June 18, 2021 - Secondhand luxury re-sale is connected the emergence and truthful are concerns regarding authenticity, modification, and marketplace control.
While definite philosophical issues person ever surrounded the contented of “real” versus “fake,” “original” versus “unauthorized reconstruction,” the stakes are present higher than ever: according to Vogue, “[i]n 2019, resale grew 25 times faster than retail — and what is present a $28 cardinal secondhand-apparel marketplace volition much than treble to an astonishing $64 cardinal by 2024.”
These issues person travel to a head in Chanel Inc. v. RealReal Inc. The RealReal, founded by Julie Wainwright, is a California based institution specializing successful secondhand luxury consignment. The RealReal takes possession of goods and guarantees that what it sells is authentic. However, Chanel has asserted that The RealReal has sold eight counterfeit “Chanel” items to customers.
According to Chanel, “[t]he only way for consumers to guarantee that they are successful information receiving genuine CHANEL products is to acquisition specified goods from Chanel oregon from an authorized retailer of Chanel.” Chanel does not merchantability secondhand goods and has nary engagement in authenticating immoderate secondhand Chanel inventory. Unfortunately for luxury re-sale companies, entities that instrumentality possession of goods are strictly liable for trademark infringement.
Section 32(1)(a) of the Lanham Act, 15 U.S.C.A. § 1114(1)(a), imposes civilian liability connected immoderate idiosyncratic who, without the consent of the registrant “use[s] successful commerce immoderate reproduction, counterfeit, copy, oregon colorable imitation of a registered people successful transportation with the sale, offering for sale, distribution, oregon advertizing of immoderate goods or services connected oregon successful transportation with which specified usage is apt to origin confusion, or to origin mistake, oregon to deceive.”
In general, a idiosyncratic who places a counterfeit point wrong the watercourse of commerce whitethorn beryllium liable for violating trademark law. Trademark instrumentality aims to forestall user disorder truthful that consumers tin reasonably beryllium upon the point they are purchasing to clasp the brand's characteristics. Otherwise, infringing trademarks oregon counterfeit items may induce a user to acquisition an point erstwhile they different would not have.
Individuals are capable to sell, display, oregon connection goods nether its archetypal trademark pursuant to the archetypal sale doctrine. However, the archetypal merchantability doctrine does not support a suspect who makes oregon sells a reproduction of a copyrighted work. Similarly, the archetypal sale doctrine does not use to an point that is materially antithetic than the one sold by the trademark holder.
The Fifth Circuit’s determination in Rolex Watch USA, Inc. v. Meece is the astir instructive lawsuit regarding the secondhand luxury goods marketplace and what level of “materially different” constitutes trademark infringement. Meece holds that replacing a indispensable and integral constituent of a Rolex ticker with a non-Rolex approved part, including any non-Rolex customizations, renders the full ticker counterfeit.
The tribunal recovered that the bezel on a Rolex ticker is simply a indispensable and integral portion of the ticker due to the fact that it serves a water-proofing function. The tribunal besides described bracelets and dials as necessary and integral parts due to the fact that a ticker cannot beryllium worn without a bracelet and a ticker cannot archer clip without a dial.
As a result, aftermarket
alterations to the Rolexes successful question were important capable to create
completely "different" products, deserving the designation of
While the Fifth Circuit recovered it relatively elemental to find what parts of a Rolex are indispensable and integral (essentially each of them), specified a trial is overmuch much hard to use to other luxury goods. Take, for example, a brace of Christian Louboutin heels, a coveted and highly counterfeited presumption shoe. Is replacing a bottommost pat astatine your local cobbler a replacement of a indispensable and integral part?
Following this logic even further, what is 1 to bash if the interior zipper of their Chanel flap is damaged? If a idiosyncratic wants to person their cobbler repair it, perchance utilizing a "non-Chanel" zipper, past should we deliberation of this full container arsenic a literal counterfeit? Most would inactive respect this altered container arsenic authentic, but following the logic of Meece, it would technically beryllium affecting the very function of the container itself, necessitating a counterfeit designation.
While it whitethorn marque consciousness to some to proceed to beryllium this exacting and captious erstwhile it comes to individuals who make a surviving "piggybacking" disconnected a brand's trademarks, specified criticism ignores realities of ownership.
Things break, and components need to beryllium fixed oregon replaced; does this mean that said alterations, which whitethorn be more indispensable than discretionary, request to hap done the precise marque itself? Luxury brands whitethorn proceed to beforehand a strict explanation of material alteration successful an effort to forestall secondhand goods from cutting into income of new luxury items.
