The primary risk for lawsuits in my company revolve around trademark infringement, and unauthorized distribution of licensed product. The company is in litigation constantly. Typical scenarios that have resulted in lawsuits are as follows: The company buys $500,000 worth of Tommy Hilfiger inventory from a manufacturer, no longer licensed to make the product. It is surplus inventory. Because the manufacturer no longer has a license from Hilfiger (probably because he sells to people like us) the product is considered unofficial and illegal. My company sells the product to XYZ large chain discounter. The legal trademark-infringement staff from Hilfiger constantly shops at these type stores. In order to protect the value of their trademark, they want to make sure that they control what, if anything shows up in them. The Hilfiger representative sees their products in the store, obtains information as to who sold it to them (my company) and then we are sued for trademark infringement. XYZ Discount chain is also sued for purchasing and selling counterfeit merchandise. We purchase a lot of assorted clothing from a department store (surplus merchandise.) It is sold to us as "first quality" goods.There are industry standards for first, second and third and fourth quality which are generally accepted throughout the industry. First quality generally means the clothing has no holes, tears or stains. It can be slightly irregular in size, but other than that should be essentially perfect. Second quality means that there could be small holes (no larger that 1 to 2 millimeters), small, unnoticeable tears - such as in the hem of a garment, or inside the collar, or small stains. Third quality means there could be larger holes and stains, broken zippers, some tears. Fourth quality is really the bottom of the barrel. The garments have holes, stains, broken zippers, cuts, etc. At this level the goods also generally have the brand labels cut...
