Fashion Law : Fashion Lawyer & Attorney : Fox Rothschild Law Firm : Licensing, Intellectual Property

Guest post by Tom Chan, Esq.

The entire fashion community is talking about Lululemon's recent design patent infringement suit against Calvin Klein, wherein Lululemon claimed Klein violating its rights in its iconic "cross-over waistband."

The recent settlement between Lululemon and Calvin Klein is stirring up renewed interest in design patent protection for apparel brands.

Contrary to common misconceptions, design patents should be an arrow  in every fashion designer's quivers because they are:

·  inexpensive to obtain, about $2,000-2,500, including fees and costs, around the cost of a trademark registration.

·  easy to get: almost 90% are allowed and around 80% do not even receive an office action,

·  often granted in 6-8 months, faster than trademark applications and comparable to copyright applications.

Oh, and the best part? Recently, we have successfully avoided the cost of technical drawings by using a digital picture instead.  

And there is more good news:  protecting your design patent in court posses less challenges than protecting other types of IP your brand may own.  For example:

·  unlike in a trademark  infringement case, a costly survey to show confusing similarity is not needed; and

·  unlike in a copyright infringement case, the designer does not have to prove access and the USPTO will not reject the application because it is an utilitarian article.

 Now, to give you the full picture, you need to know there are some disadvantages, which include: most garment employers/principals do not have the proper pre-employment agreement to vest the title of the fashion design patent in the employer/principle, since unlike the work for hire concept in copyright law, the employer only has a “shop right” in the design patent, which amounts to an implied nontransferable paid-up license from the creative employee; only registered patent lawyers can apply for design patents, even though a design course is not  a prerequisite for qualifying to be a registered patent lawyer, instead science/engineering lab courses are required; and styles change so quickly in fashion, so you need to have "staple" or iconic pieces in your collection.

Other brands besides Lululemon are successfully using design patents to protect their items.  For example, Nike aggressively protects its shoe designs using design patents and files many design patents.  This Nike's Design Patent No. D659,988 was issued after less than three-months.  

Yet, many fashion lawyers are not familiar with design patent law, giving design patent plaintiffs a leg up, and many fashion designers do not have an ongoing relationship with a patent litigator who the designer can call on to show up in federal court on 24 hour notice to defend a TRO.   

So don't be stuck in down-dog; instead try a sun salute, center your third eye and remember to consider design patent protection to keep your brand in top shape.

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I hope everyone had a great holiday season and for those of you in the office, are having a smooth transition back.

2012 came to a crazy year end for Congress, and while they may have resolved the income tax portion of the fiscal cliff, they postponed the rest of the open issues until 2013.  We'll have to wait and see how that drama plays out in this first quarter.  But here is the good news:  the Fashion Copyright Bill, currently known as Innovative Design Protection Act of 2012 (S. 3523) (IDPA) or the Destruction of Affordable Fashion Act as we call it here at the Fashion Law Blog, has (once again) died in Congress.

Why? Because the 112th Congress has ended and the bill was not passed into law. 

What does that mean for the Fashion Industry? 

The status quo remains, at least for now.  My guess is CFDA darling Senator Schumer will introduce some form of the Act for a seventh time in this next session as this is one piece of legislation that just keeps desperately trying to live another day.

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Caught your attention, right?  What in the world does Fashion, Food, Football and Finance have in common?  And why are you reading about it on the Fashion Law Blog?

Well, all four industries are thriving, despite having very little intellectual property protection.  They are also covered in Professor Kal Raustiala and Professor Christopher Sprigman's new book, the Knockoff Economy (along with Magic and Comedy),

As you all know, there are those in the Fashion Industry claiming fashion designers need copyright protection, and you, faithful readers of this blog, know we are vehemently against such legislation, calling it the Destruction of Affordable Fashion Act.

In the Knockoff Economy, you will see studies that show in the past several years, high end fashion designers - those most vocally in favor of the new laws - have realized increased sales and increased profitability.  So, the authors argue, why change something that isn't broken? 

Oh, and let's compare fashion to the music industry for a sec.  The music industry has been given heightened intellectual property protection in recent years.  Now look where it is....facing the largest losses ever seen.

Is that the path fashion should take?  Nah.....Remember we innovate and set trends.

xoxo

Staci

ps -- the book would make a great holiday gift.  You can buy it here.

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So Congress was back in session for 5 days in September, which was just enough time to enact a temporary budget to avoid a government shut-down, and for the Senate Judiciary Committee to act on the Design Piracy Bill, or as it is known here at the Fashion Law Blog, the Destruction of Affordable Fashion Act.

Renamed the Innovative Design Protection Act of 2012 (S. 3523) (IDPA) when it was introduced into the Senate on September 10, 2012 by CFDA darling Senator Schumer, the IDPA was reported favorably out of the Senate Judiciary Committee on September 20, 2012.  IDPA now sits on the Senate's Legislative calander, waiting for the senators to come back to the "lame duck" session of Congress.  

Having reviewed the bill, we wanted to point out two changes:

• First, a person/company is required to give notice to a potential infringer and then wait 21 days before filing suit.  Us fashion lawyer typically call this a "safe harbor provision."

• Second, damages don't begin to accrue until notice of potential infringement is sent.  This should mean that the amount at issue is only sales made AFTER that date.  Right now, in fabric copyright cases for example, once a potentially infringing item is found, the plaintiff generally claims all profits for the sale of that style or statutory damages.  Most sales are made PRIOR to the sending the cease and deist and/or filing of the action. 

Not much has been said about this radical change in the potential damages, but I think this is a step in the right direction.  The only problem is when you have de minimis damage awards, the case becomes all about attorneys fees.  For example, have you gotten a class action settlement where you get $.25 off your next cable bill, but the attorneys get over 6 figures?  Yeah, that's what will happen here.  As a fashion lawyer who defends copyright infringment cases, I guess I shouldn't complain, but a bill where only the attorneys wins is not good for the fashion industry or you the consumer.

In sum, we maintain our previous position:

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September is turning out to be a hot fashion law month, and we are only into week two!

