In a significant victory in its bid to maintain control over the distribution – and marketing – of products bearing its name and other trademarks, a U.S. District Court in New York has ruled in favor of Chanel, Inc. in its long-running litigation against luxury reseller What Goes Around Comes Around. As first reported by TFL, the February 26 decision, which comes as part of the second stage of the proceedings that focused on equitable remedies, follows a 2024 federal jury verdict that found WGACA liable for trademark infringement, false association, unfair competition, and false advertising.
The final judgment, issued by Judge Louis Stanton of the U.S. District Court for the Southern District of New York, formalizes the jury’s findings and imposes strict penalties on What Goes Around Comes Around (“WGACA“), including: a permanent injunction restricting WGACA’s use of Chanel’s trademarks and branding; $4 million in statutory damages for selling counterfeit handbags; and disgorgement of $12,739 in profits from the sale of unauthorized Chanel-branded handbags and 779 counter-support items.
The court’s injunction bans What Goes Around Comes Around and its affiliates from engaging in specific activities that could mislead consumers into believing the reseller is affiliated with Chanel. The key prohibitions include …
> Misuse of Chanel’s Trademarks: WGACA is barred from using Chanel’s name, logos, the interlocking CC monogram, and the brand’s stylized font in any promotional material, advertising, or store displays; the use of Chanel-related hashtags, such as #chanel, #wgacachanel, #chanelgiveaway, and #giveawayfromchanel, is also prohibited; and WGACA cannot use Chanel’s name in discount codes or reference Chanel’s founder, Gabrielle “Coco” Chanel, in a way that implies affiliation.
> Sales of Unauthorized or Altered Products: WGACA is prohibited from selling Chanel-branded items that have been materially altered or repaired without full disclosure; the reseller must not sell Chanel-branded items that were never authorized for sale, such as retail props and point-of-sale materials; and the court specifically bans the sale of handbags with voided serial numbers, including those stolen from the Renato Corti factory in 2012.
>> As for alterations/modifications that are alright, the court says: “Minor changes in the form of polishing, cleaning, and other small preparations for sale shall not be considered repaired, restored, or refurbished.” The court also stated that “re-dyeing a Chanel item the same color as the original shall not be deemed a material alteration.”
> Mandatory Disclosures on Branded Items: WGACA must include a clear and conspicuous disclaimer on all Chanel-branded items, stating, “WHAT GOES AROUND COMES AROUND IS NOT AFFILIATED WITH CHANEL AND HAS NOT BEEN AUTHORIZED BY CHANEL TO SELL THIS ITEM.” This disclaimer must appear prominently on product listings, physical tags, and online sales pages. Additionally, each Chanel-branded item must list the original Chanel Serial Number, if available, to verify authenticity.
> Restrictions on Authentication Claims: WGACA cannot make any claims or guarantees about the authenticity of Chanel-branded items unless it has documented proof of its own authentication process.
>> What about the notice requirement? As for the polarizing provision in the proposed injunction that prohibited WGACA from “advertising, offering for sale, or selling any CHANEL-branded items that have not been authorized for sale by Chanel, including, but not limited to, point-of-sale items and retail props, after notification by Chanel that such items have not been authorized for sale,” the notion of notice appears to have disappeared from the final judgment and injunction altogether.
Attached to the judgment: A Notice of Right to Appeal, suggesting that this fight might not be over just yet.
At the most immediate level, this case is about the unauthorized offering of Chanel-branded point-of-sale items, WGACA’s use of Chanel-centric marketing materials, and its sale of Chanel bags with allegedly faulty serial numbers. But beyond the surface, the more important question seems to be: Who other than Chanel can use its name (including in connection with claims of authentication) and offer up double-C logo-emblazoned wares?
This is a critical issue in this case (and others like it), as while a number of luxury brands have embraced the secondary market as a way to reach younger consumers and tap into an alternate revenue stream, Chanel has distanced itself from resale – presumably in furtherance of an effort to retain as close control as possible over its offerings and the conditions in which they are sold. Yet, that has not stopped third party resale companies – like WGACA and The RealReal, which is also facing a lawsuit from Chanel (albeit probably not for much longer) – from parlaying demand for pre-owned Chanel offerings and those of other luxury names into potentially big businesses for themselves.
