[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
U.S. COURT OF APPEALS
________________ ELEVENTH CIRCUIT
JUNE 11, 2002
THOMAS K. KAHN
No. 00-10744 CLERK
________________
D.C. Docket No. 98-00464-CR-LCN
UNITED STATES OF AMERICA
Plaintiff-Appellee,
versus
JORGE GUERRA, CESAR TELLEZ, LOUIS ORDONEZ,
Defendants-Appellants.
________________
Appeals from the United States District Court
for the Southern District of Florida
________________
(June 11, 2002)
Before BLACK and RONEY, Circuit Judges, and RESTANI*, Judge.
*
Honorable Jane A. Restani, Judge, United States Court of International Trade,
sitting by designation.
RESTANI, Judge:
Defendants-Appellants Jorge Guerra, Cesar Tellez, and Louis Ordonez
(“Appellants”) appeal their convictions and sentences for conspiracy to traffic in
counterfeit cigars in violation of 18 U.S.C. § 371, for trafficking in counterfeit
cigars in violation of 18 U.S.C. § 2320, and for aiding and abetting such violations.
All Appellants argue that their convictions were not supported by sufficient
evidence and that the district court erred in applying the sentencing guidelines
based on the value and number of the “infringing items.” In addition, Appellant
Guerra claims that (1) the jury was not properly instructed as to an element of the
substantive offense (specifically, whether the genuine trademarks were “in use”),
or as to “attempt”; and (2) the district court erred in denying Guerra’s motion for a
mistrial, which asserted that his Fifth Amendment Right against Self-Incrimination
was violated by a government witness’s comments. We affirm the convictions and
remand for resentencing.
FACTUAL AND PROCEDURAL BACKGROUND
Defendant Cesar Tellez is the owner of Alpha Foil Stamping, a business that
engages in embossing and foil stamping for printers. Defendant Guerra owns and
operates Panorama Printing shop. Defendant Louis Ordonez is a cigar dealer who
owned and operated the Don Louis Cigar Company.
2
On June 1, 1998, Special Agents with the United States Secret Service
seized from Ordonez’s home various boxes, cigar rings or bands, and cigars
bearing labels of various marks, as well as different types of “Made in Cuba”
printing plates. Ordonez waived his Miranda rights and admitted that he sold four
to five boxes of counterfeit cigars a week, and that he had been selling them for
approximately one year (i.e., approximately 234 boxes total) at a price of $40 to
$100 per box. The Agents subsequently seized labels and other items from
Tellez’s foil stamping business, and from Guerra’s print ship.
On November 11, 1998, a federal grand jury returned a seven-count
indictment (superseding a three count indictment on June 19, 1998), alleging that
from on or about March 11, 1998 through on or about June 5, 1998, Appellants
conspired to intentionally traffic in cigars bearing counterfeit marks in violation of
18 U.S.C. § 2320 (Count One). The indictment alleged that the Appellants had
intended to produce counterfeit cigar rings, affix them to inferior grade cigars,
package them with counterfeit labels for sale as more expensive, higher grade
cigars under separate U.S.- trademarked brands.1
1
These trademarks are as follows: “Cohiba” (corresponding to Count II), “Monte
Cristo” (Count III) and “Romeo y Julieta” (Count IV) cigars. Only Ordonez was charged with
trafficking in goods bearing the counterfeit marks of “Punch” (Count V) and “Bolivar” (Count
VI), while Tellez was the only defendant charged for the counterfeit mark “Fuente y Fuente
Opus X” (Count VII). The “Montecristo” trademark is registered with the United States Patent
and Trademark Office to Cuban Cigar Brands, N.V., a subsidiary of Consolidated Cigar
3
After a four-day trial, the jury reached a guilty verdict convicting all of the
defendants on all counts. On January 25, 2000, the district court sentenced Tellez
to 27 months and Guerra to 18 months incarceration, respectively. On March 14,
2000, the district court sentenced Ordonez to 18 months incarceration.
