The Sophistication of Thrifting for Designer Goods: Trademark Law in The Secondhand Market

UIC

REVIEW OF INTELLECTUAL PROPERTY LAW

THE SOPHISTICATION OF THRIFTING FOR DESIGNER GOODS: TRADEMARK LAW IN

THE SECONDHAND MARKET

DEEMA K. HASAN

ABSTRACT

Trademark law serves as a critical framework for regulating retailers and

safeguarding consumers from potential deception from providers of goods or services.

Cases involving trademark infringement and false advertising, which may confuse

consumers, are brought before the courts under the Lanham Act. The primary focus

has historically been trademark owners against direct-to-consumer infringers.

However, with a shift in consumer trends with online shopping becoming consumers’

primary source of commerce paired with the rise in popularity of purchasing goods

secondhand, the prominence of online secondary retailers has expanded exponentially.

Chanel v. The RealReal demonstrates the court's stagnant approach to trademark

infringement and false advertising issues within the context of an ever-evolving

market. The shift toward secondhand purchases facilitated by online platforms like

The RealReal has led to new challenges in maintaining consumer trust and brand

integrity. This case note will discuss the court's approach and its role in nurturing a

collaborative relationship between designers and secondhand retailers, as both share

a common objective of safeguarding consumers, protecting the brand, and upholding

the integrity of their respective platforms. The case note will explore how the legal

system can adapt to meet the needs of all parties to effectively address the complexities

of trademark issues in the new market.

Cite as Deema K. Hasan, THE SOPHISTICATION OF THRIFTING FOR DESIGNER GOODS:

TRADEMARK LAW IN THE SECONDHAND MARKET, 22.3 UIC REV. INTELL. PROP. L. 340

(2023).

THE SOPHISTICATION OF THRIFTING FOR DESIGNER GOODS: TRADEMARK

LAW IN THE SECONDHAND MARKET

DEEMA K. HASAN

I. INTRODUCTION .............................................................................................................340

II. BACKGROUND ..............................................................................................................341

A. The Lanham Act of 1946 ...................................................................................342

B. The Expanding Secondhand Market & Growing Need to Protect

Consumers .........................................................................................................346

III. THE CASE ...................................................................................................................348

A. The Facts of the Case.........................................................................................348

B. The Procedural History .....................................................................................349

C. The Court’s Decision ..........................................................................................349

IV. DISCUSSION................................................................................................................350

A. The Current Approach (of the Lanham Act) ....................................................350

B. Expanding the Application of the Lanham Act to Protect Consumers ..........353

C. Consumer Trust in a Growing Resale Market .................................................354

V. CONCLUSION................................................................................................................356

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340

THE SOPHISTICATION OF THRIFTING FOR DESIGNER GOODS: TRADEMARK

LAW IN THE SECONDHAND MARKET

DEEMA K. HASAN

I. INTRODUCTION

My first exposure to the Dior Saddle bag happened over a decade ago while

watching Sex and the City on television.

It was recently when I met a close friend who

happened to own the same iconic Dior Saddle bag, which had only been seen carried

by the Carrie Bradshaw.

Since the bag debuted on television in the early 2000s, its

value has only increased.

Whether it is the Dior Saddle, Fendi Baguette, or a glimpse

of the Hermes Birkin, the collection of bags and shoes seen on Sex and the City are

some of the most notable and desired vintage luxury goods.

The desire to invest in and

own vintage luxury products stems from their exclusivity.

If you are seen carrying a

unique vintage Chanel Flap Bag, your bag will be noticed. Secondhand retailers make

it possible for the average consumer to own some of the most exclusive bags and

shoes.

The high demand and exclusive nature of vintage designer goods consequently

increase their value.

Their high value and steep prices create an essential need to

authenticate vintage bags, shoes, accessories, and other luxury goods.

Without

guaranteed authenticity, such products risk losing their value in the secondhand

Marketing, B.B.A. in Entrepreneurship and Innovation Management, University of Michigan, Flint

(2019). Thank you to the 2022-23 UIC Review of Intellectual Property Law board, especially my editor,

Kylie Ostling, for all the encouragement and support provided throughout the process. I must also

thank my professors, Professor Arthur Acevedo, and Professor William Ford, for their invaluable

insight and feedback on this case note. I would like to dedicate this case note to my parents, siblings,

and friends, without whom the vision for this path could not have even been imagined. Especially my

older sister, Shurooq, who encourages and inspires me to believe in myself and has continuously

supported me at every stage of my personal and professional life.

Isabelle E., The Handbags of Sex and The City, THE VAULT (Nov. 29, 2021),

https://www.rebag.com/thevault/the-handbags-of-sex-and-the-city/.

Id.

Anna Solomon, The Economics of Exclusivity: Why Luxury Brands are Hiking Prices to Draw

Buyers In, LUXURY LONDON (June 17, 2022), https://luxurylondon.co.uk/style/hers/chanel-hermes-

price-rises-luxury-scarcity-exclusivity.

Achim B., Bassel B. Naoyuki I. & Stefano Z., Welcome to Luxury Fashion Resale: Discerning

Customers Beckon to Brands, MCKINSEY & COMPANY (Nov. 29, 2021),

https://www.mckinsey.com/industries/retail/our-insights/welcome-to-luxury-fashion-resale-

discerning-customers-beckon-to-brands.

Solomon, supra note 5; see also Erica Kagan, The Luxury Price Boom: Why You Should Invest

in Chanel Handbags Today, SOTHEBY’S (Mar. 14, 2022), https://www.sothebys.com/en/articles/the-

luxury-price-boom-why-you-should-invest-in-chanel-handbags-today.

The Rise of Pre-Owned Luxury in the US, VOGUE BUS. (Aug. 12, 2021),

https://www.voguebusiness.com/sustainability/the-rise-of-pre-owned-luxury-in-the-us.

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Trademark Law in the Secondhand Market

341

market.

Secondhand retailers have become more prevalent in the luxury goods

market, making the guarantee of authenticity a critical selling point for their

companies.

Chanel v. The RealReal teaches us that authentication cannot be certain

unless the luxury goods are purchased directly from designer brands.

Chanel

concerned protection of the Chanel Brand;

however, courts should consider the effects

of counterfeit products on consumers and the secondhand market overall.

This case note will discuss policy arguments in favor of applying the Lanham Act

in the fashion resale market to protect consumers from purchasing counterfeit

products. Part II will discuss the case of Chanel v. The RealReal and the court’s

application of the Lanham Act. Part III of this case note will discuss the history and

legal standards of Trademark Law and the role the law plays in retail and secondhand

markets. Part IV will analyze the court’s application and decision and discuss whether

the judicial system should take a broader approach when applying the tests under the

Lanham Act where various markets begin to overlap. Part V will summarize the main

points of this case and reiterate the importance of the broad application of the Lanham

Act to protect consumers.

II. BACKGROUND

The foundation of trademark law is a two-fold concept built on the objective of

protecting consumers.

Both in historical and current trademark law, the goal is to

minimize consumer confusion and deception over trademarks and protect a trademark

owner’s property.

In instances where the use of a trademark may cause confusion for

consumers, courts rely on the Lanham Act to guide their analyses and discussions on

the use of trademarks.

