Background
Fendi Italia Srl, Loewe S.A., Christian Dior Couture S.A., Celine S.A., and LVMH Moët Hennessy Louis-Vuitton SE (collectively representing major luxury fashion brands) commenced proceedings against Rolo Fashion Limited and Georgia Aldridge for infringement of their registered trade marks. The defendants sold counterfeit luxury goods bearing the claimants’ trade marks through online channels including AliExpress, DHgate, Instagram, and WhatsApp. A freezing injunction was granted in September 2024, and judgment in default was entered against the defendants on 17 January 2025. This inquiry determined the quantum of damages owed.
The defendants’ disclosure was incomplete and inconsistent. Ms Aldridge initially provided only AliExpress transaction records, and later disclosed WhatsApp messages in plain-text format, omitting images and failing to provide documentation relating to other supply sources. The claimants alleged the defendants operated through multiple channels and accounts but disclosure was inadequate to establish a complete picture of sales.
The Court’s Holding
His Honour Judge Hacon awarded total damages of £213,000, comprising £200,000 for lost profits and £13,000 under the user principle. The court rejected the claimants’ assumption that each of 1,311 WhatsApp group members purchased one counterfeit item, finding this lacked evidentiary support. Instead, the judge adopted Ms Aldridge’s methodology of calculating sales from bank statements but corrected her use of the claimants’ average selling price (£751.67) by substituting the defendants’ average price (£110), yielding approximately 4,752 total sales over the 72-month limitation period.
The court applied a 15% substitution rate (the percentage of defendants’ sales causing lost claimant sales), resulting in approximately 713 lost sales and £200,000 in lost profit damages. The remaining 4,039 sales—which did not deprive the claimants of sales—were compensated under the user principle at 3% of selling price, yielding £13,000. The court rejected claims for reputational damage and further relief under Regulation 3, finding no evidence that consumers believed goods were genuine or that the trade marks had been tarnished. Notably, the defendants’ prices at approximately 15% of genuine prices clearly signalled counterfeit status.
Key Takeaways
- In trade mark infringement cases, damages may be assessed under the user principle (reasonable royalty) even where the trade mark proprietor would not have licensed the mark, provided infringing acts are established.
- When defendants fail to provide complete disclosure as ordered, courts will not award presumptions in their favour and may draw adverse inferences; claimants are not required to pursue successive disclosure applications.
- Lost profit damages require evidence that customers purchased from the infringer instead of the trade mark proprietor; evidence that consumers recognized counterfeit goods sold at steep discounts cannot support a finding that sales resulted in brand confusion or reputation damage.
- A bare minimum royalty rate may be applied under the user principle when no evidence of reasonable licensing terms is presented, but such an award requires a finding that the defendant’s use constituted infringing activity even absent lost sales or reputational harm.
Why It Matters
This decision clarifies the application of damage principles in online counterfeit trade mark cases. It establishes that courts will undertake a rigorous evidential assessment of substitution rates rather than accepting unsupported assumptions, and that incomplete disclosure by a defendant will not operate in its favour. The judgment demonstrates judicial scepticism toward reputational damage claims in the counterfeit goods context, particularly where pricing alone reveals the goods’ counterfeit status to consumers.
The decision is significant for luxury brand enforcement, confirming that the user principle provides a compensatory mechanism for infringing sales that do not result in lost sales to the proprietor, addressing situations where counterfeit goods feed a distinct market segment. It also underscores the importance of thorough disclosure in intellectual property inquiries as to damages, signalling that defendants cannot rely on incomplete cooperation with court orders.