After a three year long investigation, which resulted in a lawsuit being filed against online business-to-business online marketplace Tradekey.com, Swiss luxury giant Compagnie Financiére Richemont has been ruled the victor. The presiding judgegranted Richemont a ‘permanent injunction’ against Tradekey for consciously promoting and selling a number of counterfeit products on its website.
In August 2011, Tradekey published a press statement on its site which explains the company’s dedication to ‘promote fair competition’ on its site. It also explains the site continuous perseverance to ‘preventing trading of fake and replica products, services, and brands with intellectual property.’ However during the investigation, spearheaded by Susan Kayser partner at Jones Day and representative of the plaintiffs, it was discovered that Tradekey had more than 6,000 unauthorized sellers promoting replicas of Richemonts' products, and that the company was intentionally helping sellers advertise and deliver large quantities of knock offs. At one point, the Richemont investigator asked a employee point blank if Tradekey had a “problem” with selling counterfeit products to other companies, to which the employee answered “it did not” and concluded that the company hold the “replica industry” accountable for a “whole lot of revenue.”
Richemont wins important battle in their campaign against counterfeit goods
The Californian federal court ruled that Tradekey had “actively promoted and facilitated the sale” of forged goods by selling memberships to its site, which in turn give new members tips on how to market their products. The judge therefore ruled Tradekey accountable for “contributory trademark infringement” and banned the site from “permitting, allowing or facilitating customers, users or members of Tradekey.com” and its partner websites from posting or displaying listings to “buy, sell, manufacture or distribute products bearing the plaintiffs marks.” The injunction granted also included the disuse of search-engines to show any of the luxury company’s bands and prevents Tradekey from using brand names as “key words, ad words or any other type of metadata.” The judge also stated that the company was not allowed to give out advice to any outside parties on “how to create or post listings for products” that contain Richemont brands, logos or marks. The federal court ordered Tradekey to introduce new “procedure to ensure compliance” with the new injunction and that the company must submit written evidence of their compliance, as well as guarding its site against future counterfeiters.
Kayser stated that the goal of their lawsuit “was to protect consumers worldwide,” and show that holding websites can be held accountable for selling counterfeits: “They cannot hide their head in the sand and wait to be tapped on the shoulder,” Kayser argues. The winning of this lawsuit also had an impact on brands and third-party websites, like eBay or Alibaba, the largest business-to-business marketplace website. Whilst eBay sells its products straight to its consumers, Tradekey sells its goods in bulk to businesses, making vital for Richemont to be able to hold the company accountable for ‘contributory infringement’. Roxanne Elings, a partner at Davis Wright Tremaine LLP, specialized in trademark law and brand protection believes that this case ruling may “change the landscape” and how online counterfeiters run their operations. Elings argues that this case settlement shows a “prevailing attitude,” and reinforced the notion that online marketplaces need to have a system in place to look out for counterfeits and replicas being sold on their sites.
Earlier this year Richemont won a lawsuit against Chinese own company, Nangen Technology and were awarded 100 million dollars in damage by a New York federal court. However, as in the previous court ruling, this financial compensation is considered a 'symbolic gesture,' because it will be almost impossible to piece together the money from such a large and widespread grid of operators. What is most important to Richemont is being able to prevent and interrupt the counterfeiters line of work. Due to the courts ruling in Richemonts' favor, a number of websites will be shut down and the verdict stops these sites from being found on search engines, like Google or Yahoo. The judged also ordered all social network sites to remove any advertisements they have from these websites.
Counterfeiting is a big issue in the luxury industry, especial in the watch market. It is estimated by the Worlds Customs Organization that counterfeiting is a 600 billion dollar crisis, with between five and seven percent of all goods sold on the global market are in fact counterfeits. According to Swiss group Fondation de la Haute Horlogerie, approximately one billion dollars are lost each year to counterfeit producers.