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

It may come as a great of a surprise to you as it did to my Loyola Fashion Law class:

It is illegal to sell, distribute or manufacture counterfeits.  But it is perfectly legal to purchase them.

After my class got over the shock, we had a fabulous discussion (best of the semester in my opinion) about the ethics of buying counterfeit products, and compared that action to how society looked at illegally streaming or downloading music or movies. 

Last week, NY City Council woman  Margaret Chin proposed new legislation that would amend New York's administrative code so that anyone caught purchasing a counterfeit product would be subject up to a year in jail and have to pay a fine of $1,000 fine.  Chin previously introduced similar legislation in 2011, but it died in the City Council.

Like my class, I am conflicted over this issue and question whether new legislation is needed.

Let's be clear.  I do not support counterfeits.  In many industries, like pharmaceuticals or consumer products (think tires or water bottles), counterfeits have the potential to poss serious risk to your health, safety and well-being.

That said, I have read the MIT study that show that almost half the purchasers of counterfeit fashion products subsequently purchased the authentic version.

And from listening to the passionate discussion in my class, most didn't regret buying counterfeit fashion items stating luxury brands mark up their products so much, what's the harm? 

When we compared purchasing fashion counterfeits to illegally downloading or streaming music and/or movies, the overwhelming majority of my class felt more guilty about pirating music and/or movies than buying counterfeit fashion products. 

Interesting, when we discussed online purchases verse in person purchases, my class thought those who purchased online should not be punished, as they are less likely to know the item is counterfeit (although some vocal dissenters said the price of the item and which website you were on should clue you in.)

Perhaps threats of fines or jail will change the attitude and behavior of the buyers.  But compare our "war on drugs."  Has that really stopped, or even decreased, the drug trade?

In the end, throwing tourists visiting canal street in jail won't will drain the city of its counterfeit problems.  The new law could harm tourism, which is New York City's largest industry, and be a PR nightmare.

New York, and other cities around the world, LA included, face an moral dilemma.  As a society, we need to take a hard look at what drives consumer purchasing behavior and weigh the best possible steps to effectuate change.

Announcing new laws relating to fashion is a great PR play. 

But don't forget, at issue is ethics.  And I am not sure our country's politicians always have the best moral compasses.

xoxo

Staci

ps -- you can read more of our tips, thoughts and advice for protecting your brand against counterfeiting 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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I said it before and in response to Bloomberg Law's interview of Professor Susan Scafidi [Video] I will say it AGAIN:

IDPPPA will not prevent improper litigation.  Period.

Any argument that the "Heighten Pleading Standard" will prevent improper suits i.e. suits based on a designer's belief that their design is unique or original, is just nonsense, or a red herring as we lawyers call it.  Ask any litigator, not just a fashion litigator like me, and I promise you they will tell you the same thing.

I am seriously disturbed by the Bloomberg Law interview and you should be too.  Why?

• Professor Scafidi's comments - did she really say "elements" of Diane Von Furstenberg's wrap dress would get protection under IDPPPA or the Destruction of the Affordable  Fashion Bill?;
• It was 15 minutes and only presented one side;
• IDPPPA will be very costly to fashion brands because litigation costs will have to be factored into the price of clothing, increasing the price;
• It will cause less choice in the market place.  All designers need to do is "tweak" a garment compared to the original, says Scafidi.  What does that mean?
• It will flood the courts with litigation - Americans, unlike the rest of the world are KNOWN to be litigious; and
• By the way Professor Scafidi laughed at the suggestion of addition of loser pays langauge into the bill.

The only good thing about the interview? Professor Scafidi looked great!  Loved her necklace.

Repeating all the reasons why the Destruction of Affordable Fashion Bill is a really.bad.idea would take too long, but you can read more at the following related posts:

BREAKING NEWS: New Design Piracy Bill Introduced into Senate

Why IDPPPA is going to KO the Business of Fashion

IDPPPA: How to SLAPP the Sting Out of Frivolous Litigation

F21 Defeats Express: an IDPPPA Preview?

IDPPPA will not prevent frivolous litigation

The "Destruction of Affordable Fashion Bill" or IDPPPA gets one step closer to becoming Fashion Law

Senator Feinstein Puts the Breaks on The "Destruction of Affordable Fashion Bill"

Destruction of Affordable Fashion Bill Gets A Hearing Date

More Propaganda from Professor Scafidi on the Destruction of Affordable Fashion Bill on Bloomberg Law 

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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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Dear Susan:

As a fellow fashion lawyer, I applaud what you are doing at Fordham University with the Fashion Law Institute, despite your unfortunate "pink and lavender" comments to New York Magazine, and agree that the fashion industry desperately needs fashion lawyers who have industry insight and knowledge.

I have to say, though, that the comments published in the press, touting Fordham as the legal arm of the Council of Fashion Designers of America (CFDA), have left me disturbed and disappointed. 

Law school is suppose to be an open forum -- a safe place to share ideas, debate concepts and teach tolerance of all sides of an issue.

While I understand that the CFDA and Diane Von Furstenburg were instrumental in helping the Fashion Law Institute open, it seems that the CFDA will be forever inter-twined in its future:

• "The collaborative efforts between the Fashion Law Institute and the CFDA will prove beneficial.....