Trademark infringement has customarily been categorized as a form of consumer

deception as it deprives consumers of the ability to distinguish genuine goods from

counterfeit goods.

Existing trademark laws protect the average consumer and

trademark owners from direct-to-consumers infringers.

Trademark law does not

clearly define the type of consumer protected under the law but instead is intended to

offer broad protections.

In specific cases of trademark law violations, sections 43(a)

Graham Wetzbarger, The Rise of Recommerce: Resale and Authenticity, A.B.A. SEC. OF INTELL.

PROP. L. (Mar. 30, 2022),

https://www.americanbar.org/groups/intellectual_property_law/publications/landslide/2021-

22/march-april/rise-recommerce-resale-authenticity/.

Id.

See generally Chanel v. The RealReal, 449 F. Supp. 3d 422 (S.D.N.Y. 2020).

Id.

112 ANNE GILSON LALONDE, JEROME GILSON, GILSON ON TRADEMARKS § 5.01 (2022)

[hereinafter GILSON ON TRADEMARKS].

5 J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 2:2

(5th ed. 2022) [hereinafter MCCARTHY ON TRADEMARKS].

Id.

MCCARTHY ON TRADEMARKS, supra note 14, § 2:22.

Id.

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and 32 of the Lanham Act were designed to provide plaintiff trademark owners

protection from infringement and false advertising of their brands.

A. The Lanham Act of 1946

The Lanham Act defines “trademark” as a mark used in commerce.

The Act

requires that trademark owners use their marks to create an affiliation between the

brand, the trademark, and their products or services.

The purpose of the Lanham Act

is rooted in the fundamentals of trademark law, which is to protect consumers from

deception and brands from the misappropriation of their names.

Bringing a claim of trademark infringement or false advertising under the Act

require the plaintiff to demonstrate that the defendant is using an owned mark in

commerce without the plaintiff’s consent.

Section 32(1)(a) of the Lanham Act

generally imposes civil liability on any person or brand who uses any counterfeit or

copy of a registered mark in connection with a sale or distribution of any good or

services without the permission of the trademark owner.

A critical component for

such liability is the high likelihood that the use will cause confusion or mistake for

consumers.

Courts make two inquiries when analyzing a trademark infringement claim under

section 32(1) of the Lanham Act.

First, whether the mark “merits protection.”

And

again, whether the allegedly infringing use of the mark will likely cause consumer

confusion.

Similarly, the primary purpose in creating section 43(a) of the Lanham Act is to

prevent consumer confusion concerning the source of their product.

The standards

MCCARTHY ON TRADEMARKS, supra note 14, § 27:10.

GILSON ON TRADEMARKS, supra note 13, § 5.01; see also Robert A. Mikos, Unauthorized and

Unwise: the Lawful Use Requirement in Trademark Law, 75 VAND. L. REV. 161, 163 (forthcoming Jan.

2022).

Id.

GILSON ON TRADEMARKS, supra note 13, § 5:01; see also MCCARTHY ON TRADEMARKS supra

note 14, § 23:8.

The Lanham (Trademark) Act of 1946, 15 U.S.C. § 1114 (imposing civil liability on, “[a]ny

person who shall, without the consent of the registrant— (a) use in commerce any reproduction,

counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering

for sale, distribution, or advertising of any goods or services on or in connection with which such

use is likely to cause confusion, or to cause mistake, or to deceive; or (b) reproduce, counterfeit,

copy, or colorably imitate a registered mark and apply such reproduction, counterfeit, copy, or

colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements

intended to be used in commerce upon or in connection with the sale, offering for sale, distribution,

or advertising of goods or services on or in connection with which such use is likely to cause

confusion, or to cause mistake, or to deceive . . .”).

Id.

Chanel, 449 F. Supp. 3d at 435.

Id.

Id.; see also MCCARTHY ON TRADEMARKS, supra note 14, § 23.

Chanel, 449 F. Supp. 3d at 435; GILSON ON TRADEMARKS, supra note 13, § 5.01 (prohibiting

any person from using in commerce, “any word, term, name, symbol or device or any combination

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under sections 32(1) and 43(a) of the Lanham Act are essentially identical.

Under

both, the test for trademark infringement or false advertising relies on the deception

that may result from the alleged infringement.

The tests under the Lanham Act do

not distinguish between particular categories of products or services.

Courts may apply different analyses provided under the Lanham Act in suits

brought by designer brands to stop the sale of counterfeit products by independent

retailers.

However, regardless of the court’s approach, the factors being analyzed are

consistent in such cases.

As consumer trends become more complex with the emergence of secondhand

retailers in the market

, courts must become more liberal in applying the Lanham Act

to such claims brought by designers. In other words, courts must determine how to

adequately use the Lanham Act in suits emerging from the secondhand market.

1. Consumer Confusion Standards & The Role of Consumers

Although brands are subject to the protections of trademark law, in order for a

claim to survive, it is imperative that the alleged trademark infringement or false

advertising brought before the court is deceptive to consumers.

However, contrary to

the goal of the Lanham Act, consumers do not actually have standing to invoke claims

under sections 43(a) or 32.

The consumer protections embodied in the Lanham Act

may only be initiated by the trademark owners themselves.

When a brand brings

about a claim under either section, courts have consistently placed a burden on the

thereof or any false designation of origin, false or misleading description of fact or false or misleading

representation of fact, which is likely to cause confusion ... as to the affiliation, connection or

association of such person with another or the origin, sponsorship or approval of their goods, services

or commercial activities by another person.”).

Id.

See GILSON ON TRADEMARKS, supra note 13, § 3.02.

Gucci America, Inc. v. Duty Free Apparel, 286 F. Supp. 2d 284, 290 (S.D.N.Y. 2003) (discussing

the court’s application of the Lanham Act to find that Duty Free’s sale of counterfeit Gucci products

violated the trademark law, and the court’s decision to grant injunctive relief to stop the sale of

counterfeit products).

See generally Chanel, 449 F. Supp. 3d at 429; see also Chanel v. What Goes Around Comes

Around, 2018 U.S. Dist. LEXIS 158077 (S.D.N.Y. Sept. 14, 2018).

Caylee Phillips, Online: A No-No From Coco: The Contentious Relationship Between Luxury

Brands and Resale Websites, 24 SMU SCI. & TECH. L. REV. 445, 447 (2021) (discussing the growing

popularity of resale websites among younger consumers).

15 U.S.C. §§ 1114, 1125.

MCCARTHY ON TRADEMARKS, supra note 14, § 27 (stating that the congressional goal of the

Lanham Act § 43(a) is to protect consumers from deception and continues to explain that consumers

do not have standing to invoke those protections and it may only be invoked by either a competitor of

the defendant or some other injured commercial entity and discussing the paradoxical relationship

between the Congressional goal and the consumers who fall victim to deception who cannot bring a

claim to court against the defendant company).

Id.

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plaintiff, who is not the consumer, to demonstrate the likelihood of consumer

confusion.

Historically, courts have recognized that the very purpose behind manufacturing

counterfeit goods is to create consumer confusion.

In all other trademark

infringement suits where counterfeit products were not involved, developing a

standard for consumer confusion was necessary to help guide courts when applying

the Lanham Act.

The Second Circuit set out an eight-factor balancing test in Polaroid

Corp. v. Polarad Electronics Corp., providing guidelines for infringements that are

likely to cause confusion.

