In the case that currently has a fair amount of my attention … Chanel and What Goes Around Comes Around (“WGACA”) are expected to make their closing arguments before a New York federal jury today, bringing the first portion of the trademark trial to a close.
You may recall … that Judge Stanton of the U.S. District Court for the Southern District of New York provided an outline for the trial in December, 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].” This will “be followed immediately by its award of damages and legal remedies, such as statutory damages,” according to the court. Then, the parties will present evidence related to “equitable remedies, such as disgorgement and injunctive relief,” exclusively to the court.
A bit of background: Chanel filed suit against WGACA in 2018, alleging that the resale company has tried 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 is offering up] in order to trade off of Chanel’s brand and goodwill.” At the same time, Chanel has claimed that the New York-headquartered reseller has offered up infringing Chanel-branded products – from coveted handbags to hundreds of display items, the latter of which were never meant for sale. WGACA has come back with nominative fair use, first sale, etc. arguments in its defense.
At a high level, Chanel is asserting four claims against WGACA under federal trademark and unfair competition law …
(1) Chanel claim that WGACA infringed its trademark rights and engaged in unfair competition by using the Chanel trademarks and other indicia in a manner likely to cause confusion among consumers as to the affiliation, connection, or association between WGACA and Chanel;
(2) Chanel claims that WGACA infringed its trademark rights and engaged in false association and unfair competition by selling or offering for sale non-genuine CHANEL-branded products. Specifically, Chanel claims that: WGACA used its word mark in hashtags; sold/offered for sale infringing bags and point of sale items, and “materially altered or repaired Chanel-branded products with no disclosure that the alterations or modifications were made and were not authorized by Chanel,” among other things;
(3) Chanel claims that WGACA engaged in trademark infringement by selling or offering for sale counterfeit CHANEL-branded handbags, namely, handbags bearing serial numbers stolen from one of its supplier factories and pirated serial numbers; and
(4) Chanel’s fourth claim is that WGACA committed false advertising by falsely advertising: non-genuine, counterfeit, and repaired CHANEL- branded products as genuine and unaltered; point-of-sale items as genuine CHANEL-branded products originally made and sold by Chanel to the public, and certain products as vintage.
Meanwhile, WGACA is looking to chip away at the aforementioned claims by way of a handful of different defenses, including nominative fair use, with its counsel asserting, among other things, that it should be shielded from trademark liability since it is using the Chanel trademark to identify Chanel goods that it is selling. In other words, “it is necessary for WGACA to use the Chanel trademark to identify the secondhand Chanel goods that [it] sells and that such a finding cuts against a finding of likelihood of confusion.”
Another likelihood of factor that WGACA says weighs in its favor: sophistication of consumers. The reseller has argued that “the Court has already determined that Chanel and WGACA operate in high end luxury products and so [the jury] should infer that the relevant ordinary purchaser is sophisticated and that … tends to minimize the likelihood of confusion or infringement.”
In terms of Chanel’s claims that various bags bearing stolen serial numbers and 700-plus point-of-sale items (namely, trays and tissue boxes) are infringing, WGACA is focused in large part on the element of authorization, looking to chip away at Chanel’s claim that these items were either never meant for sale, or were never authorized by Chanel for sale because they were not subject to its quality control processes. With regard to Chanel bags offered up by WGACA that Chanel claims are infringing because they came with serial numbers that were stolen from the Corti Renata factory, a Chanel supplier factory, back in 2012, WGACA has urged the jury to consider “whether those bags were made in the Corti factory (or other factory authorized by Chanel to make Chanel handbags) and whether the bags were sold with Chanel’s authorization.”
More to come on this trial (and what it means for entities in the resale segment more broadly) shortly. In the meantime, you can find our running timeline of the case right here.