November 1, 2010
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UNITED STATES: U.S. Companies Win $78 Million Verdict Against Chinese Cybersquatters
The U.S. District Court for the Southern District of New York has awarded apparel brand owners North Face and Polo Ralph Lauren $78 million in damages in an Internet counterfeiting case. The North Face Apparel Corp. & PRL USA Holdings, Inc. v. Fujian Sharing Import & Export, Ltd. Co. d/b/a B2BSHARING.com et al., Case No. 10-CIV-1630 (S.D.N.Y. Sept. 13, 2010).
The defendants operated a vast network of more than 130 Chinese websites and drop-shipped knock-off goods from China directly to consumers in the United States. According to the plaintiffs, the defendants amassed approximately 6,000 domain names, many of which included the plaintiffs’ marks—for example, NorthFaceOutletsale.com, PoloShirtCompany.com, and PoloRalphWorld.com.
To facilitate sales in the United States, the defendants’ websites and domain names were designed to resemble authorized Internet retail stores selling the plaintiffs’ genuine products. Further proof that the defendants knew they were engaging in illegal activity was that they provided incomplete identification and false contact information to the Internet Corporation for Assigned Names and Numbers (ICANN), the body that governs domain names and requires all registrants to provide accurate registration information.
In March 2010 the court entered a temporary restraining order and an order to show cause directing the defendants to demonstrate why a preliminary injunction should not be entered. On September 13, 2010, after the defendants had refused to answer or otherwise respond to the plaintiffs’ complaint or amended complaint, the court entered a default judgment and permanent injunction against the defendants for federal trademark counterfeiting and infringement under Section 32 of the Lanham Act, 15 U.S.C. § 1114, and cybersquatting under Section 43(d)(1), 15 U.S.C. § 1125(d)(1).
The court gave weight to the facts that the defendants had gone to great lengths to conceal their identities and to remove their profits from the court’s reach. The defendants’ illicit tactics included using multiple accounts to evade money-laundering limits and using multiple PayPal accounts to mask the true identity of the entities receiving the monies.
The permanent injunction order required the disabling and transfer of the infringing domain names to the ownership and control of the plaintiffs. The court released to the plaintiffs the monies restrained in the defendants’ PayPal accounts, although such funds fell short of the plaintiffs’ statutory damages award of $78 million.
The ruling may serve to deter some counterfeiters from selling fake goods on the Internet.