April 18, 2018
On March 14, Swiss fashion giant Chanel filed suit against What Goes Around Comes Around (WGACA), a group of related companies that sells pre-used “vintage” luxury-brand bags and other accessories on its Web site and in five bricks-and-mortar stores located in expensive shopping districts around the country.
What is unusual about the suit is that Chanel is not claiming that WGACA’s items are not authentic. Rather, Chanel is asserting that WGACA uses the Chanel brand, promotional materials and promotional photos in a way that misleads consumers to believe that there is an association between it and WGACA, when in fact Chanel refused to enter into such an association.
Similar cases have been brought before.
What makes this case notable is that many of the activities that Chanel complains about involve social media and other 21st-century means of promotion. The case could be a landmark in drawing the line between permissible and impermissible uses of a brand by third parties.
As we have written before, trademark law differs from patent and copyright law in one basic way: its purpose is not to protect creativity, but to protect the right of a merchant or company to identify goods as its own, and to protect consumers from confusion and deception that one company’s goods are another’s.
Not all uses by a third party of a brand owner’s trademark are forbidden – only those that create a likelihood of confusion among consumers. Very simple – no confusion, no infringement.
What kind of confusion? Courts have recognized several kinds. The most basic is confusion as to who manufactures a product – a “Brand X” product is recognized as made by the company that owns the “Brand X” mark.
But another form of confusion is confusion as to association or sponsorship. A store or other retail outlet cannot use another’s trademark in a way that confuses or misleads consumers into believing the store is an authorized dealer, for example, or that its services – for example, repair services on the product – are authorized by the brand owner.
On the other hand, if the product truly emanates from the brand owner, then anyone is free to sell it, and is free to advertise the fact that it is selling Brand X product.
To summarize, the key legal principles that apply are:
As always, in trademark law consumer perception is paramount: what do consumers think when they see the seller using the mark?
In the Chanel case against WGACA, if consumers merely think that WGACA sells Chanel product, Chanel will lose. If they think WGACA is an authorized Chanel dealer or its services are authorized, Chanel will prevail.
Chanel's specific complaints
Chanel’s allegations focus mainly on three areas that WGACA engages in: its Web site, its social media postings and its authenticity letters:
Chanel’s complaints about the WGACA Web site include:
Some of these complaints strike us as weak sauce. If Chanel is WGACA’s largest-selling item, it is entitled to show that on its Web site. But “excessive use” of Chanel’s trademarks and imagery – including of Chanel products that WGACA in fact does not offer – might well suggest an association with Chanel.
Social media posts
Chanel also complains about WGACA’s social media postings on Facebook, Instagram, Twitter and Tumblr:
The complaint adds several other examples of use of Chanel trademarks, photos of Chanel products with and without models, and various banners and hashtags incorporating the term Chanel.
WGACA clearly has made a major push to drum up excitement about its Chanel offerings using social media tools. But that is legitimate – as we discussed, it is entitled to advertise that it offers genuine Chanel products.
The question is whether consumers reviewing these social media posts take away a further message: that WGACA is associated or sponsored by Chanel.
In the traditional bricks-and-mortar world, prominent display of a brand logo in a store is often thought to imply some kind of sponsorship or authorized dealer status. How that carries over to the world of social media seems to be a new issue in trademark law.
The Chanel case thus seems to be treading new ground.
Letters of authenticity
WGACA provides all customers with a letter of authenticity guaranteeing that the particular product is authentic.
Chanel complains that (1) the letter fails to advise that the authenticators are not trained by, nor affiliated with, Chanel in any way, nor that Chanel itself has not authenticated the item; and (2) on two occasions, WGACA has sold a counterfeit item (WGACA denies this); and, (3) the letter was used to authenticate a Chanel tissue box, but Chanel does not sell these items separately.
This again strikes us as weak sauce.
The “letter of authenticity” (a copy is attached to Chanel’s complaint) features WGACA’s mark twice very prominently. Otherwise, it merely states: “[t]his letter confirms that item Q6HCHK00KB000 Chanel Black Long Tissue Box is an authentic Chanel decoration.” It looks like this:
This “letter of authenticity” strikes us as rather contrived – it does not state what the basis is of the “confirmation” nor even what exactly that means. Is this a money-back guarantee? The certification of an expert?
Still, whatever it means exactly, if anything, it is difficult to imagine that a consumer would believe this is a guarantee or certification by Chanel, rather than by WGACA.
Again, WGACA is entitled to offer its own guarantee or warranty on its items, and it is hard to see what it could do differently to provide the same guarantee or certification without supposedly implying a connection to Chanel.
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THE CHANEL CASE presents a traditional problem area in trademark law: how far can an unauthorized dealer in authentic branded goods go in using the brand’s trademarks to promote the branded products.
While the basic legal principles have long been set, it remains to be decided how those are applied in the digital world.
The Chanel case may well provide some guidelines for online merchants and brand owners on this topic.
Milton Springut is a partner at Springut Law PC, New York. Reach him at email@example.com.