if Assuming that the subcontractor had no authority to produce these additional units and knew he had no such authority, the conduct presented in this hypothetical could, and should, violate the proscriptions contained in H.R. 2447. Of course, there was a legitimate issue as to (1) whether the subcontractor had authority, or (2) whether he knew he did not have such authority, the government (or plaintiff) may not be able to sustain such an action. In the first instance the government (or plaintiff) may be unable to prove, to the required degree of certainty, that the goods were in fact counterfeit. In both instances the government (or plaintiff) may be unable to prove that the subcontractor had the requisite criminal intent. As with all counterfeiting claims, the gravamen of a claim against the subcontractor is the reproduction of another's goods without authority. The actions of the subcontractor result in precisely the type of harm trademark law is meant to protect against. First, those actions spawn consumer confusion as to the identity of the company which stands behind or insures the quality of trademarked goods. See e.g., Bell and Howell: Mamiya Co. v. Matel, 548 F. Supp. 1063, 1069-70 (1982). Second, such actions deprive the trademark owner of his proprietary interest in the exclusive use of his registered trademark. See e.g. National Auto Club v. National Auto Club, 365 F. Supp. 879 (D.C.N.Y. 1973) affirmed 502 F.2d 1165. While the Subcommittee is understandably concerned with protecting the nonflagrant or comparatively innocent infringer from criminal sanction, the infringer who knowingly exceeds his authority (i.e., has the requisite criminal intent) is as equally culpable as the infringer who never had the trademark owner's blessing to produce the counterfeit goods. A number of federal statutes provide criminal penalties where one entrusted with the property of another for a certain use misuses that property (i.e., exceeds the authority given). See e.g., 18 U.S.C. S 641 (theft, embezzlement and conversion of things of value belonging to the government); 18 U.S.C. § 648 (misuse of public funds); 18 U.S.C. $ 656 (embezzlement and misapplication of funds entrusted to banks); 15 U.S.C. $ 800-836 (embezzlement and conversion of funds and securities of a registered investment). (2) Representative Sawyer also asked whether the bill as currently drafted is adequate to address a second hypothetical situation, in which an individual obtains genuine labels for "Calvin Klein" jeans and sews them on the pockets of other jeans in order to deceive consumers. Because the labels themselves are genuine, this type of activity arguably does not appear to be within the literal terms of the proposed statute. Under the present version of H.R. 2447, only "counterfeit marks" substantially indistinguishable from "genuine" marks are proscribed. Though it could be argued that unauthorized marks should be deemed "spurious" and, hence, within the bill's definition of counterfeit, the courts can be expected to construe a criminal statute such as this narrowly. Accordingly, it is entirely possible that the proposed statute would not be read to cover such an unauthorized and deceptive use of "genuine" marks. Though we have no information indicating that such deceptive use of genuine trademarks is a significant problem, it may be desirable to amend the bill to address this possibility. One approach, which we would favor, would be to amend the bill to prohibit trafficking in "counterfeit goods and services, rather than "counterfeit marks." See Statement of Gerald J. Mossinghoff, Assistant Secretary and Commissioner of Patents and Trademarks before the Subcommittee on Crime of the House Committee on the Judiciary on H. R. 2447, November 3, 1983. The falsely labelled blue jeans in Representative Sawyer's example, should certainly be considered "counterfeit goods, even if the labels themselves are arguably not counterfeit. " While this approach is adopted in S. 875 (H.R. 2447's companion bill in the Senate) as reported from the Senate Subcommittee on Patents, Copyrights and Trademarks, it should be noted that Representative Sawyer's hypothetical may still present difficulties under the definition of "counterfeit goods and services" in the current version of S. 875, which is: goods or services on or in connection with Thus, in order to have "counterfeit goods or services," you must also have a "spurious" mark. It is not clear that a genuine mark attached to a non-authentic product would fall within the definition of "spurious mark" contained at $ (b) (3) of the bill "'spurious mark' means a mark that is not genuine or authentic." This definition could, however, be modified to clearly cover