It is a victory for companies who have been fighting Chinese counterfeiters for years. A New York judge has ordered that the Bank of China must hand over specific detailed information about Chinese bank accounts used by counterfeiters which sold millions of dollars of fake Gucci products.
The decision will likely have far-reaching implications as this allows United States courts to have jurisdiction over Chinese banks regarding the alleged criminal activities of its customers. As of now, Chinese banks serve as a safe place for money launderers and counterfeiters to store their profits – on an enormous scale.
Obviously, Chinese banks fought vigorously to avoid this outcome. They argued that a United States court ordering a Chinese bank to produce such information essentially tampers with China’s sovereignty. Indeed, the case has attracted political attention from both China and the United States.
The fundamental question becomes about whose rules Chinese banks located in the United States should be following.
Dan Plane, an intellectual property lawyer at Simone IP Services in Hong Kong, warned that even though the Bank of China is now required to disclose account information records, it will disclose few details. The bank also will likely tell its customers how to avoid such risks following the disclosure. He explained that, “[The court’s order] gets you over the initial hump, but there are still going to be challenges, particularly in actually collecting a damages award. The biggest question of all is: Are you ever going to be able get your hands on counterfeiters’ funds in the control of Chinese banks?”
While many state-run Chinese banks and China’s financial system are frequently used by counterfeiters to stash their illegal profits, United States investigators are not able to dig into the situation. It is therefore very difficult for American prosecutors to get records that essentially trace the flow of profits gained illegally. They are also hampered in their ability to freeze illicit funds.
The ruling in the Gucci case changes things by determining that U.S. courts have jurisdiction over the Bank of China because it has four branches in the United States and facilitates wire transfers of U.S. dollars to and from China. In his decision, United States District Judge Richard Sullivan wrote that, “Forcing Gucci to initiate this process in China would be significantly less efficient, extremely time consuming, and potentially fruitless.”
Intellectual property lawyer, Geoffrey Potter, observes that Chinese banks have been “helping” counterfeiters for years. If the banks are compelled to reveal specific details about its clients’ accounts, it would make business much more difficult for counterfeiters. “Counterfeiting is a crime committed in order to make money. In order to get paid you need to be part of the banking system.”
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