Recently, the Federal Court of New York issued a verdict in the trademark infringement case of Chanel v. What Goes Around Comes Around (hereinafter referred to as "WGACA"), and the jury upheld Chanel's four claims:trademark infringement, false association and unfair competition based on the use of CHANEL trademarks and other brand logos and labels based on WGACA; Trademark infringement, false association and unfair competition based on the sale of non-Chanel** products sold by WGACA; Trademark infringement based on the sale of counterfeit goods by WGACA; and false advertising
In March 2018, French luxury goods company Chanel filed its first lawsuit against WGACA, a second-hand luxury goods e-commerce company in the United States, alleging trademark infringement, false association, unfair competition, and false advertising. At the time, Chanel claimed that WGACA had not only faked Chanel products, but also tried to mislead consumers into believing that there was a connection between the two companies "beyond the norm under the banner of Chanel", when in fact there was no relationship between the two companies. In addition, Chanel also made it clear that it rejected WGACA's request to enter into a formal partnership, and said that the brand has authenticated the second-hand goods on the platform**.
On January 9 of this year, the protracted legal dispute was heard again after six years. After nearly a month of hearings, the Federal Court of New York finally gave a formal conclusion: the plaintiff Chanel won the trial.
The jury voted unanimously in favor of Chanel on all four charges, and they ruled in favor of Chanel on four counts of trademark infringement, false association, unfair competition, and false advertising, and awarded $4 million in damages. Chanel will consider additional non-statutory damages in the pleadings filed after the trial.
In a statement issued after the verdict, a CHANEL spokesperson said: "CHANEL welcomes this decision, which demonstrates CHANEL's unwavering commitment to the protection of its brand and the rights of its consumers, against all false associations, trademark infringement and counterfeiting, as well as false advertising. These infringements hurt consumers and damage Chanel's goodwill and brand, as they are likely to cause confusion among the public about the nature of the Chanel-branded goods purchased. ”
In its statement, Chanel continued: "Second-hand platforms that sell Chanel-branded merchandise in a transparent manner and work with law enforcement and Chanel will help in the fight against counterfeiting. ”
The WGACA, for its part, maintains its position that there is no wrongdoing. Speaking after the verdict, WGACA CEO and co-founder Seth Weisser said: "We are incredibly disappointed with today's verdict; However, the case is not over and the court has not yet heard the post-judgment motions".
Chanel's dispute with WGACA is not over, and the trial will next assess non-statutory damages.
In response to the allegations of selling counterfeits, Seth Weisser insisted that the WGACA had never ** counterfeit goods. "WGACA has always had a rigorous identification process and has never had a non-** or counterfeit product in the company's history. Today's verdict has nothing to do with whether or not a counterfeit is sold, but rather with the fact that WGACA** has invalidated the products associated with serial numbers in the Chanel database. Without access to the database, the resale industry will not be able to know the status of these serial numbers. We will continue to uphold the 100% guarantee of authenticity."
In this case, WGACA argues that Chanel's purpose of the lawsuit is:Trying to prevent the legal resale of their productsand that WGACA uses the CHANEL trademark solely to identify its products and does not claim any affiliation or sponsorship with CHANEL.
Throughout the course of this round of trials, some key pieces of evidence have been repeatedly mentioned, such as:
Of the more than 30,000 serial numbers stolen from Chanel's Renato Corti factory in Italy in 2012, 13 were the serial numbers of WGACA** bags, which were invalidated after they were stolen;
The serial number on a handbag made by WGACA** does not match 17744200 description of the same serial number in Chanel's internal Orli software system;
The two sides also disagreed over 779 Chanel items, such as trays, mirrors, and tissue boxes, which were seized by WGACA, while Chanel's legal team insisted that the items were "props" or display materials that were never authorized**.
During the proceedings, one of Chanel's lawyers, Sheppard Mullin Richter and Hamilton partner Theodore Max, saidWGACA sold $90 million worth of pre-owned Chanel merchandise between 2016 and 2022。On February 7, the number of second-hand Chanel items on sale was 988, and the highest price was a limited edition surfboard worth $190,000.
