LVMH Wins Trial Against Web Firms

Jury awards luxury firm LVMH $32.4M in damages, finds two web firms that host web sites selling fake goods shared responsibility with counterfeiters.

A federal jury on Friday handed a $32.4 million victory to LVMH Moët Hennessy Louis Vuitton when it found that two service providers that hosted Web sites selling fake goods shared responsibility with the actual counterfeiters.

This story first appeared in the September 1, 2009 issue of WWD.  Subscribe Today.

After two days of deliberations in U.S. District Court in San Jose, Calif., an eight-member jury found that Akanoc Solutions Inc. and Managed Solutions Group Inc., and Steven Chen, manager of the two firms, were liable for contributory trademark and copyright infringement. It awarded the luxury house $32.4 million in statutory damages.

LVMH filed its suit in 2007. In an amended complaint filed in July 2008, the firm alleged Akanoc and Managed Solutions hosted more than 75 commercial Web sites with names like LVBagz.com and Louivuittonbagz.com that offered counterfeit LVMH wares to Internet shoppers.

The luxury brand said it had repeatedly warned the Fremont, Calif.-based Web hosts that sites on their servers sold counterfeit merchandise, but that the two firms continued to allow the sites to function.

“Louis Vuitton had given the defendants very specific notice of the infringing activity and it hadn’t changed,” said attorney Andy Coombs, who argued the case for the luxury house in the two-week trial.

A lawyer for Akanoc, Managed Solutions and Chen did not return a call seeking comment.

The case is one of a number of lawsuits in recent years filed by luxury brands and other intellectual property holders that have targeted trade service providers for their roles in the counterfeit economy. Last month, Gucci America Inc. sued a bank and two card processors it alleged had handled payments to Web sites selling knockoffs.

“It’s like going after the warehouse, instead of the guy on the corner,” said Susan Scafidi, a professor at Fordham Law School who maintains the blog Counterfeit Chic. “It’s much easier to go after that central provider of services instead of going after every tiny retailer.”

Louis Vuitton’s complaint against Akanoc, Managed Solutions and Chen did not specify who actually ran the sites hosted on their servers.

Jurors found LVMH had proven Chen and the two Web hosts knew, or should have known, their customers used their services to infringe on the company’s trademarks.

The jury granted $31.5 million in damages related to trademark infringement and $900,000 for copyright violations.

In its amended complaint, LVMH also sought an injunction barring the three defendants from further contributing to counterfeit sales. The judge hearing the case has not yet ruled on that request. (For more on Vuitton, see page 13.)