Fake Watches Lose in Court

Luxury watch brands have won recent court victories against online and brick-and-mortar retailers who sell fake or altered versions of their products.

  • A recent court victory for Montblanc pens could benefit luxury watchmakers, says a recent American Watch Association (AWA) newsletter. In May, a Boston federal court issued a nationwide preliminary injunction against Staples, the national office supply chain, to stop selling Montblanc writing instruments whose serial numerals and secondary trademarks have been removed.
    This decision is “a valuable precedent for luxury watchmakers facing similar problems from the sale of altered and defaced gray market and diverted watches bearing their trademarks,” says the AWA report.
    The court held that sale of the altered pens tarnished Montblanc’s image and impeded its ability to control product quality. Montblanc also has trademark infringement suits against two other national office supply chains—Office Depot and OfficeMax.

  • A Web site’s operators have admitted to selling counterfeit goods online in the first successful federal prosecution 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 Columbia, S.C., federal court to conspiracy to traffic in counterfeit Rolex, Cartier, and TAG Heuer watches, Montblanc pens, and Oakley sunglasses, in violation of federal law. Each faced 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.

“We hope the criminal indictment [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. “We will spare no effort in pursuing counterfeiters, whether in the online or ‘off-line’ context.”

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

This case concerned fakegifts.com, 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 United States, Europe, South America, Australia, Mexico, and Canada.

Owners of affected luxury trademarks weren’t idle. In civil actions against DiPadova and the site last year, Rolex reportedly won a $1 million judgment and Movado $250,000. In November, Montblanc and Cartier were awarded $15 million—the most ever by a federal court in a trademark counterfeiting case—by a U.S. District Court in Southern California. It found DiPadova (and the several aliases under which he allegedly worked) guilty of “willful trademark counterfeiting” under state and federal law, and authorized Montblanc and Cartier to “take any action technically feasible to shut down or interfere with the unlawful operation of [his] infringing Web sites.”

That was difficult because the Internet firm had no legal address, used “mirror” sites and DiPadova—who allegedly dared brand owners to find him—couldn’t be located.

More than a year ago, Cartier and Montblanc hired a detective firm to investigate the site and its operations. Based on information obtained during the investigation, along with other tips, U.S. Customs launched a seven-month investigation in July 2000. The “weapons” used included the U.S. Customs Cybersmuggling Center, which investigates crimes involving the Internet, including trademark infringement and violations of intellectual property rights. Customs agents in Columbia and Greenville, S.C., Charlotte, N.C., and members of the department’s Jacksonville, Fla., Air Branch also were involved, and additional aid came from the Computer Crime and Intellectual Property Section of the United States Department of Justice.

Based on the investigation’s results, on Jan. 17, a federal grand jury in South Carolina 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 on Jan. 22 by federal marshals and local police in Lancaster, S.C., where the Web site’s operations were found. In February, fakegifts.com was shut down when the California civil court order 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.