The process of fraudulently manufacturing, altering, or distributing a product that is of lesser value than the genuine product.
Counterfeiting is a criminal offense when it involves an intent to defraud in passing off the counterfeit item. The law contains exemptions for collector's items and items that are so obviously dissimilar from the original that a reasonable person would not consider them real. However, making a poor copy is no defense if the intent to defraud exists.
Counterfeiting most commonly applies to currency and coins. It is illegal to manufacture, possess, or sell equipment or materials for use in producing counterfeit coins and currency. Federal law also prohibits producing counterfeit postmarks, postage stamps, military papers, or government securities. Counterfeiting also applies to the fraudulent manufacture and sale of other items, such as computer software, CDs, consumer products, airplane parts, and even designer dresses. An increase in this type of counterfeiting has led to a strengthening of intellectual property and copyright laws worldwide. Counterfeiting or conspiracy to distribute counterfeit goods can lead to state or federal criminal charges. Civil lawsuits also can result from allegations of counterfeiting.
Coins and Currency
Counterfeit coins appeared within a century of the first legitimate coins, which appeared in about the seventh century b.c. The severity of the punishment for counterfeiting (death, in many cultures) and the difficulty of creating counterfeit coins that did not include some metal of value (and therefore cost a significant amount to produce) kept the practice in check. However, counterfeiting flourished after the development of paper money in about a.d. 1650, especially in American colonies where counterfeit bills and even coins were sometimes more common than genuine ones. Counterfeiters had honed their skills so much that when the United States issued its first federal coins in the 1780s, the government hired an ex-counterfeiter to cut the dies. Counterfeiting boomed again during the Civil War when the United States issued its first paper money.
For many decades, the skills and equipment needed to create counterfeit money confined the practice to a few professionals, and the Secret Service, the branch of the U.S. Department of the Treasury charged with enforcing counterfeiting laws, discovered most counterfeiters before their money leaked into circulation. But in the late twentieth century, with the availability of new technologies, such as color copying and electronic reprographics, more counterfeit schemes emerged. The Treasury Department estimated that $25 million in counterfeit bills were passed off in fiscal year 1994. Further damaging U.S. currency was a flood of fraudulent $100 bills on the world market. The Secret Service believes that from the early 1990s to the mid-1990s, as much as $10 billion in nearly perfect counterfeit $100 bills were circulated internationally. The bills are believed to have been printed on a press that is similar to those used by the U.S. Treasury and which was sold to Iran in the 1970s.
This increase in counterfeiting prompted Congress to pass the Counterfeit Deterrence Act of 1992 (18 U.S.C.A. § 471 note) to increase penalties. Prior to the new law, it was not a criminal act to manufacture counterfeit U.S. currency abroad. The law also instructed the Treasury Department to redesign paper money to make it more difficult to reproduce. In 1996 the first new currency was released. The portrait was increased in size and moved to the left to make room for a watermark miniature of itself. Treasury officials believe that the watermark and the use of color-shifting inks make the currency nearly impossible to reproduce with current technologies.
Other Items
Counterfeiting also applies to reproductions of packaging when the intent is to defraud or to violate protections under trademark, copyright, or patent laws. It is estimated that U.S. companies lose $8.1 billion in overseas business owing to violations of intellectual property laws. Increasing the enforcement of trademark and copyright law to discourage counterfeiting has been a focus of U.S. trade negotiations, both with individual countries and during the Uruguay round of the international General Agreement on Tariffs and Trade, Pub. L. No. 103-465, 108 Stat. 4809 (1994).
For example, disputes over pirated CDs and computer software have been at the center of U.S. trade conflicts with China for several years. Software manufacturers claim that 98 percent of the software used in China, including that used by the government, was illegally copied. Other goods distributed under false trademarks include cornflakes, razor blades, and soap. Under pressure from the United States, China strengthened its copyright and trademark laws in 1993. Lax enforcement resulted in a new trade agreement in 1995, designed to give U.S. manufacturers greater access to Chinese markets.
Although most counterfeiting allegations are brought through the criminal courts, counterfeiting that violates patent, trademark, or copyright laws has resulted in civil lawsuits. For example, in 1994, a Paris court ruled that designer Ralph Lauren had copied a tuxedo dress pattern from Yves Saint Laurent's collection, and ordered Lauren to pay the rival designer $386,000 in damages.
Punishment
Under federal law, counterfeiting is a class C felony, punishable by up to twelve years in prison or a fine of as much as $250,000, or both. State laws also establish penalties for counterfeiting.