The eight factors under the Polaroid test include (1) the

strength of the trademarks; (2) the similarities of the trademarks; (3) proximity of the

products and their competitiveness; (4) evidence that the senior user may ‘bridge the

gap’ by developing a product for sale in the market of the alleged infringer’s product;

(5) evidence of actual consumer confusion; (6) evidence that the imitative mark was

adopted in bad faith; (7) quality of products; and (8) the sophistication of consumers in

the relevant market.

Courts may also use the “nominative fair use” factors to analyze

the likelihood of consumer confusion.

In either approach, the court makes clear that no single factor is dispositive,

however, every factor must be analyzed when determining if consumer confusion is

likely.

Where a factor is not relevant to a certain case, the court must explain why.

Despite that, when the very purpose behind manufacturing a counterfeit product is to

deceive the consumer, the Polaroid test becomes obsolete.

Circuit courts have held that using a trademark in a non-confusing way is legal.

The court in Chanel explicitly stated that the Lanham Act “does not prevent one who

trades a branded product from accurately describing it by its brand name.”

Trademark law is limited in that it does not reach sales of authentic goods bearing a

MCCARTHY ON TRADEMARKS, supra note 14, § 23:11 (discussing that the plaintiff has the

burden of proof to demonstrate that the use of its trademark is likely to cause consumer confusion).

Chanel v. Veronique Idea Corp., 795 F. Supp. 2d 262, 267 (S.D.N.Y. 2011); Chanel, 449 F.

Supp. 3d at 421 (explaining that the inherent nature of counterfeit products is to create consumer

confusion, so applying the step-by-step likelihood of consumer confusion analysis is e unnecessary).

MCCARTHY ON TRADEMARKS, supra note 14, § 23:1.50 (discussing that in almost every aspect

of trademark law “likelihood of confusion” is the test of infringement).

Chanel, 449 F. Supp. 3d at 436-37.

Id.

Id. at 437. There are three factors under the “nominative fair use” doctrine that courts use to

guide their analysis of consumer confusion, including; “(1) whether the use of the mark is necessary

to describe both the plaintiff’s ... and defendant’s product or service ...; (2) whether the defendant uses

only so much of the plaintiff’s mark as is necessary to identify the product or service; and (3) whether

the defendant did anything that would, in conjunction with the mark, suggest sponsorship or

endorsement by the plaintiff.” Id.

Id.

Veronique Idea Corp., 795 F. Supp. 2d at 267; see also Chanel, 449 F. Supp. 3d at 421

(explaining that the inherent nature of counterfeit products is to create consumer confusion, so

applying the step-by-step likelihood of consumer confusion analysis is not necessary).

See generally New Kids on the Block v. America’s News Pub., Inc., 971 F.2d 302 (9th Cir. 1992);

see also Tiffany Inc. v. eBay, Inc., 600 F.3d 93, 103 (2d

Cir. 2010); see also MCCARTHY ON TRADEMARKS,

supra note 14, § 23:11 (discussing that the use of a brand’s trademark without consent alone is not

illegal).

Chanel, 449 F. Supp. 3d at 435.

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true mark even though the mark owner does not authorize the sales.

However,

secondhand retailers often face trademark infringement claims as counterfeit goods

enter the stream of commerce in the resale market among genuine goods.

Since designers cannot bring a claim against secondhand retailers for the

unauthorized sale of genuine goods, courts must determine how to apply the Lanham

Act when secondhand retailers begin selling counterfeit products to consumers in good

faith.

Courts must broaden their approach by allowing consumers to be plaintiffs in

such trademark infringement suits, as neither secondhand retailers nor designer

brands’ primary objective in such lawsuits is to protect consumers from spending

thousands on counterfeit products.

Trademark law in the secondary market must

afford consumers equal protections similar to those provided to the brands without

deterring the expansion of the resale market.

2. An Overview of Counterfeits and Trademark Law

Counterfeiting is “the act of producing or selling a product with a sham trademark

that is an intentional and calculated reproduction of the genuine trademark.”

cases involving counterfeit products, courts assume the likelihood of confusion is

present and therefore do not apply the consumer confusion analysis.

Official and

unofficial retailers engaged in the sale of counterfeit goods are consistently held liable

for trademark infringement.

However, those entities that unknowingly transport

counterfeit products are not held directly liable as an infringer.

In the past, the most

common suits involved independent retailers who intentionally sold the counterfeit

product.

Regardless of the consumers awareness of the authenticity of the products,

those retailers were nonetheless held liable for trademark infringement and false

advertising.

As consumer trends evolved and the secondhand e-commerce market began to

expand, the authenticity of luxury goods has become increasingly more important.

Tiffany Inc. v. eBay, Inc., 600 F.3d 93, 103 (2d Cir. 2010); see generally Chanel v. What Goes

Around Comes Around, 2018 U.S. Dist. LEXIS 158077 (S.D.N.Y. Sept. 14, 2018).

Louise Nash, Gina Vetere, & Mark Young, Responding to the Hidden Threat: How Luxury

Brands are Fighting Back Against Counterfeiting, WORLD TRADEMARK REVIEW (Mar. 2014),

https://www.cov.com/~/media/files/corporate/publications/2014/02/responding_to_the_hidden_threat_

how_luxury_brands_are_fighting_back_against_counterfeiting.pdf.

Id.

Akriti, Chanel v. The RealReal: Luxury Meets Resale, MIKELEGAL (July 6, 2022)

https://blog.mikelegal.com/ip-litigation/chanel-v-the-realreal-luxury-meets-resale/ (discussing that

Chanel is attempting to take away The RealReal and other secondary retailers’ rights to sell their

products).

Nash, supra note 55.

MCCARTHY ON TRADEMARKS, supra note 14, § 25:10.

See supra text accompanying note 14, § 25:15.50.

See supra text accompanying note 14, § 25:27.

See supra text accompanying note 14, § 25:27.50.

Gucci Am., Inc, v. Duty Free Apparel, 277 F. Supp. 2d 284, 285 (S.D.N.Y. 2003) (discussing

that Defendant, Duty Free Apparel intentionally infringed Gucci’s trademarks by selling counterfeit

products with Gucci logos).

Id. at 290.

See discussion infra note 76.

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Secondhand retailers like The RealReal have invested in technology and processes for

authentic luxury goods to allow consumers to buy and sell their designer items.

the recent cases involving Chanel, issues arise where the secondhand retailer acts in

good faith and unknowingly sells a counterfeit product to a customer through its

respective platform.

Courts must determine how to approach the complex issue

involving counterfeit products, which are inherently infringing, and secondhand

retailers who act in good faith.

In other words, courts must determine how to

adequately apply the Lanham Act in suits emerging from the modernistic secondary

market.

B. The Expanding Secondhand Market & Growing Need to Protect Consumers

The resale of designer products has grown exponentially in recent years as

consumers have realized the potential value of their products.

Regular consumers

began tapping into the secondhand market, accelerating the demand for resale

products.

Vintage couture pieces previously confined to local confinement shops have

become largely accessible to the global population.

The increased demand for vintage

and pre-owned goods has created a new and growing market for fashion resale.

According to the Boston Consulting Group, secondary fashion sales currently generate

nearly $40 billion annually, with a projected annual growth of 10 to 15 percent in the

next decade.

