F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
July 6, 2005
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
No. 03-3263
v.
JEROME DANIEL FOOTE,
Defendant-Appellant.
Appeal from the United States District Court
for the District of Kansas
(D.C. No. 00-CR-20091-KHV)
Terrence J. Campbell, Barber Emerson, L.C., Lawrence, Kansas, for Defendant-
Appellant.
Scott C. Rask, Assistant United States Attorney (Eric F. Melgren, United States
Attorney, with him on the brief), Kansas City, Kansas, 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
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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
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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 (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
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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.
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§ 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.
1
The full definition of “counterfeit mark” is:
(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; or
(B) a spurious designation that is identical with, or substantially
indistinguishable from, a designation as to which the remedies of the
Lanham Act are made available by reason of section 220506 of title
36;
but such term does not include 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
question authorized to use the mark or designation for the type of
goods or services so manufactured or produced, by the holder of the
right to use such mark or designation . . . .
18 U.S.C. § 2320(e)(1).
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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
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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 (8th Cir. 1987); Torkington, 812 F.2d at
1352. This court is persuaded by the reasoning of these courts and now joins
them in holding that the “likely to cause confusion, to cause mistake, or to
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deceive” test is not limited to direct purchasers of the counterfeit products.
Instead, the correct test is whether the defendant’s use of the mark was likely to
cause confusion, mistake, or deception in the public in general.
This conclusion is mandated by the plain language of the statute. Even in
the context of post-sale confusion, it is still the defendant’s use of the product in
commerce (i.e., the sale of the counterfeit product) that is likely to cause
confusion, mistake, or deception in the public in general (i.e., when the product
comes into contact with third parties). As the Eleventh Circuit noted in
Torkington, the statutory language is broadly worded, and “[n]othing in the plain
meaning of the section restricts its scope to the use of marks that would be likely
to cause direct purchasers of the goods to be confused, mistaken or deceived.”
Torkington, 812 F.2d at 1351. 2 The court’s instruction to the jury was therefore a
correct statement of the law, and the court did not err in refusing to give Foote’s
proposed alternative instruction. See United States v. Grissom, 44 F.3d 1507,
2
In crafting the language of the Counterfeit Trademark Act, Congress had
available to it language from an earlier version of the civil liability provisions of
the Lanham Act, which required a showing that the infringer’s use be “‘likely to
cause confusion, or to cause mistake, or to deceive purchasers as to the source of
origin of such goods or services.’” Syntex Labs., Inc. v. Norwich Pharmacal Co.,
437 F.2d 566, 568 (2d Cir. 1971) (emphasis added) (quoting 15 U.S.C. § 1114(1)
(amended 1962)). The absence of similar clarifying language in the Counterfeit
Trademark Act is further evidence that the statute covers confusion in the post-
sale context.
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1512 (10th Cir. 1995) (noting that a defendant is not entitled to a jury instruction
that lacks a reasonable legal basis).
B. Trafficking in a single good
Count ten of the indictment charged Foote with “intentionally traffick[ing]
and attempt[ing] to traffic in the following good: Mont Blanc Pen.” (emphasis
added). Foote argues that the language of this count did not state a violation of
§ 2320, which prohibits “intentionally traffic[king] or attempt[ing] to traffic in
goods.” 18 U.S.C. § 2320(a) (emphasis added). The statute’s use of the plural
word “goods,” Foote contends, requires that a defendant traffic in more than one
counterfeit good in order to violate the statute.
The first section of the United States Code provides that “unless the context
indicates otherwise . . . words importing the plural include the singular.”
1 U.S.C. § 1. Under this provision, trafficking in a single counterfeit good
constitutes trafficking in “goods” and is therefore a violation of the Counterfeit
Trademark Act. Nothing in the language or context of the statute mandates a
different result. Contrary to Foote’s assertions, interpreting the statutory
language in this way does not contravene Congress’ intent to limit criminal
penalties to the most egregious cases of trademark infringement. Section 2320 is
still far narrower than the civil liability provisions of the Lanham Act because it
requires proof of criminal intent, and because it proscribes only the use of
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counterfeit marks that are “identical with, or substantially indistinguishable from”
a registered trademark. 18 U.S.C. § 2320(a), (e)(1)(A)(ii); see Hon, 904 F.2d at
805-06 (noting that the Lanham Act covers “reproduction[s],” “cop[ies]” and
“colorable imitation[s]” of registered trademarks in addition to counterfeit
marks). The district court therefore did not err in denying Foote’s motion for
judgment of acquittal on this ground.
