By: Kaylie Scalze
In the wake of a recent legal win for luxury brands, resale sites, and authenticators are looking to find new ways to fortify the authentication process for reselling luxury brand products. In March 2018, luxury fashion Brand Chanel sued luxury resale brand What Goes Around Comes Around (“WGACA”) for a laundry list of claims. In Chanel, Inc. v. What Goes Around Comes Around, LCC, et al., WGACA was accused of: trademark infringement based on the reseller’s sale or offering for sale of counterfeit goods; trademark infringement, unfair competition, and false association based on the sale or offering for sale of non-genuine Chanel products; trademark infringement, false association, and unfair competition based on their use of Chanel marks and other brand indicia, and hashtags; and false advertising. The US Southern District Court of New York ruled in favor of Chanel in February 2024, sending major waves through the resale world. The ruling questions secondhand and resale brands’ abilities to properly authenticate luxury products and has caused authentication houses and companies to reevaluate their processes. Authentication experts believe this ruling will also make the process more costly.
The resale industry is a $43 billion dollar industry;unfortunately, the fashion industry loses an estimated $50 billion each year to counterfeiting issues. That’s why a ruling such as Chanel v. WGACA further reinforces the need for luxury brands to work with resale websites in better partnerships. Luxury and resale brands believe cooperation between brands and resale platforms will help against counterfeiting. The major game–changer in the luxury authentication world, however will be technology.
Authentication houses and resale companies have begun to use Artificial Technology (AI) and automated intelligence to streamline their authentication processes. These data-driven methods are typically the first stop for some resale sites to make initial detections of counterfeiting or to scan lists of previous counterfeiting culprits to flag products. Pairing authenticators’ expert human knowledge with AI is even more crucial now that replicas are produced at higher qualities, making authentication even more difficult. Despite the helpful benefits AI and automated intelligence have provided companies, authentication technology is still lacking. Kayla Marci, senior retail analyst at retail intelligence software company Edited, states, “[t]he absence of robust digital authentication methods or AI jeopardizes this valuable expertise and poses a risk to the integrity of timeless products and their creators.”
Implementation of Digital Product Passports (DPPs) could be just the tech to pick up the pieces AI and automated intelligence lack. DPPs use metadata blockchain technology to create digital identities for products that track and provide data throughout a product‘s entire lifecycle. The European Union plans to enforce regulations requiring DPPs to be on every product by 2026. However, many players in the fashion industry are seeking to get ahead of these regulations or have already implemented similar technology to counteract counterfeiting. The idea behind including digital identities for fashion products is to prevent counterfeiting and allow consumers to track purchase histories if a product is resold.
The current implementation of DPP-like tech is already being tested or used by several major fashion brands. Ralph Lauren and Another Tomorrow have QR codes on their product care labels that link the products’ digital identities. An issue companies are finding with this method is ensuring the codes are printed on materials capable of withstanding several washes and making sure the labels are comfortable enough so purchasers don’t cut the labels off. Tech company Evrythng creates digital identities for these brands and has suggested using QR codes and other labelings like watermarking or Near-field communication (NFC) chips to solidify transparency and authentication. Resale companies eBay and Trove have used NFC chips successfully in the recent past.
Technology can help facilitate the authentication process for brands and resale sites, but human touch will always be required. Currently, tech is limited; it needs to be fed data to give data, and humans will always be the first to discover and interact with physical luxury products. Authentication processes will still require human input and knowledge despite the emerging fancy new technologies. The key for resale brands and the brands they sell will be to maintain collaborative relationships with one another and use technology and human expertise in tandem to create reliable and secure resale options to prevent consumer confusion and the infringement of designers’ intellectual property rights.
Student Bio: Kaylie Scalze is a second-year law student at Suffolk University Law School. She is a staff writer on the Journal of High Technology Law and is a member of the Executive Board of the Business Law Association serving as the Social Media Chair. Kaylie received a Bachelor of Arts in Legal Studies from Suffolk University.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.