• “The CFDA is committed to nurturing this important new venture.....

• "The CFDA’s invaluable support and advice will help ensure that the Fashion Law Institute is able to provide a resource and research platform to law students, fashion houses and especially emerging designers..."

I just hope CFDA money and its political agenda of protecting high-end New York designers at the expense of small businesses, jobs and the financial well being of the rest of the country, does not color or taint the open discourse of ideas that a law school is suppose to be. 

As I know you know, Fashion is a $350 Billion dollar industry in the United States, and only a very small fraction of that out-put comes from NY.  As you launch this new, very important endeavor, please remember that as a pioneer in Fashion Law you will be watched and scrutinized. 

Please don't make this about politics and rhetoric, but instead use the platform you have been given to help the US fashion industry continue its incredible growth and dominance.

To proceed otherwise would be truly be a fashion disaster.

Sincerely,

Staci Riordan

Chair, Fashion Law Practice Group, Fox Rothschild LLP

Editor, Fashion Law Blog

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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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Well, we knew it was coming.  Today, Senator Charles Schumer introduced the Innovative Design Protection and Piracy Prevention Act, or Senate Bill S. 3728 (IDPPPA).

While it seems that NY academics, the Council of Fashion Designers of America (CFDA) and the American Apparel and Footwear Association (AAFA) have signed off on this bill, I cannot find any indication that the people involved in the business of fashion, or fashion litigators were consulted.

From a review of the bill, I only see some small improvements over the last version:

1. Home sewers are free to make copes of anything for personal use;
2. The increased damages that were proposed under DPPA were stricken, leaving section 1323 unchanged;
3. The Plaintiff will have to plead his or her case with particularity -- like a fraud cause of action now, for example.  This implies that the Plaintiff will have the burden of proof on those elements, but we'll have to see how the courts interpret that language; and
4. The drafters have tried to clarify what constitutes infringement.  The new standard is "substantially identical," which means "an article of apparel" (which includes clothes, handbags and eyeglass frames and hats, among other things) "which is so similar in appearance as to likely be mistaken for the protected designs, and contains only those differences in construction or designing which are merely trivial."  HUH?

Here are the confusing parts: 

First, fashion designs will automatically be protected so designers don't have to register the designs with the copyright office, saving the designer a $35 fee.  Interestingly, Counterfeit Chic is touting this point as a victory, but to me, how could one verify that a design is "new and unique" if there is no public database to search? 

Also, most federal circuits require copyright registration as a pre-requisite to filing suit.  In legal terms, this means a plaintiff does not have standing to file a claim unless they have a copyright registration.  Is this bill trying to change that federal requirement?

Second, so many designers mistakenly believe that their creation is new.  But almost all the design we see these days pull inspiration from the art of past designers.  A great example is Diane Von Furstenberg and the wrap dress.  She claims to have invented it, but fashion history students know that McCardell introduced a wrap dress in the 1940's.

Third, only an article that is "unique, distinguishable, non-trivial and non-utilitarian variation over prior designs for similar types of articles," qualify as a fashion design.  As a member of the fashion community, I shrudder to think how a judge is going to decide THAT question.

In sum this propossed legislation ignore the realities of the business of fashion including the financial ramifications of such a law and would make judges the arbitrator of fashion.

For example, I see:

• a ton of litigation as the courts sort this out.  Pleading with particularity is no game changer.  It only adds an extra round of litigation costs.  Added litigation costs will raise the price consumer pays for apparel, something definitely not needed right now because the cost of clothing will likely rise anyways due to increasing cotton and labor prices.  Do we really need the consumer to bear more cost increases when our economy finally seems to be rebounding?  OR 
• No one will be able to create a "fashion design" that qualifies under IDPPA as written, making it needless and irrelevant.

So, while I wait to see how the rest of the industry reacts, I see this as a big win for lawyers and big companies with the resources to sue. For now, I stick to my previous 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. 

 photo credit: CFA

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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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The best part of the Oscars is the fashion.  While there were definitely some misses last night, and some boring entries, my favorite look was Sandra Bullock's metallic Marchesa gown.  And for the record, she is one of my favorite actress ~ I am SO glad she won (Best Actress for The Blind Side in case you turned if off after the red carpet)!

On an interesting side note, Fashionista has a story this morning, listing this dress as Five Oscars Dresses ABS by Allen Schwartz is Bound to Knock-Off.   

This time, Schumer is being aided by Jeannie Suk, Harvard Law professor and co-author of Standford Law Review article, "The Law, Culture and Economics of Fashion," in which a new fashion copyright infringement standard is proposed. (because substantial similarity wasn't difficult enough for judges or Nimmer, see section 13.03). 

Suk, and her co-author C. Scott Hemphill, propose that fashion designs will be "infringing" i.e. an illegal knock-off if they are a "close copy" or are not "substantially dissimilar." 

WHAT DOES THAT MEAN?!  And how in the world will judges figure that one out?  Is a "style guide" included in the Act?

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. 

This proposed legislation will do nothing but hurt the $350 billion dollar United States Fashion Industry.  Doesn't Schumer know the rule, "three strikes, and you are out?"

Stay tune for more on why the DPPA is a VERY BAD IDEA and will only harm the fashion industry.

Photo Credit: Fashionista.com

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