Image: La Californienne

Rolex and La Californienne say that they have settled the trademark infringement, counterfeiting, and unfair competition lawsuit that the Swiss watch-making titan filed in November 2019, but a federal court in California has essentially said, no so fast. On the heels of the two watch companies filing a joint Stipulation for Entry of Judgment and Permanent Injunction, and a Proposed Stipulated Judgment by Consent and Permanent Injunction, a judge for the U.S. District Court Central District of California has sent them back to the drawing board. 

In the two filings dated May 21, Rolex and La Californienne – the latter of which is in the business of customizing authentic, pre-owned luxury watches, including Rolex models – alerted the court to the fact that they have “agreed to settle and resolve this matter in full, pursuant to the terms of a confidential settlement agreement.” 

The settlement agreement comes six months after Rolex filed suit against La Californienne, alleging that despite not being or “ever [having] been, associated, affiliated, or connected with, or endorsed or sanctioned by, Rolex,” the 4-year old company “manufactures, offers for sale and sells altered Rolex watches that bear one or more of Rolex’s registered trademarks.” Because the “customized” watches – which La Californienne sells for between $6,500 and $14,000-plus by way of retailers, such as Browns, Galeries Lafayette, Goop, Maxfield, The Webster, and Farfetch, among others – include “refinished dials (some with diamonds) from which one or more of Rolex’s registered trademarks have been removed and reapplied,” Rolex claims that La Californienne has transformed otherwise authentic watches into counterfeits, and thereby, is running run afoul of the law by selling them. 

Following an initial back and forth between the two companies, including La Californienne’s argument that Rolex’s claims are “precluded by the nominative fair use doctrine,” and in lieu of a trial, Rolex and La Californienne informed the court in their Proposed Stipulated Judgment that they have agreed that a final judgment will be entered against La Californienne and in favor of Rolex on its federal claims for: trademark counterfeiting, trademark infringement, and false designation of origin and unfair competition.

More than that, they have agreed that La Californienne will be subject to a permanent injunction barring it from “using any of the Rolex registered trademarks or any reproduction, counterfeit, copy or colorable imitation of the Rolex registered trademarks in connection with the advertisement, promotion, offering for sale, or sale of its altered Rolex watches,” as well as from “engaging in any course of conduct likely to cause confusion, deception, or mistake, or dilute the distinctive quality of the Rolex registered trademarks.” 

Still yet, as part of the settlement, La Californienne would be prohibited from using or continuing to use the Rolex marks on its “website, the Internet (either in the text of a website, or as a keyword, search word, metatag, or any part of the description of the site) or in any promotion or advertising in connection with its altered Rolex watches or any goods or services not authorized by Rolex.” 

In short: the parties’ settlement enables La Californienne to continue to customize and sell the Rolex watches at issue but not with Rolex’s name or its various trademarks, such as its crown symbol, attached to the watches, themselves, or on any advertising of the watches. 

“Notwithstanding the foregoing,” the Proposed Stipulated Judgment states that, ”if asked, La Californienne can advise that its altered Rolex watches were formerly vintage Rolex watches” that have since been modified.” 

Contingent upon the court entering a judgment against La Californienne, the parties stated that they would “file a stipulated dismissal of [Rolex’s] claims with prejudice against [La Californienne], which will resolve this case in its entirety.” But that the latest development in the case has not played out as planned, as the court denied the parties’ Proposed Stipulated Judgment on the basis that it “resolves only a portion of the parties or claims.” 

Given that the proposed judgment was denied without prejudice, Rolex and La Californienne are free to submit a new proposal to the court, and likely will do so. 

The case, itself, is a particularly interesting one given that it centers on Rolex’s notorious bright-line rule for how it distinguishes between authentic and counterfeit products (according to Rolex, if sizable changes have been made to an otherwise perfectly authentic watch, that a watch becomes a counterfeit), and also because it comes as part of a larger effort by brands – from luxury names like Rolex and Chanel to more mass-market companies like mask-maker 3M – to try to control the conditions in which their products are resold. To date, the results of such litigation has been mixed, with 3M recently securing a preliminary injunction barring an unaffiliated company from reselling its N95 masks are “grossly inflated” prices. At the same time, Chanel is facing pushback from The RealReal and more recently, from What Goes Around Comes Around in connection with the lawsuits that it has filed against the resellers on counterfeiting and false advertising grounds.

*The case is Rolex Watch U.S.A., Inc. v. Reference Watch LLC d/b/a La Californienne; Courtney Ormond; and Leszek Garwacki, 2:19-cv-09796 (C.D.Cal).