C. Statute of limitations
Section 2320 incorporates “[a]ll defenses, affirmative defenses, and
limitations on remedies that would be applicable in an action under the Lanham
Act.” 18 U.S.C. § 2320(c). Although the Lanham Act does not contain an
express limitations period, other circuits have held that claims under the Act are
subject to the statute of limitations of the most analogous state-law cause of
action from the state in which the claim is heard. See, e.g., Gen. Bedding Corp. v.
Echevarria, 947 F.2d 1395, 1397 n.2 (9th Cir. 1991). Foote argues that Kansas’
two-year statute of limitations for unfair competition claims is the most analogous
state-law provision. Kan. Stat. Ann. § 60-513(a)(4). Because a civil trademark
suit under the Lanham Act would have been barred by the Kansas statute of
limitations at the time of his criminal prosecution, Foote argues that the plain
language of § 2320 mandates that his conviction for trafficking in counterfeit
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goods should also have been barred. 3 Foote further contends that the conspiracy
charge should have been precluded because no overt act in furtherance of the
conspiracy was committed during the two-year limitations period. See United
States v. Hauck, 980 F.2d 611, 613 (10th Cir. 1992) (noting that a conspiracy
occurs within a limitations period when an overt act in furtherance of the
conspiracy is committed within that period).
This court has not yet addressed the relevant statute of limitations under the
Lanham Act, and need not do so here. Unlike civil statutes such as the Lanham
Act that are sometimes held to incorporate analogous state-law limitations
periods, criminal provisions without express statutes of limitations are subject to
a catchall limitations period of five years. See 18 U.S.C. § 3282. According to
the criminal catchall provision, the five-year period applies “[e]xcept as otherwise
expressly provided by law.” Id. (emphasis added). There is no such express
statute of limitations in either the Counterfeit Trademark Act or the Lanham Act.
Although some courts have read the Lanham Act to incorporate analogous state
statutes of limitations, these limitations periods arise only by implication and are
not “expressly provided by law.” Courts read implied limitations periods into
statutes only when Congress has failed to specify a contrary statutory period. See
3
The evidence at trial indicated that Foote trafficked in the Mont Blanc pen
on November 22, 1998. The government does not dispute that the prosecution
against Foote was not commenced until more than two years after this date.
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Trs. of the Wyo. Laborers Health & Welfare Plan v. Morgen & Oswood Constr.
Co., 850 F.2d 613, 618 (10th Cir. 1988). In the case of the Counterfeit
Trademark Act, a criminal statute, Congress has provided a specific statutory
period in § 3282.
Because there is no question that Foote’s criminal conduct occurred within
the five-year limitations period, the prosecution in this case was timely.
D. Sufficiency of the evidence
In the district court, Foote moved for a judgment of acquittal because the
prosecution had failed to submit evidence that the relevant trademarks were in use
at the time Foote trafficked in goods bearing those marks. The court granted the
motion as to all counts except for the charges of trafficking in and conspiracy to
traffic in a single counterfeit Mont Blanc pen. As to those counts, the court
concluded that the government had presented sufficient evidence for a jury to
conclude that the Mont Blanc trademark was in use at the time Foote sold a pen
bearing that mark to Richard Smith on November 22, 1998. A district court’s
decision to deny a motion for judgment of acquittal is reviewed de novo. United
States v. McClatchey, 217 F.3d 823, 829 (10th Cir. 2000). Viewing the evidence
in a light most favorable to the government, this court must determine whether a
reasonable jury could have found the defendant guilty beyond a reasonable doubt.
Id.
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At trial, the government introduced a certified copy of the registration for
the Mont Blanc trademark, which indicated that Mont Blanc began using the mark
on pens in 1913 and registered the mark in 1967. Foote correctly argues that this
evidence standing alone would have been insufficient to demonstrate that the
trademark was in use at the time Foote sold the pen bearing the mark in 1998.