Today, WWD reports Senator Charles Schumer (D., N.Y.) has once again introduced the Design Piracy Bill into the Senate. It is no secret that we here at the Fashion Law Blog are not fans of this legislation, and have dubbed previous incarnations of the bill, the Destruction of Affordable Fashion Bill. 

This time, we reserve judgment (kinda) as the exact text of what was introduced toady is not yet available, but we have no expectation that it will be any better than Schumer and crew's last five attempts.  But, we'll share it once we can get our hands on it and then we can all decide together.

In the meantime, one has to wonder WHY Schumer introduced this bill now?!  With elections rapidly approaching, Congress will only be in session about another two weeks.

Maybe Schumer is being passive aggressive - submitting the bill to please his generous contributing constituents, but knowing nothing will ever happen on it.  Win-Win, for him right?

Sigh.  Well, here's to hoping that Congress spends its Fall dealing with our economy, expiring tax cuts, fixing the deficit and avoiding a government shut down.  Otherwise, this will really be a September to Remember.

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This morning, the Second Circuit Court of Appeal issued its long awaited decision and it contains something for everyone.

To summarize, the Court narrowed Louboutin's "Red Sole" trademark to:

"only those situations where the red lacquered outsole contrasts in color with the adjourning 'upper' of the shoe."

Once the Court reached this conclusion, it necessarily follows that YSL's monochromatic shoe does not infringe on the red sole mark and thus, the District Court properly denied Louboutin's request for a Preliminary Injunction.  Once the Court limited the mark and found in YSL's favor on infringement, the Court did not need to discuss the highly debated affirmative defense of aesthetic functionality.

Louboutin is very lucky that it gets to keep some of its trademark and should say a prayer of thanks to the Court of Appeal (remember, the District Court was ready to cancel the Red Sole Mark in its entirety). 

As I said back in August 2011:

I also have to wonder why Louboutin chose YSL as its test case.   Especially when the YSL shoes Louboutin claim are causing customer confusion look nothing like his and have been used by YSL long before Louboutin used his red soles. 

Again, poor lawyering or maybe the result of two long time French competitors taking a grudge match to the US Courts.  Someone should have warned Louboutin about the American legal system.

While this morning's blog posts tout this decision as a victory for Louboutin, I am not so sure.  Yes, it is nice that the Court found that the Red Sole Mark, as modified, had secondary meaning, but no one really doubted that.  To me, in determine a win, I ask:

Are you in a better position today than before filing the suit?

Here, the answer to that question is clearly "NO."  Louboutin's trademark is narrowed (not far enough in my opinion - I would have included the pantone number for the red).   

YSL, and anyone else out there for that matter, can sell all the monochromatic shoes they want.

So despite claims of victory, if I were Louboutin, I would still be seeing red.

xoxo

Staci

ps -- check out footnote 19 where the Court explains that "the more appropriate vehicle for the protection of the Red Sole Mark would have been copyright and not trademark."  Does this set the stage for future IDPPPA battles or what?  Imagine the drama!!  This footnote also gives insight on the Court's view of functionality.  So, Fashion Law fans stay tuned!  (and remember that the juiciest bits are always in the footnotes!)

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Why is it that success makes others so jealous?  

Working late, a google alert brought my attention to a Businessweek story on Forever 21's historic opening on Fifth Avenue.  The story was snarky and writer's apparent disgust of the chain's success a surprising contrast to the quality articles published by Businessweek.

The most shocking quote of all came from Susan Scafidi, the director of the newly launched Fordham Fashion Law Institute:

"Their design is swathed in mystery. . .But it probably looks a bit like a crime scene, with the chalk outline of the garments they're copying."

Ouch!  From a law professor no less, one who knows the difference between copying and counterfeiting. 

Instead of being mean girls, let's take a look at the facts:

The Changs came to this country in 1981.  They opened their first store in downtown LA in 1984 and had first year sales of $700,000.  Forever 21 founds its niche -- affordable fashion that brings joy and self-esteem to people at all socio-economic levels. 

Not only does Forever 21 have an eye for style, they understand the business of fashion:  you only make money by controlling your margins, dilution and inventory.

Today, Businessweek reports that Forever 21 has 35,000 employees in 477 stores with sales of almost $3 billion.   That takes determination, long hours, and drive.

Yes, you can find Forever 21 items that are inspired by other designers, but there is nothing illegal about that and I dare you to show me one designer that hasn't been inspired by the works of another.

This story should have been written as an inspirational tale of a hard working, immigrant family with a vision.  A reminder to us all that the American Dream is possible, especially when you find your niche.

So, all you fashion entrepreneurs out there, ignore Businessweek's sour grapes and join me in congratulating Forever 21 on their success. 

2011 is a new year and a time for new possibilities.  Where is your niche?  Will you be the next American Success Story?

With faith, and hard work, you can achieve anything you set your mind to.

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Consumers beware.  The cost of clothing is about to rise.  Reasonably priced fashionable items will be non-existent and affordable clothing will be utilitarian and boring.  Why? 

The Innovative Design Protection and Piracy Prevention Act ("IDPPPA") was unanimously approved by the Senate Judiciary Committee yesterday and now moves into the Senate for a full vote.

Deceptively called the "fake fashion bill" by its supporters, this bill has nothing to do with Counterfeit goods or Knock-off goods, which are covered under trademark law and are illegal.

This bill, more appropriately called the Destruction of Affordable Fashion Bill, seeks to amend copyright law and will:

• put numerous small businesses that don't have $400,000 to spend on litigation out of business;
• cause 1.6 jobs to be lost in Los Angeles for every fashion job lost;
• severely disrupt the fashion manufacturing process;
• cause lenders to stop lending;
• increase expediently the work load of the federal judiciary -- the court that rules on copyright litigation;
• narrow your choice of clothes; and
• increase the cost of the few items you can buy by at least 30%.

Pretty scary right?

And legally, the Destruction of Affordable Fashion Bill will wreck havoc in the courts, tying up dockets (and your inventory) for years because: 

• it violates due process because designers are not required to file a copyright registration on their alleged "original design;" and  
• its has new, uninterpreted terms - like "substantially identical," "deliberate copies" and "independent creation."

just to name a few problems. 

