Chanel and The RealReal Both Nab Wins in Latest Round of Ongoing Counterfeit Lawsuit

The RealReal and Chanel have each scored a few wins in the highly-watched trademark-centric lawsuit that the famous French brand waged against the resale giant for allegedly selling counterfeit goods, and using the Chanel name to “deceive consumers into falsely believing that [it] has some kind of approval from or an association or affiliation with Chanel [when it doesn’t] or that all CHANEL-branded goods sold by The RealReal (“TRR”) are authentic.” In response to the motion to dismiss that the San Francisco-based resale site filed last year, a New York federal court has agreed to toss out a number of Chanel’s claims, while enabling three to remain intact.
On Monday, Judge Vernon Broderick of the U.S. District Court for the Southern District of New York granted TRR’s motion to dismiss in part, agreeing to toss out Chanel’s claims of trademark infringement, and false endorsement and unfair competition, as well as the Paris-based brand’s claims under New York State General Business Law on that basis that TRR’s “use of Chanel’s genuine trademarks is not likely to cause customer confusion, and because Chanel has not adequately alleged injury to the public at large.”
At the same time, the judge refused to dismiss Chanel’s trademark counterfeiting/infringement and false advertising claims, and similarly kept its common law unfair competition claim in play, as well because Chanel “adequately alleges that TRR marketed and sold counterfeit Chanel products, and because [TRR’s] advertising regarding the authenticity of the products it sells is literally false.”
In the recently-released opinion and order, Judge Broderick looks first to Chanel’s claims of trademark infringement, false endorsement and unfair competition, which he says Chanel “does not plausibly allege … based on [TTR’s] use of genuine Chanel trademarks” in connection with its sale of authentic Chanel products, as the Lanham Act – the federal statute that governs trademarks and unfair competition – “does not prevent one who trades a branded product from accurately describing it by its brand name, so long as the trader does not create confusion by implying an affiliation with the owner of the product.”
Here, Judge Broderick asserts that Chanel fails to successfully make its claims because it is “highly unlikely that a customer buying a secondhand Chanel product from [TRR]—which unambiguously holds itself out as consignment retailer in a luxury market— would confuse the nature of [TRR’s] business, the source of its products, or its affiliation—or lack thereof—with Chanel.”
To be exact, the judge points to the following factors as examples of why consumers are not likely to be confused about the source of the goods in question or be misled into believing there is an affiliation between TRR and Chanel given TRR’s use of Chanel’s trademarks: 1) “Chanel’s trademarks are incredibly well-known, recognizable, and prevalent in the luxury fashion market;” 2) “As Chanel makes clear in [its complaint], [it] does not sell secondhand or vintage Chanel goods, and in that sense, [TRR] does not directly compete with Chanel;” 3) “Chanel has identified no evidence of actual customer confusion, or that [TRR] has adopted the genuine Chanel trademarks in bad faith;” and 4) “the luxury fashion market is a relatively sophisticated market that … commands top-dollar prices.”
The judge similarly states that “Chanel has not plausibly alleged facts suggesting that [TRR] ‘stepped over the line into a likelihood of confusion by using [Chanel’s] mark[s] too prominently or too often, in terms of size, emphasis, or repetition,” and thereby, diminishing the merits of a nominative fair use defense. “Chanel has identified no facts suggesting that The RealReal displays Chanel-branded goods ‘more prominently than other luxury-brand goods,’” Broderick asserts, and “has offered no non-conclusory allegations to suggest that [TRR] inaccurately depicts its relationship with Chanel or Chanel’s products and services.”
This is particularly true, according to the court, given the disclosure on TRR’s website that “[b]rands identified on [its website] are not involved in the authentication of the products being sold, and none of the brands sold assumes any responsibility for any products purchased from or through the website,” and that “[b]rands sold on the [website] are not partnered or affiliated with [TRR] in any manner.”
With those claims out of the way, Judge Broderick states that Chanel does, in fact, “plead sufficient facts to plausibly allege a cause of action for trademark infringement based on [TRR’s] advertisement and sale of counterfeit Chanel products.” And while the resale site is “involved neither in the manufacture nor the affixing of [Chanel’s] trademark to [any counterfeits], its sale of the [counterfeits] [is] sufficient ‘use’ for it to be liable for the results of such infringement,” Broderick declares, due to the nature of its model.
As distinct from the Second Circuit’s finding in Tiffany Inc. v. eBay Inc., in which eBay was let off the hook for the counterfeits sold on its site, Judge Broderick says that TRR may be liable for infringement in connection with the sale of allegedly counterfeit goods because it “retains the power to reject for sale, set prices, and create marketing for goods, and unlike eBay is more than a platform for the sale of goods by vendors.”
“By adopting a business model in which [TRR] itself controls a secondary market for trademarked luxury goods, and by curating the products offered through that market and defining the terms on which customers can purchase those products, [TRR] reaps substantial benefit,” according to Judge Broderick. “As a result of this business model, [TRR] must bear the corresponding burden of the potential liability stemming from its ‘sale, offering for sale, distribution, [and] advertising of’ the goods in the market it has created.”
In terms of the alleged counterfeits sold by TRR, the court states that “Chanel has adequately averred that its own investigation revealed that [TRR] marketed and sold counterfeit Chanel products, and Chanel has also alleged that [TRR’s] own customers have complained about the receipt of counterfeit merchandise,” which is “sufficient to plausibly allege that [TRR] directly infringed Chanel’s trademark.”
Finally, as for Chanel’s false advertising claim, the court sides with the “iconic” fashion brand, determining that TRR’s “advertisements regarding the authenticity of the products it sells, considered in context, are literally false.” For instance, TRR’s statement that it “ensures that every item on [its site] is 100% the real thing” is an “unambiguous representation of fact,” per Broderick, which stands in contrast with “Chanel’s allegations that certain products advertised and sold by [TRR] are counterfeit.” As such, this “suffices to establish a plausible allegation of literal false advertising based on [TRR’s] representation that all the products it offers have been authenticated and are 100% the real thing,” thereby, enabling Chanel’s claim to move ahead along with Chanel’s unfair competition and counterfeiting/trademark infringement claims.
Chanel made headlines when it first filed suit against The RealReal in November 2018, accusing the popular resale site of “selling counterfeit CHANEL handbags,” despite its claims that it “ensure[s] that every item on[its site] is 100% the real thing.” The fashion brand went on to claim that while “there is no nor has there ever been any approval by or association or affiliation between Chanel and The RealReal …. the RealReal understands that the value of its CHANEL-branded inventory and attraction for consumers is enhanced if consumers believe that Chanel has a business relationship or affiliation with The RealReal.”
From the outset, The RealReal has vehemently denied Chanel’s claims, characterizing the brand’s suit as “nothing more than a thinly-veiled effort to stop consumers from reselling their authentic used goods, and to prevent customers from buying those goods at discounted prices.”
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It’s Official: Barneys New York's New Owner Is Authentic Brands Group

