By  on March 19, 2010

Polo and The North Face are on the warpath against counterfeits.

In what legal observers say is the largest case of its kind, Polo Ralph Lauren Corp. and VF Corp.’s The North Face brand have used a federal lawsuit to strike at a large network of more than 130 Chinese Web sites selling counterfeit goods to U.S. customers through up to 6,500 domain names.

According to court documents unsealed this week, the two apparel firms’ own investigations recently uncovered a ring of related Web sites that, since January 2008, have moved as much as $780,000 a month in fake Polo and North Face goods at domains such as polo4sale.com and outletnorthface.com.

While Polo and The North Face are the only two plaintiffs in the case, the accused counterfeiters also offered goods from a varied list of brands including Dior, Ed Hardy, Coach, Gucci, Paul Smith and Abercrombie & Fitch.

Such cybersquatting enterprises have gained in favor among counterfeit sellers in recent years for their comparatively low-risk level and relative anonymity. But in their joint suit, filed March 1 in U.S. District Court in Manhattan, Polo and The North Face say the domain names are largely traceable to the operators of one Web site, B2BSharing.com, and an affiliate program it uses to help other parties sell counterfeit wares. Lawyers for the firms wrote the operation is “of a size and scale they have not seen before.”

“Defendants…claim that their English-language Web sites (which accept payment in U.S. dollars) each bring in at least $200 in profits everyday — or $6,000 per Web site per month,” the companies’ attorneys wrote in court documents.

In lifting a protective seal on the case Tuesday, Judge Alvin Hellerstein continued an order that allows Polo and The North Face to take down the infringing domain names.

According to the complaint, B2BSharing.com is operated by Fujian Sharing Import & Export Ltd. at an unknown address in China. Polo and The North Face also named 15 people, all with unknown addresses, as co-defendants.

The Web site, which advertises itself as a wholesale discounter and also touts brands such as Nike and Louis Vuitton on its home page, did not respond to an e-mail Thursday seeking comment.

Such hard-to-track operations often hinder trademark owners from going after online counterfeiters. Even The North Face and Polo admitted the business model of multiple Web sites maximized profits and minimized risk.

“To borrow from the well-worn analogy of comparing an anticounterfeiting program to playing a game of whack-a-mole, combating this modern day Internet-driven counterfeiting ring is akin to playing a game of whack-a-mole on steroids,” the firms’ attorneys wrote in a court memorandum.

However, because customers paid the sites in U.S. currency, the apparel firms have been able to track some assets. Hellerstein’s ruling also freezes accounts at U.S. banks and service providers such as PayPal and Western Union used by the defendants. Roxanne Elings, an attorney at the law firm Greenberg Traurig representing Polo and The North Face, said the investigation has found Stateside assets in the “high six-figure” range thus far. The companies are still working to take down the sites, she said.

VF Corp. senior counsel Barbara Kaplan on Thursday said the case represents a “significant step forward” in combating counterfeiting and that the company is pleased with the judge’s decisions to date. A Polo spokesman said: “Polo Ralph Lauren takes trademark infringement very seriously and will take aggressive action to protect our valuable trademarks and to cease the counterfeiting of our products.”

Large in scope, the B2BSharing.com operation also is immensely sophisticated. The site itself, which was still in operation Thursday, offers “24/7” service support through an online chat function, while its affiliate sites, according to the suit, often lifted authorized images directly from the sites of authorized sellers.

“They steal your images wholesale,” said Barbara Kolsun, an intellectual property attorney and the editor of the book “Fashion Law: A Guide For Designers, Fashion Executives and Attorneys.” “This is your classic counterfeiting-as-stealing operation because they’re using the advertising that you paid for and convincing customers that you are somehow involved.”

Fred Felman, chief marketing officer of online security firm MarkMonitor, called the site a “great example of employing legitimate marketing techniques with black hat techniques.” He said online counterfeiting has always been profound but that he was surprised with “the speed at which criminals have adopted search engine strategies and search engine marketing.” Even the idea of an affiliate program was an example of such a combination, Felman said.

“It doesn’t take a calculus or statistics master to figure out that they’re probably right in terms of dollar value; these are big brands,” Felman said of the suit’s allegations on the infringing sites’ revenues.

Indeed, Polo and The North Face are seeking large monetary damages in the event that their investigation finds a solid operator behind the sites. The companies have asked for $2 million for each mark counterfeited and $250,000 per infringing domain name, as well as the re-registry of all infringing domain names. Tracking down assets outside of the U.S. could prove problematic.

“All roads lead nowhere,” Kolsun said. “If you follow the shipment back to China, 80 percent of the time, you will find yourself at a post office box or a vacant lot or a farm or a location that has nothing to do with the business.”

Though Polo and The North Face are taking a new approach, the Internet has presented a legal front for global brand owners since its earliest days, often with results that vary by country. Tiffany & Co., for example, is currently appealing a U.S. District Court ruling that held it is responsible for policing its own mark on the online reseller eBay, while LVMH Moët Hennessy Louis Vuitton has consistently prevailed in its trademark contests with eBay in its native France.

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