13/02/2024
Chanel, Inc. v. What Goes Around Comes Around, LLC, et al., 1:18-cv-02253 (SDNY)
Luxury brand Chanel has won its case against luxury brand reseller “What Goes Around Comes Around (“WGACA”) in the U.S. District Court for the Southern District of New York, in what turned out to be nearly a month-long trial. This case is particularly important for luxury resellers, who need to be mindful of the authenticity of the goods being sold, and the way the goods are marketed for sale.
WGACA is a US-based reseller of luxury goods, such as bags and accessories, which are originally manufactured and sold by renowned fashion brands such as Louis Vuitton, Yves Saint Laurent and, relevant to this case, Chanel. In March 2018, Chanel filed a lawsuit against WGACA on four counts: trade mark infringement, unfair competition, false advertising and the sale of counterfeit products. More specifically, Chanel claimed that:-
- WGACA was selling counterfeit Chanel bags with serial numbers that had been stolen after a theft of a Chanel supplier factory in Italy back in 2012. Chanel claimed WGACA also sold other non-genuine items of Chanel, for example over 750 items were props that were never intended or authorised to be sold.
- Through their advertising and marketing, WGACA have misled customers by creating an affiliation with Chanel that did not exist. In particular, WGACA’s use of discount code “COCO10” and Coco Chanel quotes on their website, were efforts to imply that Chanel authorised the resale of the goods, and authorised the use of its trade marks.
Chanel was able to provide additional supporting evidence to these claims, showing that 23% of 200 participants of a survey thought that WGACA made handbags as opposed to reselling them, which helped to show consumer confusion was possible.
WGACA’s defence included the argument that it should be shielded from liability on the basis that Chanel was attempting to stop second hand resellers legitimately sell their products. It also claimed that the use of Chanel’s trade marks was merely to advertise the products’ identity as belonging to Chanel.
On 6 February 2024, the jury in the District Court in New York decided in favour of Chanel in respect of all four counts of the action, stating that WGACA acted ‘with reckless regard, or with wilful blindness’. Chanel was awarded $4 million of statutory damages (with further damages to be assessed post-trial). Despite the verdict, WGACA stands by its statement that it has never sold a non-genuine product, and the history of the stolen serial numbers was unknown.
This case could be influential in future actions involving third party resellers of luxury products, and will likely encourage resellers to think carefully about their current and future authentication processes. In addition, third party resellers should be mindful of the use of well-known trade marks and other intellectual property to promote the goods. Undoubtedly, this case will provide assurance to brand owners whose products are frequently resold via companies such as the WGACA.
Chanel has also brought an action in the US against another reseller, called The RealReal, again claiming infringement and the sale of counterfeit goods. It will be interesting to see what comes of this case – if Chanel prevails, the two cases will surely set a strong precedent for similar cases going forward and set the parameters of when a fair use defence to trade mark infringement claims will likely fail.
This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking any action in reliance on it.
