Cigarette maker Philip Morris USA and a Fruitland store owner have reached a settlement in a lawsuit over counterfeit cigarettes.
Philip Morris, Store Reach Settlement
July 28, 2006
BOISE, Idaho (AP) – Cigarette maker Philip Morris USA and a Fruitland store owner have reached a settlement in a lawsuit over counterfeit cigarettes.
In the lawsuit filed last April in U.S. District Court, Philip Morris claimed that Alberto Gonzales, the owner of The Orchard Store, was selling phony Marlboro and Marlboro Lights cigarettes and infringing on the company’s trademark.
The two businesses reached a settlement late last week, however, with Gonzales agreeing to routine inspections and hefty fines for any future counterfeit cigarette sales. He also agreed to share information about his cigarette suppliers.
“As a result of the sale of counterfeit Marlboro and/or Marlboro Lights cigarettes, Philip Morris USA is suffering a loss of the enormous goodwill associated with the Philip Morris USA Marks, and is losing profits from lost sales of genuine products,” the company wrote in the settlement agreement.
Gonzales did not contest the cigarette maker’s claim that the cigarettes were fake, though he did not admit any knowledge that the items in his store were phony, the agreement said.
“These guys are as duped as anybody else,” said Frank Dykas, Gonzales’ lawyer. “Lots of products are counterfeits where the store owners have no clue, and neither do the end users. They’re as much an innocent victim as the big companies are.”
The settlement calls for fines ranging from $500 to $5,000 if Gonzales sells counterfeit cigarettes at his store in the future, with the amount increasing for each subsequent occurrence and topping out at $100,000. Additionally, Gonzales agreed to let Philip Morris workers inspect his cigarette stocks during business hours as needed.
Gonzales could not be reached for comment. Counterfeiting is an insidious problem that affects many industries, Dykas said.
“The companies aren’t really after the store owners — what they’re after are the guys who are producing this stuff,” Dykas said. “It’s everything from perfume to ink cartridges to cigarettes to videotapes. Sometimes I wonder, with color scanners and color photocopiers and printers, just how difficult it is to produce a counterfeit.”
Philip Morris claimed it discovered the counterfeit cigarettes after someone hired as a “purchaser” for the company bought some packs from The Orchard Store and sent them to a company facility for proprietary testing, according to court documents.
Mike Neese, a spokesman for Philip Morris, said he couldn’t comment on any specific cases but that counterfeit and contraband cigarette problems are widespread and lead to lost tax revenues for state and federal governments.
“Contraband cigarette-related activity is a very complex and ever-changing problem that affects many businesses,” Neese said. “Since 2002, Philip Morris USA has identified the existence of counterfeit cigarettes at retailers in 20 states.”
Contraband cigarettes include counterfeits as well as smuggled cigarettes and cigarettes sold without proper tax payments, Neese said. In 2001, U.S. Customs and Border Protection estimated the value of contraband cigarettes seized by the department at $4.5 million; by 2004 the estimated value was more than $24 million, Neese said.
