A federal judge in the Southern District of New York recently sent a strong message to online counterfeiters by granting the owners of famous clothing brands The North Face and Polo Ralph Lauren the authority to shut down new websites selling counterfeit goods and seize proceeds from counterfeit sales without seeking further court approval. Judge Alvin K. Hellerstein unsealed the order for contempt in The North Face Apparel Corp. et al. v. Fujian Sharing Import & Export Ltd. et al. on December 20, 2010.

By way of background, in March 2010, The North Face and Polo Ralph Lauren brought a trademark infringement, unfair competition, and anti-cybersquatting action against a number of Chinese entities believed to be selling knockoff versions of their trademarked goods through a large counterfeiting ring. Many of the goods were sold under domain names that were similar to the brands’ names. The counterfeiting ring involved hundreds of websites and was believed to be the largest of its kind on the Internet.

After the defendants failed to answer the plaintiffs’ amended complaint, the Southern District of New York entered a default judgment in favor of the brand owners in the amount of $78 million, and awarded the plaintiffs a permanent injunction. The court ordered that all money in the defendants’ PayPal and similar online payment processing accounts be transferred to The North Face and Polo Ralph Lauren as partial payment.

Although the permanent injunction specified approximately 100 fraudulent websites that were to be transferred to the plaintiffs, the counterfeiters continued registering new infringing domain names and creating new sites to sell the knockoff goods. Rather than back down, The North Face and Polo Ralph Lauren sought the order for contempt from the court to allow them to continue to shut down any new infringing websites and obtain proceeds from the counterfeit sales without further court approval.

The contempt order issued in December 2010 is particularly noteworthy in that it grants The North Face and Polo Ralph Lauren ongoing authority to provide notice of the order to domain name registries when additional infringing domains are identified. The registries will have two days to temporarily disable the domains and ten days to transfer them to the brand owners. After getting notice of the order, ISPs hosting any infringing websites owned or controlled by the defendants must deny access to the IP addresses used by those websites within three days. “Internet providers” including ISPs, back-end service providers, web designers, sponsored search engine or ad-word providers, and any parties delegating IP addresses must also discontinue providing services for the defendants within two days of being provided notice of the order.

It is unclear what effect the order issued in this case will have on the broad and complex issue of online counterfeiting and enforcement of trademark rights on the Internet. At the very least, it may encourage brand owners facing similar online counterfeiting challenges to more aggressively pursue infringers. It may also encourage entities that are engaged in online counterfeiting to think twice about their infringing conduct.

Arent Fox currently represents a number of apparel and fashion companies in anti-counterfeiting and related enforcement matters. Please contact us with any questions regarding this case or our expertise in this area.