David Yurman Enterprises sued Sam’s East Inc. and Sam’s West Inc., alleging trademark infringement, false designation of origin, tortious interference, and unfair competition in Houston federal court last week.
Yurman claims that Sam’s Club has engaged in the “wrongful, unauthorized promotion and sale of David Yurman-branded jewelry products” in Texas, throughout the country and even online at www.samsclub.com.
The luxury jewelry brand points out that Sam’s Club is not an authorized retailer for the David Yurman products, and therefore, the only way they were able to obtain any David Yurman products is by “inducing one or more Yurman authorized retailers to sell the products to Sam’s Club in violation of their Authorized Retailer Agreements.” Thus, Yurman is claiming that the retailer has committed tortious interference with its contractual relations, harming the luxury jeweler’s business.
Furthermore, Yurman is arguing that by selling David Yurman-branded products without the authorization of the company, the retailer has engaged in an unauthorized use of the David Yurman trademark as well, by using the mark “in connection with its promotion and sale of wrongfully acquired David Yurman jewelry products.” The jeweler claims that this creates a “false impression” on consumers that Sam’s Club is associated with Yurman.
The jewelry brand also stated in its complaint that Sam’s Club acquired and sold their products with the “full knowledge that Yurman sells its David Yurman jewlery products through an exclusive network of authorized retailers who receive specialized training regarding such products and the manner in which they are to be displayed and promoted.” This points to the impact that selling in a wholesale retailer could have on the brand’s value and reputation.
Yurman states in its complaint it is a “well-known designer, manufacturer and supplier of unique fine jewelry and luxury jewelry designs,” and that the brand and products are well-known by consumers. It continues to state that its products are marketed to “fashion-conscious consumers” through “a carefully selected network of authorized retailers, consisting of speciality stores and high-end department stores, and that Sam’s Club is a “national mass merchandiser” that sells items at discounted or bulk prices; a somewhat lower end market than what David Yurman caters to.
David Yurman’s vice president and general counsel, Phillips Nazro, spoke to Women’s Wear Daily, “Our company very carefully controls the retail distribution of our merchandise to ensure that David Yurman jewelry and timepieces are available at only the finest jewelry and department stores, consistent with the image and goodwill of the David Yurman brand that our founders, the Yurmans, have worked so hard over the years to build.”
Sam’s West Inc. and Sam’s East Inc. is a subsidiary of Wal-Mart, whose spokesperson commented to WWD, “We have protocols in place to provide our members with authentic, high-quality products. We believe those protocols were followed in this instance. We will review the complaint and respond appropriately.”
The crux of Yurman’s claim against Sam’s Club is that Sam’s Club was never given authority to sell Yurman’s products in its stores and that by doing so, Sam’s Club has violated retailer agreements that Yurman entered into with it’s retailers, has used the David Yurman name and logo wrongfully and without permission, and has created an association with the luxury brand.
Many luxury brands are very selective and careful about whom they enter retail agreements with to sell their products, because just as much as a brand has a reputation about its level of luxury and to whom it caters to, retailers have the same reputation.
The brand oftentimes wishes to sell through retailers that are on the same level as itself. Louis Vuitton for instance is incredibly strict about where its products are sold. Rarely will you see Louis Vuitton products in any stores other than a Louis Vuitton store. This helps the brand control the distribution of the products as well as the reputation of the brand.
Furthermore, it is legal for brands to enter into an agreement with retailers prohibiting the retailer from re-selling or “transshipping” the products to another retail store. That’s why, it seems, that Sam’s Club may be in a bit of hot water in this case. If the wholesale retailer did not enter into an agreement to purchase products from David Yurman directly and then sell to its consumers, there is probably no legal ground that Sam’s Club can stand on to prove they have the right to sell David Yurman products.
And then, because the retailer was not authorized to sell the jewelry, any sort of promotion or advertising where it used David Yurman logo or name will prove to be trademark infringement, as the retailer was using the name for its own benefit and was trading off the goodwill and reputation of the brand to increase its own sales.
Yurman is seeking injunctive relief as well as unspecified damages and costs. Stay tuned to see how Sam’s Club responds to the lawsuit!