Rolex in Court Part Deux: There's Audio

There comes a moment in the servicing of a watch that is probably easy to miss among the hundreds of steps required to remove a movement from a case, inspect the parts, repair anything amiss, lubricate all the pieces, and put the whole thing together again.

A watch that Rolex's investigator bought at Beckertime for approximately $4,500. The lawsuit refers to this as "Counterfeit Watch One."

That moment is when a watchmaker takes the dial and reattaches it to the movement. There is nothing particularly unique when it comes to the tools required or the tasks involved in this step. Instead, what is unique about this moment is that the watchmaker holds in their hand a mark that is not the property of the watchmaker and it is not exactly the property of the watch's owner. In the case of Vacheron Constantin, that mark is a Maltese Cross. For Audemars Piguet, it is the brand's initials. When it comes to Rolex, the mark is a widely recognized crown.

If the reassembly of a watch takes place outside an authorized channel, this moment is more fraught for a watchmaker than they may realize. Intellectual property rights typically grant a trademark owner the exclusive authority to determine which products carry their mark. An independent watchmaker does not necessarily have permission to apply a brand's mark to anything. Intuitively, it would seem like there is no risk in removing a genuine dial holding a Rolex crown mark, servicing the watch, and then reapplying the same dial to the watch. But the truth is more complicated, as I learned from reviewing materials in a lawsuit filed by Rolex against independent watch seller Beckertime.

Legal jeopardy emerges, in particular, when a brand's mark is reapplied to a watch which has been altered with inauthentic parts. The presence of the Rolex crown and name on the dial, for example, signals that a watch originates from a particular organization with particular priorities, methods and heritage. But if an independent dealer or watchmaker employs methods and / or parts which are not sanctioned by the brand, and then applies the brand's mark to the resulting watch, the dealer or watchmaker has actually confused the buyer about how the watch came into the world and what it is made from. The watch, arguably, crosses into the territory of counterfeit.

This is the heart of the matter when it comes to Rolex v. Beckertime, which is really the latest in a series of similar lawsuits. Before we go any further, I'd like to offer a tip of the hat to Instagram user @thewatchguy. A few days ago, he sent me a DM because he'd found a recording of oral arguments in an appeal of a decision in the case. It is rare to hear a "voice" making arguments on behalf of Rolex. For this reason, it was a fascinating listen (at least for people like me and others who find the watch industry fascinating).

Rolex alleged that Beckertime sold altered Rolex watches, often featuring an afermarket bezel and / or a repainted dial (possibly with aftermarket gemsetting). In my prior post, I discussed a nearly identical, more recent, lawsuit Rolex filed against a watch dealer selling timepieces with aftermarket parts. What makes the Beckertime case a bit different is the fact that the company seems to have taken earnest steps to inform buyers that certain watches were not 100% originally manufactured by Rolex. The watch dealer provided condition disclosures to buyers. Moreoever, Beckertime's lawyer made some intuitively plausible arguments about how the owner of a car, for example, can modify that car using third party parts, perhaps as a "restomod" and not face legal jeopardy.

The response by Rolex's lawyer to these defenses was quite interesting.

A second watch bought by the Rolex investigator at Beckertime, called "Counterfeit Watch Two" in the lawsuit.

First, the attorney noted that there is existing caselaw pertaining to Rolex watches which makes it clear that affixing Rolex's mark to an altered product runs afoul of the brand's exclusive control of its trademark. For this reason, venturing into intellectual property matters in the automobile industry, for example, isn't appropriate. Caselaw extablished through Rolex's prior, rigorous, defense of its trademark may well pay dividends in the Beckertime case.

Second, Rolex convincingly argued that collectors were still confused about the authenticity of Beckertime's altered watches, despite disclosures. The lower court decision (leading to the appeal) cited a number of specific pieces of evidence suggesting that confusion by collectors was a real issue. First, the court discussed an altered Rolex watch and mentioned that its "listed retail price was $4,299.98." But alongside this price, Beckertime published that the watch had "a comparison price of $19,050.00 labeled as `New MSRP (if all factory).'" and that "Rolex has never sold a watch matching the description of Watch One. Therefore, there can be no true MSRP price." The court further noted that "BeckerTime has held itself out as a 'Certified PreOwned Watch Dealer' with a `Rolex Certified Master Watchmaker.'," information which might lead a potential buyer to conclude that Beckertime-sold Rolexes generally had 100% authentic parts. Further, Rolex presented evidence that customers did contact Beckertime and express confusion about the aftermarket modification to their watches, a matter which was particularly troubling because, in the words of the lower court, "BeckerTime's customers are not as sophisticated as Rolex customers, but are not unsophisticated" (ouch).

There are a few additional points worth noting from the oral arguments in the Beckertime appeal. Beckertime's attorney claimed, "This case is about Rolex wanting to control not just the new goods. The only thing it sells through its authorized dealers are new Rolex watches. The only thing Mr. Becker and Beckertime sells are decades old, used Rolex watches." When I heard this part of the argument, I thought about sending in an amicus statement to the appeals court, because the Beckertime attorney was not exactly correct in this statement. As is well-known by watch enthusiasts, Rolex now participates in Certified Pre-Owned watch sales through authorized dealers. Further, Rolex's pending acquisition of Bucherer means that the watchmaker, itself, will have a direct financial stake in sales of pre-owned watches. This means that, in any lawsuit, Rolex will be able to more easily show they are harmed from trademark infringement when it comes to vintage pieces. Independent dealers would be wise to take note that there is greater exposure to financial liability from litigation now that Rolex has a "dog in the hunt" when it comes to pre-owned timepieces.

It is difficult to know how the Rolex v. Beckertime appeal will turn out. If I had to guess, I'd say Rolex will win. There is a lot of prior, similar, case law that seems to work in their favor. However, I wouldn't rule out a surprise. It is clear that the watch industry seemed quite odd to one judge, who remarked that a Beckertime modified watch, "looks kind of like a Rolex and your friends will think you're wearing a Rolex, OK, which apparently is good for something." There are certainly successful enterprises that have been able to sell "modified" watchs on an ongoing basis, such as Vortic and Artisans De Genève, while seemingly avoiding legal liability. It is clear, though, that to get away with such practice, a business must very carefully consider how it characterizes itself and how it actively respects another business's exclusive authority over their trademark.

The Beckertime case is 4:20-CV-1060 and the appeal is 22-10866

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