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Los Angeles-When Michael Holihan first filed suit against two Colombia-born brothers who allegedly had been importing counterfeit Nokia cellphone accessories into Miami, he got a permanent injunction and a $130,000 settlement. But a few years later, officials at U.S. Immigration and Customs Enforcement started an investigation of the brothers and seized up to 10 suitcases full of counterfeit Nokia merchandise. Holihan said he assisted prosecutors by providing copies of Nokia’s trademark registrations and witnesses at Nokia who verified that the products that were seized were counterfeit. After both brothers pleaded guilty to illegal trafficking, Holihan, who represents Nokia Corp., filed a motion to hold one of the brothers and his company in contempt. In May, he received a $1.3 million judgment in the case. Nokia Corp. v. AH Wireless LLC, No. 03-CV-20329 (S.D. Fla.). Holihan, a lawyer at Holihan Law, in Maitland, Fla., said the guilty pleas helped in his civil contempt motion because the government had done most of the legwork in the case. “It’s evidence they did something wrong,” he said of the guilty pleas. “And that makes it easy for me.” In the past two years, lawyers who file counterfeit and trademark lawsuits on behalf of the world’s largest corporations have been working more closely with federal prosecutors, U.S. customs officials and local law enforcement authorities, all of whom have stepped up their efforts significantly to bring criminal actions against counterfeiters. Much of the increase comes as counterfeiting has become a global problem and recent revelations show that profits derived from counterfeiting have been used to fund terrorist organizations. To assist the government, civil lawyers provide client testimonies and hire private investigators, who give tips to law enforcement. In exchange, U.S. customs officials alert lawyers if their clients’ merchandise gets seized, and prosecutors obtain convictions, which could significantly enhance the success of a civil case. “More often than not, we work hand-in-hand with law enforcement,” said Michael Heimbold, a partner at Santa Monica, Calif.’s Alschuler Grossman Stein & Kahan who represents brand companies including high-end jeans maker Seven for All Mankind. “We’ll develop leads through retailers and distributors, and we’ll then work with investigators, if there’s local and federal law enforcement.” In past years, lawyers said U.S. customs officials and federal prosecutors were more reluctant to investigate counterfeit goods. But with the Internet and increased globalization of trade, counterfeiting has become a large problem for corporations. According to the U.S. Chamber of Commerce, counterfeiting and piracy cost the U.S. economy between $200 billion to $250 billion each year. “Where there used to be significant capital entry barriers in the market, because you had an inventory of goods, all that has been eliminated by using the Internet,” said Stephen Gaffigan, a solo practitioner based in Fort Lauderdale, Fla., who represents Chanel and Gucci in counterfeit suits. “What’s happening now is you have a proliferation of nonprofessional counterfeiters. It’s what they do in their spare time for extra cash.” The terrorism factor Michael DuBose, deputy chief of the computer crime and intellectual property section of the U.S. Department of Justice, said that the Bush administration and Attorney General Alberto Gonzales have made counterfeiting and other intellectual property matters a priority because of the impact on economic security. But lawyers said law enforcement officials have a different motivation. “They believe that counterfeiting profits are being used to fund terrorist or drug-related activities,” said Griffith Price, a partner at Washington’s Finnegan, Henderson, Farabow, Garrett & Dunner who helped draft the 1984 Anti-Counterfeiting Act. “That’s a connection that was not present or even imagined when the trademark counterfeiting act was adopted in 1984. It certainly is present today.” DuBose declined to comment about the terrorism links. In many cases, U.S. customs officials and local law enforcement alert lawyers about counterfeit merchandise that has been seized in a raid or at the nation’s ports. Heimbold said he gets daily reports from U.S. customs officials about seized shipments. “If we get leads, we’ll enlist the Department of Homeland Security to help us,” Heimbold said, referring to the department that oversees Immigration and Customs Enforcement. “They just appear to be more willing than ever to assist and execute these seizures.” Most government assistance comes on the front end of a case since they have “obviously more flexibility for a host of investigative tools that we as civil litigants do not have,” said Jonathan Jennings, chairman of the trademark division of the American Bar Association’s Section of Intellectual Property Law. Having an ongoing criminal investigation creates a cloud over the defendant, especially if he or she is forced to plead the Fifth Amendment during a civil case. “It makes it easier for us to proceed to judgment,” Gaffigan said. “If I ask you if you sell counterfeit Chanel merchandise, and you say, ‘I take the Fifth,’ that doesn’t prove you sold counterfeit goods. But the court has a right to draw a negative inference because you’re not answering the question.” In the majority of cases, civil lawyers will hold off filing suit until after a criminal case is completed. Having a prior conviction helps civil attorneys prove intentional conduct, which comes with potential recovery of attorney fees and treble damages, Gaffigan said. “From our perspective, if you’re a defendant who’s been convicted, it’s great for the civil suit,” he said. In many cases, civil suits are filed to recover higher damages for the victimized company. In December, the U.S. Attorney’s Office for the Southern District of Florida announced two indictments against five individuals charged with trafficking counterfeit batteries, handbags, sunglasses, shoes and other goods to their homes and warehouses and selling them at local flea markets. The goods included brands such as Duracell, Prada, Coach, Nike and Oakley. Sandie Beattie, U.S. enforcement manager at Foothill Ranch, Calif.-based Oakley Inc., said that she worked with prosecutors at the U.S. attorney’s office on the December indictments in Florida. A conviction behind a civil suit gives the suit “more teeth,” she said. “If we’ve got a conviction, we’re pretty confident that they’re going to try to settle if anything.” Lawyers said that their clients often pay for private investigators who tip off law enforcement officials on where to find stolen goods. Oakley, for instance, has a team of 50 investigators, which the company shares with other product manufacturers such as Rolex, Nike and Adidas, said Beattie. Sometimes, lawyers work concurrently with the government by providing client testimonies or documents that would be helpful in a criminal case. Roberta Horton, a partner at Washington’s Arnold & Porter, said she represented Philip Morris a few years ago in a civil suit that helped bring down a Swiss Internet site selling gray-market cigarettes, or cigarettes sold through improper distribution channels. Philip Morris USA Inc. v. Otamedia Ltd., No. 02-CV-7575 (S.D.N.Y). “We were also able on the civil side, through work of co-counsel, to get a great judgment turning over the Internet domain name that the counterfeiters used,” said Horton. “That was a very useful tool because a lot of smokers out there would visit that Web site and buy more cheaply than buying cigarettes in the retail stores. One day, they sit down and type that in and, lo and behold, it’s not active and reverts to Philip Morris.” The federal Bureau of Alcohol, Tobacco, Firearms and Explosives seized the cigarettes, she said.

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