See Guerra, 293 F.3d at 1290. The counterfeiting statute requires not only that
the genuine mark be federally registered, but also that the mark be in actual use at
the time of the defendant’s use of that mark. See 18 U.S.C. § 2320(e)(1)(A)(ii)
(requiring the mark to be “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” (emphasis added));
Guerra, 293 F.3d at 1290.
The prosecution presented additional evidence, however, in the form of the
testimony of Joyce Workman, Mont Blanc’s vice-president of customer services.
Workman testified that the company produced writing instruments from “way
back” and that the Mont Blanc trademark “appears on every single Mont Blanc
product that Mont Blanc makes.” When combined with the evidence of trademark
registration and first use, this evidence was sufficient for a jury to reasonably
infer that Mont Blanc had been producing pens continuously since 1913. A jury
could further have reasonably concluded that the trademark appeared on every pen
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the company produced since that time. The district court therefore did not err in
concluding that there was sufficient evidence in support of Foote’s convictions
for trafficking and conspiracy to traffic in counterfeit Mont Blanc pens.
E. Sentencing
1. Guidelines version
In determining Foote’s sentence, the district court applied the version of the
United States Sentencing Guidelines Manual that became effective on May 1,
2000. 4 Foote objected to the court’s use of this version of the Guidelines, arguing
that the November 1998 version instead should instead have been applied.
The Guidelines specify that “[t]he court shall use the Guidelines Manual in
effect on the date that the defendant is sentenced.” U.S.S.G. § 1B1.11(a). There
is an exception to this rule, however, for cases when “the court determines that
use of the Guidelines Manual in effect on the date that the defendant is sentenced
would violate the ex post facto clause of the United States Constitution.” Id.
§ 1B1.11(b)(1). “The Ex Post Facto Clause is violated if the court applies a
guideline to an event occurring before its enactment, and the application of that
4
The May 2000 Guidelines consist of an emergency amendment to the
sentencing provision for criminal infringement of copyright or trademark,
U.S.S.G. § 2B5.3, to be used in conjunction with the remainder of the 1998
Guidelines manual. Other than § 2B5.3, the two versions of the Guidelines are
therefore identical. All references to the Guidelines hereinafter refer to the 1998
version unless specified to the contrary.
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guideline disadvantages the defendant by altering the definition of criminal
conduct or increasing the punishment for the crime.” United States v. Sullivan,
255 F.3d 1256, 1259 (10th Cir. 2001) (quotation omitted). In such a case, the
court is instead required to “use the Guidelines Manual in effect on the date that
the offense of conviction was committed.” U.S.S.G. § 1B1.11(b)(1).
The parties agree that the version of the Guidelines in effect at the time of
sentencing would have resulted in a higher sentence than the Guidelines in effect
at the time Foote’s offense was committed. The district court therefore applied
the May 2000 version of the Guidelines based on its finding that the conspiracy
alleged in count one of the indictment continued until at least May 18, 2000. 5
Foote argued in the district court and maintains on appeal that the conspiracy
actually terminated on December 7, 1998, which was the date when the
government seized all the merchandise from his store. Based on this date, the
5
The Guidelines specify that “[i]f the defendant is convicted of two
offenses, the first committed before, and the second after, a revised edition of the
Guidelines Manual became effective, the revised edition of the Guidelines Manual
is to be applied to both offenses.” U.S.S.G. § 1B1.11(b)(3). This is true “even if
the revised edition results in an increased penalty for the first offense.” Id.
§ 1B1.11, cmt. background. This court in United States v. Sullivan held that this
“one-book rule” does not violate the Ex Post Facto Clause. 255 F.3d 1256, 1261-
63 (10th Cir. 2001). Accordingly, the district court was required to apply the
Guidelines in effect on the last date of any of Foote’s offenses of conviction,
which in this case was the conspiracy offense. The effective date of the offense
of conspiracy is the date when the conspiracy is terminated. United States v.
Stanberry, 963 F.2d 1323, 1327 (10th Cir. 1992).
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November 1998 version of the Guidelines would instead have been the applicable
version, and Foote’s base offense level would have been two levels lower than the
level specified by the May 2000 Guidelines. This court agrees that the conspiracy
terminated in 1998 and that the district court therefore erred in applying the 2000
version of the Guidelines.
