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Warning: Don't Get Sued for Selling Knockoffs

A small business in Washington state was slapped with a lawsuit after an undercover shopper for Coach bought five allegedly counterfeit Coach items at the local antique store. What can you learn from their ordeal?

Pegasus Memorabilia's owner Sherl Stocking was flabbergasted that the Coach products at issue -- including a pair of glasses sold for $9.95 -- were alleged fakes, claiming that he had bought them used at a trade show in Las Vegas, reports Seattle's KING-TV.

How can your small business avoid the same mistake?

Coach Moves In on Counterfeits

Stocking was targeted as a part of "Operation Turnlock," a "zero-tolerance" anti-counterfeiting program initiated by Coach that employs undercover shoppers to root out fake Coach merchandise. It's resulted in approximately 700 lawsuits to date, reports KING-TV.

This is not the first time a luxury merchandiser has moved in to protect their intellectual property rights against cheap imitations; in 2011, designer Tory Burch secured a $164 million verdict against counterfeiters and the websites who sold products that sold the fake goods bearing her mark.

Coach's "Turnlock" program also began by focusing on Internet retailers. But now the designer-bag behemoth is targeting small business owners like Stocking.

Protect Your Business From Counterfeit Suits

Average consumers can be slapped with criminal punishments for even buying one fake designer bag, so it's important that a business owner safeguard her company from criminal or civil penalties that could foreclose a business' future.

If your business deals in used goods, and knowingly sells a bag that is counterfeit, then your business may be liable for violating federal criminal law and also vulnerable to civil suits by the designers for trademark violations.

The National Association of Wholesale-Distributors suggests the following steps to avoid this liability:

  • Purchase designer bags only from a manufacturer or an authorized reseller.
  • Avoid buying brand name goods at online auctions or flea markets for resale.
  • Look for signs of a knockoff (e.g., misspelled labels or logos).

If a deal is too good to be true for a designer bag, then it's likely a counterfeit. Steer clear, as you don't want to risk your business ending up in court over a fake $10 bag.

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