Farouk Systems, Inc. Awarded $300 Million Judgment Against Internet Counterfeiters

Farouk Systems, Inc. Awarded $300 Million Judgment Against Internet Counterfeiters

Houston, TX (October 22, 2010) -- A federal court in Houston, Texas has awarded Farouk Systems, Inc., the producer of CHI ceramic hair styling irons and other beauty products, a $300 million default judgment against a group of Internet counterfeiters in what is believed to be the largest judgment ever issued against on-line counterfeiters. The lawsuit filed in July 2010 alleged that defendants, operating under a series of fake names and addresses, were selling counterfeit CHI hair tools at wholesale on popular B2B sites like Tradekey.com and DIYTrade.com as well as at retail on 'rogue' web sites like chihaironline.com and chiretailsite.com purporting to be authorized sellers of CHI hair tools.

As part of the judgment,  Farouk Systems was awarded control of 35 Internet domain names used to sell counterfeit CHI hair tools.  Also as part of the judgment, third parties like B2B sites and payment processing services are permanently enjoined from providing services to these defendants in relation to their counterfeiting activities.  The default judgment awarded maximum statutory damages of $2 million per counterfeited trademark against each of the 75 defendants. 

At the outset of the case, Farouk was able to obtain an injunction freezing counterfeiters' financial accounts and  immediately disabling dozens of infringing web sites before the counterfeiters could hide their assets or change their operations.  "Nothing gets a counterfeiter's attention like freezing their bank accounts and having their web stores suddenly shut down," says Farouk Systems' General Counsel Wisam Ghuneim.  "We trust they will think twice before knocking off our products again."

These counterfeiters used a series of fake names and addresses in connection with their businesses, making them virtually impossible to identify. "Brand owners often feel powerless to stop Internet counterfeiting because they don't know who they are pursuing.  But in this case, we were able to show that defendants' use of false identities was precisely why this kind of injunctive relief was necessary," said Scott Gelin of Greenberg Traurig LLP, counsel for Farouk Systems. 

Counterfeiting is a multi-billion dollar enterprise, and it's not just luxury goods that are being knocked off.   Every imaginable product from car parts to pharmaceuticals to home electronics like CHI hair styling irons is being counterfeited.  U.S. Customs and Border Protection reported that counterfeit consumer electronics was the second largest category of fake goods it seized in fiscal year 2009.  "While the sale of counterfeit products is irresponsible for any company, it is worse for counterfeit home electronics like hairstyling irons, since these fakes have not passed regulatory safety standards,"  says Farouk Systems' founder and chairman Farouk Shami. "People think that by buying over the Internet, they are getting a deal, but in reality, they are buying a fake, inferior products that could cause them harm." 

Information about these defendants obtained through expedited discovery shows that many of these wholesaler and retail operations were bringing in tens of thousands of dollars in revenue each month from the sale of counterfeit CHI products and other goods.

Farouk Systems Inc. was represented by Greenberg Traurig LLP.  The case is  Farouk Systems, Inc.  v. EYOU International Trading Co, et al., 4:10-cv-2672 (KMH)

About Farouk Systems, Inc.

Farouk Systems, Inc. is a Houston based company that manufactures the world-renowned brands CHI and BioSilk.  The company's mission statement is Education, Environment and Ethics.  With over 2,500 employees, the company sells its products in over 100 countries.  The inception of the company was due to a major breakthrough, and it eventually created a revolution in the beauty industry.  Farouk Systems went from inventing ammonia-free color, incorporating silk into hair care products, pioneering CHI thermal tool technology, and hiring a former NASA Senior Scientist. For more information log onto www.farouk.com.