The district court’s conclusion that the conspiracy continued until at least
May 18, 2000, was based on its findings by a preponderance of the evidence that
Foote continued selling counterfeit goods even after the FBI seizure in 1998. The
court relied for its finding on the testimony of Brandon Smith, an employee of
Foote’s. Brandon Smith testified that Foote continued to sell items similar to
those seized by the FBI, including products with Nike, Tommy Hilfiger, and
Dooney & Bourke trademarks, until May 18, 2000. The district court had
previously held, however, that there was insufficient evidence presented at trial
on which a jury could conclude that the Nike, Tommy Hilfiger, Dooney &
Bourke, or any other trademarks other than the Mont Blanc mark were in use at
the time Foote trafficked in goods with those marks. See Guerra, 293 F.3d at
1290 (noting that the Counterfeit Trademark Act requires the relevant trademarks
to be in actual use at the time of the defendant’s conduct). Because the
government failed to prove that Foote engaged in illegal trafficking of these
goods, it also necessarily failed to prove that Foote engaged in an illegal
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conspiracy when he conspired to sell them. See United States v. Pinckney, 85
F.3d 4, 8 (2d Cir. 1996) (noting that, in order to establish conspiracy, the
government must prove that the agreed-upon conduct included all elements of the
underlying substantive crime); United States v. Hanson, 41 F.3d 580, 582 (10th
Cir. 1994) (“[T]he essence of any conspiracy is the agreement or confederation to
commit a crime.” (quotation omitted)). A conspiracy to sell goods with
trademarks that are not in use is not a crime. See Guerra, 293 F.3d at 1290.
The only trademark that the government proved was in use at the time of
Foote’s conduct was the Mont Blanc mark, and the only criminal conspiracy for
which Foote could have been convicted was therefore conspiracy to sell products
with counterfeit Mont Blanc trademarks. Both Brandon Smith and Foote denied,
and there was no other evidence presented, that Foote sold any items with the
Mont Blanc trademark after the FBI seized all the goods from his store on
December 7, 1998. The uncontradicted evidence therefore established that the
conspiracy to sell counterfeit Mont Blanc pens terminated on that date. See
Grunewald v. United States, 353 U.S. 391, 397 (1957) (noting that the duration of
a conspiracy is determined by the scope of the conspiracy). 6 To the extent the
6
This is true even though the indictment alleged that the conspiratorial
agreement continued until approximately October 2000, because the conspiracy
alleged in the indictment encompassed Foote’s sale of a whole range of
counterfeit goods for which the government failed to prove the trademarks were
(continued...)
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conspiracy count in the indictment included conspiracy to traffic in other goods,
such a conspiracy was not supported by sufficient evidence.
The government nevertheless argues that the district court’s application of
the 2000 Guidelines was proper because of the court’s finding by a preponderance
of the evidence at sentencing that the other trademarks were in use at the time
Foote trafficked in goods bearing those marks. Even though the district court was
entitled to sentence based on relevant conduct found by a preponderance of the
evidence, however, only the offense of conviction is relevant for purposes of the
Ex Post Facto Clause. U.S.S.G. § 1B1.11, cmt. n.2. The Guidelines specify that:
the last date of the offense of conviction is the controlling date for ex
post facto purposes. For example, if the offense of conviction (i.e.,
the conduct charged in the count of the indictment or information of
which the defendant was convicted) was determined by the court to
have been committed between October 15, 1991 and October 28,
1991, the date of October 28, 1991 is the controlling date for ex post
facto purposes. This is true even if the defendant’s conduct relevant
to the determination of the guideline range under §1B1.3 (Relevant
Conduct) included an act that occurred on November 2, 1991 (after a
revised Guideline Manual took effect).
Id.
6
(...continued)
actually in use. The evidence of trafficking in the Mont Blanc trademark did not
support the existence of a conspiracy past December 7, 1998. Although the
government contends that it needed only to prove an overt act in furtherance of
the conspiracy within the relevant time period, it has not identified for this court
any evidence of an overt act in support of the conspiracy to traffic in products
bearing the Mont Blanc trademark after December 7, 1998.
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It is clear from the district court’s dismissal of all the substantive
trafficking counts other than the count involving the counterfeit Mont Blanc pen
that Foote’s conspiracy conviction could only have encompassed conspiracy to
traffic in counterfeit Mont Blanc products. The government has therefore failed
to meet its burden of establishing that the conspiracy of conviction continued
beyond the effective date of the May 2000 Guidelines. See United States v.
