Coach says it's not overzealous in sales crackdown

[February 11, 2011]  SEATTLE (AP) -- Gina Kim liked the $428 handbag she bought with her employee discount at a Coach Inc. store in San Francisco for its pillowed bottom and striped, colorful strap.

But she hardly used it: It was white and she didn't want it to stain. So she ultimately did what many other people do with luxury items they no longer want.

She put it up for sale on eBay.

That decision earned Kim a "cease and desist" letter from a law firm representing Coach that accused her of selling counterfeit goods in violation of state and federal law. The letter threatened her with up to $2 million in penalties, instructed her to sign a statement admitting wrongdoing, and demanded she pay Coach $300.

Now that letter -- and the removal of her eBay ad -- has prompted Kim to sue Coach. It also raises questions about companies' efforts to crack down on the massive U.S. market for counterfeit goods.

"If Coach wants to send letters threatening $2 million lawsuits against their own customers, they should at least do minimal investigation to see whether those claims are accurate," says Jay Carlson, one of Kim's attorneys.

Kim, a 31-year-old student at Seattle Central Community College who worked for Coach in 2004, sued the company in U.S. District Court in Seattle this week alleging violations of the state Consumer Protection Act, defamation, interference with her business relationship with eBay, and other claims. The lawsuit, which seeks class-action status, claims that Coach's real motive in sending out the letters is an attempt to suppress the online sale of used items and force people to pay top dollar directly to the company if they want a Coach handbag.

Nancy Axilrod, associate general counsel at Coach, called it frivolous.

"We strongly believe there is absolutely no merit to the allegations in the lawsuit and we intend to vigorously defend against the claims," she said.

Last October, eBay deleted Kim's handbag ad after receiving a complaint about it from Coach. Kim said that at first she was just confused, but then she received the letter from Coach's law firm, Gibney Anthony and Flaherty in New York, and got scared. She contacted Jason Moore, a Seattle lawyer and friend, and she wrote the law firm back saying they were wrong. The firm apparently acted on her complaint, because Kim soon received an e-mail from eBay saying her ad was being reinstated.

Nevertheless, her lawyers insisted, the damage was done; it was wrong of the firm to accuse her of breaking the law and try to bully her into paying $300 without investigating her case at all, they said.

John Macaluso, the lawyer at Gibney Anthony who signed the cease-and-desist letter, did not return calls or an e-mail seeking comment Wednesday or Thursday.

Analysts say counterfeiting is an enormous problem for retailers, whether the products are sold online or on the streets of New York or Los Angeles, and companies are well within their rights to monitor sites such as Craigslist and eBay. A spokeswoman for eBay did not immediately have a comment on cases like Kim's, but she noted that the company has a program called Verified Rights Owners, by which companies can flag items that appear to be counterfeit and have the auctions shut down.

Joseph LaRocca, senior adviser for asset protection at the National Retail Federation, said companies take a variety of steps to protect their intellectual property, including using programs like eBay's, hiring contractors to search for knockoffs online and hiring private investigators to investigate. But they also know that consumers have a right to sell legitimate secondhand items, and that's not necessarily bad for the companies.

"That's brand penetration," he said. "It's a good thing when everyone on the street is carrying your product. You just want to make sure they paid for it."

LaRocca and Madison Riley, managing director at the retail consulting firm Kurt Salmon, said companies typically investigate before taking legal action. Often, that involves buying items from a suspect seller and figuring out whether they're really counterfeit.

Companies also seek to shut down online ads that feature stock photographs of brand items. Even if the item being offered for sale is not counterfeit, the companies claim they hold the rights to the photos.

Kim posted her own photograph of her handbag in the eBay ad. But another eBay seller, James Caffarella of Littleton, Mass., ran into trouble two weeks ago when he tried to sell a legitimate silver golf-ball Tiffany key chain using a stock photograph.

He too received a cease-and-desist letter from Gibney Anthony, this one demanding $450 in payment.

Caffarella took the matter directly to an in-house lawyer at Tiffany. He said the lawyer e-mailed eBay on Thursday on his behalf.

The key chain "had been reasonably and in good faith reported by Tiffany . for removal based on the counterfeit item depicted in the auction photo," the lawyer wrote, according to a copy of the e-mail Caffarella provided to the AP. "We believe that he mistakenly used a stock photograph for his authentic item and it is our belief and recommendation that eBay should reinstate (his) eBay account status."

The Tiffany lawyer, Ewa Abrams, declined to comment.

Caffarella said he's rooting for Kim in her lawsuit against Coach.

[Associated Press; By GENE JOHNSON]

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