United States v. Guerra
293 F.3d 1279 (2002)
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Rule of Law:
For sentencing purposes in trademark counterfeiting cases, the number of 'infringing items' must be based on the quantity of completed or nearly completed counterfeit goods the defendant was reasonably certain to produce, not on the total number of component parts (like labels) seized.
Facts:
- Cesar Tellez owned a foil stamping business, and Jorge Guerra owned a printing shop.
- Louis Ordonez, a cigar dealer, ordered the production of counterfeit cigar bands and box labels from Tellez and Guerra.
- Ordonez would affix the counterfeit bands and labels produced by Tellez and Guerra to inferior grade cigars.
- Ordonez then sold these finished counterfeit products, packaged to look like expensive, high-quality trademarked cigars, for a profit.
- Ordonez admitted to selling four to five boxes of counterfeit cigars per week for approximately one year.
- Federal agents seized counterfeit boxes, cigar bands, cigars, and printing plates from the homes and businesses of all three men.
Procedural Posture:
- A federal grand jury returned a seven-count indictment against Appellants Guerra, Tellez, and Ordonez in the U.S. District Court, charging them with conspiracy to traffic and trafficking in counterfeit cigars.
- Following a four-day jury trial, all defendants were convicted on all counts.
- The district court sentenced Tellez to 27 months, and Guerra and Ordonez each to 18 months of incarceration.
- The defendants (Appellants) appealed their convictions and sentences to the United States Court of Appeals for the Eleventh Circuit.
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Issue:
In calculating a sentence for trafficking in counterfeit goods under U.S.S.G. § 2B5.3, did the district court err by basing the number of 'infringing items' on the total number of counterfeit labels seized, rather than the number of finished counterfeit cigars the defendants had the capacity and likelihood to produce?
Opinions:
Majority - Restani, J.
Yes. A district court errs in its sentencing calculation when it inconsistently defines 'infringing item' by using the value of the finished product (cigars) but the quantity of a component part (labels). For sentencing, the court must be consistent and base the number of infringing items on the quantity of finished goods the government establishes with 'reasonable certainty' the defendant came close to completing for sale. Here, the district court based the value of the infringing items on the retail value of finished cigars but based the quantity on the far greater number of labels found on the premises of each defendant. This was improper because it failed to make findings as to how close the defendants were to actually completing and selling a number of cigars corresponding to the number of labels. The court cannot simply assume that every label would have become a completed, sold counterfeit cigar. Therefore, the case must be remanded for resentencing with a consistent definition of 'infringing item' and findings on the number of completed goods the defendants were reasonably likely to produce.
Analysis:
This decision clarifies the application of the U.S. Sentencing Guidelines for trademark counterfeiting, particularly in cases involving component parts. By adopting the 'reasonable certainty' standard from the Seventh Circuit's Kim Tae Sung decision, the court prevents sentencing enhancements based on speculative potential production. This holding requires the prosecution to provide more concrete evidence linking component parts to completed goods, thereby protecting defendants involved in earlier stages of a counterfeiting conspiracy from being sentenced based on the full potential output of the entire operation, which may never have been realized. The ruling forces lower courts to be more precise and consistent in defining the 'infringing item' for both valuation and quantification purposes during sentencing.
