Coach has no patience when it comes to fakes.
That’s why nearly three years ago the leather goods powerhouse decided to redouble its anticounterfeiting efforts with the launch of an aggressive national civil litigation program.
Dubbed Operation Turnlock, the zero-tolerance program targets companies and individuals involved in the distribution or sale of counterfeits in state and federal courts.
“Coach has always taken counterfeiting very seriously, but the missing piece was shoring up the civil lawsuits,” said Todd Kahn, company senior vice president, general counsel and secretary. “Counterfeiters are more afraid of paying a penalty than going to jail.”
And that penalty can be a hefty one. Under federal law, damages can be as much as $2 million per counterfeit item.
Since starting the program in May 2009, Kahn said that Coach has initiated more than 500 lawsuits. Of those suits, 250 judgments have come in, all in favor of Coach. Including judgments and out-of-court cash settlements, Kahn estimated that the firm has amassed a sum of money in the “eight figures.” Coach’s largest settlement was more than $2 million and its largest seizure at one time was more than 500,000 units, the company said.
In 2010, U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement made 19,959 counterfeit seizures valued at $188.1 million, of which fake handbags, wallets and backpacks amounted to $15.4 million, or 8.2 percent of the total.
Part of what makes Operation Turnlock so successful is how it works. Unlike most anticounterfeiting programs, Turnlock employs lawyers on a contingency basis. In some cases, this translates to keeping law firms on retainer and paying them a percentage of the judgment.
“It’s much more cost-effective than a straight hourly fee,” Kahn said. “The opportunity to see judgments that are very significant really is a very powerful incentive.”
Coach’s legal counsel also puts in more hours than most in-house teams do, taking on behind-the-scenes investigative work and preparing its own case files.
Besides legal manpower, Coach said that its customers play a pivotal role in helping to identify new hot spots of counterfeiting. The company receives loads of tips daily via e-mail and telephone.
“We’ve created a turnkey operation,” he said. “The program has had a chilling effect on counterfeiting.”
As a result, Coach reports that it has seen fewer instances of counterfeiting on the streets, which is good — the only problem is, the majority of counterfeiting today takes place on the Internet.
“It’s the new frontier,” the attorney said. “What’s really troubling there is the confusion it causes to the consumer.”
Internet counterfeiting, which is referred to as “whac-a-mole,” after the arcade game in which players armed with padded mallets try to force moles back into their holes, is probably the biggest problem facing fashion brands today.
But, according to Kahn, Coach is in the process of adapting some of Turnlock’s strategies to fighting counterfeiting on the Web.
“We’re more optimistic about how to prosecute e-commerce guys,” he said. “There’s no one silver bullet. It’s a combination of certain strategies, but we will succeed in fighting Internet counterfeiters.”