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The courts are upping the ante on Internet counterfeiting.
This story first appeared in the November 2, 2012 issue of WWD. Subscribe Today.
Coach Inc. has won a $257 million judgment — one of the largest in the relatively brief history of Internet counterfeiting — as well as the ability to seize more than 573 domain names linked to Web sites selling fake Coach merchandise.
An Illinois federal court judge ordered payment of the damages, which topped similar anticounterfeiting victories by Tory Burch, which won a $164 million judgment in June 2011, and Hermès and Burberry, which each won a $100 million ruling this past spring.
The largest Internet counterfeit rulings so far were won by True Religion Apparel Inc., which was awarded $863.9 million in March, and Ugg Australia, which received $686 million in May. These and the Coach ruling indicate how seriously the courts are taking cybersquatting.
“The magnitude of this judgment underscores the severity and illegality of counterfeiting, and sends a clear message that our courts will enforce the law,” said Todd Kahn, Coach’s executive vice president and general counsel.
Although he called the award a “warning,” Kahn and his colleagues in the legal world have acknowledged that at least part of the judgment is purely symbolic. That’s because no brand is able to collect the millions in monetary damages, as it’s nearly impossible to physically locate the culprits running the illegal Web sites. Having the ability to shut down infringing sites is where companies begin to wield some power.
According to Nancy Axilrod, Coach’s vice president and deputy general counsel, the case is noteworthy considering the fact that “much of counterfeit activity takes place online.”
“The primary focus of the lawsuit is to seize domain names,” Axilrod said, adding that, through its three-year-old program dubbed “Operation Turnlock,” Coach has aggressively pursued counterfeiters.
In recent years, the handbag and accessories maker has grabbed headlines for its seizures of knockoff product sold across the U.S. The cybersquatting judgment underscores the brand’s focus on policing the Web for illegal Coach wares and infringing sites.
In this particular case, the company became aware that the word “Coach” appeared in hundreds of Web addresses linked to sites selling fake Coach bags, small leather goods, eyewear, apparel, jewelry and beauty product.
Infringing Web sites included coachbagfactory.com, usa-coach-bags.com and mycheapcoach.com. Knockoffs on such sites included bags bearing the Coach’s “C” logo design, as well as accessories with a Coach script design.
According to Coach, the illegal Web sites, which all had a similar format, also infringed on its intellectual property by using photographs taken from its actual Web site. Other than trademark infringement and counterfeiting, the court said the defendants violated the Illinois Uniform Deceptive Trade Practices Act, and are liable for false designation of origin and cybersquatting.
In addition to damages, presiding Judge Robert Dow said Coach would be able to seize any money held by the defendants’ PayPal and Western Union accounts.
The judge added that if Coach identifies additional infringing domain names by the defendants, the accessories company may directly notify the court, which will take action immediately.
“Shutting down the specific domain names themselves is only part of these cases,” said lawyer Joseph Gioconda, whose namesake firm won significant cybersquatting judgments for Hermès, Burberry and Michael Kors this year. “The other aspects of the case are the PayPal asset seizure, and the ongoing jurisdiction the court now has over new domains and Web sites created by the same defendants in the future. Brand owners definitely need to act very aggressively in this area, as there is a plague of counterfeit Web sites.”