Against this background, the court’s ruling stands to have significant implications for the workings of luxury resale market. The case highlights the fine line between legitimate luxury resale and unauthorized brand association, potentially signaling increased legal risks for secondary market sellers and certainly reinforcing the existing obligations of resellers to limit their use of others’ trademark and other branding elements (despite the protections provided by fair use) and clearly differentiate their business from official brand channels via disclosure/disclaimer language, among other things.
In waging a successful case against WGACA, Chanel, which has become well-known for its aggressive stance against unauthorized sellers, has taken a decisive step in protecting its brand image and the exclusivity of its products (and their distribution).
In a case that underscores the challenges luxury brands face in policing the booming resale market, Chanel and What Comes Around Goes Around are at an “impasse” over which party bears the responsibility for identifying counterfeit or otherwise infringing goods in order to ensure that they are not offered up to unknowing consumers in the resale market. That is the question currently before Judge Louis Stanton of the U.S. District Court for the Southern District of New York, as the parties face off in the latest round of a long-running trademark-centric lawsuit.
Some Background: The lawsuit between Chanel and WGACA got its start in March 2018, with Chanel accusing the reseller of infringing its trademarks, selling counterfeit goods, and misleading consumers into believing there is an affiliation between the two companies. In February 2024, a jury sided with Chanel, awarding the company $4 million and finding WGACA liable for willful trademark infringement, false association, unfair competition, and false advertising.
As part of the second phase of the proceedings, Chanel is seeking a sweeping injunction to permanently bar WGACA from using its trademarks in connection with its unauthorized advertising and sale of CHANEL-branded, among other things.
The court gave a sneak peek at what the injunction will look like in a proposed injunction that it provided to the parties late last year. As first reported by TFL, the court proposed an array of restrictions and/or requirements, including barring WGACA from “using any of the CHANEL trademarks … to advertise or promote WGACA’s general business” and from “making any advertising claims, representations, or statements [about] the genuineness of any CHANEL-branded items” unless it has records to support such authentication claims.
As of now, the most contentious element of the proposed injunction: The last 13 words of a provision that prohibits WGACA from “advertising, offering for sale, or selling any CHANEL-branded items that have not been authorized for sale by Chanel, including, but not limited to, point-of-sale items and retail props, after notification by Chanel that such items have not been authorized for sale.”
> Chanel’s Jan. 31 letter: In a letter to the court early this year, Chanel argued that this language would “impose a burden on [it] to continually monitor what WGACA is selling and then give WGACA notice for all CHANEL-branded items that were not authorized for sale, including non-genuine or counterfeit items,” thereby, defeating the purpose of the injunction. Because such a notice requirement is not required by law and renders the proposed injunction “both unfeasible for Chanel and ineffective at enjoining WGACA,” it should be deleted, Chanel has argued.
> WGACA’s Feb. 21 letter: In a letter to the court on February 21, counsel for WGACA claims that the notice requirement is necessary, as Chanel “does not share with the public or second-hand sellers the serial numbers that it has voided in its [internal] ORLI database. As such, there is no way for WGACA … to know that a Chanel handbag that has been authenticated by WGACA, (i.e. has all the hallmarks of a genuine Chanel handbag) is considered non-genuine by Chanel because of Chanel’s voiding of that serial number in its database.”
Against that background, WGACA proposes a notice requirement that obliges Chanel to inform WGACA of suspected counterfeit items, providing a 15-day window to remedy the issue. This, WGACA claims, would allow it to avoid unknowingly selling counterfeit Chanel products.
> Chanel’s Feb. 25 letter: In a subsequent letter to the court dated February 25, counsel for Chanel responded to WGACA’s proposal, stating that the reseller has not only kept the “overly burdensome” language intact, but it “further burdens Chanel by imposing an additional mandatory notice and cure requirement for all CHANEL-branded items, including obvious counterfeits.” In essence, Chanel argues that WGACA’s proposal “improperly shifts the burden of compliance with the injunction to Chanel, and forces Chanel to become [its] ACA’s de facto authenticator.”