And, yes, the trial lawyers i.e. the plaintiff's bar that work on contingency fees, support this bill.  Why wouldn't they?  There is no loser pays provision in the Destruction of Affordable Fashion Bill, so if a plaintiff files suit on a design they feel is original and they lose, they never have to deal with the economic consequences. 

So let's all give a big round of applause to the CFDA and Senators Charles Schumer, Orrin Hatch and our own Dianne Feinstein. 

When unemployment rises, your business collapses and the economy gets more depressed then it already is, you'll know where to send your thank you notes.

Related Fashion Law Blog Posts:

Why IDPPPA is going to KO the Business of Fashion

IDPPPA: How to SLAPP the Sting Out of Frivolous Litigation

IDPPPA will not prevent frivolous litigation

BREAKING NEWS: New Design Piracy Bill Introduced into Senate

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In a position paper published by the California Apparel News on September 24, 1010, Kevin M. Burke President and CEO, American Apparel & Footwear Association ("AAFA") said:

The IDPPPA also dramatically curtails the opportunities for the industry to become mired in frivolous lawsuits. Unlike previous attempts at design-piracy legislation, this bill establishes a clear system to both initiate and defend against an infringement claim.

To discourage legal intimidation and unnecessary lawsuits, the legislation creates a heightened three-step pleading process in which the burden of proof lies completely with the plaintiff. A plaintiff must demonstrate that the design in question is protectable, the offending design is substantially identical and the infringer had access to the protected design. In other words, this improved pleading requirement stops mischief before it even hits the courtroom.
 

As a seasoned fashion litigator, I can tell you that Mr. Burke is just wrong.  There is nothing the IDPPPA pleading requirement, heightened or not, that would deter a plaintiff from suing that believed that its design was original. 

Lay people tend to forget that pleading does not equal proving.  You prove to a jury or judge, at the end of the litigation process. 

The purpose of pleading is to give the other side enough information so they know why you are suing them.  It occurs at the very beginning of a lawsuit and if you don't plead well, judges almost always let you try again.

Again, if I were a proponent of this bill, and I really wanted it to deter frivolous litigation, I would include ANTI-SLAPP like procedures, which significantly, make the Plaintiff pay for the Defendant's attorneys fees if the Defendant prevails.

But, my guess is that the CFDA and the AAFA aren't worried about defending suits, as their constituents will be the ones suing.

Only time will tell.

ps -- if you want to join me for a live discussion on the current state of Fashion Intellectually Property Law and IDPPPA, I will be presenting at GlobalTex on September 29, at 'Your Legal Lifeline - Specialists Required! '

The panel, which is from 4-6 in the West Hall, Hall A, is preceeded by a wine tasting starting at 3pm - fun!!  Hope to see you there.

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Anyone in favor of the Innovative Design Protection and Piracy Prevention Act needs to read the recent ruling in Express v. Forever 21.  In that case, Express claimed that Forever 21 infringed on both its copyright in a plaid print and its tradedress in 4 pairs of shorts and a jacket.

Express lost, as it should have, as its copyrights were improperly filed and more importantly, it's tradedress claim failed because Express could not prove secondary meaning, a very high standard as we have often discussed. 

Sitting here today, I wonder if this case foreshadows what awaits us if IDPPPA passes?

In this matter, we have one large company suing another, because it thought its plaid jacket and shorts were so distinctive that consumers associate the item (ie the jacket or shorts) with the supplier (ie Express).

Here the Court note that if it were to accept Express' arguments:

"virtually every garment Express sells has secondary meaning.  Unfortunately for Express, secondary meaning is not so lightly bestowed."

What about "originality" under the new IDPPPA??  Will Court's look, like this one did, to the designer's testimony about the creation process and look for documentation supporting that process?

If your designers use trend reports, magazines, look books or runway shows as inspiration, will you be liable for copying?  Likely.

Will large company's sue because they think their non-distinctive design is original?  Probably.

And could they win?  Maybe -- we'll have to see which way the fashionable judiciary's gavel rolls.

photo credit: shoppingblog.com

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As you know, I am not a fan of the proposed Innovative Design Piracy Protection and Piracy Prohibition Act ("IDPPPA").  IDPPPA is something that sounds good on paper and lures in the public, like Johnnie Cochran did with OJ's glove.  And then, before we know it, the jury will conclude that OJ Simpson is not guilty, despite the DNA evidence.  Best.closing.argument.ever.  (and you should read the book)

There is no debate that counterfeits are illegal.  But there is no such thing as "original design" in fashion.  And without originality, nothing truly can be a copy.

If you read last week's WWD you were able to see where the inspiration of s/s 2011 came from.  If you watch Project Runway you can see contestants are given look books and style guides to draw inspiration for new creations.

But I digress. 

The proponents of IDPPPA claim that this third version protects against frivolous lawsuits by requiring the plaintiff to plead with particularity.  Nonsense.  As any seasoned litigator will tell you, this requirement will only increase the cost of litigation. 

Now, if I were a proponent of this law, and I really wanted to stop frivolous litigation under it, here is what I would do:

• I would require all fashion designs be registered with the Copyright Office, and have them indexed, examined and searchable, just like Trademarks currently are; and
• I would incorporate Strategic Litigation Against Public Participation-like (SLAPP) procedures to afford a falsely accused Defendant an opportunity to get out of the lawsuit quickly and for a fraction of the cost of regular litigation.

(note, I am about to sound like the Fashion Litigator I am, so if this stuff makes your eyes glaze over, I am warning you to stop reading now.....)

Most of you are probably familiar with the Trademark Office and can related to the suggestion in point 1 above.  SLAPP, on the other hand may be a foreign concept so I am going to give you a bit of an overview.

SLAPP was enacted by the California legislature to protect the rights of free speech of environmentalists and other "little people" fighting big oil companies, developers and such.  The government found that Big Businesses were using lawsuits to abuse protesters by suing them for a variety of free-speech related reasons, usually under the guise of slander or libel, merely to scare the protesters into going away instead of having to spend tons of money defending themselves personally in court. 

