Imitation may be a sign of success, but one Orange County surfwear maker isn’t flattered.
Huntington Beach-based Quiksilver Inc. recently filed lawsuits in OC and New York against companies it claims sold or attempted to sell knock-off versions of its clothes to Costco Wholesale Corp.
Quiksilver is suing Los Angeles-based Sam-Rox Industries Inc. and New York-based Arthur Dgangiev Inc. for trademark infringement. The company claims Sam-Rox and Arthur Dgangiev bought or planned to buy fake Quiksilver clothes and resell them to wholesaler Costco. Issaquah, Wash.-based Costco has been working with Quiksilver and is not a defendant in the suits.
Last month, Quiksilver filed a suit against Sam-Rox, accusing the company of selling more than 3,000 pairs of pants bearing its trademark to Costco in May 2000. The lawsuit says Sam-Rox also is mentioned in a separate trademark claim filed a year ago by Irvine-based apparel maker Stussy Inc. The Stussy lawsuit still is pending.
Quiksilver filed a second lawsuit in New York against Arthur Dgangiev alleging the company planned to sell 718,000 items with Quiksilver labels and those of its Roxy line to Costco. The lawsuit put the value of the shipment from an unnamed supplier at $10 million.
According to the lawsuit, Costco became suspicious because of the size of the order and review samples it received. Costco contacted Quiksilver and forwarded the samples to the company, which confirmed them as fakes. The company filed suit against Arthur Dgangiev in the hopes of identifying the supplier of the products.
“Quiksilver is very careful because it built its reputation in part for being selective about distribution,” company attorney Charles Exon said. “We have to be diligent to make sure brand name is not diluted.”
As surfwear has grown in popularity, companies such as Quiksilver have become targets for pirates, just like top-name designers and other clothing companies.
“It’s a problem for anybody who sells branded consumer products that are easily duplicated,” said Tony Cherbak, a retail analyst at Deloitte & Touche LLC in Costa Mesa. “Mostly companies fear that there are now inferior products out there that can tarnish the image of a brand. Another issue is that counterfeiters don’t care where they sell the product, but a company doing a good job of building its brand has to watch its distribution.”
One of the biggest defenders of its products is Foothill Ranch-based sunglasses maker Oakley Inc.
Last year, the company’s anti-piracy efforts resulted in the seizure of more than 780,000 pairs of sunglasses as well as production gear and supplies. In 1999, Oakley recovered more than 2.4 million fake products and helped gain the arrest of some 300 people on suspicion of trademark violations, the company said.
Two weeks ago, Oakley officials came across their first samples of counterfeit shoes.
Vance Lommen, Oakley’s director of legal and security, recently was mailed knock-offs of three shoe models, including imitations of the company’s Flesh and Nail lines found in Colombia by a local sales representative.
“When you start seeing them knocking off our goods, that means sales are good,” Lommen said.
Oakley’s Time Bomb watches, which sell for $1,500 to $22,000, also have been found on the streets for about $120.
Lommen heads up a team of five people at Oakley with contacts around the world. He said he calls upon lawyers and works with local police to stop counterfeiters. A recent bust in New York led to the arrest of 14 people and the three-month closure of six stores selling fake products on Canal Street, where counterfeit products are common.
“It’s like a drug war,” Lommen said. “The people knocking off our goods operate like a cartel family. You can get rid of as much as you can, but it always pops up somewhere else.”
Hurley International President Bob Hurley says he is flattered that his two-year-old company’s brand has reached a point where it has become a target of counterfeiters.
“But it’s also stealing,” he said, “and it’s not nice to steal.”
A big driver of counterfeit goods is the desire by retailers to sell the hottest brands, even if they can’t get them directly from the manufacturer, said John Sommer, general counsel for Stussy. His company has gone after violators, who typically don’t pay taxes and operate under poor working conditions, he said. The company filed 18 lawsuits in 1999, six in 2000 and one so far this year. Stussy hasn’t lost a case yet, he said.
“It’s essential to the survival of the brand,” Sommer said. “The financial loss to counterfeiting is relatively a low priority. We are interested in protecting the image of the brand and counterfeiting undercuts that by selling products we would never sell. We once found some Mexican ponchos with our name on them.”
Sommer is the former chairman of the Western AntiCounterfeiting Coalition, which hires investigators on behelf of apparel and other companies.
The loss to U.S. businesses due to counterfeit consumer products has been estimated at $200 billion a year, according to the Commerce Department and the International AntiCounterfeiting Coalition. The maximum penalty for trademark infringement is a $2 million fine and 10 years in prison.
Sommer said Stussy seeks reimbursement in infringement cases, but whether it pursues criminal charges “depends on the circumstances.”
“If it’s a felony, we provide the information to law enforcement officials and have the people arrested,” he said. “But if criminal is not appropriate, we’ll sue.” n
