As an alternative to actual damages, which may be tripled at the court’s discretion, suppliers like Lorillard will demand that retailers pay statutory damages of as much as $100,000 for each infringed trademark, as well as an additional $1,000,000 per counterfeit mark in punitive damages. On top of that, the supplier will demand that the retailer be required to pay its extensive attorney’s fees and court costs.

    The result of such litigation can be devastating. In a recent decision issued by an Illinois federal court, Lorillard Tobacco Co. v. S&M Central Service Corp., a service station dealer who had been found to have resold 83 cartons of counterfeit cigarettes was assessed $250,000 in damages and ordered to pay Lorillard’s attorney’s fees and court costs, which Lorillard contended amounted to over $140,000.

    And there may be other consequences as well. If not only the cigarettes but also the tax stamps are counterfeit, the local taxing authority is likely to impose significant penalties.

    For example, when a routine inspection by the Division of Taxation of a Brooklyn, New York service station reveal 168.9 cartons of counterfeit cigarettes, the dealer was assessed a tax penalty of $15,800.

    Further, although it is less than likely to be applied, federal criminal law provides that a person who knowingly uses a counterfeit mark may be fined as much as $2,000,000, and be sent to prison for as long as ten years.

    The lessons are clear. Be very careful to acquire cigarettes only from legitimate sources. Do not trade for product or merely assume that product you acquire was in turn obtained from a lawful source. And if a problem arises, secure competent counsel and resolve it as promptly as possible.