So, the legislature devised a way for the small fry to get out of frivolous litigation fast and easily - it allowed them to yell "SLAPP," and then file an ANTI-SLAPP motion to reveal the true motivation of Big Business - squashing free speech with their large litigation budgets. 

But then, to the dismay of (some) the judiciary and (most) of the legislature, SLAPP morphed at the hands of crafty attorneys and expansive-reading judges, and became this neat trick that litigators tend to over use for all types of causes of action not just those relating to free speech, and it has spanned further legislation like SLAPP-Back motions. 

Yes, it is a bit of a hot mess, but some of its provisions can be useful in strengthening the proposed IDPPPA legislation.  Here's how:

1. Allow a defendant to file an "ANTI-SLAPP" type motion within 20 days of service of a fashion design copyright complaint.  In this motion, a defendant would essential plead that the plaintiff's "fashion design" is not original and doesn't warrant copyright protection under the act.
2. Once Defendant's motion is filed, all discovery is stayed until the ANTI-SLAPP motion is ruled upon by the Court.
3. Then, the burden shifts to the Plaintiff.  To proceed with the litigation, in its response to the ANTI-SLAPP, the Plaintiff must prove that its Fashion Design is original within the meaning of IDPPPA, and Plaintiff has substantial probability of prevailing on the merits of its case.
4. If the Defendant wins, the Plaintiff must, like under SLAPP, pay for ALL of defendant's legal fees incurred in filing the ANTI-SLAPP motion.  And a Defendant may be award punitive damages if the Court finds the Complaint frivolous.  (If the Defendant loses, the case proceeds as usual and the Plaintiff only gets their fees if the Defendant's ANTI-SLAPP motion was frivolous.)

If we are going to be stuck with this terrible new law that will put numerous companies out of business, and raises the cost of clothing for all consumers, don't you think America's manufacturers deserve as much protection as the environmentalist? 

Both are endangered species, right?

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Apparel manufacturers.  I am worried about the Innovative Design Protection and Piracy Prevention Act ("IDPPPA") and so should you. 

Do you know that last week WWD predicted a 10-15% rise in the wholesale price of fashion products for spring 2011? Or home sales are down 27% this year and unemployment remains about 9.5%? Or that cotton costs are up 32.2% and analysts are predicting dim holiday sales?

The last thing our country, its fragile economy and the apparel industry needs is more legislation that is guaranteed to drive up the cost of fashion products.  IDPPPA would do just that. 

How?  By giving fashion houses with fat litigation budgets the opportunity to convince judges that their designs are uniquely different from anything that has ever been made before.  If you know your design history, or even have worked in the fashion business for awhile, you know how hard that standard is to meet. 

But this is America and everyone is "entitled" to their day in court.  Plaintiff's lawyers (working on a contingency) are creative and judges historically interpret copyright law expansively.  Companies all along the supply chain would pass off the cost of litigation to the retailer purchaser.  Just what the country needs right now, right?

And the harm of IDPPPA doesn't stop there.  Since IDPPPA requires a plaintiff show that a defendant had "access" to the alleged copied products, designers would have to stop:

• reading fashion magazines;
• shopping retail stores or attending trade shows;
• watching or subscribing to trend reports, or
• caring about the runway shows.

If they do, designers will be prohibited from claiming that their designs are the "result of independent creation."   Another hit our economy doesn't need.

So, if you want to influence the process, now is your chance!  Call your congressmen and senator today. 

Otherwise, you'll have no right to complain when it costs more for clothes for you and your family, or when an unscrupulous plaintiff (think of the ones we see making fabric claims) sues you.

Take action now!!!

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by: Cassidy Saitow

On Friday, the California Apparel News reported that a major shipment of fake True Religion jeans was discovered in a random search of incoming cargo. Authorities unveiled over 21,000 pairs of jeans that were disguised under Tuff Made USA labels and false metal button covers. Underneath were counterfeit True Religion brand labels and True Religion embossed button heads. The street value of the contraband is $1.5 million dollars, and if sold at full price, the jeans would be worth $6.2 million dollars!

While it was a random search, this huge stop does show the Port of LA means business, and is going to keep a watchful eye out for counterfeit goods.

Here are a few other things you can do to help out the ICE and Border Patrol officers:

1. Centrally ship your product from the same location so that authorities know the chances its genuine are better when it comes from one place;
2. Keep authorities up to date on what your product looks like and how counterfeiters are trying to fake your genuine product. For example, True Religion knows that counterfeiters actually cover up the fake True Religion "made in the USA" labels with other brand labels, as they did here. Their brand enforcement people train the authorities at the Ports to look extra closely at goods to determine authenticity; and
3. Trademark and copyright the aspects of your product that you can, as the more protection you have, the more chance you can enforce your rights. There's a reason why True Religion jeans have T's and R's on the rivets and the Buddha all over the pocket bags: they are marketed as design features, but are actually critical components of the jeans that are protected which helps give some recourse when they are full on counterfeited!

While this was just a random check, the scary thing is that True Religion spokespeople pointed out that an average consumer who didn't already have a pair of True Religion jeans could be deceived into thinking these were real.  I have True Religion jeans, and I'd hope I could distinguish the quality, but for the company to point that out shows just how valuable this seizure was.

Go Port of Los Angeles!!!

photo credit: CAN

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In the past quarter, there has been a tremendous increase in licensing and acquisition activity in the fashion industry.  For example, in June, WWD reported that Jamie Salter of Authentic Brands Group is actively looking to acquired lifestyle brands.  Two weeks ago, Billabong bought RVCA. 

Is your Fashion Brand being overlooked?  And if so, why?

Yesterday, I published a practical advice piece, "Are You Fit to License" that discusses what licensing is, how it works and offers tips and advice as you begin your licensing journey.

Remember, done right, licensing gives a company opportunity for massive growth in a very short amount of time, for a minimal investment.  Why?

Because every dollar you receive in royalty goes directly to your company's bottom line.

Photo Credit: A Reason to Write - India

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With the World Cup in full swing, street vendors hawking counterfeit products are out in full force. [Video]  Allegedly, the official FIFA suppliers are losing millions of dollars and South Africans are losing jobs because the official products are suppose to be manufactured in South Africa. 