Because of the widespread interest in the secondhand market, a focus

on building consumer trust and protecting consumers from purchasing unauthentic

goods has become increasingly important.

Secondhand retailers operate differently from primary retailers in how they

source, market, and sell their products.

Secondhand retailers rely on consumers,

The RealReal Inc., Prospectus (Form S-1) (May 31, 2019) (explaining the multi-point

authentication process by highly skilled and trained professionals).

See generally Chanel, 449 F. Supp. 3d at 421; see also WGACA, 28 U.S. Dist. LEXIS at *4.

Akriti, supra note 53.

Solomon, supra note 5; see also Leeann Duggan, In the Case of Chanel “Investment” Actually

Means Investment, REFINERY29 (Nov. 7, 2014), https://www.refinery29.com/en-us/chanel-bags-

investing.

See Duggan, supra note 70; See also Abigail Southan, Vintage Chanel bags – the ultimate guide

to buying secondhand, HARPER’S BAZAAR (Aug. 26, 2022),

https://www.harpersbazaar.com/uk/fashion/what-to-wear/a40906821/vintage-chanel-bag/ (discussing

the growing secondhand market as consumers have become more concerned with sustainability).

Samantha Woodworth, Top 10 Best Designer Resale Sites to Buy Second-Hand Luxury Online,

LUXE DIGITAL (Aug. 13, 2022), https://luxe.digital/lifestyle/style/best-luxury-resale-websites/.

TFL, The Secondary Market Watch: A Running Timeline of Resale Investments and M&A, THE

FASHION LAW (Sept. 20, 2022), https://www.thefashionlaw.com/the-resale-market-watch-a-running-

list-of-funding-and-ma/.

Id.

Bella Webb, Where Fashion Resale is Headed in the Next Two Years, VOGUE BUS. (Mar. 31,

2022), https://www.voguebusiness.com/sustainability/where-fashion-resale-is-headed-in-the-next-

two-years-vestiaire-kering-balenciaga.

Pamela N. Danzinger, Battle of Luxury Resale Business Models: The RealReal Vs. Reflaunt,

FORBES (Oct. 7, 2022), https://www.forbes.com/sites/pamdanziger/2022/10/07/battle-of-luxury-resale-

business-models-the-realreal-vs-reflaunts-resale-as-a-service/?sh=6452b5194f37 (explaining the

various business models secondhand retailers, such as The RealReal and Reflaunt, use for buying and

selling products).

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whereas primary retailers rely on manufacturers or designers to stock their stores.

Essentially, secondhand retailers are the in-between for consumer-to-consumer

sales.

The secondhand marketplace has long existed; however, the online secondhand

retailers who primarily focus on valuable pieces worth thousands are relatively new.

The RealReal, StockX, The Outnet, Rebag, Vestiarie Collective, and Grailed are a few

of the largest secondhand retailers of designer and luxury products, none of which

existed ten years ago.

These secondhand retailers understand their sophisticated

consumers, and as a result focus on authenticity as their selling point through their

respective platforms.

Some luxury designers even started working directly with

official secondhand retailers to preserve the resale market and protect their consumers

and the value of their brands.

However, the select few designers are outweighed by

the range of issues the resale market has created between the consumers, the brands,

and the secondhand retailers.

Brands like Nike and Chanel have become increasingly

adamant about ensuring that only their authentic products are sold on secondhand

retailers' sites.

In addition to the growing consumer interest, technological advancements play a

critical role in the accessibility of luxury consignments online.

Consequently,

however, these technological advancements have also created a thriving market for

counterfeit manufacturers.

It has become progressively more challenging to

differentiate counterfeit products from authentic products without the support of

designer brand specialists.

Unsurprisingly, over 95 percent of shoppers cited the

importance of authentication when purchasing pre-owned designer pieces.

Like other

designer brands, Chanel seeks to ensure that products which are sold bearing its

trademarks are genuine and authentic.

Every year, Chanel seizes thousands of

websites, e-commerce marketplaces, and other platforms selling or supporting the

sales of counterfeit Chanel products.

On its website, Chanel clearly noted that

Pamela Danzinger, Luxury Resale Market is on Fire and The RealReal Lit The Fuse, FORBES

(Feb. 5, 2022), https://www.forbes.com/sites/pamdanziger/2022/02/05/luxury-resale-is-on-fire-and--

therealreal-lit-the-fuse/?sh=64c9a6c213c1.

Id.

See generally id.

Woodworth, supra note 67.

Danzinger, supra note 72.

Emily Farra, What Does Kering’s Deal with Vestiaire Collective Mean for Secondhand Fashion

– And the Entire Industry, VOGUE (Mar. 9, 2021), https://www.vogue.com/article/kering-vestiaire-

collective-resale-secondhand-fashion-industry-future.

Emilia Petrarca, The RealReal Is a Total Mess And I Can’t Quit It, THE CUT (Aug. 30, 2022),

https://www.thecut.com/2022/08/the-realreal-review-mess.html.

Blake Brittain, Nike Ramps Up Sneaker NFT Lawsuit with StockX Counterfeiting Claim,

REUTERS (May 11, 2022), https://www.reuters.com/legal/legalindustry/nike-ramps-up-sneaker-nft-

lawsuit-with-stockx-counterfeiting-claim-2022-05-11/.

Vogue Bus., supra note 8.

Id.

Nash, Vetere, & Young, supra note 55.

Vogue Bus., supra note 8.

Chanel, Chanel is Very Committed to Fighting Against Counterfeits, CHANEL,

https://www.chanel.com/au/anti-counterfeit/ (last visited Mar. 14, 2023).

Id.

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guaranteed authentic products are only being sold through its boutiques or authorized

retailers.

The overlap between consumer protection, brand authenticity, and growth of the

secondhand market must be protected by the courts as consumer buying and selling

trends evolve.

III. THE CASE

A. The Facts of the Case

Chanel is a French luxury fashion company founded in 1910 by Gabrielle (or

“Coco”) Chanel.

Chanel is currently based out of New York, New York, and sells

luxury fashion goods worldwide through its retail stores and carefully selected high-

end specialty stores including Neiman Marcus, Saks Fifth Avenue, Barneys, and

Nordstrom.

Chanel product include “bags, shoes, clothing, jewelry, sunglasses,

accessories, and beauty products.”

Chanel owns the rights to several Chanel and

“CC” monogram trademarks that have become associated with its products and luxury

designs.

The RealReal is a California-based retailer founded in 2011 by Julie Wainwright.

Wainwright established The RealReal as an online e-commerce site for pre-owned

luxury and high-end designer goods.

The RealReal specializes in luxury consignment

by creating a strict and lengthy process to ensure counterfeit products are not sold on

its platform.

Customers can purchase and consign used luxury goods through its

website or in its stores.

In 2018, The RealReal acknowledged that Chanel was one of the most popular

brands bought and sold through consignment.

Around the same time, Chanel

conducted an investigation into the products being sold through The RealReal.

Subsequently, Chanel discovered at least seven counterfeit Chanel handbags that were

advertised as genuine and authentic through The RealReal’s marketing efforts.

The

inauthentic bags were of different quality from Chanel’s genuine products.

Some

Id.

