Fighting Fakes

Fighting Fakes

By Janet Leiser

Senior Editor

Thanks to the ubiquitous Internet and the cost of cheap overseas manufacturing, high-quality knockoffs are an increasing problem for U.S. business.

Seven For All Mankind LLC knows the game. To protect its name and multimillion-dollar sales, the company has filed 24 lawsuits nationally since October to stop the sale of copycat 7FAM jeans on the Internet and in stores.

In April, with the help of 100 law enforcement officers, the company seized several thousand pairs of fake 7FAM jeans at 18 locations, from Miami to Key West.

The counterfeit jeans are made in China and sell for far less than the retail price of $120 or more for the real thing, says Michael Heimbold, the Santa Monica, Calif., intellectual property rights lawyer who represents the Los Angeles-based apparel company

"It used to be just handbags and sunglasses," Heimbold says of knockoffs. "Now it's jeans."

Seven For All Mankind was the eighth company this year to file a trademark infringement complaint in U.S. District Court, Middle District of Florida. In 2004, there were half as many complaints filed in the district, which includes Tampa, Fort Myers, Orlando and Jacksonville. And in 2003, there were none.

"With the advent of the electronic marketplace on the Internet, people are able to conduct business on the fly just about any place," says Tampa lawyer Charles Bavol. "Now you don't have to stand on the street corner with your watches hanging from your overcoat."

Bavol is co-counsel on a local trademark infringement case brought in June by the New York City Fifth Avenue law firm of Gibney, Anthony & Flaherty LLP on behalf of Rolex Watch U.S.A. Inc. Lead lawyer is Amy Van Eepoel.

Knockoffs of watches, jeans, golf clubs and other products have been around for decades, Bavol says. In the past, the products were easily available at flea markets or street vendors. But the items were obvious fakes.

Not anymore.

Knockoffs of the 7FAM jeans have even been bought unknowingly by a New England department store. And copycat Rolex watches sold on the Internet for several hundred dollars can look like the real thing.

Heimbold estimates that 85% to 90% of all jeans sold on the Internet - from 7FAM to True Religion to Rock & Republic - are counterfeit.

"I'm sure a lot of people are being fooled," he says.

Few and far between

Historically there have been few trademark infringement cases in the Tampa Bay area, and there have been few lawyers that specialize in IP law, says Stetson University College of Law Professor Darryl C. Wilson.

"We tried to establish a Tampa Bay intellectual property lawyers' group a few years ago," Wilson says. "There were fewer than 10 of us. We got tired of seeing each other."

The southern part of the state tends to attract more IP lawyers, Wilson says. But it's the big cities, such as Chicago, New York City and Los Angeles, that have the big firms and the most IP lawyers.

Bavol, a former Holland & Knight LLP partner, who has now started six-lawyer Bavol & Judge PA, says trademark infringement cases are becoming more prevalent because of the Internet. And that's also why they're hard to go after.

"They are very, very difficult to prosecute," Bavol says. "Web sites open and close over night."

In the Rolex case, numerous sites and aliases are listed as defendants in addition to World Mail Direct Inc., CW Marketing Inc., Jean Dario and various John Does.

Although the costs of pursuing a trademark case can be high, Wilson says companies that don't prosecute copycats risk damage to their reputation, goodwill, revenue and legal standing.

"If the company doesn't go after someone who is putting out fake goods, over time the company's reputation will be diminished, and they'll lose their foothold in the market," Wilson says. "Likewise, if you wait too long to do anything and sporadically enforce rights, that behavior can be used against you (in court)."

Rolex is known as a strong policer of its intellectual property, the professor says.

7FAM

7FAM was founded in 1981 under the name of L'Koral Inc., according to the lawsuit. The privately held company transferred all of its assets, including its "Seven for all Mankind" branded jeans, to 7FAM in February.

The Authentic 7 jeans line, under the trademark Seven For All Mankind, was first introduced in 2000 at stores such as Bloomingdales, Barney's, Neiman Marcus, Saks Fifth Avenue, Macy's, Nordstrom and small boutiques.

Sales exploded from $12 million the first year to $58 million the second year. Since the jeans' introduction, sales have totaled $300 million - making the line the market share leader in their price range, states the lawsuit.

Richard H. Martin of Tampa's Akerman Senterfitt PA is co-counsel on the 7FAM case.

The company's enforcement actions seem to be working, says Heimbold, a partner at Alschuler Grossman Stein & Kahan LLP. 7FAM has shut down 10,000 Internet auctions selling knockoffs in the past few months.

"The amount of auctions are down by 80% over the past five months," he says.

Netfoundation

If 7FAM is successful in the Tampa lawsuit, the company will recover any profits from the sale of copycat 7FAM jeans sold by the defendant, Netfoundation LLC, Heimbold says. Netfoundation, which is registered to Richard and Denise Hauf, shut down its Web site, urbanweardirect.com, after the lawsuit was filed Aug. 1. The Haufs did not return telephone calls for comment.

"They had a fair amount of merchandise for sale." Heimbold says. "We're not sure yet how big a supplier they were."

In most trademark infringement cases, the plaintiffs "recover substantial monetary payments," including legal costs, Heimbold says.

"If you can demonstrate someone willfully sold counterfeit goods, he has to pay you pretty much all of his profits at a minimum," he says.

As for Bavol & Judge, the boutique business firm plans to expand to 10 lawyers by year's end, and part of the expansion will focus on IP law.