Suit Sends Message to Bootleg Sellers: Knock It Off

As they hunt for bootleg bargains on Canal Street in Chinatown, savvy shoppers pay close attention to the small, handwritten signs taped to the doorways and windows of neighborhood stores.

“Designer Belts Down Here!” reads one. “Music Upstairs!” says another.

Scrawled in black crayon and ink, the signs guide visitors to tiny shops on the street and in back alleys offering a cornucopia of counterfeit goods: designer handbags, clothing, sunglasses, watches and scarves, and DVDs at discount prices.

This month, a new kind of sign has begun appearing on Canal Street. And some are hoping it signals a turning point in the war against counterfeit goods.

In the windows of seven small stores, shoppers now see prominent placards reading: “Since we do not carry Louis Vuitton products, please don’t ask.”

“Go away!” shouted one merchant, when several tourists asked jokingly if the new signs were serious. “Closed!” snapped another, yanking down an iron grating.

Only weeks before, sales had been brisk here for knockoff versions of the distinctive brown-and-gold handbags sporting the “LV” logo. Replicas of large purses that cost several hundred dollars on Fifth Avenue were selling for $40.

The sales stopped soon after lawyers for Louis Vuitton filed a novel lawsuit this year, targeting the businessman who owns the Canal Street buildings housing some of the stores. The Paris-based designer said Richard Carroll had a responsibility to halt such sales on his property, and vowed to seek millions of dollars in damages if he refused.

Last month, a federal judge issued a preliminary injunction requiring Carroll to evict tenants who sold fake Louis Vuitton products. In addition to the new signs, the owner agreed to post messages to the public announcing that counterfeit sales were illegal. He agreed to permit random inspections to make sure that the court order was followed.

Although lawsuits like this have been filed before against an owner, legal experts said it marked the first time a major designer had prevailed and won such sweeping conditions. Efforts to reach Carroll for comment were unsuccessful.

“A company victimized by counterfeiting has to do something, and this kind of lawsuit could have a real impact,” said Joseph Gioconda, a lawyer who has represented other designer firms. “By doing this, you really turn up the heat.”

But the court order only affects seven stores, and Louis Vuitton sales are thriving elsewhere on four blocks of Canal Street and on side streets as well. Teams of women routinely approach tourists and whisper: “LV? LV?” Lookouts stand guard, warning shop owners with cellphones that issue high-pitched beeps when police drive by.

Once an alert sounds, gratings slam shut up and down the street. The stores reopen when police depart. This cat-and-mouse game is repeated several times a day.

Last year, police raided shops in Carroll’s buildings and confiscated 8,272 counterfeit Louis Vuitton items. But it was just a fraction of the city’s annual $23-billion business in bootleg products, according to a recent report by New York Comptroller William C. Thompson Jr.

Canal Street, one of the city’s prime tourist attractions, is the largest hub of a national counterfeit industry that also has a sizable presence in Los Angeles -- in the Santee Alley area downtown -- and other cities including Houston, Chicago and Miami, law enforcement officials said.

Overall, about $286 billion in counterfeit goods was sold in the United States in 2003, representing about 63% of the worldwide sales of $456 billion, the report said.

For years, New York police have tried to reduce bootleg sales on Canal Street by arresting vendors, closing stores and confiscating merchandise. But the problem moved elsewhere, including Midtown, Brooklyn and Queens. Weeks later, the counterfeit operations returned to Canal Street.

“We wanted to make a statement that this kind of activity couldn’t go on,” said Steven Kimelman, a lawyer with Arent Fox, the firm representing Louis Vuitton.

“The idea was to shine a spotlight on an owner of these buildings,” he added, explaining that the landlord had assets that could be seized, unlike an army of fly-by-night vendors who typically did not have resources and often disappeared.

Police officials who conduct raids on Canal Street say their sidewalk enforcement policies will continue. But they are heartened by the Louis Vuitton lawsuit.

“I’ve got to believe this case will have an impact, and that it’s a very important tool,” said Deputy Inspector Brian O’Neill, who supervises the New York Police Department’s Organized Crime Investigation Division and its operations on Canal Street. He conceded, however, that the battle would go on for the foreseeable future.

“This is a very complex problem,” he said. “It’s truly international in scope.”

A huge volume of counterfeit goods originates in China and other foreign countries. These products are typically sent in pieces to America, where they are assembled and sold. In New York, the parts for counterfeit watches come from China, but logos are stamped on by laborers in Chinatown. They work unseen in basements, several feet from Canal Street shops.

Another obstacle to enforcement, experts say, is the public’s ambivalence. For many, the thrill of getting a bargain supersedes concerns about international piracy. New York and other cities do not typically prosecute shoppers.

As thousands of tourists poured into Canal Street last week, they roamed from one store to the next in search of bootleg products. Some haggled openly on the sidewalks over the cost of fake Rolex watches; others snapped up items with Prada, Fendi and Gucci labels.

Business was particularly brisk in front of a gift shop a few blocks from Carroll’s properties. A police car was parked out front as tourists walked inside.

“Why should anyone care that I buy a cheap knockoff of a Louis Vuitton handbag?” asked Tom Shephard, who was making the rounds of stores with a companion, Karen May. The two had come to New York from Houston on vacation.

“If I know that I’m buying a cheap version of something, and the seller knows it’s a cheaper version, who is being deceived?” Shephard said. “What’s the crime?”

As he spoke, a salesman invited the couple into his store. Walking toward the back, he turned a hidden handle on a plywood wall filled with brightly colored scarves; then he pushed open a door and the shoppers entered a small, darkened room.

The walls were lined with shelves, all crammed with Louis Vuitton knockoffs. Shephard and May inspected the goods and began talking prices.

“Do you have a larger handbag?” Shephard asked. The salesman said he didn’t, but urged his customers to be patient: “Tomorrow I get it,” he said. “You wait.”

The tourists shook their heads, and walked quickly out of the store.

“I’ll get it somewhere else,” Shephard said. “I can get anything I want here.”