Jury Finds Costco Sold Counterfeit Hair Irons

ISSAQUAH, Wash. — A federal court has ordered Costco Wholesale Corp. [2] here to pay $200,000 in statutory damages for selling counterfeit hair styling CHI flat irons made by Farouk Systems, Houston, according to a report [3] in the Houston Chronicle.

The award stems from a 2009 lawsuit filed in a Houston state district court charging Costco with violating the Lanhm Act, which prohibits the selling of counterfeit, non-genuine goods.

After nearly two years of litigation, the jury agreed and found that Costco had indeed sold counterfeit CHI-branded merchandise consistent with the charges made by Farouk Systems.

“We are pleased that the jury returned a verdict in our favor and found Costco liable for selling counterfeit merchandise bearing the CHI trademark,” said general counsel Wisam Ghuneim representing Farouk Systems, in a company press release. “This verdict is a significant milestone in the ongoing fight against buyers, distributors and sellers of counterfeit and fake goods.

"It is of paramount importance that retailers employ better and prudent practices to ensure that the products they sell the public are genuine. Not only do counterfeit and fake goods infringe on intellectual property rights of brand owners, but they also take much needed jobs away from the American economy.”

Costco denied the charge of selling counterfeit irons, a company executive told the Chronicle.

Last year, the Supreme Court upheld a lower court decision on a copyright infringement charge against the right of Costco to sell Omega watches procured on the international market and sold at a deep discount off the manufacturer’s suggested retail price.

The CHI ruling comes nearly a year after Farouk Systems had secured a judgment against multiple Chinese entities for selling and distributing counterfeit CHI irons over the Internet. In that case, a federal judge awarded Farouk Systems a monetary judgment in the amount of $304 million dollars against the defendants.

In the lawsuit Farouk lawyers said sometimes CHI products find their way to stores through a “diverted” market, or through improper distribution channels. Such products are likely to be counterfeit, according to the lawsuit.