A major maker of baseball cards is being accused of playing dirty.
Upper Deck could be facing hundred of millions of dollars in damages, as a result of a little-noticed California lawsuit that threatens to cripple the company.
Japanese entertainment company Konami Entertainment sued Upper Deck for copyright infringement, breach of contract and trademark counterfeiting, alleging Upper Deck illegally reproduced more than 600,000 of Konami’s popular Yu-Gi-Oh! cards.
After more than a year of trading motions, a judge is set to rule on damages to be awarded to Konami on Jan. 26.
Senior execs from Carlsbad, Calif.-based Upper Deck did not dispute accusations that the Yu-Gi-Oh! cards, which are based on a Japanese animation show, were counterfeit. Instead, five Upper Deck execs involved in the alleged fakes — including Chief Executive Richard McWilliams — have resisted being deposed, citing their Fifth Amendment privilege against self-incrimination.
Under court order, however, one exec, Stephanie Mascott, provided e-mails and other damning testimony that claimed, among other things, that she witnessed McWilliams shredding the fake cards in his office, according to court filings. The filings added that she said McWilliams instructed one distributor to “remember that you do not know where you got the card from, OK?”
In criminal cases, the court is not allowed to draw any inference from a defendant’s refusal to speak. But in civil suits, that’s not the case.
Speaking of McWilliams, for instance, a court order in November noted: “In the face of allegations that he shredded cards in a meeting, instructed an employee or a third party to forget where the counterfeit cards came from, and made plans for future counterfeiting, he has said nothing. The court infers from McWilliams’ silence that those allegations are true.”
Calls to Upper Deck and its law firm, Rutan & Tucker, were not returned.
Legal sources suggested the execs took the Fifth to avoid exposing themselves to potential criminal charges, like mail fraud or wire fraud, stemming from testimony uncovered in the civil case.
Upper Deck, which has expanded its business into memorabilia like autographs, still generates the bulk of its revenue through trading cards.
It had a distribution deal with Konami going back to 2002, but allegedly began making and selling fake cards outside of the deal.
Ben Fox, Konami’s lawyer at Morrison & Foerster, said his client was looking for “hundreds of millions of dollars” in damages.
“This could be the end of Upper Deck,” said Joshua Leland Evans, chairman of memorabilia shop Leland’s Auction House in Bohemia, NY. “I’m not sure they can survive this. We are hearing big rumors of financial trouble at Upper Deck. It could only be a matter of time before they go out of business.”