DISCUSSION
I. Sufficiency of the Evidence
Appellants argue that there was insufficient evidence to support their
respective convictions for Conspiracy to Traffic in Counterfeit Cigars, and for the
substantive offenses of Trafficking in Counterfeit Cigars in violation of the
Trademark Counterfeiting Act (“TCA”).2
A. Conspiracy under 18 U.S.C. § 371
The essential elements of the offense of conspiracy under 18 U.S.C. § 371
are an agreement between two or more persons to commit a crime against the
United States and an overt act by one of them in furtherance of the agreement. See
United States v. Yamin, 868 F.2d 130, 133 (5th Cir. 1989). The government must
Corporation; the “Romeo y Julieta” trademark is registered to Max Rohr Importer, Inc.; the
“Bolivar,” “Cohiba,” “Punch,” and “Hoyo de Monterrey” trademarks are registered to General
Cigar Company, Inc.; and the “Fuente y Fuente Opus X” trademark is registered with Fuente and
Fuente Cigar, Ltd.
2
Under 18 U.S.C. § 2320(a), “whoever intentionally traffics or attempts to traffic in
goods . . . and knowingly uses a counterfeit mark on or in connection with such goods . . . shall,
if an individual, be fined not more than $250,000 or imprisoned not more than five years, or both
. . . .”
4
prove beyond a reasonable doubt that the defendant knew of the conspiracy and
that he voluntarily became a part of it. Id. The existence of a conspiracy may be
proved by circumstantial evidence and may be inferred from concert of action. Id.
Whether there was evidence sufficient to support a conviction is a question
of law subject to de novo review. See United States v. Keller, 916 F.2d 628, 632
(11th Cir. 1990). In conducting such a review, the Court must determine whether
“a reasonable trier of fact could find that the evidence establishes guilt beyond a
reasonable doubt.” United States v. Bell, 678 F.2d 547, 549 (5th Cir. Unit B 1982)
(en banc), aff'd, 462 U.S. 549 (1983). Appellants argue that no reasonable trier of
fact could have found a conspiratorial agreement where: (1) Guerra and Tellez did
not know each other personally; (2) Guerra worked with Tellez as a subcontractor
prior to the period of the charged offenses; and (3) neither Guerra nor Tellez
possessed cigars, or took part in affixing labels on cigars.
None of these alleged facts, either alone or in conjunction, defeat the
conspiracy conviction in this case. A defendant may be found guilty of conspiracy
if the evidence demonstrates that he knew the “essential objective” of the
conspiracy, even if he did not know all its details or played only a minor role in the
overall scheme. See United States v. Alvarez, 625 F.2d 1196, 1198 (5th Cir. 1980)
(en banc), cert. denied, 451 U.S. 938 (1981). Nor must the government show that
5
each defendant had direct contact with each of the other alleged co-conspirators.
See United States v. Walker, 720 F.2d 1527, 1538 (11th Cir. 1983), cert. denied
sub nom., Gustin v. United States, 465 U.S. 1108 (1984).
The essential objective of the conspiracy among the defendants was defined
in the indictment as “to unlawfully enrich themselves by causing counterfeit cigar
rings and box labels to be produced and attached to inferior grade cigars and boxes
so that they could be sold and offered for sale as finished boxes of more expensive,
high quality cigars.” We find that the aggregate of the evidence is sufficient for a
jury to infer that the Appellants knew the essential objective of the conspiracy.
The Government’s expert witness Richard Outland, the lead document examiner of
the document authentication section in the forensic laboratory at the United States
Secret Service, testified as to the common origin of items seized from the premises
of each of the three co-defendants, including stamps, typographic plates,
photographic negatives, and cigar bands. In addition, the Government introduced
evidence of a receipt of sale between Tellez and Ordonez, and an entry in Guerra’s
address book referring to Tellez. A trier of fact reasonably could infer from this
evidence that each defendant acted in concert with the other two in a process to
cause certain counterfeit cigar rings and labels to be produced and attached to
cigars and boxes to be sold as the genuine product.
6
Appellants argue that the materials of “common origin” and other evidence
merely show that the defendants were engaged in a series of “buy-sell”
transactions. See United States v. Mercer, 165 F.3d 1331, 1335 (11th Cir. 1999)
(where a “buy-sell” transaction itself constitutes a substantive offense, evidence of
that transaction alone is insufficient to support an inference of conspiracy). The
buyer-seller rule in the context of counterfeit goods is directed primarily at
distinguishing co-conspirators from individual purchasers of the goods, who
clearly fall outside the purview of the TCA. See 130 Cong. Rec. 31675 (1984)
(Joint Explanatory Statement on Trademark Counterfeiting Act of 1984) (“[I]t is
not a crime under this act for an individual knowingly to purchase goods bearing
counterfeit marks, if the purchase is for the individual’s personal use.”). Unlike in
cases involving isolated “buy-sell” transactions, the defendants in this case were
involved in a manufacturing and sales process that could reasonably serve as a
basis for inferring the existence of a “prior or contemporaneous understanding . . .
beyond the sales agreement.”3 Id. at 1334.