the hypothesized conduct as follows: "'spurious mark' means a mark that is not genuine or a mark that is used without authority of its registered owner. B. " Extraterritorial Jurisdiction The Subcommittee also asked whether any extraterritorial reach of H.R. 2447 could be justified in terms of the five generally recognized principles of international jurisdiction (i.e., (1) the territorial principle; (2) the nationality principle; (3) the protective principle; (4) the passive personality principle; and (5) the universality principle). The reach of H.R. 2447 can be "extraterritorial, in the sense that conduct occurring outside the United States may be proscribed by H. R. 2447 in circumstances where there are sufficient adverse impacts within the United States to constitutionally justify jurisdiction. The statutory basis for that reach, found in what is proposed as 18 U.S.C. § 2320 (a), is the phrase [w]hoever in the foreign or domestic commerce of the United States traffics or attempts to traffic in a counterfeit mark "In the foreign or domestic commerce of the United States" is a familiar phrase that appears in some form in a wide variety of federal laws. See e.g. 15 U.S.C. § 1 (Sherman Act); 18 U.S.C. § 2314 (criminal penalty for transportation of stolen goods). In essence, the phrase means that jurisdiction is to be of the widest reach, both domestic and foreign, that is permitted to the United States government under the Commerce Clause. Even without the express jurisdictional provision in the proposed bill itself, the statute would apply to trafficking in counterfeit imports through the jurisdictional provisions found in 18 U.S.C. § 3237 (a). Under the case law, the jurisdictional reach of a criminal statute can be applied to acts taking place entirely outside of the United States if the evidence shows (1) that the defendant intended his actions to be consummated within the United States and (2) that there were overt acts occurring within, or prohibited products introduced into, the United States. United States v. Chaparro Almeida, 679 F.2d 423, 428-29 (5th Cir. 1982), cert. denied, U.S. 103 S. Ct. 801 (1983); United States v. Mann, 615 F.2d 668, (5th Cir. 1980), cert. denied, 450 U.S. 994 (1981). See also, United States v. Lawson, 507 F.2d 433 (7th Cir. 1974), cert. denied, 420 U.S. 1004; United States v. Rivard, 375 F.2d 882, 885-86 (5th Cir. 1967). Schemes to export counterfeit goods as well as schemes occurring in part in the United States but completed outside the country would similarly be covered by the jurisdictional grant found in 18 U.S.C. § 3237 (a). 671 A significant range of extraterritorial applications of the proposed bill could be justified under one or more of five international jurisdictional principles. These five principles have been identified by case law and international law commentators as generally accepted bases for allowing a sovereign to exercise jurisdiction over criminal activities. See e.g. Matter of Marc Rich Co., A.G., 707 F. 2d 663 (2d Cir. 1983) and Brownlie, Principles of Public International Law, 303 (3d ed. 1979). Jurisdiction over counterfeiting acts occurring within United States territory is justified under the territorial principle. Such jurisdiction would include all acts committed in furtherance of a criminal conspiracy, even if those acts were not carried on entirely in this country. See Ford v. United States, 273 U.S. 593, 624 (1927); Rivard v. United States, 375 F.2d 882, 885-6 (5th Cir. 1967). Moreover, the territorial principle also justifies jurisdiction over counterfeiting acts committed abroad whose effects are felt in the United States. See Ford v. United States, 273 U.S. at 623 (1927); Matter of Marc Rich & Co., A.G., 707 F.2d 663, 666 (2d Cir. 1983) and Brownlie, Principles of Public International Law 303 (3d ed. 1979). Thus, the territorial principle would provide support for United States jurisdiction over a broad range of counterfeiting activity which adversely affects the United States but occurs, at least in part, abroad. It would, for instance, he very likely to provide strong support for applications of the proposed statute to extraterritorial acts that are part of schemes to import counterfeits into the United States or export counterfeits from the United States where any act in furtherance of the conspiracy occurs within the United States. The nationality principle allows a sovereign to claim jurisdiction over its nationals who commit crimes abroad. See Marcuss and Richard, "Extraterritorial Jurisdiction in United States Trade Law: The Need for a Consistent Theory", 20 Colum. J. Transnat'l L. 439 (1981). This principal would support the assertion of jurisdiction over citizens engaging in