According to the Dawn Media Group, South Africa's Counterfeit Goods Act makes possession of fake goods a crime which can result in a three-year jail term or a 5,000 rand (approximately 650 US dollars) fine per item found in possession.  This is in direct contrast to US law.  Here, only the sale of counterfeit products is a crime. 

I wonder if this difference will impact a potential buyer's decision?  Or will cost, $85 for an official jersey compared to $15 for a knock-off, a substantial difference given the standard of living in South Africa compared to the U.S, drive choice? 

As we have previously discussed, in fashion, unlike many other industries, the purchasers of counterfeit products usually know that they are buying a fake.  Even more interesting is a recent study that  show that 46% of all people who buy counterfeits end up buying the real thing.

It will be interesting to see how this one plays out.

photo credit: FIFA

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I just saw this presentation tonight online that Johanna Blakley gave at the TED conference:

Not sure if I embedded it correctly, so you may have to click here for the PDF or click here for it on You Tube.  Johanna oversees USC's Ready to Share project.

Anyone interested in Design Piracy or whether Fashion Should be Copyrighted should watch it.

And if any of you out there can introduce me to Johanna, I would love to meet her!

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To end counterfeit week, I challenge each of you to examine your own attitude towards purchasing counterfeit fashion products, like purses, shoes or watches.

Earlier on this blog, guest author Biana Borukhovich, after recognizing views about the passage of the Design Piracy Prohibition Act ("DPPA") differ greatly from coast to coast, suggested that the difference could be caused by the annual amount of counterfeiting that each coast incurs.  Specifically, Biana wrote:

For example, in December 2009, New York City officials confiscated over $1 million in “knockoff” designer handbags, watches, and wallets in Chinatown.

In addition, roughly ten buildings along New York City's Canal Street housing over thirty counterfeit operators were shutdown for illegal sale of counterfeit items. On the other hand, this year, only four storefronts near Fisherman’s Wharf in San Francisco were closed down due to counterfeiting.

But after spending last week in NYC, I think Biana has it backwards.  Here's why: 

If you are accustom to seeing and buying fashion counterfeits, and you believe that doing so is ok, doesn't hurt your integrity, and doesn't really harm anyone, wouldn't that belief easily translate into your attitude towards using other designers products as inspiration?

Putting it another way, since copying or being inspired by other  fashion designs is common, accepted and is legal in the fashion industry, maybe this freedom informs consumers decisions to buy counterfeits? 

If consumers know that it it is ok to buy an ABS dress that is a "copy" of a couture gown, why is it wrong to buy the counterfeit Prada being offered by the street vendors?

And interestingly buying counterfeits is legal.  Selling them is not. 

So if attitudes towards copying and counterfeits are linked, wouldn't New Yorkers, like Diane Von Furstenberg and the other Council of Fashion Designers of America ("CFDA") members or Professor Susan Scafidi be more likely to think copying is ok?

What do you think?

photo credit: my blackberry so I apologize for the blurred images. 

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The answer is: it depends.  (yes annoying answer, I know, but even a Fashion Lawyer sound like a regular lawyer at times)

It is undisputed that counterfeits are illegal.  But no one really knows what economic or social effect fakes have on the U.S. economy.  An MIT study has shown that almost half the buyers of counterfeit fashion products subsequently purchased the authentic version.

In the rest of today's post, Cassidy Saitow, my fabulous intern and FIDM student, takes a look at the costs of counterfeits:

Fakes are bad. But just how bad are they?

The US Government Accountability Office ("GAO") can’t put a number on it, but estimates counterfeit goods affect the economy in the order of $200 billion.  Apparel, footwear and handbags comprise just over 50% of this figure. 

The World Customs Organization estimates that counterfeit goods steal $600 billion annually from brand owners, or 7% of global trade. Whether it’s $200 or $600 billion, it is clear that counterfeiting is putting a dent in the global economy.

Buying a fake is not harmless.

Profits from counterfeit sales have been linked to human trafficking, drug crimes, and terrorism. The worst part is that while much counterfeiting occurs in factories in other countries, it also occurs under the radar at "purse parties" which are much harder for law enforcement agencies to track.

How can you stop it?

Don't buy counterfeits!  If you are a brand owner you can take some affirmative steps to protect your brand as well as educate your customer so they understand the importance of buying the real thing.

Put the government to work

You and you company pay taxes so take advantage of government programs designed to combat counterfeiting.   For example, US Customs can help stop the importation of counterfeits and local law enforcement also takes an active role in prosecuting trafficking and smuggling counterfeit goods. Often they view it as the tip of the iceberg into cracking a larger crime ring.

Remember, in her days before serving on the United States Supreme Court, Justice Sonia Sotomayor wore a bulletproof vest while conducting warehouse and alley raids in New York’s Chinatown to crackdown on Fendi counterfeits.

As we have discussed on this blog previously, people buy fakes for appearances (also called signaling), self-esteem and because they just cannot afford the originals.  Some you have commented that it could be a sizing issue also, which I also find credible.

But in the end, they why doesn't matter -- it is illegal,   The GAO or the powers that be need to figure out just how big of a problem fashion counterfeiting really is as compared to drugs or auto parts -- counterfeit products that directly endanger human safety.  That would calm the hysterics and allows us to fight Cannel street (and its ilk) with the appropriate amount of government resources.

photo credit: the Fashion Bomb

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What exactly is a counterfeit anyway? You have likely heard the term and if you have been to Canal Street, Sante Alley, High Street, the Silk Market or a Turkish bazaar, you don't need a fashion lawyer to tell you, as you have surely seen them.

A counterfeit product is one that is made without permission of the brand owner, that the seller is trying to pass of as an original product.  In fashion, the seller will generally incorporate a brand's logo or name, which is illegal.  By doing so, the seller violates trademark law as well as federal, anti-counterfeiting law.

Interestingly, in fashion, unlike many other industries, the purchasers of counterfeit products usually know that they are buying a fake.  Even more interesting is a recent study that  show that 46% of all people who buy counterfeits end up buying the real thing.

