Counterfeits appearing at legitimate retailers.

The label may say Seven For All Mankind, but the Vernon-based manufacturer of premium jeans is finding that a growing number of legitimate retailers are selling knockoffs of its pricey merchandise.

With its jeans typically costing over $120 a pair, the company has found counterfeit copies being sold at familiar discount stores, including those operated by Loehmann's Holdings Inc., Burlington Coat Factory Warehouse Corp. and Filene's Basement Corp.

That has prompted Seven For All Mankind LLC, which dominates the premium denim category, to file 19 lawsuits in the last five months against the retailers to cut off sales.

"It is not an old problem, it is a new problem." said Michael Heimbold, a partner with the law firm Alschuler Grossman Stein & Kahan LLC, which represents Seven. "The company is committed to protecting its brand."

Retailers are used to seeing knockoffs being sold by street vendors and at flea markets where consumers almost expect that the low price means they may not be getting the real deal.

But counterfeits at respected discounters are another matter. It's an emerging problem for the new wave of premium jean makers, whose retail prices are in the hundreds of dollars--yet they are selling an item that can be cheaply manufactured and still be plausibly passed off as the real thing.

"If there is a large margin then it makes sense to counterfeit," said Rod Berman, chair of the intellectual property department at the Century City office of Jeffer Mangels Butler & Marmaro LLP. "A company that sells products with a high profit margin where there is a demand for the product in the low-end market is a candidate for counterfeiting."

It's also a tricky problem because the discounters claim they received the merchandise through regular supply channels and didn't know they were knockoffs.

Seven, a privately held company, is the market share leader in the premium denim category. Since the jeans started being sold four years ago, its sales have totaled over $300 million, according to the lawsuits it has filed.

Seven wasn't aware of any counterfeits being sold in discount stores until last fall when a Canadian called the company saying that he bought a pair of knockoffs, Heimbold said. The pants were ultimately traced back to a Filene's Basement in New England and a suit was launched in October in the U.S. District Court in Massachusetts.

The company subsequently upped its policing of counterfeit merchandise by visiting more retailers, and later identified fakes in the other discounter stores, prompting the flurry of lawsuits, Heimbold said.

An undisclosed settlement was reached with Loehmann's and is being sought with Filene's and the other discounters. Karen Lapidus, general counsel for Loehmann's, declined comment on the issue or the settlement. "The only thing that we can say is that the suit was amicably settled between the parties," she said.

But Filene's Basement issued a written statement that it was unaware it was selling counterfeit goods and takes the matter seriously.

"Filene's Basement reasonably believed that the jeans were legitimate goods when bought, so this purchase was an unfortunate, rare incident," said Mark Shulman, the store's president, in the statement. "Filene's Basement views the infringement of intellectual property as a very serious matter."

Street vendors often get their counterfeit goods directly or indirectly from Chinese manufacturers who are not authorized to make or sell Seven clothing. At the discount stores, Heimbold said most of Seven's knock-offs are also from Chinese manufacturers and then channeled through wholesale brokers not authorized to sell Seven jeans.

Legal strategy

Seven has federally trademarked both its name, which is on the jeans with the number "7" and "for all mankind" in cursive, along with a pocket stitch design called the "squiggle wave."

At the retailers, Heimbold said exact replicas of Seven jeans were being sold--with both the company's trademarked name and the trademarked pocket design--though the quality was clearly inferior. The jeans were being sold for between $40 and $80, far below their average selling price.

"I would expect the liability is pretty clear because consumers recognize the '7' mark," Berman said. "In order to demonstrate counterfeiting, you have to demonstrate that the infringing mark is really, really close to the trademark owners' mark."

When a trademark has been infringed, an obvious remedy is to take the fakes out of the stores, but companies also seek to recover lost profits and attorney fees. If the company can prove that a retailer knew it was selling counterfeit products, it can go after them for punitive damages. In some of the cases, Heimbold said Seven has sought punitive damages.

"We are clearly entitled to injunctions to stop the sale of counterfeit goods," said Heimbold. "We generally recover the profits that people have made from selling the jeans. If it is an egregious case, we will go for punitive damages as well over and above the profits."

In addition to discount stores, Seven has made a push to stop counterfeits from being sold on the streets and over the Internet. The company has confiscated thousands of jeans from street vendorse. It also has shut down more than 4,000 eBay auctions where counterfeits were being sold, Heimbold said.

Ilse Metchek, executive director of the California Fashion Association, said other luxury brands such as Gucci Group N.V. have dealt with similar problems for years.

"It's virtually impossible to eradicate all counterfeiting. You see it all the time," she said.

RACHEL BROWN Staff Reporter