Chanel asserts that WGACA’s proposal lacks legal precedent and is contrary to the Lanham Act and Federal Rule of Civil Procedure 65, which do not require a trademark owner to provide notice or an opportunity to cure to a willful infringer. Moreover, Chanel argues that the proposal would allow WGACA to continue infringing without consequence, undermining the “safe distance” rule, which requires proven infringers to avoid future infringement.
> What the court has said: Since he issued the proposed injunction, Judge Stanton responded to the parties’ responses in an email last month, addressing the notice requirement. As quoted in WGACA’s Feb. 21 letter, Judge Stanton stated, in part, “I believe it is fair to ask Chanel, which is better informed, to put WGACA on notice of potential infringements, given the difficulty of identifying close copies (i.e., super fakes or Frankenstein bags) without access to the ORLI system. However, I also understand Chanel’s critique that the current draft injunction is overly burdensome for them.”
THE BOTTOM LINE: The biggest enduring issue for the parties in stage 2 of the case (equitable remedies) centers on whether Chanel should be required to provide advance notice of alleged counterfeits before moving for contempt of court. WGACA asserts that this requirement would be fair and reasonable, given Chanel’s exclusive access to the ORLI system and the near-impossible task of identifying superfakes without it. On the other hand, Chanel argues that the notice requirement would undermine its enforcement rights and complicate the already burdensome process of protecting its brand.
The parties will appear before the court for a status conference on February 26.
A New York federal court has proposed a sweeping injunction following a jury trial win for the luxury goods brand in February and a subsequent bench trial over equitable remedies. In an email to the parties last week, Judge Louis Stanton set out proposals for injunctive relief for Chanel by way of an order that – if finalized – will prevent What Goes Around Comes Around from, among other things, “using any of the CHANEL trademarks or any marks confusingly similar thereto to advertise or promote WGACA’s general business” and will permanently block the reseller from “making any advertising claims, representations, or statements [about] the genuineness of any CHANEL-branded items” unless it has records to support such authentication claims.
At a high level, the far-reaching proposed injunction, as first reported by TFL, seeks to ensure that consumers are not confused about the lack of connection between Chanel and What Goes Around Comes Around (“WGACA”) or the nature of any Chanel-branded products that are being offered up by WGACA. In furtherance of this aim, the court proposed an array of restrictions and/or requirements that WGACA must abide by within 90 days of the injunction being issued …
> Use of Chanel branding: Primarily, the court stated that WGACA must refrain from using the CHANEL word mark or any marks confusingly similar thereto in Chanel’s “stylized font,” and using any of the CHANEL marks … in connection with its advertisement, promotion, distribution, or sale of CHANEL-branded items, “other than to identify a particular item currently for sale as made and sold by Chanel, or to the extent the specific item currently for sale itself bears CHANEL marks.”
Beyond that, WGACA also must not: (1) use photos or copies of Chanel runway and marketing campaigns and/or Chanel print ads bearing the CHANEL Marks or any marks confusingly similar thereto; (2) use any hashtags consisting of or including the word “Chanel”; (3) use the word “Chanel” in discount codes; and/or (4) use the name, image, or likeness of Gabrielle “Coco” Chanel.
And in any circumstance, the court says that WGACA “must ensure that no more of any of the CHANEL marks is used than is necessary to identify the particular item being offered for sale, such as, but not limited to, emphasizing the CHANEL marks or using the CHANEL marks more prominently than the surrounding text.”
> Disclaimers: The court’s proposed injunction requires WGACA to “prominently display, clearly and conspicuously, the following disclaimer on any webpage or social media post advertising or selling a CHANEL-branded item, or on physical tags where products are sold in person: ‘THIS ITEM HAS NOT BEEN AUTHENTICATED BY CHANEL.’”
For CHANEL-branded items being advertised and/or sale online, WGACA must post the disclaimer “noticeably on the individual product page, not merely at the bottom of the webpage, and that page must also list the CHANEL-branded item’s Chanel Serial Number as it appears on the accompanying Authenticity Card, Authenticity Plate, or label affixed to the actual CHANEL-branded item.”
> Refurbished and/or modified goods: WGACA may not advertise, offer for sale, or sell any CHANEL-branded items that have been “materially altered or changed, including, without limitation, items that combine original and non-original Chanel parts.” Additionally, it may not advertise, offer for sale, or sell any “genuine CHANEL-branded items that have been repaired, restored, or refurbished without fully disclosing on any webpage selling a CHANEL-branded item, or on physical tags where products are sold in person, the nature of the repair, restoration, or refurbishment.”