Chanel, The History, CHANEL, https://www.chanel.com/us/about-chanel/the-history/1910/ (last

visited on Dec. 17, 2022).

Chanel v. The RealReal, 449 F. Supp. 3d 422, 428 (S.D.N.Y. 2020).

Id.

BOF, Julie Wainwright, BUSINESS OF FASHION,

https://www.businessoffashion.com/community/people/julie-wainwright (last visited on Sept. 25,

2022).

Id.

See BOF, supra note 91; Chanel, 449 F. Supp. 3d at 428.

Chanel, 449 F. Supp. 3d at 428.

Id. at 430.

Id.

Id. at 432.

Id.

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349

even contained carte d’authenticite

with serial numbers that did not correspond with

the serial number of Chanel’s genuine handbags.

100

In June 2018, Chanel brought its discoveries to The RealReal.

101

Although

Chanel put The RealReal on notice, The RealReal failed to stop the sale of the

counterfeit products.

102

Instead, The RealReal removed the serial numbers that

indicated the products lack of authenticity.

103

B. The Procedural History

On November 14, 2018, Chanel filed a complaint against The RealReal for its

failure to address the counterfeit products discovered in Chanel’s investigation.

104

its complaint, Chanel included six accompanying exhibits.

105

The complaint also

referenced two customer reviews from The RealReal’s site complaining of the

counterfeit Chanel products being sold through The RealReal.

106

Chanel alleged that despite The RealReal’s authentication process, their

authentication experts did not have the proper qualifications necessary to authenticate

Chanel products.

107

Chanel sued, alleging claims of trademark infringement, counterfeiting, false

endorsement, unfair competition, and false advertising under Sections 31(1) and 42(a)

of the Lanham Act, 15 U.S.C. §§ 1114(1) and 1125(a), and other claims under New

York state common and statutory law.

108

Chanel sought to prevent The RealReal from

“(i) continuing to mislead consumers into believing that The RealReal has an affiliation

or association with Chanel and/or that Chanel has approved of or authenticated the

secondhand and counterfeit items being sold by The RealReal, and (ii) continuing to

sell counterfeit Chanel products.”

109

C. The Court’s Decision

The United States District Court for the Southern District of New York granted

The RealReal’s motion to dismiss Chanel’s claim of trademark infringement, false

endorsement, or unfair competition under 15 U.S.C § 1114(1) or 15 U.S.C

§ 1125(a)(1)(A) based on The RealReal’s use of genuine Chanel Trademarks.

110

The

court held that Chanel had not sufficiently alleged facts supporting its infringement,

See How to Authenticate Chanel Bags, STYLISHTOP (Sept. 12, 2020),

https://www.stylishtop.com.au/blogs/authenticate/how-to-authenticate-chanel-bags (explaining that

the carte d’authenticite is the official certificate of authenticity provided by Chanel when purchasing

one of their products from an official retailer).

100

Chanel, 449 F. Supp. 3d at 432.

101

Id. at 433.

102

Id.

103

Id.

104

Id. 434.

105

Chanel, 499 F. Supp. 3d at 434.

106

Id.

107

See id.

108

Id.

109

Id.

110

Chanel, 499 F. Supp. 3d at 438.

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350

false endorsement, or unfair competition claims for The RealReal’s use of genuine

Chanel trademarks.

111

The court reasoned that Chanel had failed to demonstrate that

the dispute involved injury to the public interest over and above ordinary trademark

infringement.

112

However, the court denied The RealReal’s motion to dismiss Chanel’s complaint

alleging trademark infringement and false advertising based on The RealReal’s use

and sale of counterfeit products and their advertisements.

113

The court found sufficient

evidence established by Chanel to allege a claim for trademark infringement based on

The RealReal’s sale of counterfeit products.

114

IV. DISCUSSION

This section analyzes the court’s application of the Lanham Act that led to its

holding and argues that the judicial system should consider taking a consumer’s

approach when applying the tests under the Act.

115

In supporting such an argument,

this section demonstrates the courts’ role in nurturing the relationships between

brands and secondhand retailers by centering its analyses on victim consumers.

Additionally, it will establish the necessity for brands and secondhand retailers to

work together to protect consumers from counterfeit items and false advertising of

products.

116

A. The Current Approach (of the Lanham Act)

1. The RealReal’s Advertisements Using the Chanel Trademarks

The court’s decision to dismiss Chanel’s first claim based on advertisements using

their trademark is no surprise.

117

The court’s determination that Chanel failed to

provide sufficient evidence showing The RealReal’s usage injured the public interest

disregards the victim consumers who purchased the counterfeit Chanel bags under the

belief that these products were genuine.

118

Customers shopping at The RealReal for

Chanel or Hermes bags are, in some regard, collectors of designer products.

119

The

111

Id.

112

Id.

113

Id. at 449.

114

Id.

115

See Chanel v. The RealReal, 449 F. Supp. 3d 422, 438 (S.D.N.Y. 2020).

116

Webb, supra note 70 (discussing the designer companies like Isabel Marant, Gucci, and

Kering have begun signaling interest in this new sector of the luxury market and explains the

essential need to build consumer trust as this market exponentially grows).

117

Chanel, 449 F. Supp. 3d at 448.

118

Id. at 439; International Information Systems v. Security University LLC, 823 F.3d 153, 156

(2d Cir. 2016) (explaining that Chanel has not plausibly alleged facts suggesting that The RealReal

“stepped over the line” into a likelihood of confusion by using it’s marks too prominently or too

often, in terms of size, emphasis, or repetition).

119

Danzinger, supra note 72.

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sophisticated consumers purchasing bags worth thousands of dollars are particular

about the retailers from which they source their collections.

120

The RealReal’s use of Chanel, along with other designers, trademarks in their

advertisements paired with the guaranteed and detailed authentication process, leads

the average consumer to believe the item being purchased is genuine.

121

The RealReal

has acknowledged the popularity of Chanel products among its consumers.

122

The

RealReal’s use of Chanel trademarks intentionally portrays that the designer products

being sold are genuine and authentic.

123

2. The Predictable Decision on Chanel’s Claims

The court’s decision to deny The RealReal’s motion to dismiss the trademark

infringement and false advertisement claim based on the sale of counterfeit Chanel

bags is consistent with the congressional goals under the Lanham Act for trademark

owners.

124

In other words, the court’s decision offered the bare minimum protections

to Chanel and consumers with its application when applying the Lanham Act.

125

The RealReal advertises that the goods sold through their platform are authentic

and genuine.

126

This is inconsistent with their course of action, including the sale of

seven counterfeit Chanel bags.

127

Accordingly, the court’s denial of The RealReal’s

motion to dismiss is appropriate as it affirms the congressional protections guaranteed

to trademark owners under the Lanham Act.

128

3. The Impact of the Court’s Decision

The holding in Chanel v. The RealReal will not influence courts’ analyses of

trademark infringement and false advertising claims because of the consistent

application of the tests under the Lanham Act.

129

However, the secondary effects of the

120

Southan, supra note 66.

121

See generally Chanel v. The RealReal, 449 F. Supp. 3d 422 (S.D.N.Y. 2020); see also Chanel

v. What Goes Around Comes Around, 2018 U.S. Dist. LEXIS 158077 (S.D.N.Y. Sept. 14, 2018).

