In April, we wrote about True Religion’s eye-popping $864 million judgment against the proprietors of over 200 websites that had been selling counterfeit True Religion merchandise. Recently, luxury manufacturer Coach, Inc. also achieved a seemingly substantial victory — a $257 million default judgment in the U.S. District Court for the Northern District of Illinois that will result in the shutdown of 573 websites. The judgment was reportedly part of Coach’s widely-publicized anti-counterfeiting campaign dubbed “Operation Turnlock”. Each of the 573 domain names incorporated the COACH trademark, such as coachbagfactory.com, cheapcoachpursesonline.com and coachbagsoutletcheap.com, and many of the websites sold products featuring counterfeit Coach trademarks. Coach was able to identify information concerning some of the registrants of the domain names, including names, email addresses and street addresses. According to court filings, Coach identified addresses spanning the globe, including numerous addresses located in China.
Coach filed the case in March raising causes of action for federal trademark infringement and counterfeiting, false designation of origin, cybersquatting and violation of the Illinois Unfair Trade Practices Act. The district court allowed Coach to serve the defendants by e-mail and electronic publication online. None of the registrants of the domain names responded and, consequently, Coach moved for a default judgment.
On October 15, the district court granted default judgment on all counts and awarded substantial damages: (i) $2 million from each of the 100 defendants ($200 million in total) that used one or more counterfeit trademarks on products sold through the websites; and (ii) $100,000 for each of the 573 domain names that incorporated the Coach trademarks ($57.3 million total). The district court also entered a permanent injunction against the defendants and ordered that ownership of each of the domain names be transferred to Coach.
In a press release, an executive from Coach said Operation Turnlock “was designed to make business increasingly more difficult for those involved in any aspect of trafficking in counterfeit goods.” However, as we asked with respect to True Religion’s $864 million judgment, was Coach’s case anti-counterfeiting strategy worth it in this case? A $257 million judgment is certainly substantial but the amount of the judgment in internet counterfeiting cases is often better suited for headlines than the bottom line. It is often difficult, time-consuming and expensive to attempt to collect on judgments against counterfeiters selling online, especially internationally. Counterfeiters have become increasingly sophisticated and evasive so that they can more easily hide their illegal operations and identities or, if caught, shift operations to a new location.
The most significant and beneficial portion of Coach’s default judgment is the transfer of the counterfeiters’ domain names to Coach, especially in view of the fact that the domain names incorporate the COACH trademark. By procuring the transfer of the domain names, Coach has shut down a substantial number of websites and will control a number of domain names that future counterfeiters might have used to further their illegal operations. One significant question, however, is where did the counterfeit inventory go and where will the counterfeiters sell next?
We don’t make it a secret at Grimes LLC — our approach to anti-counterfeiting enforcement is to develop cost-effective and cost-conscious strategies that not only shutdown illegal operations but also focus on preventing illegal counterfeit operations from recurring in the future through a mix of civil and criminal remedies.