counterfeiting outside of United States borders. Under the protective principle, a sovereign's jurisdiction to punish offenses committed outside its borders which are directed against that sovereign's security or vital interests is recognized. Justification under this principle requires that the criminal acts involved be directly injurious to the government. See United States v. Bowman, 260 U.S. 94, 98 (1922). While of more limited applicability to enforcement of the proposed bill than the territorial or nationality principles, this protective principle could provide justification for prosecution of cases involving, for example, criminal trafficking in counterfeit parts supplied to the armed forces. More than likely, one of the three principles just discussed will provide the basis for justification of any extraterritorial reach of H.R. 2447. The two remaining principles are less likely to be accepted as support for the jurisdictional reach of H.R. 2447. Because of their inclusive reach, these principles are less widely recognized in international law and, when recognized, are applied only to narrowly-defined activities outside of the scope of the proposed Act. The passive personality principle (allowing a sovereign jurisdiction to punish aliens for acts committed abroad that are harmful to its citizens) is generally accepted only when applied to terrorist or other organized attacks on a sovereign's nationals by reason of their nationality. See Tentative draft No. 2, Restatement of Law, Foreign Relations Law of the United States (Revised) § 402, Comment c. The universality principle (allowing a sovereign jurisdiction over acts of non-nationals where circumstances justify the repression of the crime as a matter of international public policy) has received general acceptance only for a very limited number of crimes, such as piracy and hijacking. See Brownlie, Principles of Public International Law, 303 (3d. ed. 1979). These five general principles suggest some, but not all, of the factors that would be considered by the courts in determining the extraterritorial reach of the proposed bill. It should be noted that consistency with one or more of these general principles is not, of course, necessarily sufficient to find jurisdiction. The courts have suggested that application of a statute such as this to extraterritorial conduct would often require a case-by-case analysis of the strength of the jurisdictional contacts with the United States together with any competing interests of other sovereigns in regulating the conduct at issue. See Timberlane Lumber Co. v. Bank of America, 549 F.2d 597 (9th Cir. 1976); Mannington Mills, Inc. v. Congoleum Corp., 595 F.2d 1287 (3d Cir. 1979). C. Ex Parte Seizures Representative Hughes expressed concern over the ex parte seizure provision contained in H.R. 2447 and its potential for abuse. During that discussion I was specifically asked whether the proposed Act should be modified to require all seizures to be conducted by a United States Marshal or other law enforcement authority. As I indicated during my testimony on November 3, 1983, it is very important for a court to have the discretion to issue seizure and other appropriate orders to prevent trademark counterfeiting in the appropriate circumstances. Indeed, in many cases the seizure of counterfeit goods before the counterfeiter can profit by selling them to innocent consumers or, if he suspects detection, spirit them away, is the most meaningful remedy possible. In our We can readily appreciate the concerns expressed by Representative Hughes and other members of the Subcommittee regarding the abuses possible from allowing private parties, some of whom may be in direct competition with the party from whom they seek seizure, to obtain ex parte seizure orders. view, these concerns are, however, adequately addressed by the standards and safeguards for issuing such ex parte seizure orders prescribed by the Federal Rules of Civil Procedure, specifically, Rule 65. Under Rule 65, F. R. Civ. P., to obtain an ex parte seizure order, a form of temporary restraining order, the plaintiff must make the following showings: (1) irreparable harm if such relief is not granted; (2) likelihood of success of plaintiff's suit on its merits; and (3) the potential harm to the plaintiff exceeds the potential harm to the defendant if the order is improvidently granted. In addition, pursuant to Rule 65, F. R. Civ. P., the issuance of ex parte orders under the proposed Act would be subject to the following additional safeguards: (1) a limit of ten days on the period in which an order can be enforced before the defendant is granted a hearing; (2) the posting of a bond by the party seeking the order; and |