122

Chanel, 449 F. Supp. 3d at 430 (asserting that Chanel was one of the most popular brands

bought and sold through consignment).

123

Id. at 438.

124

Chanel, 449 F. Supp. 3d at 445; see also MCCARTHY ON TRADEMARKS, supra note 14, § 27:9

(explaining that the Lanham Act was enacted to prohibit unfair competition and false advertising).

125

Chanel, at 449 (explaining the purpose of the Lanham Act stems from the fundamentals of

trademark law which is to protect consumers from deception and protect companies from

misappropriation of their brand name).

126

Id. at 430 (discussing that The RealReal’s represents its platform as, “the world’s largest

online marketplace for authenticated, consigned luxury goods.”).

127

Id. (“Through The RealReal’s website and in its stores, customers can purchase and consign

used luxury goods pursuant to [RealReal’s] Terms of Service and Consignment Terms.”).

128

Id. at 449. See also 15 U.S.C. §§ 1114, 1125 (2022). The purposes of the Lanham Act stems

from the fundamentals of trademark law which is to protect consumers from deception and protect

companies from misappropriation of their brand name. Id.

129

Id. at 436-37; see also Polariod, 287 F.2d at 497 (explaining that courts will use the eight-

factor balancing test and the nominative fair use factors to determine whether an alleged

infringement is likely to cause confusion).

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stagnant approach may discourage secondhand retailers from growing or expanding

their platforms.

130

Additionally, the rationale provided by the court will encourage

designers to become hypercritical of the products that exist in the resale market.

131

The reason provided by the court enables designers to bring claims against these

secondhand retailers.

132

Instead of supporting and investing in secondhand retailers,

designers will work to restrict and control the resale market by bringing claims under

the Lanham Act.

133

In 2018, Chanel filed a similar claim against the secondhand retailer What Goes

Around Comes Around ("WGACA"), for using Chanel trademarks in its advertisements

after selling counterfeit products.

134

In that case, when the court denied WGACA's

motion to dismiss Chanel's false advertising and trademark infringement claims, it

relied on the inconsistency of the authentication terms used by WGACA.

135

The

material difference between Chanel v. WGACA and Chanel v. The RealReal is a letter

of guaranteed authenticity included with every purchase made through WGACA.

136

However, the court's application of the Lanham Act is the same in both cases in that

it focuses on protecting the Chanel trademark.

137

Regardless of the specific claim

brought, the court's focus when analyzing trademark infringement claims is to protect

the designer’s brand integrity when the focus should shift to preventing future

consumers from investing thousands in counterfeit designer bags from secondary

retailers who are selling products legally.

138

Although the reported number of buyers

130

Webb, supra note 70 (discussing that the resale market will grow 10-15% within the next

decade, with online platforms holding nearly 30% of the market).

131

See generally Chanel v. The RealReal, 449 F. Supp. 3d 422 (S.D.N.Y. 2020); see also Chanel

v. What Goes Around Comes Around, 2018 U.S. Dist. LEXIS 158077 (S.D.N.Y. Sept. 14, 2018); see

also Hilary Milnes, The Tricky Relationship between Luxury and Resale, GLOSSY (May 20, 2016)

https://www.glossy.co/evolution-of-luxury/the-complicated-relationship-between-luxury-brands-and-

resale-sites/ (“brands might not like us because maybe they’re not at all comfortable with their product

being sold online.”).

132

See id.

133

See id.

134

See What Goes Around Comes Around, 2018 U.S. Dist. LEXIS 158077 at *2.

135

Id. at *7 (explaining that Defendant, What Goes Around Comes Around used Plaintiff,

Chanel’s, mark too prominently and too often considering the size and emphasis making it likely to

cause consumer confusion).

136

Id. at *3-*4. What Goes Around Comes Around’s website contains a section regarding the

authenticity guarantees stating “any piece purchased at What Goes Around Comes Around or one of

our retail partners has been carefully selected, inspected and is guaranteed authentic,” and provides

letters of authenticity to its customers which reads, “This letter confirms that item Q6HCHK00KB000

Chanel Black Long Tissue Box is an authentic Chanel Decoration.” Id.

137

See generally What Goes Around Comes Around, 2018 U.S. Dist. LEXIS 158077 at *3-*4; see

also Chanel, 449 F. Supp. 3d at 422. The courts in trademark infringement brought by Chanel focused

heavily on how the use of the trademark will affect the Chanel brand instead of shifting its focus to

the consumers who purchased the counterfeit products. Id. The Lanham Act is heavily focused on

protecting the average consumer therefore courts should consider the plaintiff, Chanel, as a

representation of their customers. See generally Id.

138

MCCARTHY ON TRADEMARKS, supra note 14, § 25 (explaining the paradox that consumers do

not have standing to invoke the protections of Lanham Act § 43(a) even though the goal of the Lanham

Act is to protect consumers from deception caused by trademark infringements and false advertising);

see also TFL, supra note 74; Kagan, supra note 7 (discussing the increase in prices for a Chanel

Medium Classic Flap bag from $1,150 to $7,800 between 1990 to July 2021, respectively and then

again in November 2021 to $8,800).

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353

in Chanel v. The RealReal are few

139

, the court is obligated to centralize its analysis on

the degree of confusion and the type of buyers confused.

140

Trademark law does not prevent the sale of genuine goods bearing a true mark

even when the sale is not authorized by the mark owner.

141

However, the court's

approach to Chanel's claims makes it so that Chanel may bring a suit every time a

secondhand retailer unintentionally sells a counterfeit Chanel product.

142

Consequently, discouraging the retailers from even selling Chanel products through

their platforms.

143

Courts must consider evolving their approach when analyzing violations of the

Lanham Act in the secondhand market. A progressive approach is needed to make a

genuine impact in the modern form of trademark violation claims and ultimately

influence the relationship between designer brands and the secondhand market

overall.

144

B. Expanding the Application of the Lanham Act to Protect Consumers

The complexity of the secondhand market and the issues that arise from this

market require courts to develop a more dynamic approach when facing trademark

infringement and false advertisement claims brought under section 43(a) of the

Lanham Act.

145

In the interest of public policy, trademark laws should be applied to

protect consumers over and above the preexisting minimum protection for brands.

146

The Lanham Act was developed without limits on the ways it may evolve throughout

the years as consumer trends and commerce evolve.

147

In the early stages of the Act,

139

Chanel v. The RealReal, 449 F. Supp. 3d at 433. Chanel’s complaint alleges that an

investigation conducted by Chanel found at least seven counterfeit Chanel bags advertised as genuine

by The RealReal. Id.

140

MCCARTHY ON TRADEMARKS, supra note 14, § 23:2 (discussing that the measurement of the

extent of likely confusion is not exact, but instead a calculated estimate with more emphasis on the

type of persons confused and the degree of their confusion).

141

Tiffany Co. Inc. v. eBay, Inc., 600 F.3d 93, 103 (2d Cir. 2010).

142

See generally Chanel, 449 F. Supp. 3d at 422; see also Chanel v. What Goes Around Comes

Around, 2018 U.S. Dist. LEXIS 158077 (S.D.N.Y. Sept. 14, 2018); see also Milnes, supra note 137

(“brands might not like us because maybe they’re not at all comfortable with their product being sold

online”).

