee.

Before SEYMOUR, PORFILIO, and MURPHY, Circuit Judges.

MURPHY, Circuit Judge.

I. INTRODUCTION

Jerome Foote was convicted in United States District Court for the District of Kansas of trafficking in counterfeit goods and conspiring to traffic in counterfeit goods based on his sale of a single counterfeit Mont Blanc pen in violation of the Counterfeit Trademark Act, 18 U.S.C. § 2320, and 18 U.S.C. § 371. He now appeals his convictions and sentence. This court has jurisdiction pursuant to 28 U.S.C. § 1291 and affirms Foote's convictions. Because the district court applied the wrong version of the United States Sentencing Guidelines ("U.S.S.G."), however, this court remands the case for resentencing.

II. BACKGROUND

Foote was charged in the district court with forty-four counts of counterfeiting, conspiracy to counterfeit, money laundering, and engagement in an unlawful monetary transaction. The indictment alleged that Foote had sewed or glued a variety of counterfeit trademarks onto goods such as purses, scarfs, watches, pens, shirts, and sunglasses, and then sold these products to the public. Foote originally sold the goods from his residence in Lenexa, Kansas. He openly advertised his business, which he called "Replicas," as offering high-quality reproductions of brand-name products.

FBI Special Agent Albert Pisterzi was one recipient of a mailing promoting Foote's business. In response to the mailing, Pisterzi went to Foote's home and observed that Foote was selling goods from which the original tags had been removed and replaced with tags bearing various famous trademarks. Two months later, Richard Smith, a private investigator employed by a firm representing trademark owners, went to Foote's home and determined that at least some of the goods sold by Foote were counterfeit. Foote told Smith during the visit that the items were the "best damn copies in the world that money could buy."

Foote later relocated Replicas from his home to a strip mall in Lenexa. Smith, along with FBI Special Agents Stanley Wright and Melissa Osborne, visited the store on November 22, 1998, and purchased $466 worth of merchandise that Smith determined was counterfeit. Among the items purchased was a pen with a counterfeit Mont Blanc trademark symbol. These purchases made Foote suspicious that he was under investigation, and by the end of the next day he had moved all the counterfeit merchandise out of the store.

Based on the purchased goods, Wright applied for and was granted a search warrant for Foote's store. In his supporting affidavit, however, Wright failed to reveal his knowledge that Foote had already removed all the counterfeit merchandise. After Wright determined that Foote had returned some of the goods to the store he executed the warrant on December 7, 1998, and seized approximately 5200 items. Following a pretrial suppression hearing, the district court concluded that by omitting his knowledge that Foote had removed the counterfeit goods, Wright had intentionally or recklessly omitted material information from his affidavit that would have negated probable cause. The court therefore granted Foote's motion to suppress all the evidence seized from the store pursuant to Franks v. Delaware, 438 U.S. 154, 98 S.Ct. 2674, 57 L.Ed.2d 667 (1978). The court did not, however, suppress evidence of goods that were purchased from the store by Smith or found in a consensual search of an employee's car.

The partial suppression of evidence resulted in the dismissal with prejudice of twenty of the counts against Foote that were based on trafficking in particular counterfeit trademarks for which all evidence had been suppressed. A jury convicted Foote of twenty-three of the remaining twenty-four counts, which involved charges of conspiracy, trafficking in goods for which the evidence was not suppressed by the district court, and related financial crimes. The district court then granted Foote's motion for judgment of acquittal with respect to twenty-one counts on the ground that the government had failed to present any evidence that the pertinent registered trademarks were actually in use at the time Foote trafficked in goods bearing those marks, as required by the Counterfeit Trademark Act, 18 U.S.C. § 2320(e)(1)(A)(ii). See United States v. Guerra, 293 F.3d 1279, 1290 (11th Cir. 2002). The court found, however, that the government had produced sufficient evidence that Mont Blanc's registered trademark was in use at the time Foote trafficked in the goods. The court therefore upheld the jury's verdict on one count of trafficking in counterfeit goods and one count of conspiring to traffic in counterfeit goods based on the sale of a single counterfeit Mont Blanc pen that Smith had purchased from Foote's store.