This conclusion is supported by evidence and testimony regarding the
3
The Government describes the process as follows: “Ordonez had ordered the
production of cigar bands and labels bearing counterfeit marks, used the bands to wrap $0.23
cigars, affixed the labels to cigar boxes, and sold boxes of cigars bearing counterfeit trademarks.
Guerra and Tellez had used printing plates that Ordonez had provided or created such plates
themselves, and then printed and foil-stamped counterfeit copies of the cigar trademarks.”
7
duration and repetition of the transactions. See United States v. Beasley, 2 F.3d
1551 (11th Cir. 1993), cert. denied, 512 U.S. 1240 (1994) (affirming conspiracy
conviction where there was evidence of a continuing relationship based on several
purchases of cocaine and deferment of payment; joint arrangement of delivery; and
knowledge of where cocaine was being sold). The jury also reasonably could have
inferred from the quantity of labels and cigars and the nature of each of the
defendants’ businesses that the transactions were for the purpose of resale. Cf.
United States v. Dekle, 165 F.3d 826, 829-30 (11th Cir. 1999) (reversing a
conspiracy conviction based on the reasoning that the small-quantity drug
transactions were for the purpose of supporting the purchaser’s personal drug habit
rather than for resale). Accordingly, the buyer-seller rule is inapposite to the
commercial supplier-dealer relationship among the defendants in this case.
B. Substantive Offense of Trafficking in Counterfeit Goods, 18 U.S.C. § 2320
1. Trafficking in Goods
Appellants Guerra and Tellez assert that the printing of labels in and of itself
does not constitute “trafficking in goods” either under the meaning of 18 U.S.C. §
2320, or as charged in the indictment. Appellants Guerra and Tellez rely on United
States v. Giles, 213 F.3d 1247 (10th Cir. 2000), for the proposition that Section
2320 does not forbid the act of trafficking in counterfeit labels unconnected to any
8
goods. At issue in the Giles case were wholesale “patch sets,” which consisted of a
leather patch and gold medallion bearing a federally registered designer logo and a
leather strap used to attach the medallion to a purse or piece of luggage. The patch
set could be sewn or glued onto a generic purse or piece of luggage to give the
appearance that the generic purse or luggage was actually a branded product. The
Tenth Circuit found that the labels sold by the defendant in that case did not
constitute “goods.” The Court reasoned that because the statute requires that a
defendant intentionally traffic in goods, and that he or she knowingly use a
counterfeit mark “on or in connection with such goods,” the term “goods” was
“intended to be viewed as separate and distinct from the marks they carry.” Giles,
213 F.3d at 1251. But see United States v. Koehler, 24 F.3d 867 (6th Cir. 1994)
(upholding conviction under TCA without questioning the propriety of charging
defendant with a separate count of trafficking in labels, where such labels were
actually used on counterfeit auto parts provided by an undercover agent), cert.
denied, 513 U.S. 1077.
Unlike in Giles, the indictment in this case did not charge Guerra and Tellez
with trafficking in counterfeit labels as the “goods,” nor did Giles address the
criminal liability of a label maker in the context of a conspiracy charge. The
indictment charged each Appellant with knowingly trafficking and attempting to
9
traffic in “goods, to wit, cigars.” Although there does not appear to be evidence
that either Guerra or Tellez themselves “transported, transferred, or otherwise
disposed of” the cigars, the labels they manufactured were actually used by a co-
conspirator, Ordonez, to render the inferior cigars counterfeit, which he in turn sold
for a profit. See 18 U.S.C. § 2320(d)(2) (defining “traffic” as to “transport,
transfer, or otherwise dispose of, to another, as consideration for anything of
value”).4
2. Knowing Use of a Counterfeit Mark
Appellant Guerra claims that there is insufficient evidence that he
“knowingly used a counterfeit mark on or in connection with” the cigars where the
labels specifically indicated Cuba as the country of origin. Guerra claims that the
country designation indicates that he intended to imitate Cuban, not U.S. trademark
4
Even if the defendants were not charged with conspiring to traffic in counterfeit cigars,
Guerra and Tellez would still be liable as principals for aiding and abetting in the substantive
offense. Indeed, the Giles Court specifically recognized that “creating or trafficking in
counterfeit labels could expose a defendant to liability as an aider and abetter in the substantive
offense.” Giles, 213 F.3d at 1251 n.6. The Giles Court did not reach the issue of whether the
defendant in that case could in fact be convicted for aiding and abetting, however, as the
Government did not so charge the defendant in that case. In this case, in contrast, Appellants
were charged under Section 2320 and Section 2 (“aiding and abetting”), and the judgment
reflects that they were convicted under both sections. The evidence supports the Government’s
charge that by manufacturing labels Guerra and Tellez aided and abetted counterfeit cigar
dealers such as Ordonez in trafficking.
