Chanel, Inc. v. The RealReal, Inc.

Background

Chanel alleged that The RealReal, a luxury-consignment retailer, advertised and sold counterfeit Chanel handbags while representing that all products it sold were authentic. Chanel also alleged that The RealReal’s use of genuine Chanel trademarks suggested an affiliation with or approval by Chanel. Chanel brought claims under the federal Lanham Act and New York law.

For purposes of the motion to dismiss, the court treated well-pleaded factual allegations as true and considered documents attached to or relied on by the amended complaint, including The RealReal’s website. Chanel alleged that its investigation found at least seven counterfeit Chanel handbags advertised as genuine, and that customers had also complained about receiving counterfeit Chanel merchandise. Chanel further alleged that, after Chanel raised the issue, The RealReal removed identifying serial numbers from Chanel product listings and possibly from physical handbags.

Rulings on the Federal Trademark Claims

The court granted the motion as to Count One, the trademark-infringement claim based on The RealReal’s use of genuine Chanel trademarks. The court held that Chanel had not plausibly alleged a likelihood of customer confusion. The RealReal’s use of “Chanel” to identify Chanel products was permissible on the allegations presented, and the court found it unlikely that customers would confuse The RealReal’s secondary-market business, the products’ source, or The RealReal’s affiliation with Chanel. The court also found that Chanel had not adequately alleged that The RealReal used the genuine marks in bad faith.

The court denied the motion as to Count Two, which alleged trademark counterfeiting/infringement under 15 U.S.C. § 1114(1)(a). Although the amended complaint used the term counterfeiting, the court construed the claim as alleging direct trademark infringement based on The RealReal’s advertisement and sale of counterfeit goods. The court distinguished an earlier case involving an online platform because The RealReal’s terms gave it responsibility for approving, pricing, displaying, marketing, and offering consigned goods for sale. The court concluded that Chanel plausibly alleged that The RealReal directly infringed Chanel’s trademark by selling and advertising counterfeit Chanel products.

False Advertising

The court denied the motion as to Count Three, Chanel’s false-advertising claim under 15 U.S.C. § 1125(a)(1)(B). The court held that The RealReal’s statements that it authenticated every item and ensured that every item was “100% the real thing” were factual representations, not merely opinions or advertising exaggeration. In light of Chanel’s allegations that The RealReal sold counterfeit products, the court found a plausible allegation that these statements were literally false. The court also stated that, even if the statements were not literally false, Chanel plausibly alleged that they were likely to mislead or confuse customers.

False Endorsement and New York Claims

The court granted the motion as to Count Four, which alleged false endorsement and unfair competition under 15 U.S.C. § 1125(a)(1)(A). The court rejected Chanel’s theory that The RealReal’s use of genuine Chanel marks and its authentication statements created a sufficient probability of confusion about sponsorship, affiliation, or endorsement by Chanel.

The court denied the motion as to Count Five, the New York common-law unfair-competition claim, but only insofar as it was based on the alleged marketing and sale of counterfeit Chanel products. New York common-law unfair competition requires bad faith. The court found that Chanel’s allegations about The RealReal’s removal of serial numbers, after Chanel raised concerns about counterfeit products, were enough at the pleading stage to support an inference of bad faith. The court emphasized that this ruling did not find bad faith in The RealReal’s use of genuine Chanel trademarks.

The court granted the motion as to Counts Six and Seven, which asserted claims under New York General Business Law sections 349 and 350. Those statutes require allegations of injury to the public beyond ordinary trademark infringement. The court found Chanel’s allegations about harm to Chanel, its goodwill, and particular consumers who purchased counterfeit products insufficient to show the required public injury. The court also noted that Chanel had not adequately alleged that The RealReal intentionally marketed or sold counterfeit goods.

Disposition

The court granted in part and denied in part The RealReal’s motion to dismiss the First Amended Complaint. The motion was granted as to Counts One, Four, Six, and Seven, and denied as to Counts Two, Three, and Five. The RealReal was ordered to answer the First Amended Complaint within 30 days of entry of the Opinion and Order.