Finally, you must know that there is a distinction between counterfeits and knock-offs.  In fashion, clothing designs do not have any sort of legal protection.  Hence the prevalence of designers paying homage to, gathering inspiration from or copying the products of another.  The fashion industry refers to these imitations as "Knock-Offs."

photo credit: For The Love Of Lily

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Since the dawn of fashion, there have been those that have made a living from creating goods that look like, pay homage to, or are inspired by the original.  In today's WSJ, Christina Binkley discuss the speed at which copies or "knock-offs" arrive in the marketplace.  Binkley's explanation of why, is spot-on:

The fashion world is ravenous for new jewelry, accessories and clothes to fill the shelves of retailers and Web sites, many of which seek to offer fresh inventory as often as every two weeks. Often, existing designs become the inspiration for new, mass-produced pieces.

As I discussed previously, that is exactly how trends start.  In her article, Binkley uses the "Shashi bracelet" by Yuvi Alpert and Danna Kobo as an example of a trend:

• The bracelet was introduced at retailers Henri Bendel and Intermix in May 2009;
• Influential stars including Ms. Lohan and Katy Perry were soon wearing them;
• By December 2009, Mr. Alpert and Ms. Kobo had sold 10,000 of the bracelets;
• By February 2010, the bracelets' retailers began complaining about less expensive versions; and
• Now, at the end of April 2010, orders are either no longer being written or are being canceled because cheaper versions are available.

I don't know about you, but any item that sells for over a year is pretty remarkable in an industry that requires fresh product every 6 weeks.  As Mr. Alpert and Ms. Kobo stated:

The Shashi helped fund the young designers' development of their more expensive Ruby Kobo jewelry line, for which they won a 2010 Council of Fashion Designers of America "Incubator" award.

That's pretty impressive. 

Despite this success, critics, like Professor Susan Scafidi of Counterfeit Chic, still implore the need for more legal protection for small designers because for "an emerging designer, cheap knockoffs can be a knockout blow.  Thus, "young and independent designers are exactly the ones who need a bit of legal protection."

I, on the other hand, think the proposed Design Piracy Prohibition Act (DPPA) or its spawn as proposed by Professor Jeannie Suk, ignore the realities of the business of fashion including the financial ramifications of such a law; would make judges the arbitrator of fashion; and as Binkley accurately states, "would benefit only big brands that have the resources to apply for and protect their copyrights, trademarks and patents."

I stand firm in my position:

As a practicing fashion lawyer, litigator, former COO of apparel companies and the fourth generation of my family to work in fashion, law professors and politicians with no hands-on fashion industry experience should not be allowed to "fix" something that they have no practical knowledge of. 

The solution?  Binkley provides us with one:  Designers need to do what they do best - provide a steady stream of "new" material.  Then, they will get known for being innovators and the leaders in their market.  (Binkley's sentiment is echoed by Janine Blain, Vice President, The Doneger Group here [video])

I will end with two quotes:

When you are talking about fashion, lose the word original. Ask the small designers where they got their inspiration. Ha! They pull it from others." 

…Marc Jacobs; and from Project Runway's Tim Gunn:

"fashion designers, it’s not as though you’re creating fire or inventing the wheel. These things already exist.”
 

photo credit: mijjo

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On Tuesday, April 20th, the California Fashion Association hosted a presentation and panel discussion on the Design Piracy Prohibition Act (DPPA), as part of the ‘Market Tuesday’ series for the California Market Center.  I was honored to have been asked to speak, and I am working on posting some video clips. 

I am still having some problems, but try these for now:

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The Design Piracy Prohibition Act polarizes the fashion industry.  In an industry where many designers come out with similar looks each season and where inspiration is said to be "in the air," the question remains whether fashion design should be given intellectual property protection when currently it has none.

On Tuesday, April 20, 2010, from noon to one, the California Fashion Association (CFA) invites you to the California Market Center Annex (in the lobby) come join an interactive panel discussing:

• Difference between copyright, trademark and counterfeit
• Inspiration vs. knock-off?
• Legal Ramifications
• Effect on Retailers

Moderated by CFA President, Ilse Metchek, the panel includes:

• Janine Blain, Vice President, The Doneger Group
• Brian Weitman, President, STC-QST and TALA 
• ME, Staci Riordan!

The event is free, but you must register.  [click HERE to RVSP] or email jriggs@californiamarketcenter.com.

Please come by and introduce yourself.  Not only should it be fun and educational, but a good in-person networking opportunity as well.

Hope to see you there!

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The debate over Design Piracy continues in the blawgosphere this week.  Princess Dominique highlighted a Steve Madden shoe inspired by Christian Louboutin and asked her readers:

• Should there be limits to copying? and
• Would your view change if your living came from a business where knock-off's were ramped?

The commentators made an interesting point. 

After clearly distinguishing between the two types types of goods commonly referred to as "knock-offs" --  imitations, copies or inspirations compared to counterfeits, which violate trademark law -- to most, imitation shoes were not as disturbing as imitation purses.  

I wonder why?

Could it be the price tag, the visibility or the status each alleged gives the owner?  What do you think?

photo credit:  princess dominique

p.s. h/t The Manolo

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Most everyone in fashion knows that clothing does not have Copyright or Trademark protection.  Hence the prevalence of designers paying homage to, gathering inspiration from or copying the products of another.

What most people don't know is that it is almost the 10th anniversary of the seminal case that set the standard of whether clothing has Trade Dress protection.  Fashionlawyerblog.com posted an interesting article today, by fellow fashion lawyer Joseph Gioconda, recounting the battle between Walmart and Samara Brothers, where the Supreme Court decide that clothing design can only be protected when it is "distinctive" or:

"only upon the designer’s proof of 'secondary meaning;' that is, once enough consumers have come to identify the design as emanating from a single source."  

Gioconda concludes "[f]or better or worse, the Samara ruling forced designers and their copiers to compete in the marketplace."

Whether such competition helps or hurts fashion is fiercely debated within the industry today.  Recent studies have shown that copying may just help the industry.

To make things more fun, there is a recent trend of increased filings of Trade Dress lawsuits by designers, such as Alexander McQueen and Balenciaga, that are apparently sick and tired of their best selling items being"knock-off."

