Counterfeit jeans seized by U.S. Customs in New York.

The bill would expand penalties to those who traffic in bogus labels and packaging, and would require the forfeiture of the equipment used to make the items.

WASHINGTON — The House passed a bill Monday that would increase criminal counterfeit penalties at a time when bogus apparel, handbags and accessories are costing U.S. companies billions of dollars in lost sales a year.

The bill would expand penalties to those who traffic in bogus labels and packaging, and would require the forfeiture of the equipment used to make the items.

The Stop Counterfeiting in Manufactured Goods Act, sponsored by Rep. Joe Knollenberg (R., Mich.), which was approved on a voice vote, would also require that restitution be paid to the trademark owners whose brands were counterfeited.

Under current law, trafficking in counterfeit labels or packaging is not illegal if they are not affixed to the finished counterfeit product, and if a counterfeiter is convicted, the fake products are destroyed but not the equipment used to make them, according to lawmakers.

The bill now moves to the Senate, where passage is expected.

“This legislation will facilitate efforts by the Department of Justice to prosecute those who exploit the good names of companies by attaching counterfeit marks to substandard products,” Rep. James Sensenbrenner (R., Wis.) said during floor debate.

Sensenbrenner also noted that the legislation will provide another tool to federal law enforcement agencies, which have established links between counterfeiting, terrorism and organized crime.

According to a November 2004 report issued by William C. Thompson Jr., New York City comptroller, about $456 billion was spent on counterfeit goods worldwide in 2003. The U.S. accounted for $286.8 billion, or 62.9 percent of that, according to the report.

U.S. apparel companies have been fighting to protect their brand names from counterfeiters for decades, and with the shift to offshore production, countries such as China are now churning out billions of dollars worth of counterfeit apparel, handbags and accessories.

“This [bill] is a more comprehensive approach” to fighting counterfeiting, said Steve Lamar, senior vice president of the American Apparel & Footwear Association, which counts among its members such companies as Liz Claiborne, Jones Apparel Group and Jockey International.

Lamar said strengthening U.S. counterfeit laws could translate into stronger anticounterfeiting provisions in free trade agreements.

This story first appeared in the May 24, 2005 issue of WWD. Subscribe Today.

“If we can make sure this is in our own laws, it is something we can then ask for in future trade agreements,” said Lamar.

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