LOUIS VUITTON MALLETIER, the owner of the “LV” registered trademark, recently filed a civil lawsuit with the IP Court against a second-hand luxury goods vendor, accusing the vendor of selling “LV” branded counterfeits online. In November 2017, the IP Court rendered a Judgment. The defendant was found to be guilty of trademark infringement while the plaintiff was awarded compensatory damages.
During the court proceedings, the plaintiff and the defendant respectively engaged an expert to authenticate the “LV” branded goods at issue. While the expert engaged by the plaintiff (also one of its employees) determined the goods at issue to be counterfeits, the expert hired by the defendant thought otherwise. Since the plaintiff refused to disclose any detail of their examination procedures, claiming that trade secrets were involved, neither the IP Court nor the defendant was in position to challenge the credibility of the examination results that the plaintiff submitted to the IP Court. The IP Court, under such circumstance, still rendered a Judgment) Judgment deeming that the defendant had committed infringement. The defendant, as a second-hand luxury goods vendor, was found by the IP Court not to have exercised due diligence in authenticating whether the goods he sold online were genuine, or retained a record of the purchase of the goods at issue to prove non-infringement.
Nonetheless, the IP Court significantly reduced the amount of the monetary compensation payable to the plaintiff to around US$21,820, in comparison with around US$348,000 as claimed by the plaintiff for the following reasons:
According to the principle of trademark right exhaustion, it is legitimate to sell second-hand products in the market. The owner of a registered trademark has no right to prohibit others from selling second-hand products branded with their registered trademark(s). In this case, a question that should be first answered is whether or not the goods at issue are fake. However, that the plaintiff (trademark owner) refused to disclose details of their examination procedures renders the examination results they submitted to be somewhat questionable. On this score, if the examination results submitted by the plaintiff were taken as impeccable key reference, it would be tantamount to giving the trademark owner powerful influence over the second-hand market, which is against the principle of trademark right exhaustion.
This case sheds light on the necessity for a second-hand luxury goods vendor to be always better prepared to avoid purchasing counterfeits and to retain a complete purchase record for a rainy day lest that the trademark owner should have final say over the authenticity of suspected counterfeits.