In a closely-watched legal clash that has escalated beyond a $4 million jury verdict in February, Chanel and What Goes Around Comes Around (“WGACA”) recently amped up their battle over the reseller’s trademark infringement following a July bench trial in furtherance of which Chanel is seeking even more from WGACA. Specifically, Chanel is asking the court for nearly $100 million in disgorged profits, asserting that WGACA’s actions have misled consumers into believing they have an affiliation, as well as an injunction to limit how WGACA can sell Chanel-branded goods in the future. Meanwhile, in defending its practices, WGACA argues that its business in the pre-owned luxury market remains legitimate and legally above-board.
Chanel and WGACA expanded on and reemphasized their respective claims in trial briefs and memorandums that they recently filed with the court ahead of the anticipated bench trial decision.
Some Background: The legal battle between Chanel and WGACA began in March 2018 when Chanel accused the reseller of infringing on its trademarks, selling counterfeit goods, and misleading consumers into believing there was an affiliation between the two companies. Chanel’s lawsuit, filed in a New York federal court, alleged that WGACA was “piggybacking” on its luxury reputation to boost sales, using unauthorized Chanel trademarks on its website and social media, and selling Chanel-branded items never meant for public sale.
Chanel’s complaint accused WGACA of attempting to deceive consumers by suggesting a non-existent relationship with it. The French luxury goods brand argued that WGACA’s actions were driven by the understanding that the value of its Chanel inventory – and consumer demand for such goods – would significantly increase if customers believed that Chanel had some business relationship with WGACA.
The New York-headquartered reseller denied Chanel’s claims, arguing that Chanel’s lawsuit is little more than 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 the luxury giant.
In February 2024, a jury sided with Chanel, awarding the company $4 million and finding WGACA liable for willful trademark infringement, false association, unfair competition, and false advertising. In a jury found that WGACA had used Chanel’s trademarks without authorization, including hashtags like “#Chanel” and “#CocoChanel” to market products, sold non-genuine and counterfeit Chanel items, and offered Chanel-branded goods that had been materially altered. But the clash is not over yet.
As the case progresses into its next phase following a bench trial in July, Chanel is pushing for the disgorgement of WGACA’s profits, which could total in the millions, and a permanent injunction to stop WGACA from continuing the practices Chanel argues confuse consumers and harm its brand. Chanel asserts that these measures are necessary to prevent further exploitation of its trademarks and protect the integrity of its brand in the luxury market.
Chanel Seeks Millions in Disgorged Profits & Strict Injunction
Fast-forward to August 30 and in its post-bench trial brief, Chanel reemphasized its claim that WGACA misled consumers by falsely implying an affiliation with the French fashion house and that the court should disgorge the reseller’s Chanel-related profits and permanently bar the company from “certifying, guaranteeing, or otherwise making any advertising claims … regarding the genuineness of any Chanel-branded items,” among other things.
> Disgorgement: According to Chanel, WGACA’s marketing tactics, including the use of Chanel trademarks and other branding elements, have caused significant consumer confusion and unjustly enriched WGACA. To remedy what it characterizes as significant harm, Chanel is seeking a court order to disgorge WGACA’s profits, a move that could see the vintage retailer parting with nearly $94 million. Moreover, Chanel is pushing for an injunction that would place limits on WGACA’s ability to sell Chanel products in the future. This proposed injunction would not only prohibit the use of Chanel trademarks in WGACA’s marketing, but also impose stringent conditions to prevent further consumer confusion.
In its pursuit of disgorgement of WGACA’s profits, Chanel’s financial expert, Dr. Andrew Safir, provided the court with both a “floor” and a “ceiling” for the profits subject to disgorgement. The “ceiling” amount, $47,964,820, reflects WGACA’s gross revenues minus the cost of goods sold, excluding any overhead expenses. The “floor” amount, $14,054,343, assumes deductions for overhead expenses claimed by WGACA. Chanel asserts that the court should consider these figures when determining the amount to be disgorged, arguing that WGACA’s attempts to “re-litigate willfulness and therefore, avoid an award of profits … is misguided.”
