One of the most audacious counterfeiting operations to target the luxury industry – complete with former Hermès insiders, clandestine workshops, and international resale networks – reached France’s highest court this spring. More than a decade after authorities first dismantled the sophisticated criminal enterprise behind thousands of counterfeit Birkin bags, the French Court of Cassation handed down a partial annulment, preserving most of the convictions and financial penalties in favor of Hermès, while exposing critical legal missteps that will now send part of the case back to the lower courts for reexamination.
An Inside Job
The case got its start back in the summer of 2011, when Hermès first uncovered irregularities within its own operations. While Hermès was working to balance supply and demand for its coveted Birkin bags amid global financial turbulence, a very different operation was quietly unfolding nearby. In hidden workshops not far from the company’s own ateliers, highly skilled leatherworkers, including several Hermès employees, were manufacturing counterfeit Birkins of near-indistinguishable quality. Some materials, including hardware and exotic leathers, were sourced directly from Hermès’ supply chain, while packaging replicated Hermès’ iconic orange boxes and gold stamps.
Unlike the cheaply made counterfeits churned out of factories in Asia, these high-end fakes were handcrafted in France, and the resulting bags were sold to eager buyers across Europe, Asia, and the United States at prices as high as $75,000. Prosecutors would ultimately estimate that the ring generated more than $22 million in revenue.
Following suspicions flagged by Hermès’ internal compliance system, the company filed a formal complaint with French authorities in 2011, triggering a year-long joint investigation with law enforcement. Wiretaps, surveillance, and raids ultimately led to the arrests of more than a dozen individuals in 2012, including two Hermès employees caught supplying authentic components for the counterfeit bags. In total, Hermès’ internal investigation and police efforts would reveal an unusually sophisticated and deeply embedded counterfeiting network operating directly under its nose.
The Trial of a Decade
In 2020, nearly a decade after the first arrests, ten defendants – including seven former Hermès employees – stood trial before the Paris Criminal Court on charges of counterfeiting, organized criminal activity, and breach of trust. Testimony detailed how Hermès workers secretly diverted materials to produce counterfeit bags, some using Hermès’ internal “bon au personnel” system. The ring targeted both Paris tourists and buyers in Hong Kong.
Sentences ranged from suspended terms to three years in prison, with the ringleader – who was tried in absentia – receiving the harshest penalty. Hermès was awarded €580,000, well below the €2 million it sought. In 2021, the case widened, leading to convictions for 23 defendants and civil damages exceeding €10 million. Twelve defendants appealed.
After partial sentence reductions by the Paris Court of Appeal in 2023, several defendants challenged both their convictions and civil liability before France’s highest court. They argued that awarding profit-based damages alongside criminal penalties violated EU law by imposing double punishment and objected to joint liability for profits they hadn’t personally received. The defendants also contested the damages calculation, claiming courts must choose between awarding profits or lost royalties. One defendant, “Mr. [Y],” argued that his conviction was invalid because his sales took place in Russia, not France, and challenged an uncharged organized crime aggravation used to increase his sentence.
The High Court’s Ruling
The Court of Cassation rejected most of the defendants’ arguments in a decision that reinforces France’s broad approach to IP enforcement. In its May 27 ruling, the court found that both civil damages and criminal penalties can be imposed. Civil damages – which are based on the profits the defendants earned from the counterfeit sales – are meant to reimburse Hermès for its losses, while the criminal penalties serve to punish the defendants, and thus, can co-exist.
The court also upheld joint and several liability, finding that because each defendant played a role in the operation, all could be held responsible for the full profits generated. The organized nature of the scheme, the court reasoned, justified holding the entire group financially accountable.
On the issue of damages as a whole, the court agreed with the Paris Court of Appeal’s decision to award profits-based damages to one Hermès entity and royalty-based damages to another. Because the two awards addressed separate harms, the court found that awarding both was appropriate.
At the same time, the Court identified serious flaws in Mr. [Y]’s conviction. It pointed to internal contradictions in the lower court’s decision, which simultaneously found that Mr. [Y] had exclusively resold bags in Russia while also convicting him for sales occurring in France. The Court further found that the appellate court improperly increased Mr. [Y]’s sentence based on organized gang aggravation that had not been charged or established. These procedural errors require partial annulment of Mr. [Y]’s conviction and sentencing, the high court held.
The Broader Fallout
The ruling leaves intact all other convictions and civil penalties, including the substantial financial awards in Hermès’ favor. Mr. [Y] will now face a retrial on his charges before a newly composed panel of the Paris Court of Appeal.
For Hermès, the decision solidifies its sweeping civil recovery and further strengthens the French judiciary’s willingness to impose expansive joint liability and significant financial penalties in complex counterfeiting operations. At the same time, the case underscores the procedural limitations that still apply under both French and EU law, particularly when territorial jurisdiction and sentencing aggravations are at issue.
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