> Authentication claims: WGACA may not certify, guarantee, or otherwise make “any advertising claims, representations, or statements asserting the genuineness of any CHANEL-branded items advertised or sold by WGACA for which WGACA has no records of its own authentication to support its authentication claims.” (You can find more about how resellers are quietly reworking the language of their authentication claims here.)
> Point of sale items: WGACA “may not advertise, offer for sale, or sell any CHANEL- branded items that have not been authorized for sale by Chanel, including, but not limited to, point-of-sale items and retail props, after notification by Chanel that such items have not been authorized for sale.”
The two parties have since lodged responses to the proposed injunction, with Chanel looking to clarify some of the language in order to avoid ambiguity and WGACA angling to rein in the scope on several points.
In a letter to the court on December 4, counsel for Chanel pushed back against the proposed injunction in a few regards – although, given the limited number of suggested edits, the brand appears to be relatively pleased with the proposed injunction. (It is worth noting that counsel for Chanel proposed language for a broad injunction earlier this year.) Chanel’s biggest issue with the injunction comes by way of the language that bars WGACA from “advertising, offering for sale, or selling any CHANEL-branded items that have not been authorized for sale by Chanel, including, but not limited to, point-of-sale items and retail props, after notification by Chanel that such items have not been authorized for sale.” (Emphasis courtesy of Chanel.)
Counsel for Chanel asserts that “taken literally, this language would impose a burden on Chanel to continually monitor what WGACA is selling and then give WGACA notice for all CHANEL-branded items that were not authorized for sale, including non- genuine or counterfeit items,” which would “defeat the purpose of the Proposed Injunction and impermissibly shift the burden to Chanel, ignoring the fact that the Lanham Act does not require that an infringer be put on notice.” (Emphasis courtesy of Chanel.) Because the notice requirement is not required by law and renders the proposed injunction “both unfeasible for Chanel and ineffective at enjoining WGACA,” Chanel requests that it be deleted.
Chanel also aims to get the court to up the ante on the terms surrounding WGACA’s display of a disclaimer. While the court proposes that WGACA “post [the] disclaimer noticeably on the individual product page[s],” Chanel wants the court to require it to “prominently display, clearly and conspicuously” the disclaimer. (Emphasis courtesy of Chanel.) This language is “both more effective and unambiguous,” per Chanel, which “respectfully requests that this language be reinserted.”
In a December 4 filing of its own, WGACA urges the court to rein in the proposed injunction in several respects, arguing, among other things, that as it currently stands, the injunction runs afoul of the First Amendment …
> First Amendment/Fair use concerns: Counsel for WGACA primarily points to language in the proposed injunction that enjoins it from using the Chanel marks to “advertise or promote WGACA’s general business”. (Emphasis courtesy of WGACA). This restriction is problematic, per WGACA, as it would “violate the nominative fair use doctrine and the First Amendment.”
Specifically, the reseller’s counsel claims that under the nominative fair use doctrine, WGACA can “lawfully use a plaintiff’s trademark where doing so is necessary to describe the plaintiff’s product.” WGACA states that it “legally sells Chanel products and is legally entitled to say so to promote its general business of selling secondhand luxury items from multiple fashion brands.” For instance, WGACA notes that the “About Us” section of its website states: “WGACA’s selection of top- tier pre-owned accessories and apparel from brands such as vintage Chanel, Hermès, Louis Vuitton, Gucci, Dior, Fendi, and Saint Laurent.”
This description “represents fair use, which is vital for WGACA to be able to communicate to consumers what WGACA sells. This type of language is also protected by the First Amendment as lawful commercial speech.” As such, WGACA suggests that the court adopt language that would enable it to “use the Chanel name in the nominative fair use sense while guarding against potential confusion.”
> Advertising: WGACA says that it agrees to the restriction that the items that appear in any of its ads must have been at one point in time offered for sale but disagrees with the requirement that advertising be restricted to items “currently” for sale. WGACA asserts that its advertising (including its social media) includes items that are or were at one point for sale, and that requiring it to retract advertisements from the internet after the items advertised therein are sold “would serve as an extreme burden to WGACA and would also serve no meaningful purpose.”
