TRADEMARK AND SELECTIVE DISTRIBUTION : DECISIONS CONCERNING TRADEMARK CHANEL MARCH 23, 2010
The company CHANEL (hereafter CHANEL) sued for infringement and unfair competition four companies: LAND, CAUD, BERY et MARM. These companies had bought from company FUTURA FINANCES cosmetics products and perfumes trademarked Chanel; the trademark is owned by CHANEL. The products belonged to the stock of the company Galeries Rémoises, authorized distributor of CHANEL, the stock had been sold at a public auction following a bankruptcy procedure.
The French supreme court, Cour de cassation, outlined the finding that: “unauthorized use of a trademark cannot result from commercializing authentic products belonging to a selective distribution network, if their first marketing in France was agreed upon by the trademark’s owner, and that the reseller acquired the products lawfully.” Consequently, the unauthorized distributor that commercializes products as authentic is not a counterfeiter pursuant to the doctrine of exhaustion of rights.
However, the owner of the trademark can oppose a new commercialization of the products if a legitimate reason is invoked; the latter is assessed by the judges.
In this case, the Cour de cassation found the existence of a legitimate reason and decided to rule out the doctrine of exhaustion of rights.
Indeed, the conditions of display of the products trademarked Chanel offered for sale and the advertising of the sale (an outlet in a warehouse located in a commercial area, flyers of poor quality…) affected negatively the value of the trademark and tarnished its appearance and the glamorous image of luxury products and perfumes of the company. As a result, CHANEL was able to oppose a new commercialization of its products.
Finally, concerning unfair competition, the court didn’t find any separate facts.