Klipsch Settles Suits, Bans Defendants

From Klipsch’s press release:

AuthorizedElectronics.com, TheBestPriceStore.com, and HomeTheaterPhiles.com.

According to Mike Klipsch, executive vice president and chief operating officer, Klipsch accomplished everything it set out to do with the lawsuit including securing a lifetime ban that prevents web sites, their owners and any future businesses they own from ever selling Klipsch brand products. He said that this lawsuit combined with the company’s zero tolerance policy on transshipping should significantly reduce any unauthorized sales of Klipsch brand products.

“Going after people whose business practices include deceiving unsuspecting consumers and illegally capitalizing on the Klipsch image is not easy and it is very, very costly,” Mike Klipsch said. “We spent over six figures without even stepping into a courtroom, and even that doesn’t come close to the millions of dollars worth of revenue we chose to give up by terminating dealers that transshipped Klipsch products.”

In January, Klipsch reported it had terminated 16 dealers that represented $5 million in business executing its zero tolerance transshipping policy throughout 2003. The company recently terminated two more dealers for transshipping violations bringing the loss of business to a grand total of $6 million dollars. Mike Klipsch said that Klipsch would continue to enforce its zero tolerance policy and “give up millions more in revenue if that is what it takes to stop the transshipping and prevent the unscrupulous procurement, promotion and sale of Klipsch-branded loudspeakers by unauthorized resellers.”

Klipsch first announced that it was filing suit on January 5 seeking an injunction to prevent the defendants from inducing authorized dealers to transship Klipsch products, interfering with the contractual relationships between Klipsch and its authorized dealers, infringing on Klipsch trademarks, illegally using Klipsch’s copyrighted materials, and otherwise competing unfairly with Klipsch. Klipsch alleged that all of the defendants removed the official Klipsch serial number labels from the products and went as far as to attach counterfeit labels.

Mike Klipsch said that within two weeks of filing the lawsuit, crazyeddie.com had closed its doors and the other four web sites had completely removed Klipsch products from their offerings. He also said that about 20 other web sites that were infringing on Klipsch’s copyrights and trademarks voluntarily removed the brand from their pages, presumably to avoid being named as defendants in a future lawsuit.

Specifically, Klipsch obtained a consent decree from Syris Holding Corporation, the parent company of the web site HomeTheaterPhiles.com, that not only enjoins the company, its owners and any associated parties from now or in the future engaging in any of the activities identified in the original complaint, but Syris must disclose the name and contacts of the dealer or dealers that supplied them with Klipsch products.

In a second settlement, the web sites 50TopSellers.com, AuthorizedElectronics.com, and TheBestPriceStore.com agreed not to sell Klipsch brand products or otherwise use Klipsch trademarks and copyrights in connection with their businesses.

The default judgment against Crazyeddie.com will include the same general provisions as the other settlements. Crazyeddie.com, its owners and any associated parties will be enjoined from now or in the future engaging in any of the activities identified in the original complaint.

In concert with filing the lawsuit, Klipsch retained the services of NetEnforcers.com, a brand protection company that assisted Klipsch with shutting down more than 125 auctions by unauthorized dealers using third party web sites such as Ebay and Yahoo. Mike Klipsch said Klipsch plans to continue its relationship with NetEnforcers.com for as long as it is needed and he indicated that more lawsuits would be filed if necessary.