> Disclaimer: In terms of the disclaimer proposed by the court, which states, “THIS ITEM HAS NOT BEEN AUTHENTICATED BY CHANEL.” WGACA pushes back on the basis that “the Chanel items being offered for sale have in fact been authenticated by Chanel” (by virtue of the fact that they have been put into the market by Chanel). (Emphasis courtesy of Chanel.) Instead, WGACA argues that the point of the disclaimer should be to convey that Chanel and WGACA are not affiliated in any way. As such, WGACA proposed language – WGACA “IS NOT AN AUTHORIZED RESELLER AND IS NOT AFFILIATED WITH ANY OF THE BRANDS WE SELL.” – that it says makes it clear that it is not associated with Chanel.
> Authorized Goods: While the injunction “appropriately reflects the fact that it is impossible for WGACA to know whether Chanel has authorized any given good for sale, in part because Chanel does not publicize the serial numbers it has voided,” it Paragraph 3(f), WGACA argues that the injunction enjoins it from selling “any ‘infringing’ or ‘counterfeit’ Chanel product without any mechanism for WGACA to determine whether Chanel regards a given product as infringing or counterfeit.” As a result, WGACA proposes language that it will not advertise or sell any counterfeit or otherwise infringing goods “after notification by Chanel that such items are deemed by Chanel to be counterfeit or infringing.”
Following a jury trial early this year, Chanel and What Goes Around Comes Around (“WGACA”) are in the midst of phase two, which is seeing them go back forth over equitable remedies. (You will recall that late last year, SDNY Judge Louis Stanton provided a general outline for the parties’ trial, stating that the first portion of the trial will be presented to the jury, which will be tasked with deciding “which, if any, of the claims made by Chanel [that] [WGACA] is liable [for], to be followed immediately by its award of damages and legal remedies, such as statutory damages.” Then, the jury will be excused, and the parties will present evidence related to “equitable remedies, such as disgorgement and injunctive relief” exclusively to the court.)
Chanel’s motion for permanent injunction: As was previously reported first by TFL, Chanel filed a motion for a permanent injunction in March, in which it is seeking to bar WGACA from continuing to partake in infringing activities, such as “unfairly competing” with Chanel by taking any action that is likely to cause confusion or mistake among consumers; making unauthorized use of Chanel marks “other than to identify the items being offered for sale”; advertising, offering for sale, or selling any CHANEL-branded items that have not been authorized for sale by Chanel; and making any representations regarding the genuineness of any CHANEL-branded items or its ability to make such claims without proper documentation, among other things.
> Additionally, Chanel is also requesting that the court order WGACA to take specific action, such as: (1) recalling all infringing Chanel items that it has sold to consumers or wholesalers since the start of the case back in March 2018; and (2) prominently displaying a disclaimer of affiliation and authorization on its website and on physical products, and prominently post a photograph of the CHANEL-branded item’s Chanel serial number on the WGACA webpage listing the item for sale.
WGACA’s response: WGACA has since responded to Chanel’s motion, arguing that the court should reject Chanel’s proposed motion on the basis that it is “impermissibly overbroad and overreaching,” particularly as “the evidence establishes that WGACA acted in good faith and built its reputation and success by establishing itself as a trustworthy purveyor of authentic luxury items.”
We reported on WGACA’s response at a high level here, including its allegations that Chanel is trying to use the injunction to exert control over (and stifle) the secondary market, but I wanted to delve into a few of WGACA’s arguments in a bit more depth. Among these are Chanel’s bid to: (1) require WGACA to obtain permission from Chanel before legally marketing any Chanel items; (2) require WGACA to include a disclaimer; (3) restrict WCAGA’s ability to sell refurbished items; and (4) prohibit WGACA from offering to guarantee the authenticity of its items.
(1) Permission before legally marketing any Chanel items – WGACA claims that Chanel’s proposed permanent injunction prohibits its from, among other things, “advertising, offering for sale, or selling any CHANEL-branded items without first obtaining permission from authorized personnel at Chanel or having documentary evidence that the item was first sold by Chanel.” It is “commercially untenable” to expect WGACA to obtain the original proof of purchase from every source of the items it sells, WGACA claims, noting that as a result, it would have to “seek and await permission from Chanel before being able to market any authentic product bearing the Chanel trademark.”
