Debugging the Trademark Laws Part II: Criminal Penalties for Trafficking in Counterfeit Microelectronics

Authors

• Patricia E. Campbell, University of Maryland Carey School of LawFollow

Abstract

Counterfeit microelectronics have been a persistent problem in government and industry supply chains for many years. Counterfeit electronic parts (e.g., integrated circuits, transistors, capacitors) pose serious risks to human health and safety, harm the economy, and jeopardize national security. Trafficking in counterfeit goods and services was first criminalized in 1984, and Congress has acted on several occasions to increase the corresponding penalties. Nevertheless, the trade in counterfeit microelectronics continues to evolve to meet market demands, and relatively few criminal cases have been brought for trafficking in counterfeit microelectronics. While several factors may contribute to this apparent lack of enforcement, the most significant involves a circuit split over whether the “material alteration theory” applies in criminal cases. The material alteration theory has been widely accepted in civil actions and holds that selling items bearing genuine trademarks constitutes trademark infringement where the items have been materially altered and purchasers are not informed about the alterations. However, courts are divided over whether selling items that are used but offered as new, are remarked, or are altered in a material way constitutes criminal counterfeiting, if the items retain the original trademarks applied by their manufacturer. Even in those cases where the Department of Justice obtains a conviction or guilty plea, the sentences that are typically imposed for trafficking in counterfeit goods often amount to little more than a proverbial “slap on the wrist,” resulting in a lack of deterrence. Congress could amend 18 U.S.C. § 2320 to expressly adopt the material alteration theory in cases alleging criminal trademark infringement, although such an amendment would likely be opposed by various groups. In the absence of a sweeping amendment to Section 2320, Congress could consider special legislation designed to curb trafficking in counterfeit electronic parts.

Recommended Citation

Patricia E. Campbell, Debugging the Trademark Laws Part II: Criminal Penalties for Trafficking in Counterfeit Microelectronics, 28 SMU Sci. & Tech. L. Rev. 397 (2025)