Yeah, that is their defense, but if someone ever sued them I am pretty sure that Coach would actually lose and have to make recompense if the plaintiff had an incorporated business (and could show damages incurred by Coach's refusal to sell them which constitutes ending their supply chain).
I'm not an attorney, but there's a cool concept in our legal system called First Sale Doctrine, and I do believe it applies. The gist of it is that once a consumer acquires something legally, they have every right to do with it what they want, whether that means using it, selling it, setting it on fire, or building an ant farm inside it. The original vendor has no say in the matter.
At least, that's my interpretation of the law, but as I said, I'm no lawyah. I should call Starr Jones and ask her.
And not for nothin', but if Coach wanted to preserve brand integrity they would go after all the makers of the completely hideous counterfeits. BLECH!!