The licensing firm’s $271.4 million acquisition of the bankrupt luxury department store has closed, but there are plans to keep a physical footprint.

After a contentious three-month auction process, Authentic Brands Group and B. Riley Financial Inc. are the new owners of Barneys New York, in a deal that will see most of the struggling luxury retailer’s remaining stores close and its name licensed to rival Saks Fifth Avenue.
The licensing company’s $271.4 million sale was approved in a bankruptcy hearing Thursday morning, but the judge left room for a last-minute bidder to offer a deal that allows some portion of the business to remain in operation before the papers are signed.
The closing Friday greenlights the liquidation process for Barneys, with sales beginning soon, according to liquidator Great American Group. The markdowns will take place online and at all five Barneys stores, as well as its warehouse and outlet locations.
Barneys CEO Daniella Vitale stepped down Friday morning, according to an internal letter obtained by BoF.
"Today is my last day with this wonderful organization. As announced earlier on the call Authentic Brands Group will take control of the company today. Transition plans will be shared shortly," she wrote in the memo. "I am deeply sorry for all you have been through in the past year. Please understand that we tried very hard to keep this out of court and to find a solution before filing. We were saddled with many issues long before this began, ones that were unfortunately exacerbated by a difficult macro environment and the loss of the Madison arbitration."
As part of its plan to monetise Barneys’ intellectual property, ABG will close remaining stores and sell off the inventory. In addition to storewide sales, the retailer will offer private sales events to its most loyal customers, according to Great American.
But after the merchandise is gone and ABG wraps up its transition, a new iteration of Barneys will emerge — one with a physical footprint, the company said in its announcement of the sale closing Friday afternoon.

