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THE LAW PAGE

Fake purses, real money: Louis Vuitton's massive Canadian counterfeiting award Add to ...

It has the makings of a prime-time TV drama, almost: A pair of undercover investigators approach the back alley entrance to a Vancouver-area warehouse. Once inside, they aren’t searching for drugs, terrorists, or illegal weaponry. They are looking for fake designer purses.

In 2009, private investigators working for Paris-based Louis Vuitton Malletier SA – a subsidiary of LVMH Moët Hennessy Louis Vuitton SA – entered the warehouse of Singga Enterprises (Canada) Inc., where they believed the importers and sellers of an array of counterfeit handbags were operating, according to court documents.

The investigators posed as potential customers and were greeted by a woman who showed them merchandise and handed them a catalogue listing handbags and other copied items bearing the trademarks of a laundry list of the world’s top luxury brands.

Two years later, the evidence the investigators found resulted in the largest anti-counterfeiting award ever imposed in Canada, as a Federal Court judge ruled last week that Singga and two other companies involved in the case must pay Louis Vuitton and its co-plaintiff Burberry Ltd. $2.48-million.

The summary judgment, issued without a full trial, is the latest victory in a global assault on counterfeit goods launched by Louis Vuitton – which has an entire department devoted to the cause and regularly employs private investigators and lawyers in its fight. In recent years, Louis Vuitton and other companies like it have taken it upon themselves to stem the flow of fakes, which experts say come mostly from China, to protect their recognizable brands.

They warn that the counterfeit business hurts more than just their bottom lines. Cheaper counterfeit goods are often made in sweatshops, they say. And the much-cheaper goods are often sold on the black market, costing Canadian and other governments tax revenue.

Louis Vuitton hailed the Federal Court judgment as a landmark, saying it showed Canada’s courts are increasingly taking counterfeit goods seriously. But Valerie Sonnier, the company’s global intellectual property director, said Canada needs to do more, including giving customs agents wider powers to seize suspected counterfeit goods at the border.

“We hope this decision will send a message to counterfeiters the world over that Louis Vuitton will aggressively implement its zero-tolerance policy against counterfeiting,” Ms. Sonnier said in a press release.

According to the text of the Federal Court judgment, Louis Vuitton found out about the Singga operation after its head of civil enforcement for North America had purchased two handbags with trademarks “confusingly similar” to its own at a store in Quebec City a few months earlier.

Louis Vuitton traced the origin of the bags and sent two private investigators to a Burnaby, B.C., warehouse, where they placed orders. Investigators also made similar visits to warehouses in Alberta and Markham, Ont. Louis Vuitton and Burberry then launched a lawsuit against three companies and seven people last year.

For Louis Vuitton, the action was the latest in a series of Canadian court fights over counterfeiting. In 2008, it won a $980,000 award in another counterfeiting case, until now the highest such award in Canada.

In the most recent Federal Court ruling, issued June 27, Mr. Justice James Russell ruled that the defendants’ conduct was “egregious” and that the counterfeiting operations were large-scale, sophisticated and deliberately concealed.

He chastised the defendants’ failure to provide documents or to do more than “minimally participate” in the proceedings, saying they showed a “blatant disregard for the Court process.” None hired a lawyer, although a Toronto paralegal did appear on behalf of some of the defendants, and one defendant appeared herself in court.

But as the judge pointed out in his decision, at least some of the defendants continued to sell counterfeit merchandise, even after the lawsuit against them was filed last year. In the case of one of the defendants, Altec Productions, based in Markham, Ont., the outfit merely changed its Web address, sending out an e-mail to clients shortly after being served with the statement of claim from Louis Vuitton and Burberry.

Altec Productions did not respond to a voice-mail left at its listed number in Markham, Ont. But on the website named in the judgment this week, you can still find a long list of luxury handbags and accessories, bearing high-profile brand names.

Calls made to Singga’s listed number in Vancouver were answered by the whistles of a fax machine. The company did not respond to an e-mail sent to an address mentioned in the judgment. The other B.C. company listed as a defendant, Carnation Fashion Co., could not be reached for comment.

Lawyers who work on counterfeiting cases say brand owners, regulators and police have barely scratched the surface of a growing, multibillion-dollar illegal industry.

Lorne Lipkus, of Kestenberg Siegal Lipkus LLP in Toronto, an outspoken lawyer who specializes in anti-counterfeiting investigations and litigation but who was not involved in this case, said it is almost impossible to estimate the size of the counterfeiting business as a whole. It is often pegged at about $250-billion (U.S.) a year in the United States alone, making it perhaps a $25-billion business in Canada, he said.

“Nobody knows how much money they are making,” Mr. Lipkus said, adding that, in many other counterfeiting cases, tracking down and collecting awards from defendants is often difficult, as some hide their assets overseas, or have links to other “organized crime.”

Tara James, a lawyer with Osler Hoskin & Harcourt LLP who has acted for Microsoft in lawsuits over counterfeit software, said awards from U.S. courts have long been larger than those in Canada. But she said word of a record award here is still likely to serve as a deterrent.

And, she added, the issue is not limited to designer handbags, but extends to other products where consumer safety could be put at risk: “People tend to be less sympathetic to clients like Louis Vuitton or Microsoft, but what you need to appreciate is counterfeiting involves things like vitamins and pharmaceuticals and batteries and shampoo and baby food.”

 

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