Executive Summary: Key Legal and Evidentiary Issues

• Counterfeit Chanel and Louis Vuitton merchandise was advertised, offered for sale, and sold through multiple retail stores and the WeChat messaging platform between 2018 and 2025.

• None of the three defendants — Nicole G Collection Inc., Zi Ke Gao, or Claudia Zhao — filed a Statement of Defence or responded to multiple cease and desist letters, resulting in a default judgment proceeding.

• Private investigators documented 30 instances of Chanel trademark infringement and 27 instances of Louis Vuitton trademark infringement, confirmed by in-house authentication experts as counterfeit goods.

• The Court applied a six-year limitation period under subsection 39(2) of the Federal Courts Act, excluding 2018 infringements from recoverable damages despite the Plaintiffs' objections.

• Liability was apportioned differently among the defendants: Zi Ke Gao bore liability for all instances, NGCI's liability was capped at its dissolution in December 2024, and Claudia Zhao's liability was limited to activities from April 2024 onward.

• Punitive damages were reduced from the requested $200,000 to $30,000, as the Court found the substantial compensatory damages award already served punitive objectives.

The parties and the luxury brands at stake

Chanel Limited and Louis Vuitton Malletier, along with their respective Canadian distributors Chanel Canada ULC and Louis Vuitton Canada Inc., brought a trademark infringement action against Nicole G Collection Inc. (NGCI), its sole director Zi Ke Gao (also known as Nicole Gao, Nico Gao, and Claudia Gao), and a principal employee, Claudia Zhao. The defendants collectively operated retail businesses under the names IF Clothing, IF Clothing Store, Casa Chic Co., and Fashion House in Richmond, British Columbia. Chanel and Louis Vuitton are manufacturers of high-end luxury fashion products sold only through authorized high-end retail locations, and their trademarks are registered in Canada for use in association with luxury fashion goods and services.

The counterfeiting operation

Between 2018 and December 2025, private investigators retained by the Plaintiffs observed and recorded numerous instances of unauthorized activity at the defendants' retail stores and through the WeChat messaging platform under the profile "Casa 2305Richmond." These instances involved the advertisement, offering for sale, and sale of clothing and fashion accessories — including handbags, small leather goods, and jewelry — bearing the Chanel and Louis Vuitton trademarks. In-house personnel trained to identify authentic and counterfeit merchandise confirmed that the products sold by the defendants were largely counterfeit and had never been authorized by the Plaintiffs.

Cease and desist efforts and the defendants' refusal to comply

On at least four occasions, counsel for the Chanel Plaintiffs delivered cease and desist letters to the IF Clothing Store, once even enclosing a draft Statement of Claim. On at least two other occasions, counsel for the Chanel Plaintiffs delivered a cease and desist letter to the Casa Chic Store. On at least one occasion, counsel for the Louis Vuitton Plaintiffs delivered a cease and desist letter to a new location of the Casa Chic Store. At no time did any of the defendants respond to these letters, nor did the unauthorized activity cease. A cease and desist letter was personally given to Zi Ke Gao, who confirmed her understanding of the document and her refusal to deliver up the counterfeit Chanel merchandise. Claudia Zhao similarly received a cease and desist letter on behalf of the Chanel Plaintiffs in April 2024 and a cease and desist letter on behalf of the Louis Vuitton Plaintiffs in February 2025, but continued participating in the offering for sale and sale of the counterfeit items.

Default and service of the Statement of Claim

Claudia Zhao and NGCI were personally served with the Statement of Claim on March 13, 2025 and April 8, 2025, respectively, but neither filed a Statement of Defence. After twenty-one attempts at personal service on Zi Ke Gao, the Plaintiffs obtained orders for substituted service on April 19, 2025 and May 8, 2025. Zi Ke Gao was substitutionally served with the Statement of Claim on May 7, 2025, which included posting a copy of the Statement of Claim together with the Substitutional Service Order to the door of four addresses and sending a copy to her email address at [email protected]. Despite this, Zi Ke Gao also failed to file a Statement of Defence. The Court found it just to render all three defendants in default.

Trademark infringement and depreciation of goodwill

The Court was satisfied that the evidence established unauthorized goods bearing the Chanel and Louis Vuitton trademarks had been advertised, offered for sale, and sold, constituting infringement under sections 19 and 20 of the Trademarks Act (TMA). The Court also found that the sale of counterfeit merchandise, which was unauthorized and involved merchandise of a lower standard and quality to the authentic goods, was likely to depreciate the value of the goodwill attaching to the Chanel and Louis Vuitton trademarks contrary to section 22 of the TMA, applying the four-part test established in Veuve Clicquot Ponsardin v Boutiques Cliquot Ltée, 2006 SCC 23. Additionally, the defendants' conduct met the requirements of subsections 7(b), (c), and (d) of the TMA — passing off, substitution, and false description of goods.