[ABG will] grow Barneys New York’s global presence across retail, including pop-ups, shop-in-shops, e-commerce, and a new freestanding store in a key US market.

"ABG will leverage its international scale, marketing expertise, and network of best-in-class partners to grow Barneys New York’s global presence across retail, including pop-ups, shop-in-shops, e-commerce, and a new freestanding store in a key US market," ABG said in the announcement. "Its initial focus will be on high-fashion collaborations, branded namesake products, and expanding international retail in both brick and mortar and [e-commerce.] There is also a strategy in development for Freds to export this beloved eatery to luxury destinations around the world."
In addition, ABG said it has tapped Saks Fifth Avenue to license the Barneys brand name in North America. This will be in the form of shop-in-shops inside Saks locations. ABG will also change Barneys' Madison Avenue location into a "pop-up retail experience," it said, which will include art installations, boutiques and entertainment.
“We see an incredible opportunity to extend the [Barneys] brand’s equity in current and new markets around the world,” ABG chief executive Jamie Salter said in a statement last week announcing the court approval of the company’s bid.
The bidding continued into Friday morning, 24 hours after ABG’s stalking horse bid was pre-approved for closing in bankruptcy court in Poughkeepsie, N.Y. on Thursday. Barneys’ vendors and employees held out hope that a competing bidder could swoop in and offer a more enticing future for the New York chain — one that entails keeping at least part of the business in operation.
Sam Ben-Avraham, a trade show operator and investor behind Kith, created a widely circulated “Save Barneys” campaign in his efforts to pool together capital from a consortium of retail veterans, including Andrew Rosen, Intermix founder Khajak Keledjian and billionaire investor — and previous Barneys’ stakeholder — Ron Burkle. But ultimately Ben-Avraham bowed out of the process.
“After two months of working around the clock, my team and I had to make the hardest decision we could have imagined: to pull out of the race and not go to court this morning,” he said in an Instagram post on Friday. “Unfortunately, we failed to convince enough people in the business community that it made economic sense to keep Barneys alive.”
David Jackson, the former chief executive of Dubai-based Istithmar World, which controlled the department store from 2007 to 2012, was also in the running to buy Barneys on behalf of the Saudi Arabia-based fragrance company Arabian Oud.
“Haven’t slept since Tuesday,” Jackson said in a text message Thursday afternoon, amid his continued efforts to put together a bid.
Both Jackson and Ben-Avraham presented plans to keep some of the remaining Barneys stores open, starkly contrasting ABG’s liquidation strategy.
“Every New Yorker that likes fashion has a relationship with Barneys,” Ben-Avraham told BoF last month. “There’s still a lot of loyalty from shoppers … We have a very specific plan on how to take it and bring it to the future.”
Barneys filed for Chapter 11 bankruptcy protection in August, after losing a rent dispute with its Madison Avenue flagship landlord, Ben Ashkenazy. The arbitration ruling resulted in a 72 percent hike in rent, from $16.2 million annually to $27.9 million, which went into effect in January.

Barneys has always been very much a fashion-forward niche player that has a good customer base, but the places and availability of product has changed.

The store’s issues ran deeper than real estate. Years of lagging sales thanks to stiff competition from e-commerce upstarts helped push Barneys into the red. It’s not the only retailer to suffer due to shifting consumer behaviour: Lord & Taylor closed a number of stores earlier this year, including its Fifth Avenue flagship, and L Brands shuttered Henri Bendel in September 2018. Some industry voices point to the inevitability of Barneys’ demise based on the challenges facing the traditional multi-brand retail business model.
“Barneys has always been very much a fashion-forward niche player that has a good customer base, but the places and availability of product has changed,” said Steve Sadove, the former CEO and chairman of Saks Fifth Avenue. “You have so many more brands themselves competing against Barneys, and consumers also have access to digital shops like Net-a-Porter.”

Rebag Introduces Clair, An Instant Evaluation Tool For The Luxury Resale Industry

Have you ever wondered how much you can buy your dream bag—that Dior tote that everyone is carrying—for on the secondary market? What’s a fair price? What’s a deal? Or, are you trying to slim down your closet and trade in that Louis Vuitton Speedy, but not sure about the right amount to sell it at? 