10
cigar labels. Under the TCA, a “counterfeit mark” is defined as a “spurious mark”
that is:
used in connection with trafficking in goods or services; that is
identical with, or substantially indistinguishable from, a mark
registered for those goods or services on the principal register of the
U.S. Trademark and Patent Office and in use, whether or not the
defendant knew such mark was so registered; the use of which is
likely to cause confusion, to cause mistake, or to deceive . . . .
18 U.S.C. § 2320(d) (emphasis added).
Thus, it is irrelevant that Guerra did not know the marks were registered in
the United States, or thought the marks were only unprotectable Cuban marks. The
jury was presented with evidence that Guerra knew the marks were not genuine.
Guerra does not assert that Ordonez and other purchasers of his labels represented
they were authorized representatives of the trademark owners or licensees. Guerra
admits that he continued to produce labels even after realizing that “not all those
people could be from the Cuban government.” Guerra Br. at 33. Thus, the jury
could have made a reasonable inference that he knew the labels were not being
sold to authorized Cuban or United States producers of the trademarked cigars.
3. Identical or Substantially Indistinguishable
Appellant Guerra claims that jury was not presented with evidence that
would enable them to determine whether the labels were “identical or substantially
indistinguishable” from the U.S.-registered trademarks for those goods.
11
Specifically, Guerra maintains that: (1) no genuine Cohiba or Romeo y Julieta
label, or cigar to which such a label was affixed, was introduced into evidence or
shown to the jury; (2) no representative from any of the companies owning the
trademarks testified; and (3) the agents who testified were not cigar experts.
Guerra Br. at 31.
The “identical or substantially indistinguishable” standard is to be construed
more narrowly in a criminal context than in a civil context. The legislative history
of Section 2320 indicates that:
[A] mark need not be absolutely identical to a genuine mark in order
to be considered counterfeit. Such an interpretation would allow
counterfeiters to escape liability by modifying the registered
trademarks of their honest competitors in trivial ways. However, the
sponsors do not intend to treat as counterfeiting what would formerly
have been arguable, but not clear-cut, cases of trademark
infringement.
130 Cong. Rec. at 31,676. The statute does not specify the means by which the
Government may establish that the marks were “identical or substantially
indistinguishable.” There is no support for the proposition that in all cases, the
trier of fact must determine indistinguishability based on the marks as affixed to
the actual goods. Nor is there a requirement that the actual trademark owner
testify in a criminal trial, or that the agent who conducted the investigation and
seizure of the counterfeit merchandise be qualified as an expert in the particular
12
type of product. In this case, the jury had been shown registered designs of the
trademarks for each cigar, as well as various cigar labels or bands produced by
authorized licensees. The jury therefore had a valid basis for comparison in
determining whether the designs were “identical or substantially identical.”
II. Motion for a Mistrial: Fifth Amendment Right against Self-Incrimination
Appellant Guerra appeals the district court’s denial of the motion for mistrial
on the grounds that his Fifth Amendment Right against self-incrimination had been
violated by comments made by a government witness, Agent Robert Villanueva,
during trial. Specifically, Guerra asserts that during cross-examination as to
whether Agent Villanueva knew whether Guerra sold counterfeit cigars, Agent
Villanueva improperly drew the jury’s attention to Guerra’s “silence” by indicating
that Guerra would be in a better position to answer certain questions.5 Guerra
5
The trial transcript reads in relevant part as follows:
Counsel: Do you know when the cigar rings that specifically were seized from my client, the
limited number of Romeo y Julieta, Cohiba and Montecristo, when those were manufactured?