143

Id.

144

MCCARTHY ON TRADEMARKS, supra note 14, § 27:7 (explaining the drafters of § 43(a) of the

Lanham Act drafted it with only a vague perception of the expansive possibilities).

145

Id.

146

15 U.S.C. § 1114(1) (“imposes civil liability on any person who – without the consent of the

“registrant” uses in commerce any reproduction, counterfeit, copy or colorable imitation of a registered

mark.”); 15 U.S.C. § 1125(a) (“[prohibits] any person from using in commerce, in connection with any

goods any words, term, name, symbol . . . or any false designation of origin, false or misleading

description of fact . . . or misleading representation of fact which is likely to cause confusion or to cause

mistake.”).

147

MCCARTHY ON TRADEMARKS, supra note 14, § 27:7 (explaining the expansive possibilities of

Lanham Act § 43(a)).

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354

the federal government and courts began to expand the meanings and protections

under section 43(a).

148

The court appropriately applied the nominative fair use doctrine in discussing The

RealReal’s use of Chanel’s trademarks.

149

However, it failed to apply the doctrine from

the perspective of the consumer.

150

Courts have previously made clear that the use of

a brand’s trademark by another to sell that brand’s good or service is legal only if it is

in a non-confusing way.

151

The RealReal did not infringe on Chanel’s trademark rights

by using the “CC” monogram.

152

However, the court failed to consider that the use of

the “CC” trademark paired with advertisements guaranteeing the authenticity of

products is likely intended to create an illusion of sponsorship or endorsement between

The RealReal and the designers.

153

In order to determine whether an advertisement will create confusion of

partnership, the court must evolve in its approach of the Lanham Act to protect the

consumers from deception in the secondhand market.

154

The consumer confusion factor

should be applied more liberally and hold greater weight in the decisions made by

courts to impact the Lanham Act in the online resale market.

155

This is especially

important in cases involving unintentional sales of counterfeit products where the

trademark infringement overlaps with the false advertisements.

156

C. Consumer Trust in a Growing Resale Market

As courts begin to implement the broader protections of the Lanham Act to

consumers, trust and reliance on the secondhand market will naturally develop.

157

Consumer trust is vital in the resale market.

158

Shoppers must confidently know that

the designer products they are purchasing are genuine.

159

This is especially true when

the secondhand retailer focuses its advertisements on guaranteed authentication.

160

148

See supra text accompanying note 14, § 11 (explaining the amendments made to the Lanham

Act since 2000, most recently in 2020). The Trademark Modernization Act created new procedures in

the U.S.P.T.O. to challenge registrations based on false claims that a mark has been used in commerce

before as a result of the “flood of falsified applications for trademark registration.” Id. The Act eases

the burden of obtaining an injunction against infringement. Id.

149

See generally Chanel v. The RealReal, 449 F. Supp. 3d 437 (S.D.N.Y. 2020).

150

Id.

151

MCCARTHY ON TRADEMARKS, supra note 14, at § 23:11.

152

Chanel, 449 F. Supp. 3d at 429.

153

Id.

154

MCCARTHY ON TRADEMARKS, supra note 14, § 2:22 (discussing how trademark laws should

be applied broadly by courts to protect consumers).

155

Id.

156

Chanel v. Veronique Idea Corp., 795 F. Supp. 2d 262, 267 (S.D.N.Y. 2011); Chanel, 449 F.

Supp. 3d at 421.

157

Webb, supra note 70.

158

Id.

159

Id.; See also Mikos, supra note 20, at 163.

160

MCCARTHY ON TRADEMARKS, supra note 14, § 25. The intent of the federal government with

the enactment and continuous amendment of the Lanham Act § 43(a) is to protect consumers from

deception that may be caused by both trademark infringements and false advertisement. Id.

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For designers like Chanel, Prada, Bottega, and others, an active and healthy

resale market encourages more customers to buy products at retail prices.

161

majority of consumers are more likely to purchase classic pieces from designer brands

for thousands if they know that the item will not lose its value.

162

Consumers are also

more willing to spend a little more using that same logic.

163

Classic designer bags are

viewed as investment pieces that can be resold at or more than the retail price or

collected.

164

Luxury brands primarily create timeless and classic pieces focusing on the

quality and style of their products.

165

The long-lasting styles and potential for growth

in value are essential in a consumer's decision to invest thousands of dollars in these

designer pieces.

166

A recent trend in the sale of designer goods is its contingency on demand within

the secondhand market.

167

The success and viability of the secondhand market depend

on the consumer's trust that the products they buy are genuine.

168

When looking at

how the three parties; the designer brand, the secondhand retailer, and the consumer,

intermingle, it is evident that each relies on the other.

169

Designer brands and

secondhand retailers must learn to co-exist to protect consumers from being misled or

purchasing a counterfeit good.

170

Designer companies like Kering

171

see the value in

nurturing such a relationship with secondhand retailers and have become heavy

investors in specific resellers.

172

Consumer trends and societal changes require the judicial system to adapt as

the brands themselves have adapted as well.

173

The Lanham Act must continuously

evolve as new issues and complexities arise.

174

The relationship between brands and secondhand retailers may be encouraged

by a judicial emphasis on protecting consumers in trademark infringement claims in

this new and evolving market.

175

Courts must consider the victim consumer who does

161

Wetzbarger, supra note 9.

162

Id. Tradeasy CEO, Tracy DiNunzio, noticed consumer patterns in the resale market

translates to the retail market. Id. She states, “when a customer knows she can resell her item, she’s

going to be willing to pay a little more for it.” Id.

163

Id.

164

Id.; Kagan, supra note 7 (discussing the investment return of a Chanel bag and the potential

of future premium charges on Chanel bags within the resale market).

165

Vogue Bus., supra note 8.

166

Id.

167

Farra, supra note 82.

168

Id.; See also Webb, supra note 70 (discussing the essential need to build consumer trust

within the online secondhand market as this market exponentially grows).

169

Wetzbarger, supra note 9 (explaining how consumers are more likely to purchase luxury

pieces when they are perceived as investment pieces that will grow in value and have the potential

for resale in the future).

170

Id.

171

Farra, supra note 83 (discussing Kering’s investment in secondhand retailer, Vestiaire, to

guarantee that all goods sold secondhand through its platform are authentic and genuine).

172

Id.; See also Wetzbarger, supra note 9.

173

Id.

174

MCCARTHY ON TRADEMARKS, supra note 14, § 11 (explaining that the Lanham Act was

created to adapt to consumer and market trends and the various amendments made between 2000

and 2020).

175

MCCARTHY ON TRADEMARKS, supra note 14, § 27:7 (explaining the expansive possibilities of

the Lanham Act § 43(a)).

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not have legal standing to bring about a claim of trademark infringement or false

advertising when determining the injury resulting from the claim.

176

In other words, a

customer who purchased a counterfeit vintage Chanel bag from The RealReal for

$15,000

177

with the belief that it is real and genuine must play a critical role in the

court's analysis of the trademark infringement and false advertising claim.

178

When the court's reasoning begins to truly incorporate the interests of consumers

and the expansion of the secondhand market, more designer brands will assist

secondhand retailers in their authentication processes.

179

Accordingly, designer

brands and fashion resellers should work together to guarantee the authenticity of the

products in the market to build and retain consumer trust in the secondhand

market.