Rebag, the luxury handbag buying and selling retail destination, unveiled a new groundbreaking tool that allows users to check the value of luxury handbags, whether it’s that Gucci that’s already in your closet, or that Chanel that you’ve had your eye on for years. The appraisal system is called Clair, named for the acronym for Comprehensive Luxury Appraisal Index for Resale. “Essentially, it's an instant evaluation tool for the luxury resale industry,” said Charles Gorra, the founder and CEO of Rebag. “We think it has a much broader impact in terms of the whole luxury ecosystem.”
Traditionally, the luxury handbag market is shrouded in secrecy. Brands keep the numbers in their heavily controlled stock to themselves. To come up with a fair price at which to buy a pre-owned handbag could take up to an hour of phone calls and price checking, but now, thanks to Clair, that can be done simply by visiting the Clair app or website. Gorra and his team spent five years recording data that spans across 50 brands and 10,000 styles of handbags. When asked how the data was collected, Gorra was vague in his response, simply saying, “Pretty much anything you can think of is somehow in there.”

What used to take an hour to calculate now takes seconds simply by entering the information required to appraise the handbag’s value. “Basically, it's a taxonomy,” said Gorra, who explained that there are five segments within that taxonomy that are taken into account: type, designer, model, style, and size.
Those who end up selling their luxury handbags to Rebag will be instantly quoted a price in cash or credit—which is 15 percent more than the cash value—because of Clair. Users can simply print out the label and ship the handbag to Rebag, or if they are located in Los Angeles, New York, Miami, or San Francisco, they can drop it off at a brick-and-mortar location.

“We can find a price, and everyone will know that and you will have good surprises, and you may have bad surprises—but you will know.” said Gorra. “And also, you will know now, which is very important.”
But Clair isn’t just for those looking to buy or sell on Rebag. Gorra knows very well that people may not necessarily use the tool for that. He also knows that people may scour the market for handbags sold below the Rebag buying price to sell to Rebag. Clair provides a free instant evaluation to anyone who wants to use it. “Clair is meant to be essentially an open source framework for the industry,” he said. “It's not for just for Rebag, it's for everyone.” Gorra wants Clair to be for the secondary luxury handbag market what the Kelley Blue Book is for used cars.
For those who want a return on investment, Clair will provide up-to-date data on the resale market. Gorra said that Hermès is the unicorn, while Chanel, Louis Vuitton, Gucci, and Goyard are the safe bets as he points to a diagram that shows that data. Then, Gorra explained that a simple handbag accessory, like the Louis Vuitton bandouliere (strap) could make a massive difference in the resale value. Those who have it will get 70 percent of the retail price, while those who don’t only get 40 percent of the retail price.
Although StockX provides a service that shows how much items are offered or sold for, Gorra explained the difference between Clair and StockX. “StockX is a peer to peer marketplace, right?” asked Gorra. “So it's what they're servicing at StockX is not a StockX view, it is not a StockX price. It is the reflection of an individual currently putting a bid or an ask on StockX that StockX does not control.”
Clair will certainly have an impact on the luxury handbag secondary market. The next year will show just how much, as well as how brands and consumers will react to it now that they have the knowledge to sell and buy luxury handbags wisely.

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Farfetch partners with second-hand clothing service

Luxury fashion platform Farfetch has partnered with second-hand clothes donation service Thrift+, giving customers access to a free collection service for unwanted items in exchange for credit to use on the etailer’s site. 

A participant in Farfetch’s technology accelerator programme, Dream Assembly, Thrift+ sells second-hand fashion online and donates a portion of the proceeds to one of 160,000 registered charities in the UK.
Through the new partnership, customers will be able to order a Thrift+ x Farfetch donation bag online. They can then book a free collection service, or drop off the filled bag at a local drop-off point.
Thrift+ will photograph and list items for sale on its site. Once an item sells, one-third of the proceeds are donated to the customer’s nominated charity, and one-third is awarded to the customer as Farfetch credit. Customers can also choose to donate their share to charity.
Thomas Berry, director of sustainable business at Farfetch, said: “We know our consumers would like an easy way to clear their wardrobes of unused items, and at the same time, they would like to feel positive about it. Thrift+ x Farfetch links our customer base with an innovative service that improves the donation experience and has a positive impact by giving good quality clothes another useful life and supporting multiple charities.
“This is a natural extension to our Farfetch Second Life resale programme, focused on luxury handbags, and part of our broader approach to sustainability.”  ao here