Chanel, Inc. v. Lin

Background

Chanel, Inc. brought this action against Xiaole Lin, Shun Miao Ding, Guo L. Huang, Xiaowei Gao, Xingyun Hu, Ming Li, Fei Y. Lu, Yongchan Zhang, Yu Hou Qu, Cai Qin Xie, Xiaoliu Wang, and John and Jane Does 1–100. Chanel sought emergency relief under federal trademark law, New York law, and the Federal Rules of Civil Procedure. The court had previously entered an emergency temporary restraining order, authorized expedited discovery, and ordered the defendants to show why a preliminary injunction should not issue.

Chanel submitted evidence that it owns federally registered CHANEL, CC Monogram, and related design marks. The opinion states that investigators uncovered a counterfeit-goods operation in Manhattan’s Chinatown and that a January 12, 2023 seizure found thousands of counterfeit items, including 185 bags and sales sheets bearing Chanel marks. The opinion states that several defendants were present during that seizure and that other defendants were believed to be involved based on earlier investigations. The defendants did not file opposition papers or appear at the April 3 hearing.

Court’s Analysis

To obtain a preliminary injunction, Chanel had to show a likelihood of success on the merits, likely irreparable harm without an injunction, that the balance of hardships favored Chanel, and that the injunction would serve the public interest.

The court found that Chanel was likely to succeed on its claims for trademark counterfeiting and infringement, false designation of origin, and unfair competition under the federal Lanham Act. Because the products used identical or nearly identical copies of Chanel’s marks, the court found that consumer confusion was nearly certain. The court also found that Chanel was likely to succeed on its federal and New York trademark-dilution claims because the marks were famous and the counterfeit products threatened harm through blurring and tarnishment.

The court further found that Chanel faced irreparable injury, had no adequate remedy through money damages alone, and would suffer harm to its reputation and goodwill without an injunction. It determined that the balance of hardships favored Chanel and that the public interest favored preventing consumer confusion and deception. Because Chanel sought an accounting of defendants’ profits, the court also found that it had authority to issue a preliminary asset freeze.

Order

Judge Jennifer H. Rearden entered a preliminary injunction pending the final hearing and determination of the action. The order bars the defendants, their agents, and persons acting with them from using Chanel’s marks in connection with counterfeit products; selling or passing off non-genuine products as Chanel products; trafficking, manufacturing, distributing, advertising, offering for sale, or selling counterfeit Chanel products or related materials; infringing Chanel’s marks or trade names; making false descriptions of goods as Chanel goods; diluting Chanel’s marks; destroying or failing to preserve relevant counterfeit products or records; and aiding those acts.

The order authorizes Chanel to inspect products bearing its marks to determine whether they are genuine or counterfeit. It requires the defendants to submit sworn compliance reports within 30 days after service of the order and requires them to preserve relevant documents, electronically stored information, and tangible things. It also preliminarily freezes money and other assets in accounts held by or connected with the defendants. Financial institutions that receive notice must locate those accounts and prevent transfers or disposal of the assets. A defendant or affected third party may seek dissolution or modification of the order after giving two business days’ written notice. The $5,000 bond Chanel posted on March 22, 2023 remained sufficient security for potential costs or damages resulting from wrongful implementation of the order.