California Jury Awards $8 Million Penalty to Coach for Customs Broker's Trademark Infringement

CBP on July 24, 2009, seized a shipment imported into the Port of Los Angeles consisting of 22,040 handbags and 10,300 wallets bearing Coach’s registered trademarks. According to Coach, the goods were counterfeit. Celco acted as the broker on the entry.

The power of attorney associated with the entry was obtained by Celco from the freight forwarder, and listed Pierce Biotechnologies as the importer. But Coach said Pierce was not in the business of importing counterfeit purses and wallets -- the company was instead listed as the result of an identity theft scheme to hide the identity of the true importers. The identity theft tactic is increasingly being used by importers of counterfeit merchandise, Coach said. By using the name of an established importer, counterfeiters avoid heightened CBP scrutiny of the shipment, and more easily avoid civil and criminal prosecution due to their anonymity.

Coach alleged that Celco knew Pierce was not the true importer of the goods. First, Celco never attempted to verify that Pierce was the true importer, as CBP advises. Even when faced with a discrepancy between the tax identification number and the name of the company on the invoice, Celco simply changed the name to match the ID number, never attempting to contact Pierce, Coach said. Second, the power of attorney was unusual in that it was only valid for eight days, and so would only support a one-time importation, Coach said. Given that the customs broker had never worked with the importer identified on the power of attorney, the short duration of the document should have immediately raised red flags, said Coach. “No legitimate and law-abiding Customs broker would have failed to take even a single step to verify the authenticity of the POA,” it said.

For its part, Celco argued Coach was only filing suit to cover up an in-house conspiracy by a Coach employee to bring in non-counterfeit but out-of-date handbags and wallets that had not been authorized for import by the company. The action doesn’t identify the actual importers of the merchandise, singling out only Celco, in line with Coach’s alleged tactic of suing “the smallest, the last, and the innocent in the chain.” According to Celco, Coach’s attorney said the company pursues this strategy “because the customs broker is rarely able to afford six-figure attorney’s fees to mount any viable defense, even though they were not liable at all because ordinarily a custom broker has no knowledge of what is in the container, and has no duty to inspect the same.”

In its March 28 verdict, the California Central District Court jury found Celco and Celine Wang guilty on all remaining counts (a conspiracy count had earlier been dismissed from the action because of its late filing). According to the jury, Celco and Wang knew that its client was using its brokerage services to infringe Coach’s trademarks, and still willfully acted as customs broker on the entry. Celco and Wang also knew that its client falsely declared the origin of the goods, yet still proceeded, the jury found.

Able to impose a maximum penalty of between $1,000 and $2,000,000 for each trademark violation, of which there were five, the jury awarded slightly less than half of the maximum penalty, or $4,000,000, against each of Celco and Wang.

Email ITTNews@warren-news.com for a copy of Coach’s complaint, Celco’s response, or other documents associated with the case.