Gucci, Chloé and Dunhill awarded over $4 million in damages

In Gucci America Inc v MyReplicaHandbag.com (Case 2008 WL 512789, February 26 2008), the US Federal District Court for the Southern District of New York has awarded more than $4 million against the defendants in a counterfeiting action.

The underlying case involved claims by Gucci America Inc, Chloé SAS and Alfred Dunhill Ltd against several defendants for offering a variety of counterfeit products bearing the trademarks GUCCI, CHLOE and DUNHILL. In an earlier order, the court denied the motion to dismiss for lack of personal jurisdiction filed by two defendants and granted the plaintiffs' motion for a preliminary injunction. A default judgment was entered against the defendants and the case was referred to the court for an inquest into the amount of damages to be awarded to the plaintiffs. The defendants failed to file an argument on their behalf in connection with the inquest.

Because the judgment was granted by default, the court considered as true all facts alleged in the plaintiffs' complaint, except those relating to the amount of damages. Included among the damages-related allegations was a claim that the defendants have "collectively sold, offered to sell and/or distributed at least 424 different types of goods bearing counterfeits of the plaintiffs' marks".

The plaintiffs' complaint sought the maximum statutory damages under the Lanham Act (15 USC § 1117(c)) of $1 million "per type of good" for each mark that was wilfully counterfeited. The plaintiffs considered each of the 424 different types of goods to be separately compensable under the statute and thus sought damages of $424 million. At a minimum, the plaintiffs requested $50,000 for each of the 424 different types of goods (ie, a total of $21.2 million). The subsection of the statute that addresses wilful counterfeiting provides only a maximum award amount ("not more than $1 million per counterfeit mark per type of goods or services sold"), but does not provide a minimum. By contrast, the subsection addressing non-wilful counterfeiting provides for a range of "not less than $500 or more than $100,000 per counterfeit mark per type of good". Thus, in order to calculate the damages, the court needed to address both the amount of money to award per type of goods, as well as the number of types of goods at issue.

As to the number of types of goods, the court found that 424 was over-inclusive for categorizing the merchandize by "subtle differences in particular product's size, shape, colour, pattern or fabric". Instead, the court relied on "the functional purpose of the product" in order to identify six broad categories of goods (ie, handbags, wallets, handbag and wallet sets, watches, eyeglasses and belts).

In order to determine the amount of statutory damages per type of goods, the court surveyed case law and noted that most judges award well below the maximum on the basis of "per mark per type of goods". Ultimately, the court drew from its own experience in a similar case in which damages in the amount of $100,000 per mark infringed was awarded. Using that number, it awarded $3.6 million to Gucci, as there were six marks infringed and six different types of counterfeit goods (ie, $100,000 multiplied by six marks multiplied by six types of goods). Chloe was awarded $400,000 based on counterfeiting of four marks and one type of product, and Dunhill was awarded $300,000 for three marks and one type of product. Altogether, the defendants were thus jointly and severally liable for a total amount of $4.3 million.

Interestingly, the website operated by the defendants had since ceased all activities and correspondence sent by the court to the defendants was returned as undeliverable. The plaintiffs may thus be left to collect certain assets that were frozen as part of the court's grant of a temporary restraining order and preliminary injunction.

Karin Segall, Foley & Lardner LLP, New York