Witness: You would have to ask your client that.
Counsel: Okay. You don’t know when they were manufactured.
Witness: No.
***
Counsel: Isn't it true that you do not know if these items are sold to the public?
Witness: To the public here in the [United States]?
Counsel: Right.
Witness: Your client was merely a printer of the item. I have no idea whether they sold any. I
13
asserts that the court's subsequent curative instruction was ineffective, and that the
testimony prejudiced the fairness of the trial.
The “constitutional harmless error” standard applies to review of a denial of
a motion for mistrial on the basis of an alleged violation of Fifth Amendment Right
against self-incrimination. See United States v. Smith, 635 F.2d 411, 413 (5th Cir.
Unit B 1981) (finding admittedly improper comment on defendant’s silence by
government witness to be harmless error where court gave clear curative
instruction and polled jury as to whether they could disregard comment). A
comment is deemed to be a reference to the defendant’s silence if “either (1) it was
the prosecutor’s manifest intention to refer to the defendant’s silence, or (2) the
remark was of such a character that the jury would ‘naturally and necessarily’ take
it to be a comment on defendant’s silence.” Id. at 413. Here, Guerra’s claim of
“silence” is misleading, as he did in fact testify at trial, and specifically testified
that there were never any cigars in his shop. See Trial Tr. at 772. Furthermore,
there is no ground for concluding that the jury would naturally and necessarily
mean you would have to ask him that.
The Court: Agent, stop saying “you have got to ask . . .”--
Counsel: Your honor, I’m going to move for a mistrial because --
The Court: Don’t move for a mistrial in the presence of the jury.
[to Witness] Don’t say any more, “Go ask the client.” I mean, he’s asking you, so don’t
say that again, please.
Witness: Yes, your Honor. Excuse me.
14
construe the comment to refer to Guerra’s supposed silence, as the context of the
statement reveals that the witness was referring to his inability to answer the
question, and was clearly minimizing Guerra’s role in the counterfeiting operation.
See trial transcript supra n 7 (“Your client was merely a printer of the item.”). If
anything, Agent Villanueva’s answers indicate that he did not believe Guerra to
have sold any counterfeit cigars.
Even assuming the statements made by Agent Villanueva in fact referred to
Guerra’s “silence,” Guerra has not shown that the curative instruction was
deficient, or that the statements are somehow incurable. In its curative instruction,
the district court specifically referenced Agent Villanueva’s comment and clearly
explained the reasons why the jury should not speculate as to whether Guerra was
in a position to answer the question.6 Guerra’s allegation that the curative
instruction was untimely is also unpersuasive. The judge had instructed the
witness immediately after the comments were made that he should simply answer
6
The curative instruction is as follows:
“[M]ention was made by this witness yesterday in answer to some certain questions:
“Well, ask your client or ask somebody else.” Now, a witness’s testimony must be based upon
what the witness knows, not what somebody else knows. Now, I remind you again that in a
criminal case, the burden is on the government to prove a defendant’s guilt beyond a reasonable
doubt. The defendant need not testify, nor present any evidence, and you must not hold it
against a defendant if he does not do so. . . . So I want you to disregard and completely strike
from your mind any reference to the fact that another witness could answer the question better or
might know the answer to a certain question. So you are to disregard any comments in that
regard and not speculate what somebody else might have said.”
15
“no” if he lacks personal knowledge to answer. The jury could not have been
confused as to which comments the judge was referring in his subsequent curative
instruction, in light of the judge’s almost verbatim quote of Agent Villanueva’s
testimony.
III. Jury Instructions
Review of a district court's jury instructions is for abuse of discretion.
United States v. Morris, 20 F.3d 1111, 1114 (11th Cir. 1994). Guerra contends
that the judge (1) misstated the law with respect to the “continued use” element of
the TCA, and (2) failed to include an instruction on “attempt.”7
A. Continued Use
The district court instructed the jury that trademark registration is prima
facie evidence of the validity of the mark as well as the owner’s “continued use” of
the registered mark, in accordance with its previous ruling that registration is prima
facie proof of continuing use “would apply to criminal as well as civil cases.”8
7
Guerra also asserts that the district court erred in failing to hold a charge conference, but
omits that (1) the Appellants had not submitted any proposed jury instructions, and (2) each jury
instruction issue had been argued at the close of the government’s case.