More than that, WGACA argues that “there is no justification for this proposed requirement which would completely undermine WGACA’s entire business and create a logistical morass forcing WGACA to regularly seek permission from a hostile actor intent on ending WGACA’s second-hand sales of Chanel all together.”
(2) Disclaimer – Chanel’s proposed injunction requests that WGACA prominently place and conspicuously feature what WGACA calls “an unnecessary and disturbingly provocative disclaimer” that states that: “WHAT GOES AROUND COMES AROUND HAS NOT BEEN AUTHORIZED BY CHANEL TO SELL THIS ITEM. THIS ITEM HAS NOT BEEN AUTHENTICATED BY CHANEL.” Pushing back against this point, WGACA claims, among other things, that “there is no legal requirement that Chanel authorize WGACA to sell an item, yet the proposed disclaimer implies and tends to mislead the public into believing that such permission is required.”
In terms of the disclosure language, namely, the part about items “not [being] authenticated by Chanel,” WGACA argues that it is untrue, as items that have previously been distributed by Chanel have, in fact, been authenticated by Chanel and deemed authentic. Suggesting otherwise would “interfere with free enterprise and WGACA’s business prospects.”
Still yet, WGACA maintains that the disclaimer that it already has on its website – which states that “WHAT GOES AROUND COMES AROUND LLC, IS NOT AN AUTHORIZED RESELLER NOR AFFILIATED WITH ANY OF THE BRANDS WE SELL” – already serves to make the public aware that “WGACA acts independently from the brand houses and itself has evaluated the items for authenticity using a proprietary process.” Since there is “no statement or implication that the item has been inspected and further authenticated by the brand houses, such as Chanel,” WGACA states that “there is thus no need for the over-the-top additional disclaimer that Chanel would impose, which would violate WGACA’s First Amendment rights by compelling speech.”
(3) WCAGA’s ability to sell refurbished items – Two sections in Chanel’s proposed injunction prohibit WGACA from: “(e) Advertising, offering for sale, or selling any CHANEL-branded items which have been materially altered or changed, including, but not limited to, items that have a combination of original and non-original Chanel parts; and (f) Advertising, offering for sale, or selling any genuine CHANEL-branded items that have been repaired, restored, or refurbished without fully disclosing the nature of the repair, restoration, or refurbishment, and the identity of the person who repaired, restored, or refurbished the item.”
Citing Hamilton Int’l Ltd. v. Vortic LLC and Champion Spark Plug Co. v. Sanders, WGACA claims that it and “any second-hand reseller has the right to sell refurbished goods, so long as the proper disclosures are made.” In the event that repairs are made, or non-original parts have been incorporated, “a reasonable disclosure that the product has been refurbished, or that non-original parts are included should be sufficient,” the reseller maintains, arguing that “there is no basis to bar the sale outright.” (For a deeper dive into the Second Circuit’s decision in Hamilton, you can find that here.)
(4) WGACA’s ability to guarantee the authenticity of its items – Finally (for us), Chanel is looking to enjoin WGACA from “certifying, guaranteeing, or otherwise making any advertising claims, representations, or statements regarding the genuineness of any CHANEL-branded items advertised or sold by WGACA or WGACA’s ability to authenticate CHANEL-branded items that are not documented, such as a receipt showing a sale of the item by Chanel or an authorized Chanel retailer or a genuine Chanel Authenticity Card.”
Angling to chip away at Chanel’s claim that when a reseller advertises that every Chanel item it sells is genuine and that every item has gone through an authentication process, “the sale of potentially infringing or counterfeit items makes this advertising claim literally false,” WGACA distinguishes the language it uses. Specifically, WGACA says that it advertises the authenticity of its goods as follows: “This item is guaranteed authentic by What Goes Around Comes Around” and further “[a]ny piece purchased at What Goes Around Comes Around or one of our retail partners has been carefully selected, inspected and is guaranteed authentic.”
This language “is not false,” according to the reseller, and in fact, it claims that it put forth evidence at trial that it “does carefully select, inspect, authenticate its products, and [thus], the jury’s verdict has no bearing on WGACA’s own guarantee of authenticity.”
