Honesty.

Sell it and use that exact money to buy 1 watch that is somehow similar. When asked, you can say that you have a problem with fakes, and after years of wanting to appreciate the gift but having a moral objection to it, you made this choice and you’re happy.

Anyone who had their heart in the right place got you the gift to make you happy, not to trap you in unhappiness. Get rid of the bad part of the gift (the physical watch) and keep the spirit of it.

Imagine a Parmigiani and Spaghetti Scametti collab. Yum