Swap Shop agrees to pay Coach $5.5 million to dismiss lawsuit

After just two days of testimony in a trial about designer knockoffs, Coach Inc. and the Swap Shop settled their dispute Thursday.

A copy of the agreement, obtained by the Sun Sentinel, shows that Swap Shop Inc. agreed to pay $5.5 million to Coach by Dec. 27 to dismiss the lawsuit.

But both sides declined to comment on the full terms of the settlement.

Neither side admitted any wrongdoing or liability, but under the agreement, Coach can send inspectors to look for counterfeit products at the flea market at any time and Swap Shop representatives will have 30 days to fix the problem and report back to Coach.


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Swap Shop owner Preston Henn and Coach executive Nancy Axilrod each claimed it was a win for them.

"I want to get the hell out of here," Henn said, with a smile, outside the courtroom when he was asked why the case had settled. "I'm glad to be out of there, I've got work to do. … It's over and the Swap Shop is going to be open today and tomorrow — just like every other day of the year."

Will customers still be able to buy fake designer Coach purses, sunglasses and wallets for a few bucks at the massive flea market on West Sunrise Boulevard?

"I hope not," Henn said.

The Coach lawsuit targeted Henn, his wife Betty and the Swap Shop, alleging they willfully turned a blind eye to vendors illegally selling counterfeit Coach products on their property.

If the trial had gone on and jurors had sided with Coach, it could have cost Henn a lot more than $5.5 million.

Experts say that one phony designer purse can bear as many as four or five trademark violations — such as the Coach name, the highly recognized trademark C, the name label inside the purse, the hang tag, the coach and horses logo, and more.

By law, jurors could have awarded damages of up to $2 million per proven Coach trademark violation.

Because there was no official verdict in the case, it does not set any legal precedent for future lawsuits. But Miami attorneys Steven Peretz and Michael Chesal, who are experts on trademark law but were not involved in the Coach case, said they thought the case was a win for Coach.

"This gives Coach and other luxury brands another arrow in their quiver in trying to enforce their branding and trademark rights against flea market operators and shopping malls," Peretz said.

Though Henn never personally sold any counterfeit items, the settlement holds him to a similar level of liability that an actual counterfeiter would face, the experts said. And they said other flea market owners will have to consider the possible financial liability they could face if vendors sell fake designer items on their property.

Because damages can run anywhere from $1,000 to $2 million per infringement, it's impossible for defendants to predict how much it could cost them to fight such litigation, Peretz and Chesal said.

"It's like running a red light and not knowing if the fine could be $100 or $10,000," Peretz said.

Last year, a federal jury in Tennessee awarded more than $5 million to Coach in a similar lawsuit against the owner of The Southwest Flea Market after finding him liable for vendor sales of fakes at his business.

Coach executives and their attorneys, George Mahfood and David Rosemberg, declined to comment on specifics of the settlement but said they felt it was an appropriate end to the litigation.

"We think it's a very important case for the [designer goods] industry as a whole," Coach vice president Axilrod said. "We think this case will provide a general deterrent to flea markets across the country that have been selling knockoffs."