Additionally, Chanel argues in its filing that WGACA’s actions have not only damaged its brand reputation but have also diverted potential sales away. The company highlights that WGACA’s profits from the sale of Chanel-branded items – totaling over $59.5 million – are directly tied to its infringing activities. Additionally, Chanel claims that WGACA has reaped an extra $34.5 million in “opportunity benefits” by capitalizing on its perceived association with the Chanel brand.
> Injunctive Relief: With regard to its proposed injunction, Chanel is pressing the court to permanently enjoin WGACA from continuing to engage in misleading and infringing practices. Chanel highlights that the jury’s findings of willfulness across all counts justify an injunction, stating, “WGACA’s refusal to acknowledge the jury’s verdict and accept responsibility for any of its willful infringements clearly demonstrates the need for a permanent injunction.”
Chanel argues that WGACA “deliberately pursued a path to create a false association between [itself] and Chanel,” despite receiving a cease-and-desist letter from Chanel in 2015. The luxury brand asserts that without a strong court-ordered injunction, WGACA will continue to exploit Chanel’s trademarks to confuse consumers and harm the brand’s reputation. Chanelinsists that an injunction is crucial not only to protect its brand but also to deter WGACA and other potential infringers from similar misconduct in the future.
WGACA’s Defense & Chanel’s “Unjustified” Claims
In its own August 30 brief, counsel for WGACA argues that Chanel’s demands for profit disgorgement and an injunction are both “unwarranted” and “excessive.” Specifically, WGACA contends that Chanel has failed to prove that the retailer’s actions led to any actual harm or loss of sales and asserts that it “operates in a distinct market from Chanel, dealing exclusively in pre-owned items, which Chanel, itself, does not sell.”
In particular, WGACA disputes Chanel’s claim that it profited unjustly from any perceived affiliation with the luxury brand. The retailer points out that it took significant steps to address Chanel’s concerns shortly after the lawsuit was filed in 2018, including adding disclaimers on its website to alert consumers that it “IS NOT AN AUTHORIZED RESELLER NOR AFFILIATED WITH ANY OF THE BRANDS [IT] SELLS.” Despite these efforts, WGACA’s sales of Chanel products continued to grow, which, according to the reseller, demonstrates that “none of the profits can be attributed to WGACA’s conduct” related to the alleged infringing activities.
Moreover, WGACA criticizes the financial calculations presented by Chanel, arguing that the profits allegedly subject to disgorgement amount to a mere “$12,739” – not the $94 million that Chanel is seeking. WGACA also challenges the necessity and fairness of the proposed injunction, describing it as “overreaching” and asserting that “the statutory damage award coupled with whatever injunctive relief the court ultimately issues is more than sufficient in terms of remedy and deterrence.”
WGACA maintains that it has always sought to sell only genuine Chanel products and has implemented rigorous authentication processes to ensure the authenticity of its goods. The company accuses Chanel of using the lawsuit to “further its war against the secondary market,” rather than addressing any legitimate concerns about trademark infringement.
What Comes Next & What It Means
As the court prepares to make a final decision on equitable remedies, the stakes are high for both parties. For Chanel, a victory could help solidify its control over the resale of its products and deter other companies from engaging in similar sales and marketing practices as WGACA. For the well-known reseller, the outcome could determine not only its financial future (a loss of this magnitude could thrust a company into bankruptcy) but also its ability to continue operating in the luxury resale market.
But beyond this case itself, the court’s ruling could have significant implications for the fashion industry at large, particularly in how luxury brands enforce their trademarks against resellers.
This case, as well as others like it, emphasizes the power that brands wield in cracking down on alleged trademark infringements, especially going forward. “As the Chanel case shows, resellers and consigners cannot trade off brands’ reputation or [co-opt] branded advertisements [as their] own,” Jeffrey Greene, a partner at Foley and Lardner LLP told TFL last month, noting that the outcome in the case may increase “brands’ power to prosecute alleged copyright and trademark infringement.” Power balance aside, he states that any clarity regarding the protection of brands and how to avoid consumer confusion is a good thing: “If anything, this case demonstrates that resellers – of any size and in any location – are not necessarily immune from liability.”
The case is Chanel, Inc. v. What Goes Around Comes Around, LLC, et al., 1:18-cv-02253 (SDNY).
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