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. The final judgment issued by Judge Louis Stanton of the U.S. District Court for the Southern District of New York on February 26 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 judgment, as first reported by TFL, comes amid Chanel’s long-running litigation against luxury reseller What Goes Around Comes Around. In particular, it follows from the second stage of the proceedings that focused on equitable remedies and a 2024 federal jury verdict that found WGACA liable for trademark infringement, false association, unfair competition, and false advertising.
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 “in any manner that conveys the impression that WGACA is related to Chanel.” At the same time, it is similarly barred from using Chanel-related hashtags, such as #chanel, #wgacachanel, #chanelgiveaway, and #giveawayfromchanel, and Chanel’s name in discount codes or reference Chanel’s founder, Gabrielle “Coco” Chanel, in a way that implies affiliation.
>> The interesting thing here, of course, is how we go about defining what “conveys the impression that WGACA is related to Chanel.”
> Sales of Unauthorized or Altered Products: WGACA is prohibited from selling 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. The injunction also bars the reseller from offering up Chanel-branded items that have been materially altered or repaired without full disclosure.
>> 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 “records of its own authentication to support its authentication claims.”
>> This is also a striking point, as Chanel has routinely argued that other companies are not equipped to authenticate its products. So, I am not exactly sure how this provision will play out; it almost seems to chip away at Chanel’s recurring claims that only Chanel can guarantee the authenticity of Chanel products.
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).
The case is Chanel, Inc. v. What Goes Around Comes Around, LLC, et al., 1:18-cv-02253 (SDNY).