In a significant ruling, the Court of Appeals for the Second Circuit upheld a lower court's decision in favor of Chanel, Inc. against What Comes Around Goes Around LLC (WGACA) for trademark infringement. The court affirmed the jury's findings, which included a $4 million damages award and a permanent injunction against WGACA, a retailer of secondhand luxury goods. This case underscores the importance of protecting brand integrity in the luxury goods market.

The ruling, issued on November 3, 2026, affects WGACA and similar retailers in the luxury resale market. The court's decision reinforces the legal protections that brands like Chanel have against unauthorized sales of their products, particularly those that may be counterfeit or infringing.

Background

Chanel is a well-known manufacturer of luxury goods, including handbags, and holds several federally registered trademarks, such as the name “CHANEL” and its iconic interlocking “C” logo. The company has strict controls over the production and distribution of its products, ensuring that each item is authentic and manufactured in authorized factories.

WGACA operates as a retailer of secondhand luxury items, sourcing products from individuals and wholesalers globally. The company claims to authenticate all items sold, but Chanel alleged that WGACA sold numerous counterfeit products, including handbags with stolen or voided serial numbers. This led Chanel to file a lawsuit in 2018, accusing WGACA of trademark infringement and false advertising.

The case progressed through a jury trial, where Chanel successfully argued that WGACA had willfully infringed on its trademarks. The jury found WGACA liable for selling counterfeit goods and awarded Chanel the maximum statutory damages of $4 million. Following this, a bench trial determined additional equitable remedies, including a permanent injunction against WGACA and an order for disgorgement of profits.

The Ruling

The Second Circuit Court of Appeals reviewed the case, focusing on WGACA's appeal against the jury's verdict regarding counterfeiting and the damages awarded. The court ruled that the district court had adequately instructed the jury on what constitutes a counterfeit mark, stating, "A counterfeit trademark means a mark that is not genuine or authentic but is substantially indistinguishable from a registered trademark."

The court also upheld the jury's decision to award Chanel $4 million in statutory damages, emphasizing that the damages were not excessively disproportionate to WGACA's infringement. The judges noted that this award serves to deter future violations, stating that statutory damages need not be directly related to the actual losses incurred by Chanel.

However, the court vacated a portion of the district court's post-trial order related to the award of costs, determining that Chanel had not properly sought these costs separately from its request for attorneys' fees. The case was remanded for further proceedings regarding the costs.

Impact

This ruling has significant implications for the luxury goods market, particularly for retailers operating in the secondhand space. It reinforces the legal framework that protects brands from unauthorized sales of their products, especially when those products may be counterfeit. The decision highlights the necessity for retailers to ensure that their inventory is authentic and legally obtained.

Moreover, the ruling sets a precedent for how courts may handle statutory damages in trademark infringement cases, indicating that large awards can be justified as deterrents, even if they exceed the actual profits gained from the infringing sales. This could impact how future cases are litigated, particularly those involving luxury brands and their efforts to combat counterfeiting.

What's Next

Following this ruling, WGACA has the option to appeal to the U.S. Supreme Court, although it is unclear if they will pursue that route. The case's remand regarding costs allows Chanel to file a bill of costs with the district court, which could lead to further litigation over what expenses are recoverable. This ongoing legal battle may continue to shape the landscape of trademark law in the context of luxury goods.