5-Hour Energy Awarded $20 Million in Counterfeiting Case

Judge requires companies to pay statutory damages for trademark infringement

5-hour energy

NEW YORK -- A New York federal judge has awarded the makers of 5-hour Energy drink a $20 million judgment in their lawsuit against companies they have accused of engaging in a scheme to manufacture and sell millions of counterfeit bottles of their energy supplement.

U.S. District Judge Kiyo A. Matsumoto granted in part 5-hour Energy owner Innovation Ventures LLC’s motion for summary judgment on its claims that the companies, a mix of distributors and manufacturers, took part in the counterfeiting scam and violated copyright law, reported Law360, citing the court’s 94-page opinion. The judge hit three companies—Advanced Nutraceutical Manufacturing LLC, Nutrition Private Label Inc. and Midwest Wholesale Distributors Inc.—with a total of $20 million in statutory damages for infringing on Innovation Ventures’ trademark.

“After four long years, we are extremely satisfied that Living Essentials was granted damages of more than $20 million against those who counterfeited our product, 5-hour Energy,” Melissa Skabich, communications director for Living Essentials Marketing LLC, said in a statement provided to CSP Daily News.

Agents of the Federal Bureau of Investigation (FBI) and Food & Drug Administration (FDA) arrested 10 people in June 2015, charged with conspiracy to traffic in counterfeit goods, to commit criminal copyright infringement and to introduce misbranded food into interstate commerce stemming from the illegal distribution and counterfeit of the liquid dietary supplement 5-hour Energy.

According to the indictment, all 11 defendants were involved in the illegal repackaging and eventual counterfeiting of 5-hour Energy.

Baja Exporting LLC, agreed with Living Essentials to distribute 5-hour Energy in Mexico. Living Essentials manufactured the liquid 5-hour Energy product and provided Spanish-language labeling and display boxes to Baja Exporting. Living Essentials also provided Baja a complete product package under the agreement that the 5-hour Energy with Spanish-language labeling was only to be distributed by Baja in Mexico.

But the defendants attempted instead to divert the product and to sell it in the United States at a higher price said the indictment.

After initial efforts to sell the product failed because of the Spanish-language labeling and display boxes, the defendants replaced the labeling and display boxes with counterfeit labels and boxes designed to imitate Living Essentials’ U.S. packaging. The defendants repackaged more than 350,000 bottles of 5-hour Energy and sold them in the United States at a price that was 15% lower than what Living Essentials charged for authentic 5-hour Energy.

By early 2012, the defendants had moved into counterfeiting the entire 5-hour Energy product, the indictment said.

From December 2011 through October 2012, the defendants allegedly ordered more than seven million counterfeit label sleeves and hundreds of thousands of counterfeit display boxes and placed false lot and expiration codes on the bottles and boxes. The defendants often changed the lot and expiration codes on the counterfeit bottles and boxes to parallel the valid codes being used on the authentic product.

The indictment further alleges that the defendants travelled to Guadalajara, Mexico, and hired manufacturers for the blank plastic bottles and caps imprinted with the Living Essentials-trademarked “Running Man” logo. They also purchased equipment to shrink-wrap the counterfeit 5-hour Energy labels on the counterfeit bottles and to place false lot numbers and expiration dates on the bottoms of the counterfeit bottles.

In addition, the indictment alleges that from May 2012 to October 2012, Midwest Wholesale Distributors distributed more than four million bottles of counterfeit 5-hour Energy into commercial channels throughout the United States.

Farmington Hills, Mich.-based Living Essentials introduced 5-hour Energy, the original liquid energy shot, in 2004. It has zero sugar, zero herbal stimulants and four calories.

The case is Innovation Ventures LLC et al. v. Ultimate One Distributing Corp. et al., case number 1:12-cv- 05354, in the U.S. District Court for the Eastern District of New York.