The Navajo nation is suing Urban Outfitters months after the tribe sent a letter to the clothing retailer demanding it remove the "Navajo" name from its products.

The lawsuit, filed on Tuesday in a district court in New Mexico, alleges trademark violations and violations of the federal Indian Arts and Crafts Act, which makes it illegal to sell arts or crafts in a way that falsely suggests they were produced by Native Americans.

The tribe has about 10 registered trademarks on the Navajo name, covering clothing, footwear, online retail sales, household products and textiles. Tribal justice officials said they were intent on protecting what they believed were among the Navajo's most valuable assets.

The lawsuit states: "The fame or reputation of the Navajo name and marks is such that, when the defendant uses the 'Navajo' and 'Navaho' marks with its goods and services, a connection with the Navajo nation is falsely presumed."

Urban Outfitters set off a storm of criticism last year with its line of Navajo-branded clothing and accessories – particularly underwear and a liquor flask, which the tribe said was "derogatory and scandalous" considering the sale and consumption of alcohol is banned on the reservation, which spans parts of north-east Arizona, south-east Utah and north-west New Mexico. The company removed the product names from its website after acknowledging receipt of the letter.

But the lawsuit claims that products with the Navajo name were still being sold through other company brands, such as Free People, in catalogues and retail outlets.

The Philadelphia-based company did not respond to messages seeking comment on Wednesday.

Company spokesman Ed Looram said in an email last October that Urban Outfitters had no plans to alter its products.

"Like many other fashion brands, we interpret trends and will continue to do so for years to come," he said. "The Native American-inspired trend and specifically the term 'Navajo' have been cycling thru fashion, fine art and design for the last few years." He later declined to comment further, saying the matter was in the hands of legal counsel.

Susan Scafidi, director of the Fashion Law Institute at Fordham University in New York, said Urban Outfitters could point to the name changes in certain items in response to the tribe's original objections. The "Navajo hipster panty" and the "Navajo print fabric wrapped flask", for example, later appeared on the company's website as "printed" instead of "Navajo".

Other defences included claiming no likelihood of consumer confusion between an authorised Navajo clothing item and the pants, using alternate spellings of the word and arguing that the contested product was not a handicraft, Scafidi said.

But she agreed with a New York-based fashion lawyer, Joseph F Murphy Jr, that the trademark infringement was clear. Both pointed to a history in which the Navajo nation lost real property and is now fighting to protect intellectual property.

"That's what disgusts me about this situation," Murphy said. "I, like many people, thought it would have been resolved. But apparently Urban Outfitters declined to write the big apology and may have to write the big check."

The Navajo nation's objections to traditionally styled beaded earrings or hacienda bags that do not carry the tribe's name are far less likely to succeed, Scafidi said.

But she said it showed a pattern that could influence a jury: "Imagine all of those products piled on a table in the courtroom, looking like Santa Fe meets New York's notorious Canal Street or Beijing's Silk Market."

Tuesday's action is not the first time the Navajo nation has asserted its trademarks, though it has never before taken action in federal court, said tribal department of justice attorney Brian Lewis.

The tribe successfully forced the cancellation of a "Navaho" trademark last year that was used by a French company doing business in the United States. The tribe argued the name was phonetically identical and infringed on its trademark.

The tribe licenses its name to other businesses in exchange for a share of their profits, and it has identified about two dozen companies it believes are violating the Navajo trademark. Lewis said letters and phone calls were typically all that was needed to convince others to stop infringing on the tribe's rights.

He said the widespread use of the word "Navajo" on products did not make it an acceptable practice, nor did it go unnoticed. But he said the tribe's resources were limited and it must prioritise the actions it takes.

"In this case, the level and degree of egregious behaviour and harm to the Navajo nation factored heavily into the Navajo nation's decision to act," he said.

The lawsuit seeks monetary compensation and an order permanently enjoining Urban Outfitters from using the name "Navajo" or variations of it on its products.