A New York federal jury sided in favor of Chanel on all of it claims against luxury reseller What Goes Around Comes Around (WGACA), awarding Chanel US$4 million in statutory damages for sales of counterfeit Chanel-branded handbags. In Chanel, Inc. v. What Goes Around Comes Around, LLC, et al., 1:18-cv-02253 (SDNY), WGACA was found liable for trademark infringement, false association and unfair competition, and false advertising claims. The jury further found that WGACA acted willfully, with reckless disregard, or with willful blindness.
Although luxury resellers have the right to resell pre-owned genuine product without permission from the brand owners under the first-sale doctrine, resellers still risk liability if offering for sale non-genuine or counterfeit products, and if using the brand owners’ marks in a misleading way in its marketing that is not fair use. This ruling will likely impact the rigor required for resellers vetting and authentication processes.
The dispute started in 2018 when Chanel accused WGACA of selling counterfeit bags and non-genuine Chanel product, which included items not offered for sale by the brand, such as display-only items. Chanel challenged WGACA’s ability to guarantee the authenticity of genuine Chanel product it was selling on resale.
Chanel also claimed WGACA implied affiliation with Chanel through its advertising and marketing materials, such as using discount codes “COCO10 for 10% off” and using quotes from Chanel founder Coco Chanel on social media. Chanel alleged these instances create a false perception that WGACA and Chanel are officially affiliated.
The jury’s findings for Chanel were based on WGACA’s use of Chanel’s marks and other indicia of Chanel, including the hashtags containing “Chanel” or “Coco Chanel” to advertise and market WGACA products on social media, and offering sales of non-genuine or counterfeit Chanel-branded items. The Chanel-branded items presented at trial included thirteen Chanel-branded handbags bearing stolen Chanel serial numbers; 51 Chanel-branded handbags bearing voided Chanel serial numbers; and 779 Chanel-branded items such as tissue boxes, trays, and mirrors not authorized for sale, differed materially from the product authorized for sale, or did not pass through Chanel’s quality control procedures.