Chanel made headlines in March 2018 when it filed a striking lawsuit against a resale company, alleging that it was trying 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 was offering up] in order to trade off of Chanel’s brand and goodwill,” all while allegedly offering up infringing products. The defendant in the case, which was filed in the U.S. District Court for the Southern District of New York: The now-30-year-old luxury resale What Goes Around Comes Around, against which Chanel lodged trademark infringement, unfair competition, false advertising, and false association claims.
In response to Chanel’s suit, What Goes Around Comes Around (“WGACA”) – which touts itself as “the leading global purveyor of authentic luxury vintage accessories and apparel” – has argued that it should be shielded from liability on the basis that Chanel’s lawsuit is an impermissible attempt by Chanel to bar the legitimate resale of its products, and that WGACA uses the Chanel trademarks simply to identify its products (which it claims amounts to nominative fair use), and does not claim any affiliation or sponsorship by Chanel.
Reflecting on the significance of the lawsuit (and Chanel’s ongoing case against The RealReal), Foley & Lardner’s Jeffrey Greene and Allison Haugen have stated that the implications “could be broad-reaching, providing guidance to resellers on the parameters of a fair use defense to trademark infringement claims.” They also stand to provide “insights into the validity of antitrust-type claims in instances of claimed interference with the resale market, as well as how resellers ought to describe the authenticity of the goods they sell.”
Given the importance of the case (particularly in light of the rising value of the resale market), we have put together a brief timeline of significant filings (complete with links to any corresponding documentation and/or articles) in order to help you to stay abreast of developments in the case, the trial for which begins on January 9 in New York …
The judge set a bench trial date of July 15, 2024 for phase two of the parties’ trial, which will center on Chanel’s bid for equitable remedies, namely, a permanent injunction.
WGACA has lodged a brief in opposition to Chanel’s motion for a permanent injunction, arguing that, among other things, Chanel has not been harmed, let alone irreparably harmed, as a result of its activities, and the luxury brand’s proposed injunction is an “overbroad” attempt “clearly intended to terminate WGACA’s ability to sell any Chanel goods.”
Chanel is seeking a permanent injunction to block WGACA from continuing to confuse consumers by way of its use of Chanel trademarks, advertising Chanel products that have not been authorized for sale by Chanel and offering up Chanel goods that have been materially altered, among other things.
The jury has sided with Chanel on all four of its causes of action (two trademark infringement claims, unfair competition, and false advertising), and awarded $4 million in statutory damages to the luxury brand as a result. (The jury verdict form can be found here.)
In a new brief, WGACA takes issue with some of the jury charges, arguing, among other things, that: (1) willfulness is not a question for the jury; (2) the proper standard for awarding statutory damages is “per counterfeit mark per type of goods sold” (not per bag); (3) in furtherance of its false advertising claim, Chanel “must prove that it has been actually injured” (not just that it has “likely” been injured); (4) Chanel’s use of the word “pirated” to describe a pouch is “prejudicial” and “suggestive of the conclusion that Chanel wishes is reached”; (5) Chanel’s use of the “point of sale” and “counter support” terminology is inappropriate in light of evidence that “establishes that in fact they were not simply ‘counter support’ or ‘point of sale’ [items, but] … ‘gift with purchase’ or give away items”; and (6) the statement that “discrepancies between Chanel records and the actual characteristics of the contested goods, is evidence that they were not made by Chanel and are counterfeit” is inappropriate in light of the fact that “the jury has heard that [Chanel’s] Orli system has flaws, and therefore, any discrepancy between the Orli system (or Chanel’s records) compared with the actual characteristics of the bags is NOT evidence that the bags are counterfeit.”
In respective briefs to the court, counsels for Chanel and WGACA are at odds over an instruction from the court regarding the definition of a counterfeit good. (More about that here.)
WGACA is looking to exclude the testimony of Chanel witness David Franklyn, as well as his consumer confusion surveys and the corresponding report, on the basis that his testimony as to legal opinions and opinions are based upon inaccurate information, and his surveys contain “significant errors that render them unreliable and inadmissible.”
Chanel presented the last of the jury-facing evidence in its case following WGACA co-founder Seth Weisser’s testimony, with Chanel’s in-house lead counsel Robin Gruber telling WWD, “Chanel believes that we have put on a strong case. If the court’s decision is one we don’t agree with, we will bring it to an appeal.”
Chanel is looking to exclude the testimony of another WGACA witness, arguing that the reseller has proposed a second “surprise witness,” Mason Howell, who it says “was never disclosed pursuant to Fed. R. Civ. P. 26(a), was not listed as a witness on WGACA’s witness list, and has never been deposed.” According to Chanel, “Based on the information provided on his LinkedIn profile, Mr. Howell appears to be involved in operations of WGACA’s sale of accessories and handbags, as well as drafting copy for WGACA’s show descriptions, website landing page, and relevant product listings. Other witnesses, such as Frank Bober, Shannon Parker, and Devyn Shaughnessy, have already testified about these subjects, [and] to date, WGACA has not made any showing that Mr. Howell’s testimony is critical to its defense or somehow different from the testimony of the other witnesses.”