With the foregoing, among other points, in mind, WGACA urges the court to deny Chanel’s request for a permanent injunction.
On Tuesday, a jury in the Southern District of New York sided with Chanel on all four of its causes of action: trademark infringement, false association, and unfair competition based on WGACA’s use of Chanel marks and other brand indicia, as well as hashtags; trademark infringement, false association, and unfair competition based on WGACA’s sale/offering for sale on non-genuine Chanel products; trademark infringement based on WGACA’s sale/offering for sale of counterfeit goods; and false advertising, and awarded Chanel $4 million in statutory damages “for its claim for trademark infringement based on WGACA’s sale or offering for sale of Chanel-branded handbags bearing counterfeit trademarks.”
As for next steps, the parties will present evidence related to “equitable remedies, such as disgorgement and injunctive relief” exclusively to the judge, with Chanel slated to file its brief on the matter within 30 days of the jury verdict.
The immediate aftermath of the trial has brought with it no shortage of commentary about how this will broadly impact the secondary market – with most of the chatter suggesting that the verdict will serve as a significant blow to resellers and their ability to offer up pre-owned goods. I am not sure I buy into the overly pessimistic view because to some extent, this case involved some arguably obvious no-no’s. WGACA was found to be selling bags bearing counterfeit marks while also offering up hundreds of point-of-sale items (think: vanity trays, tissue boxes, etc.) that were meant exclusively for use in Chanel stores and were never authorized for sale (which has been contested by WGACA). It is also not earth-shattering that products not subject to companies’ quality control/assurance methods will be viewed by those companies are not authorized for sale.
Beyond that, though, WGACA was making extensive use of Chanel’s trademarks and other brand indicia to not only promote its sale of Chanel products but maybe more fundamentally, to promote itself.
Both points provide some interesting takeaways …
> In terms of the issue of counterfeit or otherwise infringing bags, the thing that stands out (to me) is the difficult position that resellers are in since no shortage of companies treat their authentication methods/techniques as proprietary. Technological advances, including AI-powered tools, might help on this front, but even still, questions remain about how resellers can authenticate and advertise the authenticity of the pre-owned products they are selling in order to toe the line between fair use of brands’ marks and false association. After all, one of the big issues for Chanel in this case and others like it has been the ability of resellers to make statements/warranties about authenticity of Chanel products. And this is, of course, no small matter for resellers, which rely heavily on their ability to boast that their products are the real thing.
It seems to me that there is a potential competition issue in the making in the event that brands take a really hardline stance to prevent resellers from making bold claims about product authenticity, while simultaneously refusing to engage with them to help ensure that products are, in fact, authentic. (I have dove into this in the past, as this has come up in other cases, as well.)
On this point, it is worth noting that TikTok and LVMH-owned beauty brand Benefit made headlines last month with reports thatLVMH is reportedly in talks to collaborate with TikTok to address concerns about the sale of counterfeits on the video-sharing platform. This – along with other efforts, such as joint initiatives between brands and Amazon, and Kering’s investment in French resale platform Vestiaire, for example – could signal an increased willingness by brand-owners to work with third parties to identify and cut down on the sale of counterfeits.
> One of the other big issues in the case is WGACA’s “excessive” use of Chanel trademarks and branding to effectively promote itself. This is where there are some instances that likely will not prove to be death-knells for other resellers. WGACA’s use of the Chanel trademark in conjunction with its own name in hashtags and its use Chanel-centric marks in discount codes like COCO10, for example, seem to clearly go beyond any necessary use of Chanel marks for the purpose of identification/description of products. At the same time, WGACA putting Chanel imagery and other brand indicia at the forefront of its advertising/marketing materials likely is not necessary – and arguably easily avoidable – when it sells a wide array of coveted brands.
The takeaway here seems to be that even with nominative use firmly in place as a defense (when trademark use is not excessive and crossing into the false association/endorsement territory), resellers will need to be more careful when it comes to their use of third parties’ marks. Resellers almost certainly already aware of the need to not piggyback on luxury brands’ marks but seem to have been playing a bit fast and loose in light of the still-relatively-nascent stage that the luxury resale market is in.
