Marilyn Monroe was once famously asked ‘what do you wear to bed?’ She replied ‘Why, Chanel Number 5 of course’. That is the kind of celebrity endorsement Chanel appreciates. What it finds less fragrant is any infringement of its trademark which tarnishes its luxury brand. That is what it accuses online store Cresplocker of doing in an English law suit. It argues the tarnishing comes from selling ‘Chanel’- branded goods alongside goods from other less luxurious brands; offering its trademarked goods online – which its policies do not allow; using the ‘Chanel’ trademark to describe the goods it sells in product captions in both its online store and in a store on e-bay; and not offering a luxury experience to customers. It claims a test item it purchased arrived crumpled and not in the original packaging.
Crepslocker argues it is protected by the ‘trademark exhaustion rule’ under which, following a first sale of a trademark product by Chanel, or subsequent sales with their consent, the fashion house cannot then control further sales. Crepslocker also says the division Chanel makes between online and offline sales is artificial, and that Chanel has collaborated with sports clothing manufacturers, so can’t claim mixing its products with sportswear tarnishes its brand.
What is a high-end fashionista, not to say IP lawyer, to make of it all?
Post Brexit the UK Supreme Court is no longer bound by decisions of the Court of Justice of the European Union, (CJEU). However, courts in the UK are free to have regard to CJEU decisions in their own rulings, and CJEU precedents tend to protect trademark owners. They support that controlling the sale channels and respect for the integrity of the original packaging are acceptable exceptions to the trademark exhaustion rule. It seems likely the UK courts will follow these established principles.
However, Crepslocker also kept used products in consignment from its customers, and here the courts would probably consider balancing Chanel’s rights, Creplocker’s, and the owner’s rights in the used products to have a platform to sell their goods on the aftermarket.
A win for Chanel may have a chilling effect on online resellers of other luxury brands. Maintaining the prestige and value of such brands by setting sales standards and determining sales outlets may protect the brands, its consumers and the large amounts they pay for the goods. However, those consumers also need a resale outlet, and there is a demand for the products they own. Careful consideration will have to be given to whether the second-hand luxury goods market is different from the new luxury goods market, and whether the exception to the trademark exhaustion principle still applies.