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Famous handbag maker hits local retailers with lawsuits

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In an effort to crack down on knockoffs, famous handbag designer Coach Inc. has hit at least three local retailers with trademark-infringement lawsuits.

The two most recent suits, filed March 24 in U.S. District Court of Southern Indiana, are against My Walk-In Closet of Greenwood and Novedades Latina on the south side of Indianapolis.

New York-based Coach sued a mall kiosk operator called Cellaxs on Dec. 11.

The complaints in each case are similar: Coach alleges trademark infringement, copyright infringement, counterfeiting and forgery, among other counts. The company demands $1 million per counterfeit mark per type of infringing item, such as a handbag or wallet. As an alternative, the company demands defendants pay Coach all the profits realized from the sale of infringing or counterfeit goods, plus treble damages.

"This is Coach getting very serious about stopping counterfeiting and infringing materials out there," Coach General Counsel Nancy Axilrod said.

Catherine Vesely, owner of My Walk-In Closet, 350 S. Madison Ave., could not be reached for comment Wednesday.

Zadia Caban, owner of Novedades Latina, 4202 S. Meridian St., Suite E, said she was not aware of the lawsuit. However, she said her store does not sell Coach or fake Coach goods. The store sells perfume, jewelry and some clothing. She said the only wallets she sells are a Mexican brand of men’s leather goods.

"This is like using a sledgehammer to swat a mosquito that's already incapacitated," said Gregory Gadsen, an Indianapolis attorney with Indianapolis-based law firm Lee Cossell Kuehn & Love who represents Cellaxs owner Rafik Howlader.

Coach, which designs everything from home goods to sunglasses, has global annual sales in excess of $3 billion.

The company calls its legal crackdown "Operation Turnlock," a reference to the signature turning lock on its high-end handbags. Axilrod said the company has spent $1 million or more to file 160 cases in the past 15 months. Coach has netted some six-figure settlements, she said, but the company is also using the lawsuits as a general deterrant.

Gadsen said Coach's tactic is unusual because, at least in his client's case, the company didn't bother with any preliminary correspondence. "Given the size of the complaint, it would've been nice to receive a cease-and-desist letter," he said. "My client wasn't aware he was selling anything that had a Coach name. He was surprised."

Gadsen said he's met with Alejandro Valle, Coach's attorney in Indiana, and hopes to reach a settlement, though he expects it would be well under six figures.

According to the complaint against Cellaxs, an unidentified investigator visited kiosks at Muncie Mall, Tippecanoe Mall in Lafayette and at Washington Square Mall on the east side of Indianapolis last summer. He or she bought snap-on cell phone covers with a Coach label that cost $15 to $23—much less than the suggested retail price of $70. The investigator sent the goods back to Coach in New York, which verified that they were not authentic.

On Feb. 26, an investigator stopped in My Walk-In Closet and bought a Coach-labeled handbag for $72.50 and a pair of sunglasses for $34.50, the complaint against the store said. The average retail price for those items is $325 and $185, respectively.

Also on Feb. 26, an investigator visiting Novedades Latina paid $49.99 apiece for Coach-labeled wallets. The real thing costs an average of $200. According to the Coach complaint, a secret shopper went back to the south-side store two days later and bought a knockoff handbag for $130.

Axilrod declined to say how many investigators Coach employs, or how the company decides where to look. The company sells its goods only through its own retail and factory outlets, Macy's and Bloomingdale's.

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  • I Blame the Greedy Designers
    Any co that thinks their pocketbook is worth a thousand dollars, has only themselves to blame. They know how little it costs to produce their goods. Esp when manufactured OVERSEAS because of the cheap labor costs.(Taking away jobs Americans need!) When egotistical designers slap a $1,000.00 price tag on a purse that costs at most $15 to produce,they create a market for knock offs themselves. They know more than 90% of people can't afford their bags. There are many middle priced bags made with the same materials that don't mass produce either (For example Brighton Bags)
    There is no Magic Leather used to mass produce designer bags. Excellent materials are used in many cases but come on, they create this mess themselves. In fact if it wasn't for the knockoffs you would rarely even see the bags on the street.I believe there are more knock offs then actual designer bags sold. Do the math. Any day of the week you can go on sites like IOFFER where all day long 100's of sellers are openly selling copies. As long as these designers are unrealistic with the costs of their over priced bags, there will always be a market for fakes. What makes you think that only counterfeit bags are produced in sweatshops? Sweat shops, child labor all that mess has been around since long before knock off bags.Take away the GREED with unrealistic prices for goods, produce them here in the USA. If more people could afford the items to begin with you lose the demand for counterfeit goods. It all goes back to the unrealistic expectations of some designers.
  • Really?
    I'm completely against buying counterfeits, but sometimes the impacts (as Carey linked to above), are borderline absurd. (Kudos to Carey though for providing a source.) To believe that 3/4 of a million American jobs were destroyed, you'd also have to believe that if knock-offs didn't exist, the same individual would come up with $130 for a wallet. Not likely (at least in all cases). It's like when the RIAA claims they are out $10k when a 12 year old downloads 7000 songs. (Not arguing they got benefit, just that they would never have paid $120 for all the Duran Duran CD's.)

