Rolex, Breitling go to bat for Brand Integrity

Recent decisions handed down in separate lawsuits involving Rolex and Breitling may go a long way in protecting the integrity of all popular watch brands.

The David versus Goliath-type lawsuits revolved respectively and primarily around discounting and unauthorized service, two grave dilemmas in today’s watch industry. Both cases were long, sensitive and potentially landmark in their impact.

Breitling USA Inc. prevailed in a bitter lawsuit by Costa Mesa, Calif.-based Watch Connection that claimed the watch company violated antitrust laws by terminating the store as a Breitling outlet. Rolex won a majority decision in its effort to stop Dallas-based American Wholesale Jewelry from reconstructing Rolex watches with generic replacement parts.

The decisions were favorable for both manufacturers – and perhaps others that fight to defend their brand names and reputations.

In the Breitling/Watch Connection lawsuit, the Ninth Circuit Court of Appeals in San Francisco affirmed an earlier dismissal of the case, supporting Breitling’s claim that it acted within its legal rights when it stopped shipping goods to Watch Connection.

In the suit, Breitling acknowledged it terminated Watch Connection for being a “watch discounter.” However, the Stamford, Conn.-based company contended that as long as it “did not require its dealers to refrain from discounting, it was free to choose dealers whose business strategy did not emphasize discounting.”

“I think that it’s favorable for manufacturers, certainly from the point of view of you always have the right to choose which stores you want to open and which you do not want to open,” says Keith Brown, Breitling vice president. “The law is very clear. You can decide, ‘I don’t want to sell to people who discount.’ You cannot, however, open a store [as a dealer] and say, ‘I’m not going to allow you to discount.’ That’s an important distinction.

“We’re not naive about the reality of discounting in the American retailing environment. However, we do believe that to successfully represent our brand, a store should not rely on discounting alone to sell our product. We provide extensive training for our retailers to teach them about specific features that are unique to our product line. And we encourage them to promote these attributes when selling to the consumer. Ultimately we believe this strategy will build a stronger brand for the future.”

In the other case, the U.S. District Court for the Northern District of Texas issued a permanent injunction against American Wholesale Jewelry which states the company is prohibited or “enjoined from performing any services which would involve injecting into commerce a watch bearing a Rolex mark which is reconstructed with generic replacement parts and which simulates a Rolex Submariner or other Rolex watch.”

American Wholesale Jewelry is also enjoined from selling replacement bands on which the consumer’s original clasps bearing the Rolex mark have been substituted. It is also enjoined from accompanying modified Rolex watches with copies of instructions bearing the Rolex mark.

The court ruled that Rolex was to take “nothing on its claims for damages under trademark infringement and unfair competition.” The court dismissed Rolex’s claims of common law fraud, misappropriation, conversion, violation of the Texas Theft Liability Act and damages based on lost sales.

The court also dismissed American Wholesale Jewelry’s counter-claims of unfair competition, breach of contract, malicious prosecution and intentional infliction of emotional distress.

Robert Meece, American Wholesale Jewelry president, said he corresponded with Rolex for 17 years before the brand objected to his company’s trade magazine advertisement featuring Rolex watches. He said Rolex then investigated his business with mystery shoppers and subsequently filed a lawsuit. Meece, who admits that converting the watches was a mistake, said he ceased that practice after Rolex notified him.

Rolex is a staunch defender of trademark infringement and counterfeiting and never turns its back on a problem it understands better than any other watch company.

“While many aspects of this case remain before the courts, we are gratified that the court took this action against the reconstruction of Rolex watches with generic parts,” Rolex told JCK. “Rest assured we will continue our vigorous pursuit of anyone involved in converting our watches or in any way participating in the manufacture, sale or distribution of such merchandise.”

Radioactive Cat’s-eyes found in L.A.

At least three radioactive cat’s-eye chrysoberyls have surfaced in the Los Angeles trade. The 6-, 8- and 12-carat stones were shipped in from India and received in Los Angeles by two very reputable colored stone dealers. The cat’s-eyes do not appear to be at all unusual. Their $1,200 per carat price relates well to the somewhat dark honey color, but there really isn’t anything artificial looking about the three. The eyes are sharp, showing a good milk and honey effect.

Carrying the cat’s-eyes around Los Angeles to show potential buyers proved to be unhealthful for one of the dealers, who developed an unusual skin condition on his left side, thighs and hands. Fortunately, because the market for cat’s-eyes is almost non-existent in L.A., the dealer put the stones in his safe for two months. The rash has slowly disappeared, with little help from numerous visits to the doctor.

Almost by accident, the Indian colored stone dealer read about radioactive cat’s-eyes in an International Colored Stone Association alert, and faxed the news to L.A. The dealer put two and two together and quickly paid a visit to the Museum of Natural History. The needle on its geiger counter flew off the scale and the clicking sound was loud and continuous, proving that these were indeed radioactive cat’s-eyes like those spotted in Asia in September.

The stones have been sealed in a lead container and the original dealer notified. It is believed that no such cat’s eyes have been sold to retail customers.

Frank Dallahan joins jck team

Frank Dallahan has joined the JCK International Publishing Group as Executive Director, Trade Relations.

In his 26 years in the industry, Dallahan has held a number of executive positions, including vice president, marketing, for Lenox China and Crystal; president of ArtCarved Bridal Jewelry; president of Kurt Gutmann Jewelry; and vice chairman and chief executive officer of Diamonique Corp., the jewelry manufacturing subsidiary of QVC Network. Most recently, he was executive vice president, marketing and sales, for Krementz & Co.

Dallahan will be actively involved in sales and marketing programs for the various magazines in the JCK publishing group, working with publisher Richard D. Bay and JCK associate publisher Shawn Mery.

A member of the JCK Show Advisory Board, Dallahan will work with industry groups and individual exhibitors and also serve as an industry liaison with the staff of Reed Exhibition Companies, the new show managers.

William S. Preston Jr., one of the jewelry industry’s outstanding leaders, died at his home in Burlington, Vt., on Dec. 7 after a lengthy period of ill health. He was 78. Among his many industry honors, he was a past president of the American Gem Society, the Retail Jewelers of America, the Jewelers Vigilance Committee and the Vermont Retail Jewelers Association. At the JVC he led the work to revise the FTC Guides for the Jewelry Industry. An appreciation of Bill

Preston’s role in the industry will appear in the February issue.