In US law, possession of a counterfeit watch is illegal if that person can be considered to have intent to trade or sell it for goods and/or services, including barter. Beyond that, possession isn't illegal in the US.
However, what happens once you give it to the trademark holder willingly, is what we're discussing and I don't think anyone here really knows the legality, no matter how loudly they shout that they do.
We all know that if a policeman takes a counterfeit $20 off you, your property rights mean absolutely nothing, for instance.
I'm going to wait and see what happens. I know what would happen here in France, and it wouldn't be pretty.