Two stores in Queens, New York, accused of peddling unauthorized Apple Inc accessories have agreed to hand over all products in their inventories bearing the word Apple or any of the company's ubiquitous trademarks.

The proposed settlement, lodged in Brooklyn federal court on Thursday, would resolve a trademark-infringement lawsuit filed last July against Apple Story Inc and Fun Zone Inc, two stores in the Chinatown section of Flushing, Queens, that sell cases, headsets and other accessories for Apple products such as the iPhone, iPad and iPod. The two stores maintain they have not violated any Apple trademarks.

If U.S. District Judge Kiyo Matsumoto approves the settlement, the stores will have five days to turn over any counterfeit products in their inventories, as well as any products, labels, packaging, promotional materials and other items that bear any Apple trademarks, including the well-known image of an apple and proprietary phrases such as iPod and iPad.

According to a court filing from Apple, the design of the unauthorized iPhone and iPod cases sold by the two stores mimics the trademarked iPhone and iPod designs and includes the phrase: Designed by Apple in California. Assembled in China.

As part of the proposed settlement, Apple Story has agreed to change its name, which Apple contends is too similar to its Apple Store trademark. It has also agreed to remove an oversize iPhone-shaped window display.

The defendants -- who include Apple Story owner Janice Po Chiang and Fun Zone manager Jimmy Kwok -- are also prohibited from destroying any records pertaining to the manufacture, distribution, sale or receipt of the cases or headsets identified as fakes by Apple.

TIDE OF COUNTERFEITING

Apple filed the suit under seal on July 25. Under U.S. trademark counterfeiting law, a company may file a trademark infringement action under seal so as not to tip off the accused before seizure orders are executed. The record was unsealed following a request from Reuters.

Apple said in court filings it sent private investigators to buy hundreds of dollars' worth of the alleged fakes from both stores multiple times over several weeks earlier this year.

On July 27, Apple seized goods bearing the Apple trademarks from both stores. It has also won a court order requiring the defendants to turn over access to their business email accounts, which could yield clues about their suppliers, distributors or customers.

The lawsuit comes as the California company tries to stem a tide of counterfeit products and even whole counterfeit Apple stores, in China.

A spokesperson for Apple declined to comment on the settlement.

Attorneys for both parties did not immediately return requests for comment.

The case is Apple Inc. v. Apple Story Inc et al., in the U.S. District Court for the Eastern District of New York, no. 11-3550.

For Apple: Mark Mutterperl and Todd Hambidge of Fulbright & Jaworski.

For the defendants: Samuel Chuang of the Law Offices of Samuel Chuang.

(Reporting by Jessica Dye in New York; editing by Andre Grenon)

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