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Louis Vuitton Wins Counterfeit Ruling

French luxury brand just got a boost from the U.S. government in its battle against counterfeits.

WASHINGTON — Louis Vuitton just got a boost from the U.S. government in its battle against counterfeits.

This story first appeared in the April 18, 2012 issue of WWD.  Subscribe Today.

On Tuesday, the U.S. International Trade Commission ruled in favor of Louis Vuitton Malletier SA and Louis Vuitton U.S. Manufacturing Inc. in an unfair trade case alleging widespread counterfeiting and knockoffs by a “large-scale international counterfeiting and infringing enterprise” illegally profiting off the luxury brand’s trademarks.

The ITC said in a Federal Register notice Tuesday that it will essentially uphold an administrative law judge’s initial ruling, granting Louis Vuitton’s motion for summary determination of violation of a section of U.S. import trade law that covers trademark infringement and counterfeiting.

Although filing a lawsuit with the ITC is not a common practice, the ruling signifies yet another avenue that brands have to protect their trademarks against counterfeiters. In the last two years, fashion companies such as True Religion Apparel Inc., Polo Ralph Lauren Corp., Tory Burch LLC and VF Corp.’s The North Face have racked up impressive victories against cyber squatters and third-party Web sites such as PayPal, which transfer payments from customers to the counterfeiters. If anything, Tuesday’s decision sends another red flag to those with hands in the counterfeit marketplace that such activity will not be tolerated.

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“As the first luxury goods company to seek redress at the ITC, we are pleased with the significant remedy that has been recommended. The chief administrative law judge recognizes the importance of protecting intellectual property and took the welcome step of ensuring that its orders include all merchandise that infringes on our Toile Monogram Marks, and not just products of the respondents in this case,” said Valerie Sonnier, global intellectual property director of Louis Vuitton Malletier. “Preservation of creativity is of the utmost importance to Louis Vuitton. We will continue to protect our brand and customers, and to preserve the rights of designers, artists and brands.”

Vuitton noted in a statement released at the end of March that the ITC’s chief administrative law judge’s initial determination at that time was the culmination of a 15-month investigation by the agency into a group of U.S. and Chinese companies, collectively known as the “Diophy” group of companies, and some of their principals, concerning products that infringe and counterfeit the Toile Monogram Mark.

The case centers around an elaborate enterprise that allegedly operates several shell companies which import and sell thousands of counterfeit and knockoff handbags, luggage, accessories and packaging, infringing on Vuitton’s federally registered U.S. trademarks, according to the complaint, which was filed in 2010.

“The proposed respondents [defendants] have targeted the goodwill and fame of Louis Vuitton and its intellectual property rights and are infringing not only Louis Vuitton’s famous Toile Monogram Marks, but other iconic elements of Louis Vuitton’s products, including shapes, styles, color combinations and other design elements,” the complaint said. “Through these actions, the proposed respondents have engineered a widespread theft of Louis Vuitton’s intellectual property and goodwill.”

The enterprise is allegedly controlled by two individuals who are married — Jianyong Zheng and Alice Bei Wang — of Arcadia, Calif., who owned or managed several companies, including T&T Handbag Industrial Co. Ltd. in Guangzhou, China; Sanjiu Leather Co. Ltd. in Guangzhou; Meada Corp. and Pacpro Inc., both in El Monte, Calif., and Trendy Creations in Chatsworth, Calif.

In addition, two separate entities named in the complaint are The Inspired Bagger, based in Dallas, and House of Bags, based in Los Angeles. These entities allegedly purchased goods from the firms operated by Zheng and Wang, according to the complaint.

The ITC investigated the actions of a total of 12 firms, many of which are allegedly owned and managed by Zheng and Wang.

“Certain of the proposed respondents are engaged in well organized and deceptive scams to systematically violate Louis Vuitton’s intellectual property rights in two ways,” the complaint said. “First, the proposed respondents have manufactured, imported, offered for sale and sold merchandise that is confusingly similar, or ‘knockoffs’ of the Toile Monogram Marks. Second, Mr. Zheng, T&T and others have manufactured, imported, offered for sale and sold merchandise featuring exact copies, or counterfeits, of the Toile Monogram Marks.”

The complaint alleges the counterfeits and knockoffs are manufactured abroad and imported into the U.S. for sale. It also said one of the company’s Web sites advertised exact replicas of other luxury brands, including Gucci, Chanel and Hermès.

“To facilitate this illegal and infringing operation, and evade certain civil and criminal liability, Mr. Zheng and Ms. Wang have created an elaborate corporate shell operation to facilitate and obfuscate their widespread counterfeiting and infringing operation,” the complaint said.

Louis Vuitton declined to provide an estimate of the value of the infringing merchandise, but a court case in China shed light on a small fraction of the overall amount. Vuitton sued one of Zheng’s companies, named Sanjiu, in China for trademark infringement. In that one lawsuit the luxury brand said it discovered that Sanjiu had applied to Chinese customs authorities to export 8,489 infringing PVC handbags and 672 infringing purses with a value of $58,544, according to the complaint. Louis Vuitton believes Sanjiu, one of several companies named in the complaint, continues to export infringing merchandise, violating the Toile Monogram Marks on a “large scale,” to the U.S.

While Vuitton has won the first phase of the investigation, with a finding of violations by both the ITC and an administrative law judge, the case is not over. The ITC must determine whether to impose a remedy, in the form of a possible cease-and desist order and/or permanent exclusion order of the infringing imported merchandise. If the ITC determines a remedy, the action must be approved by the U.S. Trade Representative’s office before taking effect. The entire process could take several more months.

The administrative law judge recommended an exclusion order on the infringing imports and merchandise, as well as a bond of 100 percent during the period of review.

Vuitton is seeking a permanent exclusion order against the importation of the infringing products, as well as a cease-and-desist order against the companies and their affiliates, subsidiaries, related companies, agents or others who control the entities, halting the importation, sale for importation, marketing, advertising, distribution and sales after importation.