A case over allegedly counterfeit Rolex watches is raising questions about how far companies can go to control resale markets and police the appearance of their products in the secondary luxury space. In a lawsuit filed in federal court in California, Rolex Watch U.S.A., Inc. claims that Sdot Watches LLC (d/b/a Swiss Wrist), First Class Dials LLC, and Austin’s Watches Inc. are trafficking in counterfeit and deceptively altered Rolex-branded timepieces and components. But Swiss Wrist and co. are not simply denying wrongdoing – they are pushing back with affirmative defenses that challenge the core of Rolex’s claims, including whether its trademark enforcement efforts overstep legal boundaries and whether consumers were ever actually misled.
The Background in Brief: Filed in May, Rolex’s complaint accuses Sdot Watches LLC (d/b/a Swiss Wrist), First Class Dials LLC, and Austin’s Watches Inc. (the “defendants”) of engaging in an “intentional, willful, and egregious” campaign to profit from unauthorized use of Rolex’s trademarks. The watchmaker alleges that the defendants used their e-commerce sites along with social media and marketplace platforms like Chrono24 and eBay to sell watches and components bearing counterfeit versions of its iconic branding.
In its complaint, Rolex points to instances in which its investigators purchased watches that were advertised as “100% genuine,” only to find that they contained non-Rolex parts, altered engravings, and substandard gem settings. Rolex also singles out First Class Dials for allegedly manufacturing imitation dials using the Rolex crown logo. In doing so, the Swiss watchmaker contends that the defendants undermined its ability to maintain quality control and misled consumers. It is now seeking injunctive relief, statutory and punitive damages, and the destruction of infringing goods.
A Pair of Targeted Defenses
In a newly filed answer, the defendants deny the bulk of the allegations lodged against them but more interestingly, they assert a host of affirmative defenses. Two defenses, in particular, stand out for the way they frame the case: one challenges Rolex’s market control tactics as unlawful, and another cuts directly to the issue of consumer confusion, the critical element in a trademark infringement cause of action.
> Rolex’s Control of the Resale Market Violates Competition Laws: The defendants take aim at the legality of Rolex’s “restriction on the re-sale of its products,” alleging that this constitutes an “unlawful restraint of trade” that violates federal and state antitrust laws. The defendants go further, accusing Rolex of trademark misuse – or using its marks not merely to identify source, but to block legitimate resale and suppress lawful competition.
While luxury brands often use selective distribution models to maintain brand image, exclusivity, and control over conditions in which they products are marketed and sold, courts have been wary of allowing trademarks to serve as tools for anticompetitive control. The defendants essentially that Rolex’s enforcement campaign is not focused solely on stopping counterfeiting but is a strategic effort to extend its monopoly over genuine and modified Rolex watches in secondary channels.
If the court accepts the argument that Rolex’s conduct stretches trademark rights beyond their intended scope, it could mark a rare but significant application of antitrust principles to trademark enforcement in the luxury sector.
> No Confusion, No Infringement: Equally critical is the defendants’ argument that Rolex’s claims fail due to a lack of consumer confusion. Specifically, they maintain that their listings and promotional materials include adequate disclosures and disclaimers, making it clear to consumers that they are unaffiliated with Rolex and that some parts were aftermarket or modified. If the defendants can show that their disclaimers were sufficiently clear to avoid misleading consumers, Rolex’s claims for infringement and false advertising may falter.
Hardly untested terrain, the issue of disclaimers has been at the center of secondary market-centric litigation, including a separate case that Rolex filed against BeckerTime, in which the court considered the role of disclosures, suggesting that the proper use of disclosures could have impacted the element of consumer confusion in the battle over modified watches. The issue also came up in connection with Rolex’s suit against upmarket Swiss watch workshop Artisans de Genève.
At the same time, disclosure language has been a recurring theme in Chanel’s case against What Goes around Comes Around, with counsel for Chanel arguing that the disclaimer that WGACA displays on its website – in which it states that it “is not an authorized reseller nor affiliated with any of the brands we sell” – is not strong enough.
The Bigger Picture
Beyond the specific watches at issue, the case highlights the growing tension between luxury brands and the aftermarket ecosystem that surrounds them. By asserting that Rolex’s actions violate competition law and that consumers have not been misled, the defendants are challenging the idea that brands can extend trademark protection indefinitely into resale and customization markets.
As courts continue to refine the limits of trademark law in the context of the secondary market, the outcome here could influence how brands approach enforcement – and how third-party sellers defend themselves. The result may help define just how far companies like Rolex, which has a robust resale initiative of its own, can go to maintain control once their products leave the boutique.
The case is Rolex Watch U.S.A., Inc. v. SDOT Watches LLC, 2:25-cv-03990 (C.D. Cal.).
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