180

V. CONCLUSION

The role of the judicial system is instrumental in encouraging designer brands

and secondhand retailers to work together to protect consumers from purchasing

counterfeit products. The court in Chanel v. The RealReal should have analyzed the

tests under the Lanham Act for claims of trademark infringement and false

advertisement from the perspective of a consumer.

181

When courts begin to strongly

consider consumers and market trends in its analysis, designer brands will become

more willing to assist secondhand retailers to authenticate their products.

The Lanham Act was developed as a segment of trademark law to specifically

address trademarks that cause confusion in the commerce of a product or service.

182

The court in Chanel v. The RealReal and similar prior cases relied on the Lanham Act

to guide its analysis and discussion on the defendant’s use of the trademark.

183

The

element that is determinative of trademark infringement and false advertising claims

is the likelihood and extent of consumer confusion.

184

However, consumers lack

176

Wetzbarger, supra note 9 (explaining that victims of fraud often keep silent when they

purchase something and do not get what was advertised).

177

Kagan, supra note 7 (discussing that Chanel bags increase in value); see also Duggan, supra

note 79 (discusses that rare vintage Chanel bags can go for more than $10,000 in the resale market).

178

MCCARTHY ON TRADEMARKS, supra note 14, § 25 (explaining the paradox that consumers do

not have standing to invoke the protections of Lanham Act § 43(a) even though the goal of the Lanham

Act is to protect consumer from deception caused by trademark infringements and false advertising).

179

Webb, supra note 70 (discussing the designer companies like Isabel Marant, Gucci, and

Kering that have begun signaling interest in this new luxury market sector and explain the essential

need to build consumer trust as this market grows exponentially).

180

Id.

181

See generally Chanel v. The RealReal, 449 F. Supp. 3d 422, 435 (S.D.N.Y. 2020) (discussing

the effect of The RealReal’s use of Chanel’s trademarks on the value of Chanel’s brand which

ultimately led the court to its holding).

182

GILSON ON TRADEMARKS, supra note 13, § 5.01; see also MCCARTHY ON TRADEMARKS, supra

note 14, § 23:8 (explaining that the confusion needed for trademark infringement requires confusion

around whether the owner of the mark approved of the use of the trademark).

183

Chanel, 449 F. Supp. 3d at 435; see also Chanel v. What Goes Around Comes Around, 2018

U.S. Dist. LEXIS 158077 (S.D.N.Y. Sept. 14, 2018); see also Tiffany Inc. v. eBay, Inc., 600 F.3d 93, 103

(2d Cir. 2010); see also Chanel v. Veronique Idea Corp., 795 F. Supp. 2d 262, 267 (S.D.N.Y. 2011).

184

GILSON ON TRADEMARKS, supra note 13, § 3:02 (explaining that the tests for trademark

infringement and false advertising claims relies heavily on the likelihood of confusion for consumers).

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357

standing to bring trademark infringement and false advertising claims to courts.

185

has been established that trademark infringement and false advertising suits must be

brought by a trademark owner claiming the infringement.

186

Despite the congressional goal of the Lanham Act

187

, consumers only play a

theoretical role in a court’s analysis and holding.

188

The Polaroid

189

factors used by the

court in Chanel focus on the trademarks used in The RealReal’s advertisements with

little consideration of the misconception a sponsorship may create for consumers.

190

The court has an obligation to protect consumers who fell victim to the counterfeit

products sold through The RealReal as opposed to its focus on the effect of the

trademark usage on Chanel’s brand value.

191

Although the victims are few, the value

and cost of their purchases should not be neglected in the court’s decisions.

192

Consumers rely on the designer brands and secondhand retailers equally to

prevent counterfeit products from entering the market.

193

As a result, claims over

counterfeit products must give weight to consumers lack of standing to bring a claim

under the Lanham Act when counterfeit products do enter the market.

194

When courts

continue to analyze the issue of consumer confusion from the perspective of the

already-protected brand, it indirectly encourages brands to bring such claims into the

court instead of assisting the secondhand retailer with authentication of their

products.

195

Chanel does not currently sell pre-owned or vintage bags although it is one

of the most popular designers being purchased secondhand.

196

Chanel has previously

brought similar claims to the court against other secondhand retailers where the court

185

MCCARTHY ON TRADEMARKS, supra note 14, § 27:8 (explaining that consumers who are

victim of fraud do not have standing in court to bring a claim and often keep silent when they purchase

a counterfeit item); see also Wetzbarger, supra note 9.

186

Id.

187

See MCCARTHY ON TRADEMARKS, supra note 14, § 27:8 (explaining the congressional goal of

the Lanham Act us to protect consumers from deception caused by both trademark infringement and

false advertising); see also 15 U.S.C §§ 1114(1), 1125(a).

188

Chanel, 449 F. Supp. 3d at 438-39.

189

See generally Polaroid, 287 F.2d at 497.

190

See Chanel, 449 F.Supp.3d at 436-37; see also id. at 497 (explaining that courts will use the

eight-factor balancing test and the nominative fair use factors to determine whether an alleged

infringement is likely to cause confusion).

191

Id. at 438 (explaining the court’s analysis of the consumer confusion created by The

RealReal’s use of the Chanel trademarks and reasons that Chanel trademarks are well-known and

recognizable).

192

Id. at 448; see also Southan, supra note 66.

193

Id.

194

Vogue Bus., supra note 8 (explaining that over 95 percent of consumers in the secondhand

market have cited the importance of authentication when purchasing resale items); see also

Danzinger, supra note 72 (explaining that secondhand retailers understand their consumers’ concerns

regarding counterfeit products and therefore use authenticity as a selling point).

195

See Chanel v. What Goes Around Comes Around, 2018 U.S. Dist. LEXIS 158077

(S.D.N.Y. Sept. 14, 2018). In 2018, Chanel brought a similar claim to the court against the secondhand

retailer, What Goes Around Comes Around ("WGACA"), for using Chanel trademarks in their

advertising after selling. Id. at *4.

196

Chanel, 449 F. Supp. 3d at 439 (explaining that in the complaint, Chanel made it clear that

they do not sell secondhand or vintage Chanel goods).

[22.3:340 2023] UIC Review of Intellectual Property

358

ruled in Chanel’s favor for the same reasoning used in Chanel v. The RealReal.

197

Where there is no competition between the designer brand and the secondhand retailer

the courts should encourage a relationship between the two in order to protect the

consumers who do not have standing to bring a claim themselves.

198

In the future,

courts should more closely align their analyses with the objective of the Lanham Act.

199

197

What Goes Around Comes Around, 2018 U.S. Dist. LEXIS at *7. The court held that

secondhand retailer, WGACA, stepped over the line by using Plaintiff, Chanel’s, mark too prominently

or too often in terms of size, emphasis, or reputation making it likely to cause consumer confusion. Id.

at *8.

198

Mikos, supra note 20, at 163 (explaining the purposes of the Lanham Act align with the

fundamentals of trademark law to protect consumers from deception and protect companies from

misappropriation of their brand name).

199

See MCCARTHY ON TRADEMARKS, supra note 14, § 27:8 (discussing the creation of the

Lanham Act § 43(a) was created as a remedial statute that is to be broadly construed by the courts).