8
The jury instruction reads as follows:
The evidence in this case includes copies of the following certificates of registration of the
trademarks for the following cigars: Montecristo, Romeo y Julieta, Cohiba, Punch, Bolivar, and
Fuente y Fuente Opus X. . . . The certificates are prima facie evidence of the validity of the
registered mark, of the ownership of the mark, of the owner’s exclusive right to use the
registered mark, and the owner’s continued use of the registered mark. “Prima facie” means
16
Guerra does not dispute that in a civil context, trademark registrations constitute
prima facie evidence of continued use of the mark. Guerra asserts that the district
court erred in applying this presumption in a criminal context.
Guerra is correct that there is no support for the application of the entire civil
presumption in a criminal context. Under the statute, the genuine mark must not
only be federally registered, but it also must be actually in use. The term
“counterfeit mark” is defined as:
(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; . . .
18 U.S.C. § 2320(e)(1)(A)(ii) (emphasis added); see also 130 Cong. Rec. 31674.
Thus, the Government is not absolved of its burden to show that the genuine marks
are “in use” simply by presenting certificates of registration. Therefore, the jury
instruction allowing for such a presumption of use is in error. See Sandstrom v.
Montana, 442 U.S. 510, 524 (1979) (evidentiary presumptions in a jury charge
sufficient evidence to establish that the mark is valid, that the registrant owns the mark, and has
the exclusive right to use it, and the owner continues to use the mark.
17
may not be used if they have the effect of relieving the state of its burden of
persuasion beyond a reasonable doubt of every essential element of the crime).
Nevertheless, the harmless error doctrine applies to a Sandstrom error if it is
determined “beyond a reasonable doubt that the error complained of did not
contribute to the verdict obtained.” Davis v. Kemp, 752 F.2d 1515, 1521 n.7 (11th
Cir. 1985) (en banc) (citation omitted). A Sandstrom error can be harmless beyond
a reasonable doubt under two circumstances: (1) where the faulty instruction
applied to an element of the crime is not at issue at the trial; or (2) where evidence
of guilt was “overwhelming.” Id. at 1521. The error in this case is clearly harmless
as the Appellants do not dispute that they themselves introduced evidence of a
presumably current issue of a periodical that pictured, described, and rated all the
trademarked cigars.9 The record shows that Appellants did not contest whether the
trademark owners actually sold the genuine merchandise for the duration of the
counterfeiting operation. Thus, if properly charged, the jury would have
concluded that the genuine trademarks were “in use” at the time of the
counterfeiting conspiracy.
B. Attempt
9
The Court also notes that at sentencing the Government submitted affidavits showing
the current market value of the genuine cigars. Defendants did not assert that the genuinely
marked cigars were no longer sold.
18
Although the indictment charged the defendants with “trafficking and
attempting to traffic,” the Appellants argue that the district court erred in not
instructing the jury on attempt. To the extent this omission is error, it is
undoubtedly harmless as the jury was charged with finding actual completion of
the act of trafficking, and Guerra and Tellez were convicted as principals for aiding
and abetting Ordonez, who was convicted for trafficking in counterfeit cigars.
IV. Sentencing Guidelines
Interpretation of the Sentencing Guidelines is reviewed de novo, with factual
findings reversible if clearly erroneous. See United States v. Cunningham, 194
F.3d 1186, 1201 (11th Cir. 1999). Review of the district court’s application of the
Guidelines to the facts is for abuse of discretion. See United States v. Cooper, 173
F.3d 1192, 1204 (9th Cir. 1999). Individuals convicted for violating section 2320
are sentenced pursuant to United States Sentencing Guideline 2B5.3(a), which sets
the Base Offense Level at 6. Loss valuation under 2B5.3 is “the retail value of the
infringing item, multiplied by the number of infringing items.” § 2B5.3 cmt.
n.2(B). Section 2B5.3(b)(1) provides that “if the retail value of the infringing
items exceeded $2,000, increase by the corresponding number of levels from the
19
table in § 2F1.1 (Fraud and Deceit).”10
Guerra and Tellez argue that because in their case the “infringing items” at
issue are the unattached counterfeit bands and labels, rather than the counterfeit
cigars, the assigned value should be based on the retail value of the labels and
bands. In the alternative, Tellez argues that he should be held accountable only
for the 3,792 counterfeit cigars actually sold by Ordonez.
