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Coach Inc, the US handbags and accessories group, has recently aimed a blow at counterfeits in China by bringing civil lawsuits against its infringers.
Coach in July and August charged two garment markets in Shanghai with facilitating the sales of counterfeits with Coachs brand name.
Both cases were tried, although the verdict had not yet been announced.
The defendants are Shanghai Longhua Garment and Accessory Market Managing Co Ltd and Shanghai Xingwang International Garment City Managing Co Ltd.
Both were accused of ignoring Coach’s repeated requests to stop their stall vendors from selling bogus goods carrying Coach’s brand name.
Coach sent letters to the two companies earlier this year asking that they stop infringing the intellectual property rights of the US company, but a month later fakes still were being sold in the garment markets.
Coach then sued the two companies and sought 500,000 yuan in compensation from each.
Zero tolerance
"Coach has a zero tolerance policy for infringements," Coach’s legal team said, "and we will move to protect our interest to the fullest when necessary."
The New York-based luxury goods giant entered the China market in 1998 and had 28 retail locations across China by the end of its 2009 fiscal year.
Coach has had an aggressive intellectual property enforcement program in China since 2000.
Not only does it cooperate with the government to fight counterfeiting, but it also has its own investigators looking for counterfeiters in factories, warehouses and markets.
According to the company, the lawsuits are part of a new litigation strategy it is rolling out globally. The strategy is to make it more costly and difficult for traffickers to store, move and sell counterfeit products.
Suing markets in addition to individual stall vendors bears a special significance.
"Bringing a civil complaint against the markets is intended to show the owners and managers of these venues and others like them that they cannot ignore counterfeiting activity on their property," the company reported.
Longhua representatives declined to talk about the lawsuit before the verdict, while Xingwang officials were not immediately available for comment.
Indirect Infringement
It will take some time for the cases to be concluded, but Tim Meng, managing partner of GoldenGate, a law firm in Beijing, told China Business Weekly that "Coach is very likely to win the lawsuits".
Meng said Longhua and Xingwang are indirect infringers even though they did not sell counterfeits, because they have provided a convenience for stall-holders to sell fake goods.
There was a similar case in 2007 when five international luxury brands- Chanel, LV, Burberry, Gucci and Prada- jointly sued operators of five stalls in the Silk Street market in Beijing and its operator, Beijing Xiushui Haosen Clothing Market Co.
The six defendants were eventually ordered to pay a total of 100,000 yuan in compensation to the plaintiffs.
"Operators can actually do something to stop counterfeiting activities in the markets. They can draft an anti-counterfeiting clause in the contract that will result in a penalty if a stall-holder sells fake goods," Meng said.
"It also works if the operator keeps patrolling the counterfeiting stalls every day with a 'no fake goods’ poster. The stall-holders can hardly bear that," he added.
Apart from operators, those who help to store, transport and hide counterfeit goods could also be indirect infringers, he said.
Luxury mania
Although intellectual property protection is attracting more attention, counterfeits of famous brands are still making their way to markets in a covert way.
A visit to Xingwang International Garment City, which is now involved in the lawsuit, revealed no name brand bags being displayed on shelf. But some did bear a resemblance to Coach, LV or Guess bags outside of differences in patterns or logos.
When asked for the latest brand-name handbag, a stall vendor hinted that it could be available for the right price.
Meng said the popularity of luxury brands to some degree is a driver of counterfeits in the markets.
"Most people in Eastern Asia have a mania for luxury goods," Meng said.
The law alone is not enough to fight the convert counterfeits in the markets. It needs a change in such a mania culture," he said.
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