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How luxury brands can protect themselves in the secondhand market

May 29, 2024

In a significant February victory, Chanel triumphed in its six-year trademark infringement lawsuit against luxury resale boutique What Goes Around Comes Around (WGACA). The French luxury house was awarded $4 million in statutory damages after convincing a New York jury that WGACA had misled customers through false advertising and unauthorized use of Chanel’s trademarks. This case was important and the precedent set has broader implications for the secondhand luxury market.

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The evolution of resale and legal battles

The shift from traditional resale practices, such as yard sales, to online platforms like eBay in the early 2000’s led to increased trademark disputes. A notable case in 2004 saw Tiffany & Co. sue eBay over counterfeit jewelry sales, but the court ruled in favor of eBay, citing its anti-counterfeiting measures. This case marked the beginning of a new era in trademark law, particularly with the rise of luxury resale platforms like The RealReal and Vestiaire Collective.

First-sale doctrine and material alterations

The first-sale doctrine provides some legal protection for trademarks, allowing genuine items to be resold. However, significant alterations must be disclosed. In Chanel v. WGACA, WGACA’s marketing suggested an association with Chanel, leading to customer confusion. The jury found this misleading, reinforcing the need for clear distinctions in resale advertising.

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The next frontier: Customized products

Customized products could become the next major issue in trademark infringement. Chanel and Rolex have recently taken action against upcycled and modified products, arguing that significant changes violate trademark protections. For example, Chanel sent a cease-and-desist letter to stylist Logan Horne for repurposing branded materials, and Rolex objected to dealers customizing its timepieces.

Brand strategies: Partnerships and in-house programs

To navigate these challenges, brands are increasingly partnering with resale platforms or creating in-house programs to authenticate and sell items. Partnerships, like Oscar de la Renta’s with Encore and Valentino’s similar initiatives, help brands maintain control over their image and the quality of resold goods. Such strategies also allow brands to directly benefit from the resale market.

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Counterfeit detection and legal enforcement

Services like OpenLuxury, which specialize in counterfeit detection, are vital for protecting brand integrity. It should be emphasized that neglecting trademark protection could weaken future legal defenses. Even without extensive resources, brands can take assertive actions, such as sending cease-and-desist letters. Free legal clinics, like the Fashion Law Institute’s, provide valuable support to smaller companies navigating trademark issues.

Implications for the Future

The Chanel v. WGACA case serves as a cautionary tale for both resellers and brands. It underscores the importance of protecting trademarks and ensuring clear communication with consumers. As the resale market continues to expand, more legal battles are likely, shaping the future of trademark law in this dynamic industry. Brands must stay vigilant and proactive in protecting their trademarks to maintain their reputation and customer trust.

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