A. Value of “Infringing Items”
The Ninth Circuit in United States v. Bao, addressed the issue of the proper
valuation of the “infringing items” in the context of a printer’s involvement in a
conspiracy to traffic in counterfeit software. 189 F.3d 860, 866 (9th Cir. 1999).
There, the district court had assigned a sentencing enhancement to the printer of
counterfeit Microsoft computer software operation manuals that was based on the
retail value of the entire counterfeit software package into which the manuals were
eventually inserted. See id. at 867. The Court remanded for resentencing,
10
The relevant conduct guideline §1B1.3, and its commentary and examples make clear
that in the case of jointly undertaken criminal activity, a defendant is responsible for the conduct
of others only if it was both in furtherance of the jointly undertaken criminal activity and
reasonably foreseeable in connection with that activity. Note One to §1B1.3 states that the
principles and limits of sentencing accountability under § 1B1.3 are not always the same as the
principles and limits of criminal liability. According to subsections (a)(1) and (a)(2), the focus is
on the specific acts and omissions for which the defendant is to be held accountable in
determining the applicable guideline range, rather than on whether the defendant is criminally
liable for an offense as a principal, accomplice, or conspirator.
20
reasoning that the “retail value” of the manuals, not the “loss” derived from their
production, is the proper measure for determining the sentencing. See id; see also
United States v. Cho, 136 F.3d 982, 983-84 (5th Cir. 1998) (finding that Section
2B5.3 “retail value” and Section 2F1.1 “loss” were distinguishable, and that only
retail value should be used to determine the proper enhancement under the § 2F1.1
table when sentencing under § 2B5.3). The court rejected the Government’s
argument that the manual’s value could not be separated out from the value of the
whole package ($50) where there was evidence that comparable genuine manuals
Microsoft sold individually had a retail value of $12. In this case, unlike in Bao,
there is no evidence that the bands and labels are sold at retail individually. The
value of the bands and labels is inextricably intertwined with that of the completed
product, as the value of the counterfeit cigars derives primarily from the degree to
which the bands and labels bear marks that are indistinguishable from the genuine
marks. Thus, the district court did not err by considering “infringing items” to be
cigars rather than labels.
The district court erred, however, by relying in part on the value of genuine
cigars where there is sufficient evidence of the value of the counterfeit items and
21
no findings as to the quality of the counterfeit goods.11 The district court
considered the Government’s valuation of the counterfeit cigars and decided to use
the upper end of the valuation based on affidavits regarding the value of the
genuine cigars. The value actually assigned ($4.00), however, still falls within the
range specified by Ordonez as the amounts he charged for the counterfeit cigars
($40 to $100 per box, or $1.60 to $4.00 per cigar). There is no support for
Appellant Guerra’s contention that the district court was under an obligation to
calculate an “average” value rather than selecting a value within the range.
Nonetheless, because we remand for resentencing on the valuation issue based on
court’s method of determining the number of infringing items, the district court
will have the opportunity to decide if the $4.00 is the appropriate retail value of the
counterfeit, not genuine, merchandise.
11
Courts have based an enhancement on the actual retail price of the genuine
merchandise where there was insufficient evidence of the value of the infringing items, or there
were no findings as to whether they could have been sold in “normal retail outlets.” For example,
in United States v. Kim, 963 F.2d 65, 69 (5th Cir. 1992), the Fifth Circuit held that where there
was insufficient evidence of the retail value of the infringing items, “the retail value of genuine
merchandise is relevant in determining the retail value of the infringing items.” Additionally, in
United States v. Larracuente, 952 F.2d 672 (2d Cir. 1992), the Second Circuit found the district
court correctly used the retail value for genuine merchandise to determine the increase in the
defendant’s offense level under section 2B5.3. Id. at 674. The Second Circuit reasoned that,
because “unauthorized copies [of bootleg tapes] are prepared with sufficient quality to permit
their distribution through normal retail outlets, the value of the infringing items is their normal
[i.e. genuine] retail price . . . .” Id. (emphasis added). The Second Circuit expressly noted,
however, that “[w]e would have a different question if the infringing items were of obviously
inferior quality and were for that reason distributed to consumers who pay far less than the retail
price for authentic items.” Id. at 675.