Gone are the days of a single person selling a fake Fendi Baguette retired of the trunk of a car; today, counterfeit goods are knowingly oregon unknowingly being sold connected eBay, Poshmark, or The RealReal. The tribunal successful Tiffany (NJ) Inc. v. eBay Inc. was the archetypal to apply the conception of contributory trademark infringement to an online marketplace.
In this case, Tiffany & Co. ("Tiffany"), a seller of branded jewelry, among different items, sued eBay, an online marketplace that connected assorted buyers and sellers, for trademark infringement and different claims successful narration to eBay's advertizing and listing practices.
eBay facilitates income between independent buyers and sellers connected its platform, collecting assorted fees from its idiosyncratic basal on the way. Because eBay exists to facilitate the income that occur connected its website, it does not instrumentality carnal possession of the items that are sold, nor does it cognize erstwhile items are delivered to buyers.
Despite their comparatively hands-off approach toward the income themselves, eBay was alert that sellers connected eBay were selling counterfeit Tiffany jewelry nether the guise of them being authentic Tiffany pieces.
The tribunal recovered that eBay was not liable for trademark infringement due to the fact that it did not workout sufficient control implicit the infringing conduct. To successfully found liability, a service supplier indispensable person much than a wide cognition oregon crushed to cognize that its work is utilized to merchantability counterfeit items.
Essentially, a trademark holder would person to amusement that a work supplier knew oregon had crushed to cognize of specific instances of existent infringement beyond those that it addressed upon learning of them.
The tribunal acknowledged that this ruling was creating a willful blindness problem, referring to the information a service supplier could crook a unsighted oculus towards the beingness of trademark infringement connected its level successful an effort to debar their ain liability.
Tiffany (NJ) Inc. represents the best imaginable result for companies successful the luxury goods marketplace because platforms are rewarded for not exercising capable power implicit the infringing conduct, creating monolithic grey areas successful regards to authenticity of luxury goods.
These grey areas are maximized when a 3rd enactment selling level tin support that it prevents fakes from appearing connected the platform, but does not instrumentality capable enactment to beryllium regarded as exercising capable power implicit the items being sold.
Tiffany (NJ) Inc. rewards a "hands off" level portion simultaneously disincentivizing a platform from taking an progressive relation successful determining an item's authenticity for the benefit of consumers. As a result, companies that instrumentality possession of secondhand luxury goods, specified arsenic The RealReal, person 2 options: merchantability authentic goods one hundred percent of the clip oregon halt taking possession of goods.
Proceedings successful Chanel, Inc. v. RealReal, Inc. are presently connected clasp portion the parties prosecute successful mediation. However, the ineligible issues surrounding secondhand luxury re-sale volition continue to beryllium adjacent if a colony is successfully negotiated.
Consumers who attraction astir bargains and sustainability are fueling different re-sale platforms similar Poshmark, Vestaire Collective, and galore others. Brands, and consumers, volition inactive request to grapple with what level of modification makes a luxury secondhand bully counterfeit.
Luxury brands would similar to push for an expansive explanation of "materially different" successful an effort to protect marketplace stock successful the look of rising income of secondhand luxury goods. However, existent mentation of trademark instrumentality opens up endless opportunities for luxury brands to person courts deem altered yet authentic goods to be counterfeit, creating further restraints connected alienation.
By silently chipping distant astatine ways an idiosyncratic tin merchantability their luxury goods, luxury brands are protecting the market for their caller goods portion besides making it hard for erstwhile customers to pat into the equity of their luxury investments.
Previous precedent, specifically regarding power implicit product, whitethorn effect successful a halt to innovation successful the secondhand luxury goods market.
Companies that instrumentality possession of goods successful an effort to supply authentication indispensable beryllium close regarding its assessments 1 100 percent of the clip to flight imaginable liability. Or, a institution whitethorn power to a concern exemplary successful which it does not instrumentality possession of goods, adjacent if that theoretically means that much inauthentic items extremity up being sold to consumers.
Disincentivizing power over goods results successful platforms adopting a hands-off attack regarding sales. While companies similar The RealReal should not marque absolutist guarantees regarding authenticity, betterment successful preventing counterfeit items from entering the stream of commerce should beryllium encouraged.
Until luxury brands and secondhand re-sellers hold to co-exist, luxury secondhand goods are stuck being sold successful a mode that rewards a definite deficiency of oversight.
Source - https://www.reuters.com/legal/legalindustry/everything-isnt-gucci-trademark-law-secondhand-luxury-goods-market-2021-06-18/