One of the biggest beneficiaries of the pandemic economy of a few years back was the vintage watch market. As an article in Fortune notes, the pandemic saw “turbocharged demand for timepieces from Audemars Piguet, Rolex and others, boosting Swiss watch exports to record levels — almost 25 billion francs ($28.5 billion) in 2022.” The hype around new and vintage luxury watches rose to such levels that there was talk about a new “asset class,” with going rates for popular models selling at heady premiums over their usual cost. As with any bubble, media attention helped drive demand even higher, with the concomitant introduction of cash-rich speculators more than happy to snap up prime models in the hope of a quick flip for a profit. While things have cooled down a bit since the peak of the bubble in 2022, tremendous demand remains for luxury watches in the global market, particularly for blue-blood brands like Rolex, Audemars Piguet, and Patek Philippe. As a recent 2024 forecast article notes, “secondhand prices on the Big Three still commanded a collective 24.7% premium compared with retail prices,” even as prices fell for those brands from their peak in 2024. (If I had my choice and a generous reader felt inclined to send a generous gift to your humble IP correspondent, I would be more than happy to sport a classy Patek Calatrava on my wrist.)
Given the widespread demand for vintage luxury watches, with Rolex probably leading the pack in terms of name recognition and desirability in the public at large, there should be little surprise that leading watch brands are very protective of their IP rights. Chief among their efforts is their focus on stopping the flow of counterfeit items, whether on the original or secondary retail markets, using a variety of measures. For one, watch companies will issue certificates of authenticity for legitimate models, along with their exercise of close control over the network of authorized retailers for their brands. Even their publication of information about how to spot a fake serves to help maintain the value of the authentic models in the marketplace. In addition to focusing on general IP policing and anti-counterfeit measures, watch makers will also turn to litigation when necessary to protect their rights.
One long-running trademark battle involving a luxury watch maker was the subject of an interesting Fifth Circuit decision in late January. The case, Rolex Watch v. BeckerTime, involves an ongoing “trademark infringement dispute involving allegations of counterfeit and infringing use of Rolex’s marks by BeckerTime.” In particular, Rolex accuses BeckerTime of selling vintage Rolex watches “that are identified as “Genuine Rolex,” but contain both Rolex and non-Rolex parts.” After a bench trial, the district court found that BeckerTime had infringed on Rolex’s trademarks, but “concluded that Rolex was not entitled to disgorge BeckerTime’s profits because laches applied.” The parties cross-appealed the bench trial decision, leading to the recent Fifth Circuit opinion. (As has happened frequently in the past, the first and most comprehensive reporting on this decision that I saw came from the Fashion Law blog.)
To start, the Fifth Circuit focused on BeckerTime’s arguments seeking to overturn the finding of trademark infringement. In support, BeckerTime asked the appellate court to consider the district court’s decision in light of a 1947 Supreme Court case involving repaired or reconditioned secondhand products. In that case, Champion Spark Plug Co. v. Sanders, the Supreme Court found “that a reseller may utilize the trademark of another, so long as it involves nothing more than a restoration to the original condition, and not a new design.” With respect to BeckerTime, however, the Fifth Circuit agreed that “BeckerTime does more than recondition or repair vintage Rolex watches,” to the extent that “customers had ‘inquired as to the authenticity,’ stating ‘they are confused as to whether the watch is fully genuine Rolex.’ ” As a result, the determination of trademark infringement was affirmed, even though BeckerTime included many disclaimers with respect to certain vintage watches that were modified to contain non-Rolex parts.
While those disclaimers were unhelpful for BeckerTime with respect to the infringement inquiry, they did serve the defendant in good stead on the question of whether laches applied. Here, the Fifth Circuit noted that there was factual support for the district court’s declining to find willful infringement by BeckerTime, since “emails between BeckerTime and its customers show it goes to great lengths to clarify which parts are original Rolex, which are customized or modified, and which are aftermarket.” Likewise, Rolex’s long-time knowledge of BeckerTime and failure to take action caused BeckerTime to act in reliance on Rolex’s inaction, further supporting the district court’s decision not to award profits to Rolex. And because there was no justifiable award of profits available to Rolex, the Fifth Circuit further found that Rolex was not entitled to either treble damages or an award of attorney’s fees. In a silver lining for Rolex, the appeals court did find that the injunction awarded by the district court required amendment to include BeckerTime watches that contained non-Rolex bezels, even as it also found that “with the required disclosures, no customer requesting a customized watch by BeckerTime would confuse it with a genuine Rolex watch.” Finally, the Fifth Circuit remanded for a clarification of one part of the district court’s injunction.
Ultimately, this case presents an interesting example of why it can be so important for watch brands to take immediate and firm action to stop alleged trademark infringing activity. If Rolex had acted sooner against BeckerTime, it might have been able to strike an even more devastating blow to BeckerTime’s finances, on top of the restrictions it secured in the injunction that the Fifth Circuit affirmed. At the same time, the case also illustrates how the right balance of disclaimers and behavior can leave the door open for resellers to profit on the secondary market, even when selling vintage products from super-famous brands like Rolex. It will be interesting to see if this decision helps push brand owners dealing with resellers to take more timely action with respect to their trademark enforcement efforts,
Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at [email protected] or follow him on Twitter: @gkroub.