NEW YORK — You don’t always get what you pay for, even when you pay full price.
This story first appeared in the September 13, 2011 issue of WWD. Subscribe Today.
Compagnie Financière Richemont scored a $37.4 million default judgment against Concept Designs Unlimited Inc., a jeweler that sold counterfeit Cartier and Van Cleef & Arpels baubles at the same price as the originals — in some cases fetching as much as $30,000 for the fakes.
“If you look at all of the counterfeit cases, people know they are buying counterfeits and they don’t care,” said Stacey Hallerman, Richemont North America’s vice president and chief legal counsel. “This is a very unique case because the counterfeits were sold at retail prices.”
New Jersey District Judge Jose Linares entered the default judgment on Sept. 1 and ordered the New York-based jeweler to stop infringing the plaintiff’s trademarks after CDU failed to respond to the complaint, which was filed in April.
Richemont became aware of the counterfeiting in February when it discovered that Newark, N.J.-based Daniel Markus Jewelers was selling counterfeit jewelry and watches in its stores and on eBay. Hallerman said the company hired an investigator who learned that CDU had been manufacturing the fakes out of its studio in New York’s Diamond District on 47th Street.
The case against CDU is part of a larger lawsuit filed against Daniel Markus Inc. in March.
The company’s investigator bought what was presented as a ring from Van Cleef’s Birds of Paradise collection and a bracelet from its Alhambra line. The investigator also bought a counterfeit Cartier platinum wedding ring, diamond-studded gold bracelet and 10-diamond 18-karat gold Love bracelet.
The fact that all of the jewelry came with forged certificates of authenticity came of little surprise, but the price tag did.
Because the jewelry had been advertised for the same price points as the original pieces, around $30,000, the plaintiffs assumed that they were dealing with merchandise from the gray market.
However, upon inspecting falsified serial numbers on the Daniel Markus pieces, they soon realized that they were counterfeits.
“They were unbelievable,” Hallerman said of the fakes. “I thought they were real because they were being sold at the real price.”
According to the complaint, the defendants’ actions have “already caused and are in the future likely to continue to cause confusion among potential customers, who will be deceived into believing that defendants’ counterfeit goods…are genuine products of plaintiffs.”
The plaintiffs claimed trademark and counterfeiting infringement, unfair competition and trademark dilution, among other things.
In his defense, Daniel Risis, the owner of Daniel Markus, said he believed the Cartier and Van Cleef jewels to be authentic and identified CDU as the supplier.
Although CDU didn’t answer the complaint, the company’s owner, Zura Kazhiloti, did so on his own behalf, either denying the plaintiff’s claims or invoking the Fifth Amendment.
Last year, Judge Linares issued a preliminary injunction and ordered the suspected counterfeits to be seized.
The plaintiffs moved for a declaratory judgment last month and CDU defaulted, resulting in the $37.4 million judgment. The court also granted permanent injunctive relief, and ordered CDU’s bank accounts to be frozen and directed to the plaintiffs.
“Given the potential harms plaintiffs would suffer, the fact that the costs burdening defendant CDU are only those of compliance with the law, and the public interest benefits of preventing consumer confusion in their purchases of counterfeit items, this court finds that the balance of equities tips in favor of granting injunctive relief to plaintiffs,” said Judge Linares.
A trial date has yet to be set for the remaining defendants, which include Markus and Risis.