Personal liability of the individual defendants

The Court found that Zi Ke Gao was actively and personally involved in the counterfeiting operation. During the investigations, she identified herself as the manager and employer of the IF Clothing Store and Casa Chic stores, and was identified by employees of the Casa Chic Store as the "boss." Her phone number and email address ([email protected]) were used to source and pay for counterfeit product, and she was observed by each of the four investigators for the Plaintiffs actively participating in the offering for sale and sale of counterfeit items. Claudia Zhao, while not a named director of NGCI, was found to be a principal employee who was knowledgeable about the counterfeit activity and assisted with the sale of the counterfeit merchandise. The Plaintiffs relied on interactions between the investigators and Claudia Zhao at the Casa Chic Store, including her conveying a "hidden cupboard" with 15–20 counterfeit Chanel handbags from which she could "source" goods. Both individuals were held personally liable based on the principle that a corporation will not be permitted to shield officers, directors, and principal employees from actions that demonstrate the deliberate, wilful and knowing pursuit of a course of conduct that is likely to constitute infringement.

The limitation period and its impact on damages

The Court addressed whether damages could extend beyond six years from when the action was commenced, as provided under subsection 39(2) of the Federal Courts Act. The Plaintiffs argued that to place a limit on the damages that can be recovered, the limitation period would have to be pled as a defence, and relied on the Wang decision where damages were awarded beyond six years. The Court disagreed, noting that unlike section 43.1 of the Copyright Act, which explicitly provides that the limitation period only applies when it is pled, there is no such provision in the TMA. The absolute language of subsection 39(2) of the Federal Courts Act therefore applied, resulting in the removal of the 2018 occurrences of infringement from the recoverable damages.

Quantification of compensatory damages

Damages were calculated using the framework established in Nike Canada Ltd v Goldstar Design Ltd et al (1997), which applies a standard nominal damage award per infringing activity, adjusted for inflation. The original rate in Nike was set at $6,000 per infringing activity where defendants are operating from conventional retail premises and has been consistently applied and adjusted for inflation since 1997. The applicable inflation-adjusted rates were $9,000 for activities in 2019 and 2020, $9,500 for activities in 2021, and $10,500 for activities in 2023, 2024, and 2025. The Court also addressed whether both the trademark owner and its related Canadian distributor should each receive a separate damages award. Although the recent decision in Torf (2024 FC 1152) concluded that a separate damage award should not be granted to both entities, the Court followed the established and binding jurisprudence from the Federal Court of Appeal in Kwan Lam v Chanel S de RL (2016 FCA 111) and awarded damages to both the trademark owners and their Canadian distributors for the acts of infringement.

Punitive damages and costs

The Plaintiffs requested $200,000 in punitive damages, but the Court limited the award to $30,000, noting that the compensatory damage award was already significant, that two of the defendants are individuals, and that NGCI had already been dissolved. The Court observed that compensatory damages also punish and may be all the punishment required, and punitive damages are only to be awarded if all other penalties have been taken into account and found to be inadequate to accomplish the objectives of retribution, deterrence, and denunciation. The Court also declined to award the full solicitor and client costs requested, instead ordering 40% of counsel's fees and all reasonable disbursements, plus the previously awarded $3,750 for the motion for substitutional service.

The ruling and outcome

The Federal Court, presided over by Madam Justice Furlanetto, issued default judgment in favour of the Plaintiffs on April 17, 2026. The Court awarded total compensatory damages of $582,000 to the Chanel Plaintiffs and $509,000 to the Louis Vuitton Plaintiffs, with liability apportioned among the defendants based on the timeframes of their respective involvement. For the Chanel damages, NGCI and Zi Ke Gao were held jointly and severally liable for $225,000 (12 instances between 2019 and April 2024), all three defendants were jointly and severally liable for $147,000 (7 instances between April 2024 and December 2024), and Zi Ke Gao and Claudia Zhao were jointly and severally liable for $210,000 (10 instances in 2025). For the Louis Vuitton damages, NGCI and Zi Ke Gao were jointly and severally liable for $152,000 (8 instances between 2019 and April 2024), all three defendants were jointly and severally liable for $126,000 (6 instances between April 2024 and December 2024), and Zi Ke Gao and Claudia Zhao were jointly and severally liable for $231,000 (11 instances in 2025). An additional $30,000 in punitive and exemplary damages was awarded jointly and severally against all defendants. The Court also granted a permanent injunction, ordered delivery up of all offending goods, and required the defendants to disclose the names and contact information of their manufacturers and suppliers. Post-judgment interest at 4.45% was ordered on the damages awarded.