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NEW YORK — The North Face and Polo Ralph Lauren have broken up an alleged counterfeit ring that generated sales of up to $8 million a year by copying dozens of major apparel brands.

In addition to North Face and Polo products, the ring allegedly sourced and sold designs by companies such as Abercrombie & Fitch, Adidas, Aéropostale, American Eagle, Ann Taylor, Bisou Bisou, Calvin Klein, Christian Dior, Eddie Bauer, Express, Gap, Girbaud, Gucci, Hollister, J. Crew, Kenneth Cole, Lacoste, Le Tigre, Liz Claiborne, Lucky, Miss Sixty, Mudd, Nautica, Nike, Oakley, Perry Ellis, Polo, Puma, Quiksilver, Reebok, Roxy, Seven, Elie Tahari and Tommy Hilfiger.

The lawyer acting for The North Face and Polo said the case is unique given the number of major brands involved and the breadth of the ring’s distribution, which covered retailers from New York to California.

“It wasn’t just two or three brands.…it was not only ones you would normally think of, but also ones you wouldn’t have,” said Roxanne Elings of the law firm Greenberg Traurig, which is representing Polo and The North Face. “It gave [the alleged counterfeiter] a certain amount of legitimacy among retailers.”

The two companies sued the alleged counterfeiters, TC Fashions Inc. and SDT USA, in October in Manhattan federal court. The judge issued a temporary restraining order against TC at that time, and Elings and the lawyer for TC have spent the months since making various filings to support their respective arguments.

The lawsuit only recently came to light because the court unsealed the documents. These detail how investigators for The North Face and Polo started building their case against the ring’s alleged leaders — companies operating out of the same office in the heart of Manhattan’s Garment District — in March 2005. Seven months of investigation, a lawsuit and subsequent raids of the alleged leaders’ offices and of a New Jersey garment warehouse resulted in the seizure of “hundreds of thousands” of counterfeit goods and documents outlining the workings of an alleged counterfeit operation selling to hundreds of retailers across the country, according to the filing.

The filing said Polo’s investigators last March identified New York-based TC Fashions as selling counterfeit Polo apparel products, primarily knit shirts. Posing as buyers, the investigators contacted the company and were told that more than 8,000 Polo-branded items were available for purchase. TC Fashions was able to sell the goods before Polo’s investigators could complete a purchase.

This story first appeared in the March 1, 2006 issue of WWD. Subscribe Today.

The following month, investigators again inquired about making a purchase and were told that 12,000 Polo items were available. Again, the deal fell through. In July, TC Fashions told investigators that 6,000 Polo items were available. Two samples were sent, but for a third time the stock was sold before a final purchase could be made. The investigators even dropped by the TC Fashions office at 499 Seventh Avenue in late September, a move that aroused suspicion.

“The investigator observed numerous brand name goods for sale, including Timberland, Nautica, Abercrombie & Fitch and Kenneth Cole,” states a document filed by Elings to support a request for a temporary restraining order and the right to seize goods and documents. “TC asked who had referred [Polo’s] investigator and stated that no one came to the showroom without a recommendation.”

Meanwhile, North Face investigators had also been led to TC Fashions. In September 2005, a distributor involved in a separate counterfeit lawsuit handed over invoices that showed TC Fashions and SDT USA, a company sharing offices with TC Fashions, had sold more than 1,800 North Face products for about $50,456 to 45 retailers across the country. The telltale sign the goods were not authentic: labels reading “Made in China/Fabrique au Bangladesh.” According to North Face officials, the labels indicate an improper country of origin statement.

On Oct. 24, The North Face and Polo filed a joint complaint in Manhattan federal court accusing TC, SDT, its executives and multiple John Does of violations on seven counts, including trademark counterfeiting and infringement, false designation of origin and false advertising. The following day, U.S. District Court Judge Richard Berman granted a temporary restraining order and authorized the search and seizure of TC’s showroom in Manhattan and a garment warehouse in Linden, N.J., run by Waitex International.

The warehouse raid turned up more than 28,000 items of counterfeit Polo apparel and 7,000 counterfeit North Face jackets. This was the tip of the iceberg, according to Elings.

“Plaintiffs also encountered hundreds of thousands of additional units of famous-label goods held by Waitex on behalf of TC Fashions,” said a filing.

An inventory list of goods in the Waitex warehouse dated several weeks before the raid — and seized during the investigation — backed this up, showing more than 500,000 items were in storage. The inventory reads as a who’s who list of major brands of products such as jackets, sunglasses, jeans, skirts, sweatsuits, sweatshirts and knit shirts.

Following the raid, Waitex was added to the list of defendants in the case, with The North Face and Polo’s legal team arguing the company had actively participated in the counterfeiting activity.

But Waitex insists it had no knowledge of TC’s business practices. In a court filing on Nov. 4, Dwight Yellen, the defense attorney representing TC Fashions and Waitex, argued that TC Fashions was merely a “jobber,” buying close-out goods from major manufacturers and reselling them to smaller retailers.

“It’s clear that [TC Fashions] had counterfeit merchandise,” Yellen said in an interview. “They didn’t know it was counterfeit until the plaintiff showed up and pointed it out to them.”

Yellen noted that TC Fashions has cooperated with The North Face and Polo in the matter.

In his Nov. 4 filing, Yellen argued that as a provider of warehouse space, Waitex had no active or direct involvement in any counterfeiting activity. According to the filing, Waitex has been in business for 22 years and runs seven warehouses in New Jersey that primarily serve the garment industry.

“There are approximately 8 million pieces of garments stored, worth over $400 million in retail value,” said Yellen in the filing. “We receive and ship over 2.75 million garments per month on average.”

Yellen described the raid as a “fishing expedition” and said that The North Face and Polo had “not been able to link Waitex to the TC Fashion defendants beyond the bailor/bailee relationship.”

“This is not some landlord on Canal Street where everybody is selling counterfeit goods,” said Yellen in an interview. “This is a huge respected logistics operation. I don’t think they can be charged with investigating every item that goes into and out of their warehouse.”

Elings and Yellen said the judge is deliberating on Waitex’s alleged involvement in the process. Elings also acknowledges that the bulk of Waitex’s business is legitimate.

“Despite that, it doesn’t give you free reign to allow others to use you to commit illegitimate acts,” said Elings.

Documents seized at the TC Fashions office provided a look at the inner workings of the alleged ring. Elings asserts that e-mails sent to Christine Yuen, owner of TC Fashions, show Jacky Cheon, president of SDT, traveling from his headquarters in South Korea to China, Vietnam and the Philippines in search of factories to produce the goods.

“[I] found very big real factory for Polo items in here. They are a major factory (the biggest company in Philippine) for Polo in the world, now I am discussing with them, they have over 100,000 pcs of stock but they are too worry about selling. (I said I will ship to Korea),” reads an e-mail dated Aug. 9, 2005. The Polo factory comes up again in an e-mail two days later: “I checked all of the items but I couldn’t ship out yet, until now this item is under making because I am making in the same factory (the biggest factory in Philippine) at the night time only … “

On Aug. 17, Cheon responded to an inquiry about Gap hooded sweatshirts: “actually I can make this item from China but problem is it will be very hard to ship this lot from China because of big volume & making price problem … I tried to make this lot in Philippine but I couldn’t find out same textile with cheap price.”

According to Elings, the seized e-mails show that the majority of goods were likely counterfeit given how they were manufactured.

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