Juul seeks $26 million in damages to deter Chinese ‘serial counterfeiter’

LOS ANGELES (CN) — Juul Labs asked a federal judge to impose $26 million in statutory damages against a Chinese, alleged serial counterfeiter that has already been found liable for infringing the trademarks of the e-cigarette maker.

Juul squared off Monday against Andy Chou and his Yiwu Cute Jewelry business, which operates an international platform to provide so-called drop shippers with merchandise from Chinese suppliers. Juul wants the maximum possible amount of damages against Chou and his business, which had $160 million in revenue in 2020, to deter him from continuing to offer counterfeit products through his website.

Lawyers for Juul and Chou's company made presentations before U.S. District Judge Dale S. Fischer in Los Angeles during a bench trial to determine whether the trademark infringement was willful and how much the website operator should pay to Juul for selling counterfeit Juul starter kits and related merchandise.

Patrick Ryan, one of Juul's lawyers, urged the judge to put the "smackdown" on CJ, as Chou's businesses including the cjdropshipping.com website were referred to, because, he said, Chou has already been convicted in China for counterfeiting and has continued to offer fake merchandise through his platform, resulting in lawsuits by Harley Davidson, Converse and Swarovski, among other well known brands, as well as at least five default judgments for willful infringement.

"This case is emblematic of why deterrence is necessary," Ryan said. "My only concern is that $26 million might not be enough given the size of this operation and how lucrative it is."

Juul sued Chou and his businesses in 2021, after the company's investigators purchased fake Juul products from them, and Fischer issued a preliminary injunction ordering them to stop selling counterfeit Juul merchandise. She also ruled on summary judgment that Chou was liable for trademark infringement but left it to be decided whether the infringement was willful, which can boost the amount of damages Juul is entitled to.

At Monday's hearing, Ryan argued that Chou seeks out well known brands and deliberately targets U.S. consumers with counterfeit products, and in the case of e-cigarettes, shows disregard for the health risks from vaping products that are produced in unregulated facilities and with substandard materials.

Steve Moore, an attorney for the defendants, argued in response that Chou has implemented a program to vet suppliers to make sure that they are authorized sellers of brand name merchandise and that any counterfeit products represent only a small fraction of the roughly 500,000 products that are listed on the CJ website. In the past four years, CJ has denied listing on its site of 20,000 infringing products, Moore said.

Chou's business provides fulfillment services for drop shippers, who sells products online but don't keep inventory or ship to consumers directly. Instead, CJ, which also has warehouses in California and New Jersey, links these retailers with suppliers and can handle shipment of the orders.

According to Moore, the counterfeit Juul products were not sold by a CJ employee, although Juul disputes this, and Chou didn't know that Juul was a well known brand because it isn't well known in China where it's products aren't for sale. When the judge asked how it was that Juul wasn't picked up by a purported web search Chou's business performs to make sure a supplier doesn't list a fake brand name product, Moore said it "slipped through."

The lawyer argued that the $26 million Juul seeks is way out of proportion to the less than $8,000 the company suffered in lost revenue from the infringing products.

"Statutory damages must have a plausible relationship to the actual damages suffered by the plaintiff," Moore told the judge. "No case law supports statutory damages award 3,250 times the actual damages."

The judge didn't issue a decision at the hearing.

Juul this month won preliminary approval of a $255-million class-action settlement over claims it deceptively marketed its vaping products. That followed a settlement in December of about 5,000 cases brought by school districts and local governments, among others, for a reported $1.7 billion.

Follow @edpettersson

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