On February 2, WGACA made closing arguments ahead of Chanel. WGACA's defense lawyer, Yale Galanter, reiterated his point, "This is a case about David vs. Goliath [referring to the biblical story of the weak versus the strong." ”
He believes that Chanel does not like the development of WGACA and therefore wants to make its position clear by cracking down on resellers. He also claimed that Chanel contacted Dillard'S, GAP, Banana Republic and Van Maur (all of which have deals in perfume and beauty goods with Chanel) "told them to stop doing business with WGACA".
In response to Chanel's allegations of "false association" with WGACA, Yale Galanter said: "No one who walks into the court would be confused by any association between the two companies, how 'sophisticated' Chanel's customers are. He cited the testimony of Joyce Green, a key witness and general manager of Chanel France. When asked if she had been exposed to any confusing information from customers or retailers since November 2020, Joyce Green replied:"There is no similar situation".
The testimony of another of Chanel's core witnesses, Joseph Br**o, Chanel's executive director of operations, who traveled to New York three times to appear in court, was also dissected by both sides. He said the zippers on the Chanel handbag with the zipper maker's name on it seen at the WGACA warehouse** were not genuine. Joseph Br**o also said that the shape of the bag was irregular, the slider of the zipper, the font size of the logo, the color and stitching of the bag were all wrong. Yale Galanter reminded the jury that Joseph Br**o refused to measure the bag with a ruler, claiming that the ruler was inaccurate.
In Chanel's closing arguments, Dylan Price, a partner at Sheppard Mullin Richter & Hampton, her attorney, repeatedly emphasized that WGACA** had faked the bag.
He stated that the serial number on the WGACA** bag was invalid. Chanel's internal ORLI system, which tracks the production, quality control and distribution of handbags, only mentions that the serial numbers have been invalidated, indicating that any merchandise with these serial numbers is counterfeit.
He also mentioned how WGACA sells Chanel merchandise that has been repaired, refurbished and repainted. Dylan Price points out that this type of refurbishment is a common practice in Japan, where more than 80% of WGACA's handbags come from (according to the testimony of WGACA CEO Seth Weisser).
Another contentious issue concerns the 779 items mentioned in Chanel's testimony that were not gifted or **, including plastic trays and tissue boxes. Dylan Price referred to the previous testimony of Chanel employees, which highlighted that the items were:"Props", never given away or **, and therefore constitutes infringement. WGACA provided invoices for the purchase of the items from a Hong Kong** merchant and stated that the items may have been changed hands by Chanel or store employees**.
In addition, Chanel's lawyers repeatedly mentioned WGACA in print ads, emails, social ** posts"Intentionally"The use of the Chanel trademark, such as the one he showcased, shows multiple examples of WGACA's use of Chanel's old advertisements and runway ** in posts, as well as:"chanel "Print advertisements with distinctive names.
This case sends a clear message to brand owners and second-hand dealers: the right to resell genuine, second-hand goods with genuine trademarks is fully established under the first-sale principle. However, this ruling on the WGACA shows that:Even after the initial sale, trademark owners maintain a certain degree of control over the use of their intellectual propertySecond-hand dealers should avoid excessive use of brand trademarks or implying a commercial relationship with the brand during the sales process.
Chanel has successfully demonstrated that many of the goods sold by WGACA have not undergone Chanel's quality control procedures, including those identified as counterfeit and those with obsolete serial numbers. This reminds second-hand dealers that they must conduct sufficient authenticity verification when claiming the authenticity of goods.
At the same time, the case highlights the caution of second-hand dealers when conducting marketing promotions, and the need to avoid exaggerating the association with the brand. In addition, it is equally crucial for trademark holders to properly monitor the use of their brand in the secondary market to avoid the negative impact of improper use of the trademark.
This case not only draws a clear line between luxury brands and consumers in the second-hand market, but also provides a direction for formal cooperation between second-hand dealers and brands, aiming to jointly promote the healthy and compliant development of the luxury second-hand market.
*: Gorgeous Chi, FashionLaw, IPWATCHDOG
Editor: Sharon