Two very different problems get filed under the same heading. Counterfeiting is the sale of fake goods bearing a spurious mark. Gray market goods are genuine articles sold outside the channels the trademark owner authorized. One is fraud with a criminal statute attached. The other is usually lawful competition that brand owners find intensely annoying, and the law only reaches it in specific circumstances.
Collapsing the two is the most common error in this area. The counterfeit seller has committed the worst species of trademark violation and faces mandatory treble damages. The gray market seller may be doing nothing wrong at all, because the mark on the product is telling the truth.
The Lanham Act does not use “counterfeit” loosely. Under 15 U.S.C. § 1127 a counterfeit mark is a spurious mark which is identical with, or substantially indistinguishable from, a registered mark. The counterfeiting remedies in § 1116(d) narrow it further: the mark must be registered on the Principal Register and in use for the goods or services sold. Knowledge of the registration is not part of that definition. The statute says so expressly, applying whether or not the person against whom relief is sought knew the mark was registered. Knowledge does its work at the remedies stage instead, where § 1117(b) reaches only a defendant who intentionally used a mark knowing it was a counterfeit mark.
Three consequences follow from that definition:
Congress built a separate remedial track because ordinary trademark damages were a poor deterrent against defendants who keep no books and often disappear.
Mandatory trebling. Where the violation consisted of intentionally using a mark knowing it was a counterfeit mark, section 1117(b) directs the court to enter judgment for three times profits or damages, whichever is greater, together with reasonable attorney fees, unless the court finds extenuating circumstances. The default in ordinary infringement cases runs the other way: enhancement is discretionary, and after Romag Fasteners v. Fossil (2020) willfulness is a factor in awarding profits rather than a precondition. In counterfeiting, trebling is the baseline and the defendant must argue its way out.
Statutory damages. Because counterfeiters rarely produce reliable sales records, § 1117(c) lets the plaintiff elect statutory damages instead of proving actual loss: $1,000 to $200,000 per counterfeit mark per type of goods sold, and up to $2,000,000 per mark where the court finds the counterfeiting willful. Those ceilings come from the PRO-IP Act of 2008, which roughly doubled the 1996 figures.
Ex parte seizure. Section 1116(d) authorizes a court, on an application the defendant never sees coming, to order seizure of the counterfeit goods and the records documenting them. The requirements are demanding, including a showing that the defendant would destroy or move the goods if given notice, and the applicant must post security, because a wrongful seizure carries its own damages action.
Criminal liability. Trafficking in counterfeit goods or services is a federal felony under 18 U.S.C. § 2320, with penalties escalating where the counterfeits are military goods or drugs, or where they cause serious bodily injury or death.
Gray market goods, also called parallel imports, are the real thing. The trademark owner or its licensee manufactured them and applied the mark. They were sold legitimately somewhere, often abroad at a lower price, and then imported and resold in the United States by someone outside the authorized distribution network.
Nothing about that is inherently deceptive. The consumer who buys a gray market camera receives an authentic camera from the company whose name is on it. The classic objection is not confusion, it is arbitrage: the brand owner priced the goods differently by market and a reseller captured the spread. That is a business injury, not necessarily a legal one.
The governing customs statute is 19 U.S.C. § 1526, which on its face bars importing foreign-made goods bearing a U.S.-registered mark without the owner’s written consent. Customs regulations, however, carved out exceptions, and the Supreme Court in K Mart Corp. v. Cartier (1988) upheld most of that carve-out. The core exception is common control: if the U.S. mark owner and the foreign manufacturer are the same entity or under common ownership, the goods can come in. A brand cannot use § 1526 to block imports of goods its own affiliate made.
K Mart left an important gap, and the courts filled it. If the gray market article differs materially from the authorized U.S. version, the mark is no longer telling the truth, because it signals a product the consumer will not actually receive.
That principle is usually called the Lever rule, after Lever Bros. Co. v. United States (D.C. Cir. 1993), where British Sunlight dish soap and Shield soap were formulated differently from their U.S. counterparts. The First Circuit reached similar ground in Societe Des Produits Nestle v. Casa Helvetia (1992) involving Italian versus Venezuelan Perugina chocolate. Customs codified the rule at 19 C.F.R. § 133.23, which allows the brand owner to record its mark and block materially different gray goods unless they carry a conspicuous label disclosing that the product was not authorized for U.S. sale.