Harrison, 942 F.2d 751, 760-61 (10th Cir. 1991) (holding that amended
Guidelines could not be used to sentence a defendant on a conspiracy charge
when there was insufficient evidence that the conspiracy continued beyond the
effective date of the amended Guidelines). The district court’s findings of related
counterfeiting activities by a preponderance of the evidence is irrelevant to this
conclusion. See U.S.S.G. § 1B1.11, cmt. n.2.
Because the district court improperly applied the Guidelines, Foote’s
sentence must be reversed and the case remanded for resentencing. See United
States v. Doe, 398 F.3d 1254, 1257 n. 5 (10th Cir. 2005). 7
2. Infringement amount
Although the district court may consider only the offense of conviction for
purposes of selecting the proper version of the Guidelines, it may take into
7
Given this resolution, this court need not address Foote’s contention that
his sentence violates United States v. Blakely, 124 S. Ct. 2531 (2004). See United
States v. Doe, 398 F.3d 1254, 1257 n.5 (10th Cir. 2005).
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account all relevant conduct in determining a sentence pursuant to the applicable
Guidelines version. See U.S.S.G. § 1B1.3(a). The offense level for criminal
counterfeiting under the 1998 version of the Guidelines is based on the retail
value of the infringing goods, which the district court in this case determined to
be the total retail value of all counterfeit items sold by Foote. Id. § 2B5.3(b)(1).
Because an exact record of Foote’s sales was not available, the district court
calculated the retail value of the infringing goods by adding the value of the
counterfeit goods seized by the government to the total value of Foote’s bank
account deposits and cashed checks during the relevant time period. The court
then subtracted Foote’s documented income from legitimate sources and reduced
the resulting value by ten percent to reflect its determination that no more than
that proportion of goods sold at Replicas constituted non-counterfeit merchandise.
Foote disputes the district court’s methodology for calculating the
infringement amount. He argues that the precise language of the Guidelines
requires the court to calculate the infringement based on “the retail value of the
infringing item, multiplied by the number of infringing items” rather than relying
on the total value of bank account transactions. U.S.S.G. § 2B5.3, cmt. n.2(B)
(May 1, 2000). The language cited by Foote, however, does not appear in the
1998 version of the Guidelines. See id. § 2B5.3. The 1998 version, which the
district court should have applied in this case, requires only that the court
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determine “the retail value of the infringing items.” Id. District courts have
“considerable leeway in assessing the retail value of the infringing items,” and
“need only make a reasonable estimate of the loss, given the available
information.” United States v. Slater, 348 F.3d 666, 670 (7th Cir. 2003)
(quotation omitted). The district court’s methodology is reviewed for clear error.
Id. In the absence of more accurate information indicating the retail value of the
counterfeit goods sold by Foote, the court’s decision to include bank account
transactions in its calculation did not constitute clear error.
In the alternative, Foote disputes the district court’s method of calculating
total bank transactions. He contends that the district court erred when it counted
cashed checks toward this total, because the cash obtained from those transactions
could have been deposited in other bank accounts and might therefore have been
double-counted by the court. Foote also argues that the district court erred in
including deposits to a joint bank account in the absence of evidence that he was
the only one responsible for making deposits to that account. Although Foote
raised these issues in the district court, the court did not explicitly address them.
Without the benefit of an explanation of the district court’s reasons for including
these transactions, this court declines to consider Foote’s contentions for the first
time on appeal. See R. Eric Peterson Constr. Co. v. Quintek, Inc. (In re R. Eric.
Peterson Constr. Co.), 951 F.2d 1175, 1182 (10th Cir. 1991) (noting that this
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court generally does not consider issues not ruled on below). On remand, the
district court will have the opportunity to address these issues in the first instance.
3. Criminal fine
Foote next argues that § 2320’s incorporation of “[a]ll defenses, affirmative
defenses, and limitations on remedies that would be applicable in an action under
the Lanham Act” precludes imposition of a criminal fine in circumstances where
damages would not be available as a remedy for civil trademark infringement.
See 18 U.S.C. § 2320(c). Foote contends that civil damages would not be
available in this case because there was no evidence that Mont Blanc gave notice
that its mark was federally registered or that Foote had actual notice of the
registration. See 15 U.S.C. § 1111 (providing that profits and damages are not
available as civil remedies for trademark infringement unless the trademark
registrant gives notice or the defendant has actual knowledge of the federal
registration).
