Customs Broker Assessed $8 Million in Damages for Trademark Infringement

A jury awarded $8 million dollars in damages against a Customs Broker found to have engaged in a conspiracy to import fake Coach® handbags and wallets in the case of Coach v. Celco Customs Services and Celine Wang, Ct. No. 11-cv-10787 (Central District of California).

On June 24, 2009, CBP seized a shipment of “catalogs” which actually contained 22,040 handbags and 10,300 wallets. Entry was attempted utilizing a fraudulent Power of Attorney (“POA”) allegedly issued by a biochemical company. Coach claimed that the customs broker, Celine Wang, and her company Celco Customs Services (“Defendants”), knew the POA was fraudulent and were actively involved in a conspiracy to import counterfeit Coach® handbags and wallets into the United States.

Coach alleged in its complaint that members of the conspiracy included: unknown John Doe defendants that had the responsibility of manufacturing the counterfeit handbags and wallets in China; others that had the responsibility of arranging for the transportation of the fake handbags and wallets from China to the Port of Los Angeles/Long Beach; and still others that had the responsibility of providing the financing for the manufacture and transportation of the fake handbags and wallets. Finally, Coach alleged that unknown persons stole the identity of a biochemical company and created fraudulent import documents in the name of that company.

Coach claimed that the POA received by Defendants was so patently false, fraudulent, and invalid on its face that no legitimate, law-abiding customs broker would have relied upon it to file entry papers with CBP. In this regard, Coach cited to the following inconsistencies in the POA: it was received from a foreign freight forwarder rather than directly from the importer and the broker had no direct contact with the importer; the tax identification number on the POA belonged to a different company; an ABI/ACS bond query performed by the broker confirmed the tax identification number and importer address discrepancy; the forwarder provided a “HOTMAIL” e-mail address for the importer; the POA had a duration of nine (9) days; even though the commercial invoice, packing list and bill of lading were addressed to the party alleged to have issued the POA, the broker made entry in the name of the company that matched the tax identification number in ABI. The broker sent all correspondence and invoicing for the shipment to the forwarder despite not having permission from the importer to do so and declined to respond to subsequent requests for copies of the documents from the importer of record.¹

Significantly, Coach did not allege that Wang and Celco were liable for trademark infringement simply because they failed to take precautionary steps that would have alerted them to the counterfeiting activity. To the contrary, Coach alleged that Wang and Celco already knew about the counterfeiting activity and were thus conspirators to the fraud.

In civil cases, when a jury makes a decision in favor of the plaintiff, the jury determines the defendant’s liability and the amount of money damages (if any) a defendant must pay. In this case, there is no written opinion by the judge, but rather findings by the jury as to the facts at issue in the case. Coach’s Complaint alleged three claims against Defendant’s on which the jury found a verdict:

1. The Defendants contributed to the infringement of six (6) of Coach’s registered trademarks;

2. The Defendants contributed to the false designation of the origin of the imported counterfeit Coach handbags and wallets; and

3. The Defendants unlawfully imported Coach® handbags and wallets without the trademark holder’s consent.

The jury found for Coach and determined that it had not consented to the importation at issue and that the imported goods did have a false country of origin, to which Defendants contributed. Finally, the jury found that the customs broker “[knew] or [had] reason to know that the person or entity that falsely designated the origin of goods was using its customs brokerage services to do so.”

Coach sought statutory damages in this case. The jury could have awarded between $1,000 and $2,000,000 for each of Coach’s trademarks that was infringed (not to exceed $16,000,000). The jury awarded $4,000,000 against Wang personally and $4,000,000 against her Company for contributing to the infringement of six of Coach’s registered trademarks.

The case is significant for a number of reasons, not the least which is that unlike prior attempts to assign liability to customs brokers for trademark infringement, Coach did not attempt to assert a private right of action against the broker under Title 19 for failing to adequately validate the POA. Instead, Coach relied upon the broker’s actual knowledge of the counterfeiting scheme to hold them accountable under the trademark statute.

Please do not hesitate to contact Alan R. Klestadt or Frances P. Hadfield  if you have any questions or concerns regarding this case. Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP is an EACC New York Member.