Chanel and WGACA lodged respective filings with the court in connection with a clash over the latter’s use of quotes attributable to the brand’s late founder, as well as its use of Gabrielle “Coco” Chanel’s name and image. At the same time, they each filed proposed jury verdict forms with the court. (Those filings can all be found right here.)
In a new order, the court revealed that it “has been informed that its [Mar. 28, 2022] Summary Judgment Opinion & Order, which held that the bag with serial number 17744200 was non-genuine and counterfeit because its characteristics differed from the product that Chanel authorized for sale under that serial number, rested on an error with a data entry that was discovered very recently. The serial number was mistyped in WGACA’s sales records, and the proper ORLI record has been produced and is now the subject of evidence and argument at trial.”
Accordingly, the court stated that its holding in its March 2022 Opinion & Order regarding the bag with the 17744200 serial number is vacated. (In its Opinion and Order, the court granted partial summary judgment on Chanel’s claim of trademark infringement with respect to the bag with serial number 17744200.)
Chanel is looking to exclude the testimony of WGACA’s “belatedly disclosed, purported expert witness Gracie Ginn,” who acts as the Manager of Authentication at WGACA. According to a motion to excludelodge by Chanel, “To allow Ms. Ginn to testify at this late stage of this case” – namely, to “rebut Joseph Bravo’s testimony, on behalf of Chanel, concerning the physical inspection of certain of WGACA’s bags” – would result in “unfair prejudice and surprise in violation of Fed. R. Evid. 403 and would violate Fed. R. Civ. P. 37.” The brand’s counsel further asserts that WGACA “already has five other witnesses to discuss the authenticity issue,” and has not made “any showing that Ms. Ginn’s testimony is critical to its defense or somehow different from the testimony of [those] other witnesses.”
Executive Operations Director (Fine Leatherwear, Fantasy jewelry and textile accessories) Joseph Bravo testified about the theft of documentation bearing 30,000 serial numbers from the Renato Corti factory, a Chanel supplier, in Italy in October 2012. Bravo told the court that the serial numbers – which are used by Chanel on authenticity cards and product holograms in order to enable it to authenticate and track the lifecycle of its products – were kept in a locked room that was broken into, noting that the serial numbers “have value to counterfeiters.” He further told the court that nothing else was stolen from the factory and that Chanel immediately voided the serial numbers upon learning that they had been stolen.
The parties trial started on January 9, with Joyce Green, managing director of Chanel France, testifying about, among other things, WGACA’s sale of a counterfeit handbag (namely, one with a faulty serial number allegedly stolen from a Chanel supplier factory in Italy), which prompted pushback from WGACA’s counsel, Yale Galanter (and a team at Lewis Brisbois), who said that its alleged sale of counterfeits goods is an issue that has been in contention between the parties from the outset. Chanel also repeatedly pointed to WGACA’s unauthorized sale of point-of-sale items as among the $90 million worth of Chanel products between 2016 and 2022.
On cross examination, counsel for WGACA pressed Green about confusion among consumers (the most critical point in Chanel’s trademark infringement claim), with Green confirming that she did not know of any instances of consumers actually relaying confusion to her about whether Chanel maintains a connection or affiliation with WGACA. (Chanel has long argued that WGACA has made extensive use of its branding, in online advertising and other marketing efforts, in order to piggyback on the Chanel brand and suggest an affiliation with the company.)
On behalf of WGACA, Galanter told the jury that the case is a David vs. Goliath scenario that pits a French luxury giant that has opted not to participate in the secondary market against a resale company that was founded by two New Yorkers (Seth Weisser and Gerard Malone), who had the innovative idea to offer pre-owned luxury goods to consumers. Echoing contentions in earlier filings, counsel for WGACA spoke to the benefits that resellers like WGACA bring to brands and the market, including by helping to enhance the image and appeal of luxury brands and their offerings by extending the lifecycle of such products.
The court granted WGACA’s motion in limine (number 6) “to the extent that the jury may not hear evidence of the Court’s prior ruling of infringement on the 779 point-of-sale items [offered up by WGACA], the eleven handbags with serial numbers that were stolen from the Renato Corti factory, and the one handbag with serial number 17744200.”
SDNY Judge Louis Stanton provided a general outline for the impending 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.
The parties filed their joint pre-trial order.
Chanel filed declarations from two of its expert witnesses regarding trial testimony about consumer surveys and the damages suffered to Chanel in connection with WGACA’s alleged wrongdoing.
