Chanel Files $56 Million Trademark Suit Against eBay Seller

This month, cosmetics firm Chanel filed a trademark infringement suit in the New York Easter District Court against eBay seller Ryan Ladijinsky asking for $56 million in damages, claiming 27 different infringements.

The amount the company is seeking also includes punitive damages for what the company claims are Ladijinsky’s willful infringement activities.

In the court filing, the company states the eBay seller sold “used goods, goods that were never intended for sale, and/or goods lacking any packaging or product information,” as well as “testers of Chanel cosmetics, including lip gloss power, and blush; unboxed fragrances and cosmetics; and even used fragrance items.”

Packaging At Heart of Complaint

What is unique about this complaint is that Chanel is not claiming that the eBay seller was selling fake products, but that the seller was selling products without original packaging.

In its court filing, the cosmetics firm argues by not using original packaging, the seller created doubt with consumers “whether the product they receive has been opened, diluted, or otherwise tampered with after leaving the factory, and depriving them [consumers] of certain essential information, including, ingredient lists.”

Further, the company states that its brand name Chanel has a “reputation as a premium brand” and its “beauty and fragrance products… are renowned for their high quality and are identified not only by the use of the Chanel trademarks but also by the product packaging.”

The cosmetics firm goes on to say that as “a leader in the field of luxury fashion and beauty, [the company] ensures that all of its genuine products in a uniform fashion befits and enhances Chanel’s reputation.”

“…that the products are packaged, displayed, and sold in appealing packaging that enhances the value of the products and that reflects the hard-earned image and reputation of Chanel as a manufacturer and seller of high-end luxury goods.”

“The total packaging… is [an] integral [part] to the product and to the buyer’s experience of Chanel’s products.”

And “towards that end, only Chanel boutiques and those third-party retailers who are specifically approved by Chanel, following a careful review process, are authorized to sell Chanel beauty and fragrance products.”

Bottom line, the company claims only authorized dealers can sell its products and that by not using original boxes, the eBay seller created doubt about the quality and authenticity of Chanel products offered by this seller on eBay.

Don’t Ignore VeRO Warnings

eBay runs a department called VeRO that handles complaints from brands that report copyright and trademark infringements on its platform.

“The Verified Rights Owner (VeRO) program allows owners of intellectual property (IP) rights and their authorized representatives to report eBay listings that may infringe on those rights. VeRO embodies our commitment to provide a safe place to buy and sell, which respects property owners’ rights.”

eBay Description of VeRO

Chanel, Inc. is an active participant of eBay’s VeRO program and even provides a document on eBay’s VeRO site explaining its enforcement actions.

READ MORE: Even Small Businesses Have To Protect Their Brands

While we do not know if Chanel used VeRO to complain about this eBay seller, it is highly likely as that would be the way for them to find out the registered eBay details about the seller.

Typically, a brand will file a NOCI form (Notice of Claimed Infringement) with eBay. Usually, within 24 to 48 hours eBay will remove the listings and notify the seller by email.

In eBay’s notification to sellers, the marketplace will provide the claimant information so that sellers can ask why their listings were removed.

The claimant can be a department or individual from the brand, a law firm, or one of many intellectual property (IP) protection services such as The Brand Protection Agency or Clarivate’s MarkMonitor.

It is important not to ignore these emails from eBay VeRO, but to act upon them. Here are a few suggestions on what to do should you receive such a notice.

  • Seller is authorized by brand to sell products – Immediately email the contact provided in the eBay VeRO email and the person from whom you purchase your products.If this notice was a mistake, they can notify eBay and remove the infringement notice, but you will have to relist your items.Do not list items from that brand until you have resolved the situation.If it was not a mistake, you may have violated a dealer agreement that may contain retail price controls or sales channel restrictions. Depending on the agreement you may or may not be able to resolve this situation in your favor.
  • Seller is not authorized by brand to sell products – Contact the VeRO claimant from the eBay notice. Be persistent as sometimes claimants try to drag out responding.If after 7 days you do not receive an answer, start copying eBay [email protected] on those emails and make a point to highlight the number of tries you have made to receive details about the removal.Unless you are deliberately breaking IP laws, you likely used an image or description from the brand which caused you to receive the notice. Still the safe action is to get a response before you relist the item.

The above are the most typical IP infringement situations, but there could be other circumstances, such as in this case by Chanel.

The key point is not to ignore these emails, but to act upon them and make appropriate safe decisions for your business.

If you feel that the brand is abusing the eBay VeRO program and that your listings do not violate IP laws, you will need to get a lawyer.

However, such cases are expensive to litigate ($50,000 and upwards in Federal Court) and expect to pony up at least $5,000 or $10,000 just for a retainer to get started.

READ MORE: Company Obtains Trademark for ‘Bitcoin’, Sends Infringement Notice to Etsy Seller

Intriguing Case

This is an intriguing case and we will follow it to see if Chanel is able to make their allegations stick.

Certainly, the argument about the list of ingredient missing from the packaging also gets into FDA labeling regulations on cosmetics. And that could be another can of worms that Chanel is trying to protect itself from.

UPDATE (External Link): Response from Online Merchants Guild on lawsuit from Chanel

What do you think about this legal challenge by Chanel? Head over to our Facebook Discussion Group or use the comments section below.

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