Fake It and You Won't Make It: Putting an End to Online Counterfeiting

In the marketplace for counterfeit goods, online transactions are the new frontier. The ease and reach of the Internet have made it all too easy for devious manufacturers to sell counterfeit merchandise online rather than on the street, perhaps hoping to remain hidden from public view. Therefore, to protect their brands, retailers need to monitor activity on the Internet and be ready to take appropriate enforcement action, which may include strategies such as sending demand letters to online marketplaces, initiating domain name arbitration proceedings, or filing lawsuits.

For retailers, the good news is that in two recent cases, both in the Southern District of New York, the court ruled against counterfeiters who used misleading websites for the sale of counterfeit goods. In September 2010, the court issued a default judgment and permanent injunction against an online counterfeiting ring that was using trademarks of Polo Ralph Lauren and The North Face to peddle counterfeit goods of those retailers. Similarly, in May 2011, the court issued a temporary restraining order and preliminary injunction against defendants who operated a network of web sites selling merchandise bearing counterfeit Tory Burch marks.

To impersonate their victims and fool consumers, the defendants in each of the above referenced cases created internet domain names that infringed upon the plaintiffs’ marks, such as “northfaceoutdoor.com,” “polo-shirts.us,” and “toryburch-outlet.com” to name a few. With respect to Polo Ralph Lauren and The North Face, the court found the online merchants had used 39 combinations of marks and, with the statutory limit of $2 million per counterfeit mark per type of goods sold, owed $78 million in statutory damages to Polo Ralph Lauren and The North Face. Likewise, for Tory Burch, the court ruled that each defendant owed $2 million dollars in statutory damages for counterfeiting the Tory Burch marks and another $2 million dollars in statutory damages for willful counterfeiting, making the entire judgment $164 million. Additionally, in both cases, the domain names and any money held in the defendants’ Paypal accounts were transferred and released to the plaintiffs for their control, and any Internet service providers were enjoined from servicing the defendants in the future.

So, what does this mean for the future of retail and success in combating online counterfeiting? The good news is that from two recent high profile cases, courts have been sympathetic to brand owners and are likely to impose stiff penalties on counterfeiters, which may help deter some criminals and compensate the brand owners for their losses, with the added hope that brand owners can spend more time concentrating on the marks we covet.

Related topics: Litigation