The price of selling fake G-Star clothes

G-Star, a fashion label, became aware that Mr Amir Dawood was selling counterfeit G-Star clothing from his retail store, Gazoz Jeans, in Fairfield NSW.

Mr Dawood was self-represented and did not do himself any favours by materially changing his defence as the proceeding progressed. Initially, Mr Dawood responded to a letter from G-Star’s lawyers in which he admitted

to purchasing 15 counterfeit G-Star products and selling them in his store. He undertook not to do it again and claimed that he did not know that selling “copy brands” was illegal.

At trial, Mr Dawood significantly changed his story, instead claiming that, without his knowledge, his shop assistant (“Mr Yelda”) had acquired and sold the counterfeit products while Mr Dawood was in China. Allegedly, an unidentified girl visited the store with the counterfeit items saying that she purchased them overseas but that they were too big. Mr Yelda gave evidence that he took the counterfeit items in exchange for a selection of smaller sized clothes from the store.

Federal Magistrate Burchardt rejected Mr Dawood’s new defence, instead accepting the original story in which the items were purchased and sold by Mr Dawood himself. Burchardt FM found, relying on G-Star’s evidence from “mystery shoppers”, that Mr Dawood had sold 30 counterfeit items from his store, for prices ranging from $35 for T-shirts to $150 for jeans. Burchardt FM went on to find that it was “more probable than otherwise” that genuine versions of these items would otherwise have been purchased from G-Star, although it would seem that there was no evidence led on this point and the judgment makes no reference to the fact that genuine G-Star products are sold for approximately twice this price. Burchardt FM then ascribed a value of $100 to each counterfeit item and awarded G-Star $3,000 in compensation for lost sales.

The next question was how to value the loss to G-Star’s reputation as a result of this conduct. Burchardt FM decided that an appropriate amount was $20,000. These amounts are awarded at the discretion of the Magistrate and arriving at a figure tends to be a matter of art rather than science. An explanation is rarely provided for how the amount is determined, and this case was no different.

Finally, the Court had to decide whether to award exemplary damages, which are typically awarded to punish the respondent and to mark the Court’s disapproval of the respondent’s conduct. G-Star sought $50,000 but the Magistrate reduced this to $40,000. No explanation was provided for why this figure was selected, but the Magistrate held that the following factors, among others, were relevant:

  • Mr Dawood’s conduct throughout the proceedings, including failing to meet court orders;
  • the flagrant nature of the conduct given that Mr Dawood must have or ought reasonably to have known the clothing was counterfeit;
  • the need to deter other similar infringements of copyright;
  • the commercial advantage that the respondent obtained by selling the counterfeit product trading on the status established by the applicants’ own endeavours; and
  • the flagrant lies told by Mr Dawood to try to justify his conduct.

Of course, this all begs the question – was an award of $63,000 just right, too harsh or not harsh enough?

2 Replies to “The price of selling fake G-Star clothes”

  1. Interesting read. I am curious how these damages are worked out. Is the $100 per item related to the RRP of an equivalent genuine G-Star product? As you point out, how can we automatically assume that a person who buys counterfeit clothes would otherwise pay the much higher genuine price? Also, as for the matter of reputation, doesn’t this mean a luxury high fashion label could claim immensely high damages because they are ‘exclusive’.

    1. Thanks – interesting questions.  The judgment states that damages were awarded on the basis that sales of the counterfeit products were sales that G-Star would otherwise have made.  The figure of $100 appears to be the Federal Magistrate’s assessment of the average profit G-Star would have made on each of those 30 sales, rather than the RRP of the equivalent G-Star product.  It is unclear whether profit was calculated by reference to the retail or wholesale value of the items.

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