    In an attempt to also back up my opinion, I offer the following quotes from actual RIAA cases:

    "'[S]tatutory damages should bear some relation to actual damages suffered'.... and 'cannot be divorced entirely from economic reality'". -Hon. Shira A. Scheindlin, Dist. Judge, Southern Dist. New York, August 19, 2008, Yurman v. Castaneda

    "Customers who download music and movies for free would not necessarily spend money to acquire the same product.....RIAAâ??s request problematically assumes that every illegal download resulted in a lost sale."
    -Hon. James P. Jones, Dist. Judge, Western Dist. Virginia, November 7, 2008, USA v. Dove

  • Buying knockoff designer goods isn't harmless
    I'm all for Coach and other brands fighting against counterfeiting. And, I wish more consumers would actually realize that it's not just the huge brands like Coach that are affected: "fakes are believed to be directly responsible for the loss of more than 750,000 American jobs; that everything from baby formula to medicine is counterfeited, with tragic results; that counterfeiters and the crime syndicates they work with deal in human trafficking, child labor and gang warfare; and that counterfeiting is used to launder money, and the money has been linked to truly sinister deeds such as terrorism."

    Here are more details:
    http://today.msnbc.msn.com/id/28571321/#ixzz0jmOcRxuP

    Plus, many people can easily spot a fake bag, so you're not going to look cool carrying it. ;)
  • Why do after the little guy...
    Because the little guy shouldn't be selling knock offs. Create your own brand and put your own money into building it, like Coach did. If Coach wants to have crazy high prices, they are perfectly within their right. They are also perfectly within their right to protect their brand from dilution.
  • Distribution chain
    Might be easier to dry up parts of the distribution chain than to find and shut down the manufacturer. Anybody can walk into a store and see what's for sale. It's harder to get into a manufacturing facility.

    The little guy is probably making some money on the transaction too, unless they're selling the goods at cost out of the goodness of their hearts.
  • Why hassle the little guy?
    At prices like that, any consumer knows they are knock-offs. Still, they should probably have been labeled as such.

    But the effort is misplaced. Instead of going after the little-guy retailers, what about targeting the people who manufacture them? They are the ones making the real money off the Coach name.

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  1. PJ - Mall operators like Simon, and most developers/ land owners, establish individual legal entities for each property to avoid having a problem location sink the ship, or simply structure the note to exclude anything but the property acting as collateral. Usually both. The big banks that lend are big boys that know the risks and aren't mad at Simon for forking over the deed and walking away.

  2. Do any of the East side residence think that Macy, JC Penny's and the other national tenants would have letft the mall if they were making money?? I have read several post about how Simon neglected the property but it sounds like the Eastsiders stopped shopping at the mall even when it was full with all of the national retailers that you want to come back to the mall. I used to work at the Dick's at Washington Square and I know for a fact it's the worst performing Dick's in the Indianapolis market. You better start shopping there before it closes also.

  3. How can any company that has the cash and other assets be allowed to simply foreclose and not pay the debt? Simon, pay the debt and sell the property yourself. Don't just stiff the bank with the loan and require them to find a buyer.

  4. If you only knew....

  5. The proposal is structured in such a way that a private company (who has competitors in the marketplace) has struck a deal to get "financing" through utility ratepayers via IPL. Competitors to BlueIndy are at disadvantage now. The story isn't "how green can we be" but how creative "financing" through captive ratepayers benefits a company whose proposal should sink or float in the competitive marketplace without customer funding. If it was a great idea there would be financing available. IBJ needs to be doing a story on the utility ratemaking piece of this (which is pretty complicated) but instead it suggests that folks are whining about paying for being green.

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