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Beauty & The Law Beauty stores that innocently purchase counterfeit products are not subject to criminal penalties merely for innocent purchases without having reason to know they are counterfeit. It would be prudent not to rely on that exception to criminal liability since you may have to go through a criminal prosecution to prove it, and that is something no one wants to experience. You can't set out to avoid learning that the products are counterfeit because the law treats willful ignorance the same as knowledge. If you learn that products you innocently bought are in fact counterfeit, you cannot sell them legally. Auction sites such as eBay pose a difficult problem for manufacturers whose products are counterfeited. Legitimate manufacturers have a hard time tracking down the counterfeiters and several have sued eBay, arguing that eBay contributed to the violations because it gives a platform for counterfeiters to make their sales. Tiffany & Co. is one of the companies that sued eBay alleging that more than 70% of the sterling-silver jewelry sold on eBay as Tiffany silver was counterfeit. The courts found that eBay took down listings if they knew the specific listing was for a counterfeit product; Tiffany could not prove that eBay knowingly contributed to infringement of the Tiffany trademarks. A Belgian court reached the same result when Lancôme Paris sued eBay. In 2007, out of 80 Lancôme perfumes bought on the Belgian eBay site, 67 were counterfeit according to one investigation. The court found that eBay did not have an obligation to police the products offered by its sellers, and eBay did not contribute to the counterfeiting merely by offering its auction services. The laws vary from country to country, and French courts have imposed obligations on auction sites to actively take precautions to weed out counterfeit products, including demanding certificates of authenticity for products. LEGISLATIVE RESPONSE In addition to the tough penalties that are already available to punish counterfeiting, there have been several attempts to pass even tougher laws. The New York City Council considered a proposal in 2011 to make it a misdemeanor for consumers to buy counterfeit goods. The proposed penalty was jail for up to a year and a fine of up to $1,000 for each item bought. That didn't become law, but did spark a lively debate. The United States signed an international agreement called the Anti-Counterfeiting Trade Agreement but has not ratified it, and it has not become law yet either. This agreement would create new international intellectual property enforcement programs. It has been widely critiqued for its effect on Internet users, but the United 100% Human Hair Manikins Quality you can rely on! Perfect for practicing hair coloring, perming and other chemical treatments. Since 1948 Call us today for a current catalog 800 645 5118 Visit us online at www.burmax.com 62 June 2013 | beautystorebusiness.com States is still pursuing ratification. Whether or not the Anti-Counterfeiting Trade Agreement or laws such as the one proposed by the New York City Council ever come into effect—so long as counterfeiters can make huge profits by underselling legitimate manufacturers— legislators and prosecutors will keep trying to enact and enforce stringent standards to combat the problem. ■ This copyrighted article is intended to help make you aware of some of the issues that you may face, but it is not exhaustive and does not constitute legal advice. You should consult your lawyer for legal advice about the particular circumstances of your beauty business. Jean Warshaw is a lawyer in private practice in New York City. She provides advice on business and environmental law. She can be reached at 212.722.2240.