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Chanel Wins New York Lawsuit Against Reseller

  • 23 April 2024
  • Studio Legal

Written by Solicitor, Alyce Evans, and Law Graduate, Sophie Jones

Recently in legal news, a New York federal jury has sided with fashion house, Chanel, in their case against luxury reseller, What Goes Around Comes Around (WGACA).

Following a years-long legal battle, Chanel has won on all four causes of its action:

1. Trademark infringement.

2. Unfair competition.

3. False advertising.

4. False association.

As fashion and intellectual property lawyers, we’ve naturally kept a close eye on this dispute. However, it has also garnered attention beyond legal circles, with the fashion industry and consumers widely discussing the case.

While this case took place in the US (and therefore US laws have been applied to the decision), there are lessons to be learnt for fashion businesses and vintage resellers in Australia.

In this blog, we break down the latest news relating to this case, and provide key tips for Australian fashion brands and resellers.

Who is Chanel?

Chanel is a French luxury fashion house, known for its classic cuts and timeless women’s fashion.

Headed by the eminent Karl Lagerfeld as creative director for decades until his death in 2018, Chanel has established an enduring influence in the world of fashion and in popular culture.

As such, Chanel flexes its brand-protective muscles accordingly.

Who is What Goes Around Comes Around?

What Goes Around Comes Around (a mouthful – “WGACA” for short) is a leading American vintage resale company that has been operating for over 30 years.

They tout themselves as ‘the leading global purveyor of authentic luxury vintage accessories and apparel’.

The Legal Battle Between Chanel and WGACA

How did it all start?

Back in 2018, Chanel filed a lawsuit against WGACA claiming trademark infringement, unfair competition, false advertising, and false association.

This case played out in the New York Federal Court, so it’s important to remember that US law and legal doctrines applied.

What did Chanel argue?

Chanel made a number of claims, including that WGACA:

1. 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.”

2. Resold infringing Chanel products, such as display items that were never meant for sale. In doing so, WGACA guaranteed the authenticity of items that were not guaranteed by Chanel.

3. Used Chanel marketing material, images, advertisements, and trademarks on their social media in a manner which would mislead consumers to believe that WGACA was affiliated with Chanel (when in fact, it was not).

What did WGACA argue?

First Sale Doctrine (US LAW)

WGACA rejected the assertion that they had resold counterfeit items.

WGACA relied on the US ‘first sale doctrine’ as a defence.

This concept states that anyone can sell authentic trademark bearing products and use the original manufacturer’s name and logo in connection with sales, after the original manufacturer and trademark holder has sold these goods into the market.

Chanel’s Response

Chanel argued that regardless of whether WGACA can legally sell the Chanel products in question, WGACA’s use of Chanel’s trademarks, branding, and advertisement material falsely implied and misled consumers into believing that Chanel was affiliated with WGACA’s reselling business.

Nominative Fair Use (US Law)

In addition to the first sale defence, WGACA also relied on the US concept of nominative fair use. Under this defence, they argued that use of Chanel marks was necessary to identify the product that they were selling.

The limitation of this fair use argument, however, is that use of another’s trademark is only allowed to the extent that it does not create a likelihood of confusion amongst consumers. Chanel, of course, argued that it did.

What do critics have to say?

The case has been considered by some in the fashion world as a ‘David and Goliath’ style battle.

In this context, critics have implied that Chanel may be using trademark claims as a smokescreen for quashing a significant actor in the resale market (namely, WGACA).

Chanel, of course, disputes this characterisation, arguing instead that the lawsuit is necessary to protect consumers and their brand in the fight against counterfeiting.

What did the jury decide?

The New York jury unanimously sided with Chanel on the following:

– WGACA had engaged in trademark infringement and unfair competition based on a false association.

– WGACA had engaged in trademark infringement based on the sale of infringing Chanel branded products and use of various hashtags.

– WGACA had sold counterfeit Chanel branded products.

– WGACA had engaged in false advertising.

So, what happens next?

WGACA has expressed disappointment with the verdict and have signified that they will be exploring their legal options as the case moves forward (hint: we may see an appeal in future).

Nonetheless, this verdict signifies that resellers will have to tread carefully in the future – even if they are marketing authentic (i.e. genuine and not counterfeit) products for resale. They will need to ensure they don’t use other brands’ trade marks too often nor imply a connection with a brand that does not exist.

Key Takeaways for Australian Fashion Brands and Resellers

Although this case played out in the US (and therefore US laws applied), it does highlight some potential risks for Australian fashion brands and resellers.

Therefore, to help Australian fashion brands and resellers navigate this tricky territory, here are some of our key tips and takeaways:

For Australian fashion brands

– Take steps to protect your brand. Identify your IP assets and make moves to protect them. For example, apply to register your trademarks (brand names, logos, etc) and designs.

– Include a resale policy in your terms of sale, or consider creating your own resale medium for your products.

For Australian fashion resellers

– Be careful not to infringe a brand’s copyright, trademarks or designs.

– Make sure you do not mislead consumers into thinking that you are affiliated with, sponsored, endorsed by, or otherwise associated with the brands whose products you are selling.

– Include disclaimers about the goods in your resale information.

– Finally, don’t reuse images, trademarks or advertising material from brands. This could be copyright infringement. Take your own photos of products and write your own descriptions.

Further Information

For more information about IP infringement and fashion law, check out our blogs:

Top Trade Mark Tips: How to use Trade Marks to Protect your Brand

9 Common Mistakes People Make About Copyright

IP News: Australian Fashion Trade Mark is Unveiled at Fashion Week

If you’d like to speak to one of our lawyers about intellectual property or fashion law, please contact us through our online form or via email at hello@studiolegal.com.au.

Written by Solicitor, Alyce Evans and Law Graduate, Sophie Jones.

Published 15 February 2024.

Photo from Chanel, shared for the purpose of reporting news.

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The information in this article is of a general nature. It does not constitute formal legal advice and should not be relied on as such. Please see the full disclaimer in our website terms. Please contact Studio Legal if you are seeking advice about a specific legal matter.