The threshold is deliberately low. A material difference is any difference consumers would likely consider relevant when purchasing, which has covered composition, warranty coverage, language and unit labeling, quality control procedures, and inclusion in a manufacturer’s service network. Low threshold, real limits: the difference must be genuine and consumer-relevant, not a pretext invented to police distributors.
The instinct that “once they sold it, they cannot control resale” comes from copyright, and it does not map cleanly.
In copyright, Kirtsaeng v. John Wiley & Sons (2013) held that the first sale doctrine in 17 U.S.C. § 109(a) applies to copies lawfully made abroad, so a student reselling cheaper foreign textbooks in the United States was protected. First sale in copyright is now firmly international in scope.
Trademark reaches a similar result by different reasoning. There is a trademark exhaustion principle, but it is conditional: it protects resale of a genuine article, and it evaporates once the article is no longer genuine in the relevant sense, meaning materially different, repackaged in a misleading way, or stripped of quality controls. Copyright asks where the copy was made. Trademark asks whether the mark still accurately identifies what is in the box.
What is trademark counterfeiting? Counterfeiting is the use of a spurious mark that is identical to, or substantially indistinguishable from, a mark registered on the Principal Register and in use for those goods. That is the definition in 15 U.S.C. § 1127. It is a narrow subset of infringement, and it triggers a separate and much harsher remedial track: mandatory treble damages and attorney fees, statutory damages up to $2,000,000 per mark, ex parte seizure, and federal criminal exposure.
Are gray market goods illegal in the United States? Usually not. Gray market goods, also called parallel imports, are genuine articles made by or for the trademark owner and then sold outside authorized channels. Because they are real, the mark is accurate and there is normally nothing to sue over. The main exception is the material differences rule: if the imported version differs materially from the authorized U.S. version in a way consumers would care about, courts treat it as a different product bearing the same mark, and selling it can infringe.
What is the difference between a counterfeit and a gray market good? Provenance. A counterfeit is fake: someone other than the trademark owner applied the mark. A gray market good is authentic: the trademark owner or its licensee made it and applied the mark, and the only problem is the distribution channel it traveled through. A counterfeit Rolex was never a Rolex. A gray market Rolex is a real Rolex imported by someone the manufacturer did not authorize.
What are the damages for selling counterfeit goods? Under 15 U.S.C. § 1117(b), against a defendant who intentionally used a mark knowing it was a counterfeit mark, a court must award three times profits or damages, whichever is greater, plus attorney fees, unless it finds extenuating circumstances. Alternatively the plaintiff may elect statutory damages under § 1117(c) of $1,000 to $200,000 per counterfeit mark per type of goods, rising to $2,000,000 per mark if the counterfeiting was willful. Trafficking in counterfeit goods is also a federal crime under 18 U.S.C. § 2320.
Going further: Knockoffs vs. counterfeits, how to tell which one you are looking at .
This page is general legal information, not legal advice, and it does not create an attorney-client relationship.
The Ninth Circuit holds trademark counterfeiting requires likelihood of confusion, with no presumption from identical EYE DEW marks on dissimilar products.
The D.C. Circuit held Lanham Act section 42 bars gray market imports that are physically and materially different from U.S. goods, even affiliate-made ones.
A New York jury found a luxury reseller liable for willful counterfeiting and false association over Chanel-branded bags, holding that even items that left a Chanel factory can be 'counterfeit' when they fail the brand's quality controls.
The Ninth Circuit's first ruling on the contributory trademark knowledge standard holds that willful blindness requires specific knowledge of infringers, and that counterfeiting needs no stitch-for-stitch copy.
How a fight over look-alike generic capsules gave trademark law its enduring 'induces or knowingly supplies' standard for holding suppliers liable for someone else's infringement.
The Supreme Court upheld Customs' common-control exception for gray-market imports while striking the authorized-use exception, defining when genuine foreign goods can be stopped at the U.S. border under the Tariff Act.
The Ninth Circuit held that a web host that ignores notices and keeps serving counterfeit-selling sites can be liable for contributory trademark infringement, but capped statutory damages at one award per mark, jointly and severally.
The Second Circuit held that an online marketplace is contributorily liable for counterfeit sales only when it knows of specific infringing listings, not because counterfeiting is rampant on its platform generally.