K&L Gates’ Susan Kayser and Terrance Roberts ultimately did a good joint of summing it up the impact of the verdict in a couple of sentences: “Although luxury resellers have the right to resell pre-owned genuine product without permission from the brand owners under the first-sale doctrine, resellers still risk liability if offering for sale non-genuine or counterfeit products, and if using the brand owners’ marks in a misleading way in its marketing that is not fair use. This ruling will likely impact the rigor required for resellers vetting and authentication processes.”
Chanel and What Goes Around Comes Around (“WGACA”) are expected to make their closing arguments before a New York federal jury today, bringing the first portion of the trademark trial to a close.
You may recall … that Judge Stanton of the U.S. District Court for the Southern District of New York provided an outline for the trial in December, stating that the first portion of the trial will be presented to the jury, which will be tasked with deciding “which, if any, of the claims made by Chanel [that] WGACA is liable [for].” This will “be followed immediately by its award of damages and legal remedies, such as statutory damages,” according to the court. Then, the parties will present evidence related to “equitable remedies, such as disgorgement and injunctive relief,” exclusively to the court.
A bit of background: Chanel filed suit against WGACA in 2018, alleging that the resale company has tried to “deceive consumers into falsely believing [that it] has some kind of affiliation with Chanel or that Chanel has authenticated [the pre-owned] goods [it is offering up] in order to trade off of Chanel’s brand and goodwill.” At the same time, Chanel has claimed that the New York-headquartered reseller has offered up infringing Chanel-branded products – from coveted handbags to hundreds of display items, the latter of which were never meant for sale. WGACA has come back with nominative fair use, first sale, etc. arguments in its defense.
At a high level, Chanel is asserting four claims against WGACA under federal trademark and unfair competition law …
(1) Chanel claim that WGACA infringed its trademark rights and engaged in unfair competition by using the Chanel trademarks and other indicia in a manner likely to cause confusion among consumers as to the affiliation, connection, or association between WGACA and Chanel;
(2) Chanel claims that WGACA infringed its trademark rights and engaged in false association and unfair competition by selling or offering for sale non-genuine CHANEL-branded products. Specifically, Chanel claims that: WGACA used its word mark in hashtags; sold/offered for sale infringing bags and point of sale items, and “materially altered or repaired Chanel-branded products with no disclosure that the alterations or modifications were made and were not authorized by Chanel,” among other things;
(3) Chanel claims that WGACA engaged in trademark infringement by selling or offering for sale counterfeit CHANEL-branded handbags, namely, handbags bearing serial numbers stolen from one of its supplier factories and pirated serial numbers; and
(4) Chanel’s fourth claim is that WGACA committed false advertising by falsely advertising: non-genuine, counterfeit, and repaired CHANEL- branded products as genuine and unaltered; point-of-sale items as genuine CHANEL-branded products originally made and sold by Chanel to the public, and certain products as vintage.
Meanwhile, WGACA is looking to chip away at the aforementioned claims by way of a handful of different defenses, including nominative fair use, with its counsel asserting, among other things, that it should be shielded from trademark liability since it is using the Chanel trademark to identify Chanel goods that it is selling. In other words, “it is necessary for WGACA to use the Chanel trademark to identify the secondhand Chanel goods that [it] sells and that such a finding cuts against a finding of likelihood of confusion.”
Another likelihood of factor that WGACA says weighs in its favor: sophistication of consumers. The reseller has argued that “the Court has already determined that Chanel and WGACA operate in high end luxury products and so [the jury] should infer that the relevant ordinary purchaser is sophisticated and that … tends to minimize the likelihood of confusion or infringement.”
In terms of Chanel’s claims that various bags bearing stolen serial numbers and 700-plus point-of-sale items (namely, trays and tissue boxes) are infringing, WGACA is focused in large part on the element of authorization, looking to chip away at Chanel’s claim that these items were either never meant for sale, or were never authorized by Chanel for sale because they were not subject to its quality control processes. With regard to Chanel bags offered up by WGACA that Chanel claims are infringing because they came with serial numbers that were stolen from the Corti Renata factory, a Chanel supplier factory, back in 2012, WGACA has urged the jury to consider “whether those bags were made in the Corti factory (or other factory authorized by Chanel to make Chanel handbags) and whether the bags were sold with Chanel’s authorization.”