Jewelry company sued by Chanel says fashion brand ignores first-sale doctrine protections

An Atlanta-based jewelry company is opposing the trademark lawsuit against it by Chanel in connection with its sale of costume jewelry made from “upcycled” Chanel buttons. In the motion to dismiss it filed in New York federal court on May 14, Shiver + Duke (“S + D”) and its founder Edith Anne Hunt (the “defendants”) claim that the lawsuit is “the Chanel’s attempt to negate the first-sale doctrine by dragging a small business into costly litigation in a foreign state despite [its] legitimate efforts to ensure that no New York consumer can be confused by her incorporation of recycled Chanel buttons into her original costume jewelry, ”and should therefore be thrown out of court.

In the wake of Chanel filing a complaint in February and accusing S + D of “hijacking” its nested “world-famous and federally registered” monogram “C” trademark and its “Chanel” word mark in order to “create and to market costume jewelry that attracts and draws on the selling power and fame of the Chanel brands ”, S + D argues that the case should be dismissed as Chanel does not have the necessary personal jurisdiction over her to bring an action in court in New York. According to S + D, while he operates an e-commerce site, where he sells the allegedly counterfeit jewelry, which is accessible to consumers across the United States, including New York, and while he, in In fact, selling products to consumers in New York City through this website, Chanel nevertheless chose the wrong forum to file a complaint.

“All of the defendants’ business activities take place in the state of Georgia,” S + D claims in its 32-page filing, claiming that its “alone the discernible business activity in New York is that its website is accessible from New York ”, and even then, its“ sales and shipments of the reused jewelry giving rise to this case in New York State were 0.129% of [its] 2019-2021 total sales. Despite such a “lack of contact with New York, [Chanel] strength [the defendants] to defend a case 750 miles away, in an unknown court and in a jurisdiction with which [they] have no connection, ”says S + D, and says the court should dismiss the case on that basis, or at least transfer the case to a court in Georgia.

S + D also claims that Chanel “does not allege that she suffered any prejudice in New York, but rather alleges that the defendants” hijacked ” [its] trademark and used it for “their own business and their own commercial advantage” “and, therefore, the famous fashion house does not meet the standard of jurisdiction over a non-resident defendant under New York law. According to S + D, Chanel’s failure to allege injury stems, in part, from its protection by the first-sale doctrine, which states that “trademark rights are exhausted once trademarked products have been duly placed on the market ”.

If Chanel were the victim of an injury, S + D claims that “damages would be suffered by [Chanel] in Georgia, where S + D would have diverted [Chanel’s] intellectual property and where S + D is located.

More than that, S + D tackles the “central problem” of the case: Chanel’s allegations of confusion, namely that “S + D’s incorporation of authentic, recycled and reused Chanel buttons into its original designs of costume jewelry constitutes trademark infringement and will result in after-sales confusion. In addition to being protected by the first-sale doctrine, S + D alleges that it uses a series of “disclaimers” to alert consumers that it and its products are “not affiliated with Chanel,” thereby eliminating the risk. of confusion. S + D alleges that it includes “disclaimers on its website, [its] product packaging includes disclaimers, and [there are] legal notices permanently affixed to the products “in order to” ensure that confusion at the point of sale is impossible. “(Even with such disclaimers, S + D asserts that in correspondence prior to the lawsuit, Chanel’s lawyer argued that they “would not cause a consumer as part of after-sales to believe anything other than that these pieces are made or authorized by Chanel. “)

Still, the jewelry company says that in September 2020, it “began affixing hang tags to the front of every [jewelry product] right next to the Chanel button in order to be visible to the naked eye of an observer to avoid any after-sales confusion.

In view of the above, S + D argues that the court should dismiss the case “and grant any other remedy that the court considers fair and appropriate”, or at the very least, transfer the case to a federal court in Georgia. .

In filing its action for trademark infringement and dilution and unfair competition under federal and state laws earlier this year, Chanel argued that “there is no doubt” that “the Defendants’ use of the CC monogram is intended to discuss the goodwill that [it] has created its brand through decades of use and millions of dollars of investment. At the same time, the brand claimed that the defendants’ jewelry “does not alter the CC monogram and the jewelry nowhere indicates that it was created by [the] defendants without permission from Chanel. Instead, the appearance of the CC monogram on the defendants’ jewelry is “no different from the display of the CC monogram on authorized Chanel costume jewelry, and to a consumer there is no difference.” distinct between the appearance of [the] unauthorized product of the defendants and genuine product of Chanel.

As we noted earlier, the case is the latest in a growing series of lawsuits initiated by luxury brands that have sought to exert control over the distribution of products after the first sale, including by preventing the sale of modified but genuine products bearing their marks. (there was the Rolex v. Californian case, for example) – or here, parts bearing the mark derived from genuine products – on the grounds that such unauthorized use is both likely to mislead consumers and to infringe the mark.

In addition to using Chanel buttons to make various jewelry including earrings, bracelets and necklaces, S + D uses – and still offers jewelry containing – Gucci, Louis Vuitton and Dior hardware.

* The case is Chanel, Inc. v. Shiver and Duke, LLC, et al., 1: 21-cv-01277 (SDNY).

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