The What Goes Around Comes Around Saga: Chanel's Tense Relationship with Leading Resale Market Players

*** The writing does not, and is not intended to, constitute legal advice by any means***

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What Goes Around Comes Around ("WGACA") holds itself out to be a seller of "the finest authentic luxury vintage handbags, jewelry and accessories". Along with The Real Real, WGACA is a leading player in the luxury resale market. In 2018, Chanel sued WGACA for trademark infringement under the Lanham Act. Chanel forcefully claimed that "WGACA's advertising and marketing improperly trade on Chanel's famous brand and trademark to create the false impression that WGACA is affiliated with Chanel or that Chanel endorses its products." Chanel, Inc. v. WGACA, LLC, No. 18 CIV. 2253 (LLS), 2018 WL 4440507, at *1 (S.D.N.Y. Sept. 14, 2018). In response, WGACA promptly moved to dismiss the complaint. However, Judge Stanton denied WGACA's motion to dismiss on the ground that Chanel made a set of plausible factual allegations in support of its legal claim. Furthermore, the judge found that WGACA's first sale doctrine defense is inapplicable.

Let's dive deeper to the legal analysis. Chanel especially took issue with WGACA's use of the hashtag #WGACACHANEL in connection with promotional posts on its Instagram account. The complaint claimed that WGACA, by conjoining the two names, "create[d] the impression that WGACA is affiliated with Chanel or is an authorized Chanel retailer." Id. at *2. Such use can confuse consumers in the marketplace, which is expressly prohibited under Section 43(a) of the Lanham Act. Section 43(a) makes it clear that consumers need not be actually confused. The likelihood of confusion is sufficient. The complaint further pointed out that WGACA willfully piggybacked on the goodwill associated with Chanel because Chanel trademarks were too prominently featured or displayed in comparison to other luxury brands. Those who have been following my blog know well that one principal aim of the Lanham Act is to protect the goodwill of a mark.

With respect to the first sale doctrine, Judge Staton reasoned that the doctrine does not operate to shield WGACA from potential liabilities in this case. Citing the S&L Vitamins case, the judge found that the first sale doctrine is applicable only and only if "a purchaser resells a trademarked article under the producer's trademark, and nothing more (emphasis mine)." Id. at *3. Here, WGACA did much more than "laconically resell Chanel-branded products." Id. Fast-forward 3 years. Both WGACA and The Real Real are still at loggerheads with Chanel. A theme penetrating this pair of cases is that courts care about whether bad faith is at play. On one hand, courts might be asking whether these luxury resale market players are freeriding on Chanel's reputation. On the other hand, they also might be inquiring whether Chanel is going after the two to cement its power as a luxury titan. In fact, Chanel is now facing a claim that it is not leveling the same accusation against Farfetch because it owns a minority stake in the London-based e-commerce retailer. Would there be an amicable resolution to this ongoing conflict? For the moment, all of them seem so determined to fight it till the end.