22
B. Number of “Infringing Items”
Although the district court based the value of the “infringing items” on the
retail value of cigars, it based the number of “infringing items” on the number of
labels found on the premises of each defendant. This shift in definition resulted in
Tellez receiving a 10-level increase based on the 155,017 labels seized from his
premises (multiplied by the $4.00 value per cigar for a total assessed value of
$620,068), and in Guerra receiving a 7-level increase based on the 40,862 labels
seized from his premises (also multiplied by the $4.00 value per cigar for a total
assessed value of $163,448).
Appellants rely on United States v. Kim Tae Sung, 51 F.3d 92 (7th Cir.
1995), appeal after remand, 87 F.3d 194 (7th Cir. 1996), on remand to, 940 F.
Supp. 172 (N.D. Ill. 1996), and rev'd on other grounds by, 114 F.3d 1192 (1997),
for the proposition that the number of infringing items should correspond to the
number of completed or nearly completed goods counterfeit goods. We find the
reasoning of our sister Circuit persuasive. The defendant in Kim Tae Sung
produced and distributed hair care products; when arrested, he had over 1,000
gallons of product but bottles and boxes for much more. See Sung, 51 F.3d at 93.
The district court sentenced Sung based on the potential sales represented by the
bottles and boxes. The Seventh Circuit remanded for resentencing based on the
23
ground that where a defendant takes a step toward the sale of completed counterfeit
goods, the district court must make findings as to whether the Government
established with “reasonable certainty” defendant came close to completing
additional sales of the counterfeit good. See id. at 95-96. The Court indicated that
it would be clearly erroneous to assign the number of “infringing items” based on
potential sales according to the total number of containers, especially where the
defendant possessed only a limited amount of materials and there was evidence of
low market response that undermined the probability of such sales.
We find that the district court erred in assigning the number of “infringing
items” according to the labels seized. First, the district court must be consistent in
its definition of “infringing items” for the purpose of sentencing under § 2B5.3. If
the drafters of 2B5.3 cmt. n.2(B), supra, intended the district court to have
discretion to shift the meaning of the term “infringing item” within the same
calculation, they would have so indicated. Furthermore, the district court erred in
not making findings during sentencing as to: (1) how close the defendants came to
completing additional sales; (2) whether there was a reasonable likelihood of
generating revenue corresponding to the amounts assigned, i.e., $620,068 in the
24
case of Tellez, or $163,448 in the case of Guerra.12 Rather, the district court
assigned a total number of “infringing items” based on the number of labels simply
because the labels constituted “part” of the conspiracy.13 There is no support for
the proposition that the number of “infringing items” may be based on the number
of seized articles that have the mere potential of ultimately forming a component of
a finished counterfeit article, without a determination as to the extent to which
defendants had a reasonable likelihood of actually completing the goods. The
record shows, and the Government concedes, that Ordonez had received 5,125
inferior-quality cigars from the Dominican Republic, some of which had been
already sold using counterfeit bands and labels. There is no evidence in the record
of other past shipments, thus, the court’s total valuation of the infringing items may
not be sustained on this record.
12
The Government maintains that in contrast to Sung, “Guerra and Tellez simply had to
disburse their counterfeit bands and labels to enable Ordonez and other counterfeit distributors to
turn a $0.23 cigar into a $4.00 cigar. The cigar bands were not perishable and could be used to
create counterfeit cigars indefinitely.” These arguments were not made during sentencing, and
the district court did not base its decision on the ease of assembly or the length of time the bands
would be useable.
13
At sentencing, Tellez objected to the district court’s use of the number of labels on the
ground that it is improper to consider the labels as finished products. The district court overruled
the objection, reasoning that:
[T]he labels are just one part of an infringing item, and that Mr. Tellez was
convicted, along with the other defendants, of a conspiracy to counterfeit . . . and
sell the counterfeit cigars. Being in possession of the labels was just one part of
the conspiracy. So I am holding him responsible for all of the counterfeit items,
not just the labels.
25
Accordingly, the judgment’s convictions are AFFIRMED, and the case is
REMANDED for resentencing.
26
United States v. Jorge Guerra
Court: Court of Appeals for the Eleventh Circuit
Date filed: 2002-06-11
Citations: 293 F.3d 1279
Copy CitationsCombined Opinion