With the amount of pressure and attention the current regime is getting, this may be the decade the rules governing copying in fashion change, especially with the rise of the internet and social media. 

But for now, recognize that you may be copied and use that information to create your own game. Don't try to beat the competition, be different than the competition.

photo credit: apparelnews.net

ps -- please remember that FABRIC can have copyright protection and that there is no such thing as the "30%" rule.

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This past weekend, the Stylist reported that Bird Handbags has sued Juicy Couture, now owned by Liz Claiborne, for Copyright Infringement.  Despite a thorough search, I haven't located the complaint.  So, perhaps Bird Handbags is merely contemplating suit, as report by Fashion Week Daily. 

Regardless, the report of an alleged copyright infringement action odd; as a fashion lawyer, I have not seen a handbag that is protectable by copyright law, but it could be possible to protect the fabric it is made out. 

The Fashion Week Daily article seems to imply that Liz Carey, the owner of Bird Handbags, former model and ex-wife of Oasis drummer Alan White, is upset that Juicy is calling its handbag line, Bird by Juicy.   

A  company name can be protected under Trademark law.  In September 2008, Juicy Couture, Inc., filed three intent to use applications for the mark "BIRD BY JUICY" for classes 25, 18 and 14 (these classes include clothing, handbags and jewelry among other things).  In October 2009, Bird Handbags filed a trademark application for the mark "BIRD" for class 18 (bags), on a combination use and intent to use basis.  Bird Handbags claimed a first use date of July 2007. 

Usually, the first to file wins.  But this is an interesting situation because Juicy has not yet filed a statement of use, Bird has the earlier use date and Bird will likely rely on a combination of common law and federal law trademark claims.  So, for now, the answer is up in the air.

 photo credit: TinyZippers.com

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Its raining cats and dogs, or at least combat boots, this season. 

Last week, Danner Inc., sued Rag & Bone for selling the "Danner Combat Boot by Rag & Bone" to Saks and Barneys, joining in on the trademark infringement trend started by Alexander McQueen and Balenciaga.

Left: Danner Boots. Right: Danner Combat Boots by rag & bone.

Without yet reading the complaint, two things strike me as very odd:

1. In this case, the knock-offs, priced at $525.00, are more expensive then the original, priced at $265.00; and
2. Rag & Bone actually seems to be using the DANNER trademark in commerce i.e. by naming, selling and promoting its shoe under the name "Danner Combat Boot by Rag & Bone."  As Ron Coleman discussed in his excellent analysis of the Balenciaga LEGO complaint, use of someone else's trademark in selling your product implies that the trademark holder, here Danner, granted Rag & Bone permission or a license to use its name.  I am guessing that is not the case in this matter, because Danner's lawsuit is for trademark infringement and unfair competition, not breach of contract.

So it seems that Rag & Bone was dumb enough to violate the first rule of Fight Club --  if you are knocking off someone, don't talk about it in the name of your "inspired" product. 

photo credit: @PerezHilton or cocoperez.com

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These days everyone seems to be enthralled with Fashion Licensing.  What is it?

Licensing is the process of "renting" your fashion company's intellectual property, generally its trademark, but sometimes its copyright, to another entity for a sum of money called royalties, for a certain period of time, for a certain product or category of products, for an agreed upon period of time within a certain territory.

If you answer yes to both the questions below, your fashion company is probably ready to start liscening: 

1. Does your company own its intellectual property (this will generally be your company' name and/or logo)? and
2. Is your company doing more than $30 Million in sales?

Why consider licensing?  Because every dollar earned goes directly to your company's bottom line.  Done right, licensing gives your company an opportunity for massive growth in a short amount of time, for minimal investment.

On the flip side, if you chose the wrong licensing deal or licensing partner, you will lose customers and all the goodwill you have built up your brand name. 

Is it worth the risk?  Yes.  If you do your homework, spend some time "dating" and make sure you have a good prenup.  Then, utilize the know-how of "specialists" to diversify your most valuable asset and create a revenue stream where one did not previously exist.  Liscensing will turn your fashion company into a lifestyle brand.

Photo Credit: A Reason to Write - India

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 Copyright protects original, non-useful works of authorship fixed in a tangible medium of expression.  Currently, you can not copyright fashion because clothing is a "useful article."

But, if aspects of a piece of clothing can be "physically separable" from the underlying garment, you may be able to protect it.  Examples include:

• A t-shirt graphic (think Ed Hardy);
• printed fabric; and
• removable lace or applique

Registering a copyright is relatively simple.  All you need to do is submit a completed application, copies of the work to be registered (referred to as deposit materials) and a nonrefundable filing fee, which varies depending on how you file.  It is $35 if you register electronically, $50 if you register using Form CO (paper filing with 2-D barcode-generated form) or $65 to file the old-fashion way -- on paper.  

In general, if the work was created after Jan.1, 1978, the copyright lasts for 70 years after the author’s death.  When there are joint authors, it is 70 years after the last author’s death. For works for hire, the copyright lasts 95 years from publication, or 120 years from creation, whichever is shorter.

You do not need to register your work to obtain rights, but unlike under trademark law, your work must be federally registered in order to bring a suit for infringement.  There are other benefits as well.

Please remember, that there is no such thing as the 30% rule (or any percent rule).  If you copy someones protected work, even if you think the company is out of business or the print is in the public domain, you might just end up being sued.

photo credit: the Copyright Symbol Webpage

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In April 2008, several fashion bloggers noted that Steve Madden "knocked-off" French Couture House Balenciaga's "Lego" shoes, which were part of its Fall 2007 collection.

. 

Last Monday, December 15, 2009, perhaps inspired by Alexander McQueen's recent suit against Steve Madden for similar copying, Balenciaga filed suit against Steve Madden for Copyright Infringement, False Designation of Origin, Unfair Competition and Deceptive Business Practices in New York federal court.

Interestingly, the complaint barely mentions Trade Dress, and does not include it as a cause of action, maybe because secondary meaning is so difficult to prove. 

