449 F.Supp.3d 422
S.D.N.Y.2020Background
- Chanel is a luxury brand owning registered "Chanel" and "CC" trademarks; it does not sell secondhand goods and restricts authorized distributors.
- The RealReal is an online and brick-and-mortar luxury consignment retailer that takes possession of consigned items, markets and prices them, and advertises an in‑house authentication process including statements like "100% the real thing" and "we authenticate every single item."
- The RealReal's consignment terms give it sole discretion to accept, authenticate, price, display, and sell items; it may refuse or destroy items it deems counterfeit.
- Chanel investigated The RealReal and alleges it identified at least seven counterfeit Chanel handbags marketed as genuine; some listings contained serial numbers inconsistent with Chanel records, and The RealReal removed serial numbers after notice.
- Chanel filed a First Amended Complaint alleging trademark infringement/counterfeiting, false advertising, false endorsement, New York common‑law unfair competition, and GBL §§ 349–350 claims; The RealReal moved to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether The RealReal's use of genuine Chanel marks causes likelihood of consumer confusion / false endorsement under the Lanham Act | TheRealReal’s branding and authentication guarantees lead consumers to believe Chanel endorses or is affiliated with The RealReal | Resale of genuine goods and nominative use is lawful; site disclaims brand affiliation; consumers are sophisticated | Dismissed — Chanel failed to plausibly allege a probability of confusion from use of genuine marks (Counts 1 and 4 denied) |
| Whether The RealReal sold/marketed counterfeit Chanel products sufficient for direct infringement/counterfeiting liability under § 1114 | Chanel's investigation and customer reports show The RealReal marketed at least seven counterfeit handbags as authentic | Relies on Tiffany v. eBay analogy: a platform seller cannot be held liable for third‑party vendor counterfeits | Denied — Chanel plausibly alleged sale/advertising of counterfeits and The RealReal’s consignment model (possession, pricing, display) can give rise to direct liability (Count 2 survives) |
| Whether The RealReal’s authenticity advertising is literally false or misleading under § 1125(a)(1)(B) (false advertising) | Statements like "100% the real thing" and "we authenticate every single item" are unambiguous factual claims and false if counterfeits are sold | Authentication claims are process descriptions or puffery; RealReal cannot guarantee catching every fake | Denied — Court found the authenticity statements literally false (or at least likely misleading); false advertising claim survives (Count 3) |
| Whether New York state claims (common‑law unfair competition; GBL §§ 349, 350) survive | RealReal’s conduct harms consumers and the public and evidences bad faith in selling counterfeits | Claims are essentially trademark harms to Chanel and private, not public injuries; no substantial public harm alleged | Mixed — New York common‑law unfair competition re: counterfeits survives (bad faith alleged); GBL §§ 349 and 350 dismissed for failing to allege injury to the public beyond trademark harm (Counts 6–7 denied; Count 5 survives as to counterfeits) |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for federal complaints)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must be more than labels and conclusions)
- Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d 93 (2d Cir. 2010) (distinguishes platform liability for vendor counterfeits; discusses literal falsity in advertising context)
- Zino Davidoff SA v. CVS Corp., 571 F.3d 238 (2d Cir. 2009) (sale of genuine goods by unauthorized reseller generally not actionable)
- Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492 (2d Cir. 1961) (likelihood‑of‑confusion multi‑factor test)
- Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014) (proximate‑cause and injury discussion in Lanham Act context)
- Time Warner Cable, Inc. v. DIRECTV, Inc., 497 F.3d 144 (2d Cir. 2007) (literal vs. implied falsity in false advertising)
- Church & Dwight Co. v. SPD Swiss Precision Diagnostics GmbH, 843 F.3d 48 (2d Cir. 2016) (standards for literal falsity and proximate cause in false advertising)
- El Greco Leather Prods. Co. v. Shoe World, Inc., 806 F.2d 392 (2d Cir. 1986) (retailer’s sale of infringing goods suffices as "use")