A Sophisticated Online Counterfeit Ring

Online fakes can be a lucrative business and difficult to crack down on, due to the ease and low-cost of setting up multiple virtual storefronts and the ability to obfuscate an operation‰Ûªs identity. A federal lawsuit filed on March 1, 2010 by Polo Ralph Lauren and VF Corp. illustrates these points and highlights many of the intricacies of an online counterfeit ring.

According to a recent article in WWD (subscription required), the joint lawsuit uncovers one of the largest counterfeit cases ever in terms of the size, scope and sophistication of an online operation. The online counterfeit network identified in the lawsuit is comprised of 130 Chinese websites selling counterfeit goods through up to 6,500 domain names, most of which trace back to a single website, B2Bsharing.com. At least some of the sites involved in the online ring are cybersquatted — such as polo4sale.com and outletnorthface.com.

B2Bsharing.com is reportedly operated by Fujian Sharing Import & Exchange Ltd., however an actual address for the business in China is unknown. 15 other individuals were also named as co-defendants in the lawsuit, all of which have unknown addresses. This just goes to show how easy it is to run a complex online counterfeit operation without being easily traced.

The dollars generated by this counterfeit operation are as staggering as the scope of its online network. The two fashion giants claim that the ring of counterfeit Web sites generated as much as $780,000 per month in fake Polo and North Face goods — that’s up to $6,000 per month for each of the 130 Websites. And that’s just on the Polo and North Face brands; other brands offered by the alleged counterfeiters include Dior, Ed Hardy, Coach, Gucci, Paul Smith and Abercrombie & Fitch.

Finally, to make matters worse, many of the affiliate sites involved in the ring use copyrighted images from the sites of authorized resellers to create a sense of authenticity with customers.

So, there you have it. A sophisticated, complex counterfeit operation leveraging many brandjacking schemes — including cybersquatting, copyright infringement, and affiliate linking strategies — to amass major profits at the expense of legitimate brands. However, the battle is not lost. Brand owners can connect the dots between the owners of multiple domain names and websites — as Polo Ralph Lauren and VF Corp. have elegantly done — and begin to uncover the intricate relationships mentioned above. Understanding the scope and nature of the problem online is indeed the first step in taking actions against these highly sophisticated brandjackers.