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Target Disputes Coach Counterfeit Claim

Coach Inc.'s $1 million trade dress lawsuit against Target Corp. was rebuffed by the mass retailer Tuesday.

NEW YORK — Coach Inc.’s $1 million trade dress lawsuit against Target Corp. was rebuffed by the mass retailer Tuesday.

In a brief statement, the retailer said, “Target has procedures in place to ensure that we do not sell counterfeit products to our guests. We have been assured that the Coach product showcased in our store is authentic, therefore we believe the lawsuit is without merit.”

The case, filed last Friday in federal court here, alleged that Target sold a counterfeit Coach handbag at a Target store in Largo, Fla. The 49-page filing alleged that the handbag in question “bears a counterfeit of at least one of the Coach trademarks” and that the retailer “never made an inquiry of Coach concerning the genuineness of any item bearing a Coach trademark.”

Industry observers said the lawsuit is one of several in recent months that show growing friction between retailers and brand owners, who have stepped up efforts to protect their trademarks.

There are a number of factors that come into play with the increased number of brands suing large national retailers, said Harley Lewin, chairman of trademarks and global brand strategies for the intellectual property practice of Greenberg Traurig.

In the past, brand owners have been reluctant to sue retailers, not wanting to bite the hand that feeds them, Lewin and other legal experts said. That does not come into play with every brand and every retailer, but it is a factor in considering whether or not to litigate. Other factors include a party’s willingness to respond to cease-and-desist letters or the possibility of working with a brand to address a problem outside of the courts.

In some cases, gray-market goods, legitimate branded goods intended for sale in other markets that find their way into the U.S. through channels not authorized by a brand, further complicate the situation. The real clash, Lewin said, is driven by the strategic shift of midprice retailers, such as Target, who try and draw in a higher-end consumer.

“The real reason that you’re seeing more of it, aside from all of the considerations that go into anybody making a litigation decision, is that the likelihood of these companies carrying bogus product has gone up because of their own strategic changes,” Lewin said.

There have been a number of cases in the last two years where smaller companies have sued larger retailers like Target and Wal-Mart, which have both made a concerted effort to lure up-market shoppers. Earlier this year, Coach sued Kohl’s for trademark infringement, and in June, Fendi sued Wal-Mart for allegedly selling counterfeit handbags at Sam’s Club. Last year, Anthropologie and U.O.D. Inc. sued Wal-Mart for trademark infringement while L’Occitane sued Wal-Mart, Advanced Beauty Systems and CVS for trademark infringement.

Retailers have historically shied away from the negative publicity attached to lawsuits that allege the sale of illegal goods, legal sources said. If a case is officially filed, generally it will fold into a consent judgment where a settlement is worked out between the plaintiff and the defendant.

The Coach lawsuit appears to allege that Target sold one counterfeit handbag, pointed out an anonymous legal source familiar with the court documents. If that is the case, “it borders on an abuse of the legal system,” said the source. Suing large companies is a legal tactic employed by some companies to put pressure on a situation, he said.

For luxury brands like Coach, who establish limited distribution as part of a corporate strategy, it can be disconcerting to see their own product, or facsimiles of it, in unauthorized retail channels, sources said.

“Where a brand sees a store that it doesn’t want to have its goods sold, it may well consider this a justifiable opportunity to slap their hand publicly,” Lewing said. A lawsuit that gets publicity can give consumers the impression that Coach products at Target are bogus. And the stigma of that accusation in some cases makes a retailer shy away from carrying potentially infringing product in the future, he said.