What Goes Around Comes Around ' Luxury Resellers On Thin Ice?

• Published date: 08 March 2024
• Law Firm: Haldanes Solicitors & Notaries
• Author: Anthony Leung

The resale of luxury goods is big business, estimated at around US$25-30 billion in 2020 and growing¹.

However, a recent New York lawsuit may put luxury resellers on thin ice.

In March 2018, the famous French luxury fashion house Chanel started legal proceedings against What Goes Around Comes Around("WGACA"), a specialist second-hand luxury goods reseller, at the Southern District Court of New York, alleging it, inter alia, sold counterfeit Chanel goods and infringed Chanel's trade marks².

After six years of litigation and a month-long trial, on 6 February 2024, the jury ruled unanimously for Chanel on all claims³ and awarded it US$4 million in damages.

This victory may have a profound impact on how the entire luxury resale market operates.

Use of brands' marks and images to promote the resale business

It's important to note that, under trade mark laws, brand owners generally have no right to prevent third parties from (i) selling genuine second-hand goods or (ii) using the brand owner's trade marks to promote the second-hand goods they sell.

This is because, under the doctrine of exhaustion, a trade mark owner's rights in a product are spent (or "exhausted") once the trade mark owner first puts a product on the market; the trade mark owner generally cannot rely on trade mark laws to stop any subsequent sale of the same product.

While some may see Chanel's lawsuit as a cynical attempt to crack down on the resale market, the case does pose some...