At sentencing, the court considered additional evidence from the government that trademarks other than the Mont Blanc mark were also in use at the time Foote sold products bearing those marks. Based on this evidence, the court enhanced Foote's offense level to reflect the total estimated value of all the counterfeit goods sold from Foote's store. See U.S.S.G. § 2B5.3(b)(1) (May 1, 2000). The court sentenced Foote to thirty-seven months of imprisonment, three years of supervised release, and a fine of more than $104,000. Foote appeals his convictions and sentence.

III. DISCUSSION

A. The district court's "likelihood of confusion" instruction

Section 2320 provides criminal penalties for anyone who "intentionally traffics or attempts to traffic in goods or services and knowingly uses a counterfeit mark on or in connection with such goods or services." 18 U.S.C. § 2320(a). The statute defines a counterfeit mark as a spurious mark "the use of which is likely to cause confusion, to cause mistake, or to deceive." Id. § 2320(e)(1)(A)(iii).¹ Over Foote's objection the district court instructed the jury on the "likely to cause confusion, to cause mistake, or to deceive" test as follows:

Under [this] requirement, it does not matter that the specific persons who purchased the goods may not have been confused or deceived. The test is whether defendant's use of the mark was likely to cause confusion, mistake or deception to the public in general. In this regard, you should determine whether an average consumer would be deceived into believing that the product was made by the genuine trademark owner.

Foote argues that this instruction allowed the jury to find him guilty even if none of his customers were likely to be confused, as long as the jury concluded that customers might use the goods in a way that would likely cause confusion in the public in general. He contends that he openly advertised that he sold counterfeit merchandise and that he informed each customer that his merchandise was fake. Because his customers were never fooled into thinking they were purchasing authentic merchandise, Foote argues that the criminal counterfeiting statute is inapplicable to his conduct. Foote objected to the district court's instruction and tendered an alternative instruction stating that "[a]ny use of the mark by others having only an arms-length relationship to this defendant (i.e. retail customers) should have no bearing on [the jury's] deliberations." The district court overruled Foote's objection.

This court reviews the district court's refusal to give a particular jury instruction for abuse of discretion. United States v. Voss, 82 F.3d 1521, 1529 (10th Cir.1996). Whether the jury was properly instructed is a question of law that this court reviews de novo. Id. The district court's jury instruction was based on the law of "post-sale confusion." See United States v. Torkington, 812 F.2d 1347, 1352 (11th Cir.1987). Courts that have applied the concept of post-sale confusion have held that the counterfeiting statute's "application is not restricted to instances in which direct purchasers are confused or deceived by the counterfeit goods." United States v. Yamin, 868 F.2d 130, 132 (5th Cir.1989). Instead, these courts hold that the statute "is satisfied by a showing that it is likely that members of the public would be confused, mistaken or deceived should they encounter the allegedly counterfeit goods in a post-sale context." Torkington, 812 F.2d at 1352. In Torkington, the Eleventh Circuit explained:

Like the Lanham Act, the Trademark Counterfeiting Act is not simply an anti-consumer fraud statute. Rather, a central policy goal of the Act is to protect trademark holders' ability to use their marks to identify themselves to their customers and to link that identity to their reputations for quality goods and services.

It is essential to the Act's ability to serve this goal that the likely to confuse standard be interpreted to include post-sale confusion. A trademark holder's ability to use its mark to symbolize its reputation is harmed when potential purchasers of its goods see unauthentic goods and identify these goods with the trademark holder. This harm to trademark holders is no less serious when potential purchasers encounter these counterfeit goods in a post-sale context.

Id. at 1352-53 (citations and footnote omitted).

This court has not yet addressed the role of post-sale confusion under the Counterfeit Trademark Act. The Second, Fifth, Eighth, and Eleventh Circuits, however, have all concluded that the statute covers post-sale confusion. United States v. Hon, 904 F.2d 803, 808 (2d Cir.1990); Yamin, 868 F.2d at 132-33; United States v. Gantos, 817 F.2d 41, 43 ...