Or maybe Balenciaga's complaint is just poorly drafted.  In the copyright infringement claim, Balenciaga fails to allege that it holds a federal copyright registration, a prerequisite for bringing a copyright action in federal court.  In the Deceptive Trade Practices claim, the company alleges that Madden is "in direct competition with Balenciaga," which at the prices listed above, seems very hard to believe.

Under existing US laws, it is permissible to copy shoes and clothing because those items are useful articles.  But, I think Balenciaga has a leg to stand on.  Here's why:

Balenciaga argues that Steve Madden is engaged in a pattern of willful and deliberate copying, constantly stealing the most successful styles from other shoe designers, thus profiting from their research, development, and successful track record. 

By not having to spend money for design and development, and focusing only best-sellers of others, Steve Madden skips the risky part of the fashion business. 

So, Balenciaga just might have colorable argument that Steve Madden is engaged in unfair competition by copying its colorful shoes.

Photo credit: City File

p.s. While I like crazy shoes, thank goodness these Legos are not under our tree.

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Under current Copyright law, it is legal to “knock-off”, or be inspired by, another designer’s products.  Proponents of the current state of the law argue that this design piracy actual spurs sales by inducing obsolescence.

Counterfeiting, the practice of passing of imitation goods as the real things, however, is illegal in the United States. According to the International AntiCouterfeiting Coalition, counterfeiting costs U.S. businesses $200 billion to $250 billion annually. 

What if they are wrong and the sale of counterfeit products, like the sale of knock-offs, actually increases sales of the authentic product? 

A new study “The Real Value of Fakes,” by MIT Professor Renee Richardson Gosline has shown just that. MIT News reports:

Gosline interviewed hundreds of consumers who knowingly bought fake luxury apparel, many at “purse parties” where such goods are sold. Gosline found that within two years, 46 percent of these buyers subsequently purchased the authentic version of the same.

Now that’s more "faux" for your bottom line.

photo credit: ReplicaEstore.com

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Project Runway ended season six with a two part finale and an even bigger controversy. 

First, Tim Gunn counsels contestant Irina that using images of Coney Island on her t-shirt, intended as a layering piece in her collection, would be trademark infringement.

Tim advises Irina that she needs to rework the T-shirt "with images that are your own."  In part two, Irina shows Tim her revised T-shirt, which is "decorated" with reasons she allegedly loves New York.  Tim even quotes one:" 'Reasons to love NY'...is that Madonna is back?"
 

Here's the Controversy:  Bloggers Tom and Lorenzo quickly discover that Irina's reasons to love NY were not her own, but from a 2008 New York Magazine Article, "Reasons To Love New York."  A few days later, New York Magazine confirmed that Irina used their words without their permission.

Tim didn't stop her from showing her collection and Lifetime still aired the show, so Irina's conduct is okay, right?  UNLIKELY.

The lifted words were printed by New York Magazine and it owns the copyright. This means that no matter how creatively Irina arranged them on a T-shirt, only New York Magazine has the right to use this phrasing.  From the post cited above, it does not seem that Irina had New York Magazine's permission.

So why air the finale?  Due to the war between Bravo and Lifetime over who had the right to release season six of Project Runway, they certainly had enough time to re-shoot or pull the episode.

Perhaps because the producers and network were unaware of the origins.  These seems questionable because in a subsequent interview with Tom and Lorenzo, Irina admits she copied New York Magazine's article, insinuating that the producers of Project Runway were aware of the source.  Or perhaps because Irina hasn't actually sold any of her T-shirts, there is no money to recover in a lawsuit and thus no motivation.  Or maybe even the PR benefit to New York Magazine outweighs any harm. 

But, as a fashion lawyer, I couldn't let this very public copyright controversy pass by without comment.  I don't want any of you to become embroiled in a similar controversy.

In sum, taking the work of another without permission will normally get you sued.  (and remember there is no such thing as the 30% rule.)

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There is legislation pending before Congress, the Design Piracy Prohibition Act (DPPA), or H.R. 2196, that would allow designers to obtain copyright protection for their fashion designs for three years.

Steven Kolb, Council of Fashion Designers of American (CFDA), one of the supporters of the bill claims that it is needed because:

[p]irates steal American fashion designs, make low quality copies in Asian factories with cheap labor and import them back to into the U.S. to compete with the original designs.

Others, such as Jason Wu and Narciso Rodriguez rally against the injustice of lower priced companies profiting from the sales of virtual identify copies to gowns worn by celebrities or those in the public eye.

My question is this: isn’t inspiration, homage or “knocking-off” the force that creates a trend, thus causing customers across the country to desire and purchase the design?

Remember Meryl Strep in the Devil Wears Prada?

The ironic part of this new law is that copyright registration would not be allowed it if the design “merely reflects a trend.” According to the bill, a trend is:

a newly popular concept, idea, or principle expressed in, or as part of, a wide variety of designs of articles of apparel that create an immediate amplified demand for articles of apparel embodying that concept, idea, or principle.

The trend “safe-harbor” prevents protection for any “hot” or fast-checking item. Now that is the true paradox of fashion.

Photo credit: Getty Images/Mark Wilson

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There are two business mantras that every fashion company should follow:

1. Always take the meeting, and
2. Get it in writing

Recently, due to the drastic increase in the numbers of copyright infringement cases being filed, I have added a third: there is no such thing as a 30% rule or whatever “rule” your designer may tell you.

Buying a copyrighted print, then changing it a certain percentage is not permitted and can get you into expensive litigation quickly. In October, the California Apparel News reported that one recent trial over a paisley print ended in a six figure judgment.

Why are more lawsuits being filed? Two reasons:

1. Due to the current state of Copyright Law, an unscrupulous plaintiff can easily obtain a substantial windfall based on an invalid Copyright Registration.
2. Most designers still think it is okay to take a print of another, change it a certain percentage and then have it produced by their own supplier.

Once a potential plaintiff has a Copyright Registration, Courts presume that it is valid. Trying to argue that you were unaware of the copyright or you believed the design was in the public domain generally does not work. In plain English, if a average person, imagine two guys at a bus stop, think the two items look alike, you will likely be held liable for copyright infringement.

So, what should you do? Find out after the jump...

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