Earlier this month, in a lawsuit filed in a Brooklyn Federal Court, cosmetics giant Chanel is seeking over fifty million dollars in damages from eBay merchant Ryan Ladijinsky.  In the suit Chanel alleges that it Ladijinsky’s sale of its products on eBay violated its trademarks, despite the fact that the products were not counterfeit, sold as used and were all legally obtained by Ladijinisky.  Further, at no point did Ladijinsky represent to any of his customers that his eBay store was an authorized Chanel retailer.

Chanel’s assertion that the sale of their genuine article branded goods on eBay can be restricted via trademark laws is absurd.  Chanel’s position would essentially deny all people the ability to resell legally obtained goods.  Even if trademark protection protects a brand’s ability to designate what outlets can declare themselves as authorized retailers, thereby allowing the brand to retain exclusive control of their customers’ retail experience when buying their product through its preferred channels, trademark law cannot be interpreted to go so far as to suppress the right of non-authorized outlets from selling a brand’s genuine article goods.  Such an absurd position would open the floodgates for other companies to follow suit (e.g. Apple taking legal action to prevent the sale of used iPhones).

The chilling effect that such an interpretation would have on interstate commerce would be catastrophic, as it would destroy the second-hand marketplace entirely, even putting an end to non-profit retail operations such as The Salvation Army and Goodwill Stores.  This would also result in a substantial loss of resale value for every person that owns valuable property manufactured by brands that wish to control the sale of its products both in the primary and secondary market, as a person’s ability to privately sell such goods would be restricted by law, thereby diminishing its value.

A person’s freedom to sell branded products that they legally obtain also applies to goods that the brand created for purposes other than direct to consumer sales.  Trademark laws do not allow brands to restrict the sale of products that they intended for use as a sample or promotional item. So long as the product was obtained via legal means, and is legitimate, brands have no right to impede the further sale of these goods.  A ruling to the contrary would severely limit the ability of collectors and brand enthusiasts that wish to add rare versions of branded products to their collections, thereby triggering numerous commerce clause, and due process violations as well as violations under the first amendment, as the exchange of such goods can be considered a form of expression.

Chanel’s notion that a second-hand purchase of Chanel products categorized as used on eBay confuses the customer and dilutes the Chanel brand is comically absurd.  No person buying a Chanel product listed as used, would ever believe that this was anywhere near the same shopping experience that the brand seeks to ensure for its high-end department store or other authorized retail customers.   Any reasonable person knows the difference between buying from the Chanel counter at Saks versus buying used on eBay.  Chanel’s argument is analogous to arguing that buying a used BMW from Joe’s Used Car Lot could confuse the customer into thinking that their experience with the used car lot is comparable to buying a car from an authorized BMW dealer, thereby diluting the BMW brand.  It’s complete nonsense.

Online Merchants Guild supports fully supports the legal right of online merchants to sell, and the marketplace platforms right to host any legally obtained genuine article consumer goods that are not otherwise subject to regulatory resale restrictions (e.g. prescription drugs).   If brands take issue with their products being sold on marketplaces, then the brands are free to seek relief via contractual means by working with the marketplace, much like how Amazon will restrict the ability of third-party sellers to list certain items, based on Amazon’s relationship with the brand owners.

Brands that seek to weaponize our legal system to suppress the sale of its products in a secondary market by scaring online merchants with well-publicized and sensationalized lawsuits that are frivolous and only serve to scare merchants to the point where they will be too afraid to sell the branded products via retail online marketplace platforms, must not be sanctioned by the courts.  This is an unconscionable abuse of our legal system, and courts must be faster in identifying these cases when they appear on the docket and be able to take swift action to dismiss the case, preventing the online merchant community from suffering irreparable harm.