In United States v. Sung, the Seventh Circuit held that “[r]estitution in a
criminal case is the counterpart to damages in civil litigation” and therefore that
restitution could not be imposed in a criminal case where damages would not have
been available under the Lanham Act. 51 F.3d 92, 94 (7th Cir. 1995). Even
assuming that the Seventh Circuit is correct that criminal restitution is analogous
to civil damages, the rationale of Sung would not extend to this case. The court’s
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conclusion in Sung was based on its reasoning that restitution is a form of money
damages payable to the trademark owner. See id. Unlike restitution, fines are a
form of criminal punishment rather than a form of damages, and are payable to
the government rather than to the trademark owner. A criminal fine is therefore
more analogous to other forms of criminal punishment such as imprisonment than
to a civil damages remedy. Because the Lanham Act provides for no limitation on
fines or other forms of criminal punishment, the Counterfeit Trademark Act’s
incorporation of all “limitations on remedies” has no relevance to the imposition
of a criminal fine. 8
Foote also contends that the district court’s imposition of a fine of
$104,107.50 was excessive because it exceeded his ability to pay. The
defendant’s ability to pay is one factor that the district court is required to
consider in setting the amount of a fine. See 18 U.S.C. § 3572(a); U.S.S.G.
§ 5E1.2(d). The government does not identify, and this court’s review of the
record does not reveal, any findings by the district court supporting Foote’s
ability to pay a fine of $104,107.50. District courts are not required to make
specific findings in cases where uncontested evidence establishes the defendant’s
Foote’s argument that the “[a]ll . . . limitations on remedies” language in
8
§ 2320(c) prohibited the district court from imposing a period of supervised
release fails for the same reason. Congress specifically authorized district courts
to impose supervised release in criminal cases, and the Lanham Act provides for
no limitations on this form of criminal punishment. See 18 U.S.C. § 3583(a).
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ability to pay. United States v. Nez, 945 F.2d 341, 343 (10th Cir. 1991). In this
case, however, Foote disputed his ability to pay and presented evidence in support
of his position. The district court on remand should therefore make findings
regarding Foote’s ability to pay and consider these findings in deciding the
amount of the fine to impose.
In addition, the district court erred in delegating the creation of a payment
schedule to the probation office. When a district court provides that a criminal
fine be paid in installments, 18 U.S.C. § 3572 requires the court to specify the
period of time over which the payments must be made. See 18 U.S.C. § 3572(d).
The court has no discretion to delegate this function. United States v. Miller, 77
F.3d 71, 78 (4th Cir. 1996) (holding that the district court may not delegate the
payment schedule for a criminal fine); cf. United States v. Overholt, 307 F.3d
1231, 1255 (10th Cir. 2002) (holding that the district court may not delegate
creation of a restitution payment schedule). On remand, the district court should
provide a schedule for payment of the criminal fine. 9
9
The district court may make use of the probation office for assistance in
developing a payment schedule, as long as it retains and exercises ultimate
responsibility for the decision. United States v. Miller, 77 F.3d 71, 77 (4th Cir.
1996).
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4. Drug-testing condition
Finally, Foote argues that the district court erroneously thought itself bound
to impose drug testing as a condition of probation. This court agrees that the
district court’s statements at the sentencing hearing appear to indicate that the
court felt it was obligated to impose a drug-testing condition. The statute relied
on by the district court, however, provides that a drug-testing condition “may be
ameliorated or suspended by the court for any individual defendant if the
defendant’s presentence report or other reliable sentencing information indicates a
low risk of future substance abuse by the defendant.” 18 U.S.C. § 3563(a)(5).
On remand, the district court should therefore consider whether to ameliorate or
suspend the drug testing condition pursuant to its discretionary authority under 18
U.S.C. § 3563(a)(5).
IV. CONCLUSION
For the foregoing reasons, Foote’s convictions are AFFIRMED. The case
is REMANDED to the district court with instructions to vacate Foote’s sentence
and resentence him in accordance with this opinion. Foote’s motion to
supplement the record on appeal with the counterfeit Mont Blanc pen is
DENIED.
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