United States v. Hanafy
302 F.3d 485 (2002)
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Rule of Law:
Repackaging genuine, unadulterated goods into shipping trays that bear the manufacturer's trademark does not constitute trafficking in goods with a 'counterfeit mark' under 18 U.S.C. § 2320. Furthermore, such shipping trays, which merely identify their contents without providing substantial additional information, do not qualify as 'labeling' under 21 U.S.C. § 321(m), and therefore the failure to disclose that the goods are repackaged is not criminal misbranding.
Facts:
- Ibrahim Hanafy, Mohamed Mokbel, Samer Quassas, and Adel Saadat owned businesses that purchased individual cans of genuine infant formula.
- The formula was originally obtained by various third parties through purchase, welfare programs, or theft, and then sold to convenience stores.
- The Appellees' businesses purchased the formula from these convenience stores.
- The Appellees then consolidated the genuine, unadulterated cans of formula into cardboard shipping trays, grouped by manufacturer.
- These shipping trays were designed to resemble those used by the manufacturers and included the manufacturers' trademarks.
- The trays did not contain any information indicating that the formula had been repackaged.
- All cans of formula sold by the Appellees were genuine, unadulterated, and within their 'sell by' dates.
Procedural Posture:
- The United States government charged Ibrahim Hanafy and others with multiple federal offenses in the U.S. District Court for the Northern District of Texas.
- A jury found the Appellees guilty on all counts, including trafficking in goods with counterfeit marks and selling misbranded goods.
- Following the verdict, the Appellees filed a motion for a judgment of acquittal.
- The district court granted the motion for acquittal on the trademark and misbranding charges, ruling that the Appellees' conduct was not unlawful as a matter of law.
- The district court subsequently overturned the related money laundering and conspiracy convictions that were predicated on the trademark and misbranding charges, granting a new trial on the conspiracy count.
- The United States appealed the district court's judgment of acquittal to the U.S. Court of Appeals for the Fifth Circuit.
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Issue:
Does repackaging genuine, unadulterated infant formula into shipping trays that bear the manufacturer's trademark constitute either (1) trafficking in goods with a counterfeit mark under 18 U.S.C. § 2320, or (2) misbranding due to misleading 'labeling' under 21 U.S.C. § 331(a) because the trays fail to state the goods are repackaged?
Opinions:
Majority - DeMOSS, Circuit Judge
No. Repackaging genuine goods into trays bearing the manufacturer's trademark does not constitute criminal counterfeiting or misbranding. First, regarding the counterfeit mark charge, the court holds that trafficking in goods with a counterfeit mark under 18 U.S.C. § 2320 requires the goods themselves to be counterfeit, not genuine. The court reasons that criminal statutes must be construed narrowly and distinguishes civil liability under the Lanham Act, which focuses more broadly on consumer confusion. Citing United States v. Giles, the court rejects the government's attempt to apply civil trademark precedent, distinguishing this case from situations like United States v. Petrosian where a genuine mark was affixed to a counterfeit product. Here, genuine marks were affixed to containers of genuine goods, which does not give rise to criminal liability under § 2320. Second, regarding the misbranding charge, the court holds that the shipping trays do not constitute 'labeling' under 21 U.S.C. § 321(m). Following the precedent of Kordel v. United States, the court reasons that 'labeling' must provide substantial information about the use or benefits of the article, essentially supplementing or explaining it. Because the trays merely identified the contents with information already present on the cans themselves, they did not rise to the level of 'labeling' as contemplated by the statute. Therefore, the omission of 'repackaged' information on the trays was not a material omission on a 'label' and did not constitute misbranding.
Analysis:
This decision clarifies the scope of criminal liability for repackaging genuine goods, creating a clear distinction between civil trademark infringement and criminal counterfeiting. By requiring that the goods themselves be spurious for a § 2320 violation, the court prevents the criminalization of activities that might otherwise create civil liability under the broader 'likelihood of confusion' standard of the Lanham Act. The ruling also narrowly defines 'labeling' under the Federal Food, Drug, and Cosmetic Act, limiting its application to materials that provide substantive information beyond mere identification. This provides a degree of protection for secondary market resellers and repackagers, establishing that shipping containers are not automatically considered 'labels' requiring extensive disclosures.
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