The Los Angeles City Attorney’s Office won a permanent 10-year injunction and $3.6 million in civil penalties against six large-scale sellers of counterfeit clothing and accessories, all of whom are suspected gang members or affiliated with gangs, he announced this week. As well as being notable for its innovative approach, the decision highlights the link between counterfeiting and other criminal activities, and highlights the benefits of working with local prosecutors to bring intellectual property cases.

Using the California Unfair Competition Act and alleging violations of California Penal Code 350a (which covers those who willfully manufacture, intentionally sell, or knowingly possess for sale any infringing trademark registered with the Secretary of State or the USPTO ), the pursuit (in case 20STCV39902) alleged that six people were selling items believed to be from brands including Burberry, Chanel, Coach, Fendi, Gucci, Louis Vuitton and Tory Burch. The sales took place in LA’s Fashion District, using a variety of storefronts, sidewalk stands, storage units, stairwells, parking lots and car trunks.

This week, the Los Angeles City Attorney’s Office announced that the defendants – none of whom lived in the fashion district or had a legitimate job there – had been enjoined by a 10-year permanent injunction, sentenced to stay out of the district and ordered to pay a total of $3.6 million in civil penalties.

The lawsuit in California state court is the result of coordination between the office of LA City Attorney Mike Feuer, the Los Angeles Police Department, the Los Angeles Sheriff’s Department and private investigators, and is notable for a number of reasons.

The power of a civilian approach

The first is that it illustrates the impact that civil lawsuits can have.

Kevin Gilligan, an assistant attorney overseeing the Intellectual Property Prosecution Section (which obtained the judgment and injunction on behalf of the people of the state of California), told WTR that the Los Angeles fashion district is a hub of counterfeiting activity for over a decade. However, while the Los Angeles Police Department and the Los Angeles Sheriff’s Department have arrested hundreds of counterfeit sellers in the district, many are receiving light sentences and starting selling counterfeit goods again almost immediately – despite the best efforts of criminal court prosecutors.

“Therefore, we chose to use civil action as a legal strategy to deal with chronic IP infringers,” says Gilligan. “When prosecutors bring a civil action under Section 17200 and following of the Business and Professions Code on behalf of the people of the State of California, they can allege violations of multiple trademarks, document criminal histories dating back many years, and seek sweeping equitable relief, such as a 10 years of being present in the Quartier de la mode. Such inter-brand remedies and actions are generally not available under state criminal law or in an action brought by a single trademark owner. »

In this case, the ban was the big win. “Banning the worst offenders was the goal of the litigation from the start,” he notes. “Money has always been secondary. A defendant responded and stipulated a reduced sentence of $10,000 and a 10-year ban from the Fashion District. The other five did not respond and we requested and obtained the maximum sentence against the defaulting defendants. All have been banned from the Fashion District for 10 years and are subject to additional restrictions.

When it comes to end results, a civil approach may be essential, as recent criminal law reforms by the California State Legislature have reduced the impact of criminal penalties. For example, AB-3234 recently made most torts, including trademark infringement, deviable despite prosecutors’ objections. In this context, civil enforcement takes on new importance. And as this case shows, the result can be powerful.

Link between counterfeiting and other crimes

Another reason the case is notable is that it documents a tangible link between the sale of counterfeit products and organized gangs and individuals involved in other illicit activities. The six defendants were all believed to be gang members or affiliated with gangs, some with violent backgrounds. The Los Angeles City Attorney’s Office said a defendant “clearly displayed a handgun and bullets on his social media page, which is frequently used to advertise counterfeit Rolex watches,” while another told undercover investigators he was a member of the Malditos gang. In fact, a number of the defendants openly claimed gang membership. Moreover, one had previously been convicted of armed robbery and assault with a deadly weapon, the second had been convicted of possession of a sawed-off shotgun and separately of robbery. armed hand. Documents filed in court claimed that the defendants offered to sell Xanax and large quantities of marijuana, as well as counterfeit products.

In a press release announcing the verdict, Feuer said, “The sale of counterfeits is a source of revenue for some criminal gangs, who may use this money to finance other illicit activities. vital to continue disrupting counterfeiting networks involving gangs in Los Angeles.”

“A lot of people don’t understand the extent to which gangs and organized crime are involved in selling counterfeit products,” adds Gilligan. “This case shows that gang members and their affiliates routinely sell counterfeit products.”

The case also challenges the perception that counterfeiting is a victimless crime. In addition to the economic losses suffered by legitimate businesses and the city itself (with citizens deprived “of a stable tax base and revenue that can be used for courts, libraries, parks, public safety and repair streets”), the court documents paint a picture of legitimate vendors being intimidated by gang members.

The refrain of “counterfeiting only harms big brands” and the perception that such activity is isolated from other forms of criminal behavior is a great frustration for rights holders. Cases like this add to the body of evidence pointing to the error of such views.

A local approach to a big problem

Finally, the case highlights the benefits of working with local prosecutors to bring intellectual property cases.

“Trademark owners often focus on pursuing their cases through US attorneys who have powerful and far-reaching remedies,” observes Gilligan. “Some cases have international connections and a local prosecutor simply cannot bring that case due to lack of skill and/or resources. Unfortunately, for trademark owners, very few cases will merit review and prosecution under federal guidelines.

Intellectual property attorneys can therefore benefit from opening a discussion with their local prosecutor’s office about its willingness to pursue such cases. Unlike the Los Angeles City Attorney’s Office, which has focused on intellectual property cases for more than a decade and has two full-time attorneys to handle these cases, not all local offices have dedicated resources. to intellectual property. However, even “if there is no dedicated prosecutor in your jurisdiction, it may be worth contacting a section of the prosecutor’s office that deals with white collar crime or fraud to see if they would be interested,” says Gilligan.

Federal intellectual property cases, especially those involving domestic and international criminal networks, remain an important option for rights holders. They also matter to federal prosecutors. However, many intellectual property cases could be handled by local prosecution agencies, which outnumber their federal counterparts. Local experts can also provide important support to brand owners. “Best practices might include a brand hiring a local investigative agency to conduct undercover investigations and purchases, then having the investigative agency take the matter to the law enforcement agency. to investigate, serve search warrants and take the case to the local prosecutor,” Gilligan suggests.

Currently, funding for the fight against intellectual property crime at the local, state and federal levels in the United States fails to address the danger to consumers or the need for private industry to protect its intellectual property. Cases like this, however, prove just how effective prosecution can be.