I'm not sure that "when you've just received a huge amount of free publicity" constitutes a good time to quit.

No - but it might be a clever time to change the logo, make money off the back of the publicity and side step the litigation.

The brand is the entire point of the company. How many cheap knockoffs of North Face fleeces are there? Any competitive advantage he has is that his brand is poking fun at The North Face's brand.

If he wants to stay in business, changing his brand to something vanilla is probably the worst thing he could do.

Agreed. However Im sure a smart entrepeneur could come up with a logo that rides off the back of the "infamy"/publicity but doesn't leave him in court.

I cant see that the smart approach is to let them litigate... the comparative size of the companies means it is incredibly risky.

Exactly. If I'd been him, I'd have changed the logo to be more obviously a parody (maybe made it pink or something), and changed the font or something so that it's clearly distinguishable.

I'd milk it for what it's worth before doing that.

The time to quit is when the cost starts to outweigh the benefits, in this case that time may not have arrived (yet).

When that free publicity carries continued lawyers fees, I'd beg to differ.

He is a 19 year old college student; hence his downside risk is fairly limited.

On the other hand, he's received global coverage and now has the potential to make a substantial amount of cash. There's also the real possibility that negative publicity will force the North Face to back down.

Whenever someone tells you to?