Web site operators convicted of selling counterfeit goods

Two Web site operators have admitted to selling counterfeit goods in what is apparently the first successful federal prosecution of owners of an Internet site for this crime.

On March 6, Mark Edward DiPadova, 35, of Woodland Hills, Calif., and Theresa Gayle Ford, 36, of Lancaster, S.C., pleaded guilty in federal court in Columbia, S.C., to conspiracy to traffic in counterfeit Rolex, Cartier, and Tag Heuer watches; Montblanc pens; and Oakley sunglasses, in violation of federal law. Each faces a maximum five years imprisonment and fines of up to $250,000.

“This case demonstrates that persons bent on defrauding legitimate businesses of their good names cannot hide behind the anonymity provided by the Internet,” said Scott N. Schools, U.S. Attorney for the District of South Carolina. “They can and will be brought to justice.”

“We at Cartier and Montblanc hope the criminal indictment against DiPadova, et al. will deter other `cyber-counterfeits,’ ” JCK was told by Bharet Dube, associate intellectual property counsel for Cartier and Montblanc International, at their headquarters in Geneva, Switzerland. “In any event, we will spare no effort in pursuing counterfeiters, whether in the on-line or `off-line’ context.”

There are up to 600 Internet sites selling counterfeit goods, according to the international trade law firm DeKeiffer & Horgan, Washington, D.C.

This case involved fakegifts.com (now shut down), which DiPadova owned and which reportedly was one of the largest Web sites dealing in counterfeit luxury goods. Posting disclaimers that its wares were “only replicas,” the site sold thousands of fake Cartier, TAG Heuer, Montblanc, and Rolex watches and other luxury goods to consumers in the U.S., Europe, South America, Australia, Mexico, and Canada and needed at least two commercial shipping services to send them. Watches sent abroad were often wrapped in aluminum foil and hidden inside “pop lights” (six-inch dome lamps) to prevent detection, said federal authorities.

Owners of affected luxury trademarks didn’t sit idle. In civil actions last year, Rolex reportedly won a $1 million judgment and Movado $250,000 against DiPadova. In November, Montblanc and Cartier were awarded $15 million-the highest amount ever ordered by a federal court in a trademark counterfeiting case-by a U.S. district court in Southern California. That court, acting on a suit filed by Montblanc and Cartier, found DiPadova (and the several aliases under which he allegedly worked) guilty of “willful trademark counterfeiting” under state and federal law. The court authorized Montblanc and Cartier to “take any action technically feasible to shut down or interfere with the unlawful operation of [DiPadova’s] infringing Web sites.”

But enforcing such civil judgments was almost impossible because the Internet company had no formal legal address, had several “mirror” sites, and its owner couldn’t be located. DiPadova reportedly dared authorities and brand owners to find and stop him.

Over a year ago, Cartier and Montblanc hired a detective firm to investigate the site and its operations. Based on information from that investigation as well as other tips, U.S. Customs launched a seven-month investigation in July 2000 using its Cybersmuggling Center (which investigates transborder crimes that use the Internet, including trademark infringement and violations of intellectual property rights). Customs agents in Columbia and Greenville, S.C.; Charlotte, N.C.; and the Jacksonville, Fla., Air Branch were involved. Aid also came from the Computer Crime and Intellectual Property Section of the United States Department of Justice.

Based on the investigation’s results, a federal grand jury in South Carolina on Jan. 17 issued a six-count indictment for trademark infringement (and failure to comply with the California court order). Arrest warrants for DiPadova and Ford were issued Jan. 19, and they were arrested by federal marshals and local police in Lancaster, S.C., where the Web site’s operations were found, on Jan. 22. In February, the fakegifts.com site was permanently shut down when the California civil court judgment was presented to the server hosting the Web site.

“This case underscores the importance of cooperation between federal and local law enforcement, the shipping industry and product manufacturers in fighting trademark infringement and cyber crime on the Internet,” said U.S. Customs Acting Commissioner Charles Winwood.