Merry-Go-Round Enterprises Inc. claimed its biggest success in a battle to protect its private-label trademarks from counterfeiting as it reached a settlement yesterday with a New York-based company it accused of producing fake IOU brand T-shirts and sweat shirts.
Stuart M. Lucas, president of the Joppa-based clothing store chain's men's division, said the settlement of its civil lawsuit against United Outlet Center Inc. came four months after a federal district judge in New York issued a preliminary injunction against United Outlet and strongly suggested that the company settle with Merry-Go-Round.
Neither party would discuss the amount of the settlement.
Ezra Sutton, a New Jersey attorney who represents the United Outlet chain, said the settlement involved "no admission of any liability or wrongdoing."
He denied that United Outlet had done any counterfeiting or that any judgment had been entered against it.
The company settled because "it wasn't worth fighting them," Mr. Sutton said.
Mr. Lucas, however, hailed the settlement as "a very big deal" that would "send a very strong message to people who are counterfeiting."
He said United Outlet, with about 30 stores, was the largest retailer that Merry-Go-Round has taken action against.
The executive said counterfeiting is a serious problem for Merry-Go-Round's private brands, which account for an estimated 25 percent to 30 percent of its $761 million in annual sales.
Losses from sales missed because of counterfeiting have amounted to millions of dollars, he said.
"This has been going on for four or five years, and hundreds of people have been doing it," Mr. Lucas said.
Mr. Lucas said sales of counterfeit brand-name clothing are "pervasive" at flea markets and outlet malls.
Typically, Mr. Lucas said, counterfeiters buy "blank" irregular T-shirts and use them to manufacture the fakes.
"The clothes are garbage," he said.
"Put them in the washing machine one time and they shrink three sizes."
He added that Merry-Go-Round's stores often have counterfeit items returned by dissatisfied customers.
Mr. Lucas said authentic IOU garments are sold only in Merry-Go-Round, Attivo and Dejaiz stores.
If a customer sees IOU clothes in an outlet mall or flea market, chances are it is counterfeit, he said. He said a counterfeit can usually be identified by looking at the neck label. The genuine article bears a hard-to-copy IOU logo.
The executive said Merry-Go-Round has mounted an intensive effort to detect and stop the sale and manufacture of counterfeits, sending personnel from its more than 935 stores into flea markets and outlet malls across the country looking for fakes.
"We have literally hundreds of people out there looking for these items," he said.