WGACA filed a number of motions in limine to exclude Chanel’s evidence regarding alleged instances of actual consumer confusion (No. 5); Coco Chanel’s rights of publicity (No. 4); and the rulings by the court on Chanel’s motion for partial summary judgment as to the 779 point of sale items and the 12 handbags with Renato Corti serial numbers (No. 6), among other things.
A proposed pre-trial schedule approved by the court includes an 8/25/2023 due date for motions. Responses are due by 9/8/2023. Replies are due by 9/15/2023. A Pretrial Conference is set for 9/22/2023.
The court sided with Chanel in its bid to get WGACA to provide additional information about its sale of Chanel-branded products. Specifically, Judge Stanton ordered WGACA to produce the monthly financial statements dating back to 2018 that its expert used to calculate WGACA’s profits, along with its summary of Chanel-branded product “sales and costs,” as well as to update and produce “Google Analytics information, data from [URL shortening service and link management platform] Bitly, and internal reports relating to WGACA’s advertising using Chanel’s trademarks” – and the effectiveness of such ads.
The court granted WGACA’s cross-motion in part, dismissing Chanel’s New York Business Law claims, and granted Chanel’s motion in part, holding that WGACA is liable for trademark infringement in WGACA’s sales of 779 CHANEL-branded point-of-sale items. The court also held that 12 CHANEL-branded handbags with serial numbers that were stolen from the Renato Corti factory were infringing; whether those items are counterfeit is a question for the jury, according to the court.
Judge Stanton denied WGACA’s request that the court compel Chanel to provide information about its dealings with Farfetch and to make its president available for a deposition. According to Judge Stanton, “WGACA’s requests for disclosure of documents and the production of Chanel’s president to testify about its relationship with Farfetch are denied. WGACA has shown no reason Chanel’s treatment of, and activities with regard to Farfetch, with whom it has a business relationship, must be the same as those with regard to WGACA, with whom it has none.”
WGACA and Chanel filed motions for summary judgment. Chanel seeks partial summary judgment holding WGACA liable for trademark infringement and false association under the Lanham Act and dismissing WGACA’s affirmative defenses. WGACA cross-moves for summary judgment dismissing all of Chanel’s claims, argues, among other things, that its use of Chanel’s marks in advertising constitutes nominative fair use and that even if its actions infringe on Chanel’s trademarks, Chanel cannot prove it was injured.
Counsel for WGACA asked Judge Louis Stanton to require Chanel to produce certain documents in furtherance of the discovery phase of the case. Specifically, WGACA sought information about Chanel’s “business relationship” with Farfetch.
The court issued a memorandum and order denying Chanel’s motion to compel WGACA to produce its “advertisements and web listings of Chanel branded items or featuring Chanel’s trademarks, documents related to the repair, refurbishment, and refinishing of Chanel branded items advertised or sold by WGACA, and policies, procedures, or manuals regarding WGACA’s authentication and buying process.”
Chanel filed its second amended complaint.
SDNY Judge Louis Stanton granted WGACA’s motion to dismiss in part and denies it in part. Siding with Chanel, the court held that its plausibly alleges that WGACA’s use of the hashtag #WGACACHANEL infringes Chanel’s trademarks, and that it adequately alleges that WGACA’s extensive unauthorized use of the Chanel brand and trademarks constitutes false advertising or endorsement. The court shot down WGACA’s nominative fair use and first sale arguments, stating that: (1) WGACA’s Chanel-branded items would be readily identifiable as Chanel without the #WGACACHANEL hashtag and the multiple uses of Chanel’s name and trademark in the hashtags; and (2) the first sale doctrine does not give WGACA protection, as the amended complaint alleges that “WGACA did much more than laconically resell Chanel-branded products: its presentations were consistent with selling on Chanel’s behalf.”
In a partial win for WGACA, the court tossed out one of Chanel’s New York General Business Law claims on the basis that Chanel fails to make the showing of bad faith necessary to sustain its common law unfair competition claim, but adequately pleads claims under the NYGBL for unfair competition and false advertising.
WGACA filed a motion to dismiss, arguing that, among other things, Chanel’s lawsuit is an impermissible attempt by Chanel to bar the legitimate resale of its products, and that it uses the Chanel trademarks simply to identify its products, and does not claim any affiliation or sponsorship by Chanel.
Chanel filed its first amended complaint.
Chanel filed suit against MHW Properties, Inc., Gerard Maione, Pines Vintage, Inc., Vintage Designs Ltd., WCAGA LA, LLC, Seth Weisser, and What Comes Around Goes Around LLC in the U.S. District Court for the Southern District of New York, accusing them of engaging in trademark infringement, unfair competition, false advertising, and false association, and of violating New York General Business Law sections 349 and 350.
The case is Chanel, Inc. v. What Goes Around Comes Around, LLC, et al., 1:18-cv-02253 (SDNY).