Opinion ID: 75885
Heading Depth: 3
Heading Rank: 2

Heading: Number of Infringing Items

Text: 44 Although the district court based the value of the infringing items on the retail value of cigars, it based the number of infringing items on the number of labels found on the premises of each defendant. This shift in definition resulted in Tellez receiving a 10-level increase based on the 155,017 labels seized from his premises (multiplied by the $4.00 value per cigar for a total assessed value of $620,068), and in Guerra receiving a 7-level increase based on the 40,862 labels seized from his premises (also multiplied by the $4.00 value per cigar for a total assessed value of $163,448). 45 Appellants rely on United States v. Kim Tae Sung, 51 F.3d 92 (7th Cir.1995), appeal after remand, 87 F.3d 194 (7th Cir.1996), on remand to, 940 F.Supp. 172 (N.D.Ill.1996), and rev'd on other grounds by, 114 F.3d 1192 (1997), for the proposition that the number of infringing items should correspond to the number of completed or nearly completed goods counterfeit goods. We find the reasoning of our sister Circuit persuasive. The defendant in Kim Tae Sung produced and distributed hair care products; when arrested, he had over 1,000 gallons of product but bottles and boxes for much more. See Sung, 51 F.3d at 93. The district court sentenced Sung based on the potential sales represented by the bottles and boxes. The Seventh Circuit remanded for resentencing based on the ground that where a defendant takes a step toward the sale of completed counterfeit goods, the district court must make findings as to whether the Government established with reasonable certainty defendant came close to completing additional sales of the counterfeit good. See id. at 95-96. The Court indicated that it would be clearly erroneous to assign the number of infringing items based on potential sales according to the total number of containers, especially where the defendant possessed only a limited amount of materials and there was evidence of low market response that undermined the probability of such sales. 46 We find that the district court erred in assigning the number of infringing items according to the labels seized. First, the district court must be consistent in its definition of infringing items for the purpose of sentencing under § 2B5.3. If the drafters of 2B5.3 cmt. n. 2(B), supra, intended the district court to have discretion to shift the meaning of the term infringing item within the same calculation, they would have so indicated. Furthermore, the district court erred in not making findings during sentencing as to: (1) how close the defendants came to completing additional sales; (2) whether there was a reasonable likelihood of generating revenue corresponding to the amounts assigned, i.e., $620,068 in the case of Tellez, or $163,448 in the case of Guerra. 12 Rather, the district court assigned a total number of infringing items based on the number of labels simply because the labels constituted part of the conspiracy. 13 There is no support for the proposition that the number of infringing items may be based on the number of seized articles that have the mere potential of ultimately forming a component of a finished counterfeit article, without a determination as to the extent to which defendants had a reasonable likelihood of actually completing the goods. The record shows, and the Government concedes, that Ordonez had received 5,125 inferior-quality cigars from the Dominican Republic, some of which had been already sold using counterfeit bands and labels. There is no evidence in the record of other past shipments, thus, the court's total valuation of the infringing items may not be sustained on this record. 47 Accordingly, the judgment's convictions are AFFIRMED, and the case is REMANDED for resentencing.