The relationship between federal copyright law and state law is complex and sometimes confusing. While it is true that national uniformity was the overriding reason for a federal system, that system has rarely been exclusive, witness the parallel protection for unpublished works until 1/1/78, the continued state law protection for pre-1972 sound recordings (until 2/15/2067), and state law protection for unfixed works. Aside from subject matter issues, Section 301 saves from preemption non-equivalent rights with respect to equivalent subject matter. And then there are a vast host of issues involving contracts: when something is just a breach of contract, when something may be both a breach of contract and an infringement, plus traditional state law issues like, was there consideration? The ProCD case in the Seventh Circuit illustrated some of these issues. Others present jurisdictional issues: are you in the right court system?
Criminal prosecutions are another area of potential conflict. If someone steals a DVD from a store that's clearly a state law crime. If someone sells a counterfeit DVD that's a federal crime. But there may be state law issues too, and in New York City, where I work, licensing of vendors is a big issue. Those licensing laws are sometimes used to catch counterfeiters. There are though First Amendment issues. The sale of DVDs alone has been interpreted by the NYC Dept. of Consumer Affairs (DCA) not to require a vendor's license. But the DCA has also opined that the sale of counterfeit or "copyrighted" DVDs do require a license. (How many people buy blank DVDs from street vendors?)
In People v. Santiago, a July 11, 2005 opinion from the Criminal Court of the City of New York, a street vendor was selling allegedly counterfeit DVDs without a license. In addition to the license charge there was a charge for failing to disclose the manufacturer of the recording (that it was counterfeit in other words). Rejecting a First Amendment argument (he was being charged with a failure to speak, I guess), the court held:
"The First Amendment is intended to protect the creators of speech and those who facilitate its dissemination, as well, as the public's right to access information. However, when the property rights of the speech originator are wrongfully diverted by counterfeiters, copyright violators or other illicit practitioners, free speech protection may not be invoked by the offenders. Under such circumstances, the creator neither requires nor requests constitutional protection and the offenders surely are not entitled to claim it. Even the public's right to receive information must yield in light of the illicit character of the information offered for sale ... To allow those who effectively steal the original work product of another, mask and market it for profit, to claim derivatively the First Amendment rights of the defrauded maker, would stand logic and constitutional law on its head."
Presumably, if defendant had truthfully disclosed they were counterfeit, he could not have been charged, and I have I seen bootlegs that do just that. On the failure to be licensed charge, the court did depart from the DCA by holding that a complaint would be unconsitutional unconstitutional unless the DVD was not "in some respect, illicit."