FASHION LAW Jessica Elliott Cardon Camuto Group, New York, New York I. WHAT IS FASHION? A great many issues face the fashion industry with respect to the protection of intellectual property attached to fashion articles. The nature of the fashion industry is defined by the necessary capitalization of emerging trends, with limited time and opportunity to maximize profits from these trends. According to the Oxford Dictionary, fashion is a popular trend, especially in styles of dress and ornament or manners of behavior. When used as a modifier, the word fashion signifies the production and marketing of new styles of goods, especially clothing and cosmetics. These definitions encapsulate the biggest challenge the fashion industry faces with respect to intellectual property rights, namely, the balance of the costs to develop and protect intellectual property through various legal registration regimes around the world against short-lived commercial opportunities to exploit this intellectual property. Fashion industry members who rely upon the development of fast fashion are intent on capitalizing on the execution of trends spotted at major fashion weeks (e.g., New York, Paris, London), by rushing fashion styles and fashion articles to production in order to expeditiously reach consumers through mass-market retailers. Fast-fashion opportunities are balanced by the development of longer-term classic and traditional styles, which fashion industry members develop and offer at the retail level for multiple seasons and years, saving development costs year after year. II. THE IMPACT OF FUNCTIONALITY AND THE TYPES OF INTELLECTUAL PROPERTY RIGHTS PROTECTION ASSOCIATED WITH FASHION 1
When fashion is inherently tied to exploiting a trend, how then do fashion industry members evaluate the potential intellectual property rights to develop and protect? Certain rights, such as trademark rights, are integral to the protection of a fashion industry brand and provide protection for all types of fashion articles, whether for luxury fashion houses or for fast-fashion companies who are seeking to protect both the fast fashion and the longer-term classic and traditional styles. Because trademark rights can offer protection on a brand level, these IP rights are often the ones that fashion industry professionals should focus on developing. Additionally, there are opportunities within the fashion industry to develop and protect trade dress rights, design patent rights, and copyrights for fashion articles. Some of these rights are combined or protected differently in Europe, through design registration regimes that merge some aspects of the United States trade dress, trademark, copyright, and design patent systems of protection. Though not discussed below, companies can also seek utility patent protection for technological advancements in their fashion articles. By example, utility patents have protected breakthroughs in footwear comfort systems, improved methods of construction of fashion articles, enhanced manufacturing processes, and developed unique textiles that improve fitness and performance fabrics. Evaluating how to best protect individual fashion articles requires analyzing a few issues, namely, what aspects of a fashion article are non-functional and thus amenable to protection and whether it is necessary to register the protectable intellectual property for enforcement purposes. When evaluating the enforcement opportunities, the costs of registering intellectual property may require a cost-benefit analysis by the fashion company. In the United States, new or improved functional product features can be protected only by utility patents. Thus, other systems for protecting intellectual property trademark, trade dress, copyright protect only the non-functional elements of a fashion design. However, a feature that makes the fashion article more attractive to the consumer is aesthetically functional and not capable of trademark or trade dress protection. This consideration of functionality, whether utilitarian or aesthetic, is arguably the aspect of fashion articles that impedes protectability of fashion articles as a whole, as it is difficult to separate the functionality of a design from the fashion article itself. The vast majority of fashion articles arguably have a utilitarian purpose in that they are intended to be worn by the consumer as clothing. To protect a feature of a fashion article, fashion companies must establish that the particular feature is non-functional and that protection of the feature will not hurt competitors. The lawsuit in United States Court of Appeals for the Second Circuit, between Christian Louboutin and Yves Saint Laurent, 1 involved issues of functionality relating to the exclusive 1 See Christian Louboutin S.A. v. Yves Saint Laurent Am Holding Inc., 696 F.3d 206 (2d Cir. 2012). 2
right to use the color red on footwear soles. As is well known in the fashion industry, Louboutin uses a red sole as a source identifier and trademark in connection with its luxury footwear. Yves Saint Laurent introduced a collection of footwear that featured monochromatic uppers and soles, including a red upper with a red sole. In evaluating the issue of trademark infringement as between these fashion articles with respect to Louboutin s red-sole trademark, the court determined that Louboutin, despite several years of use of the red shade on the soles of its fashion footwear articles as a source identifier, could not protect this red sole, which is aesthetically functional, as a trademark to exclude competition from the marketplace. On appeal the Second Circuit Court of Appeals upheld Louboutin s trademark, but limited it to footwear products having red soles with contrasting-color uppers. This distinction cleared the way for the fashion article made by Yves Saint Laurent, while preserving, albeit with a narrowed scope of protection, Louboutin s rights in its well-known trademark. By the time the court decision was delivered, however, the collection from Yves Saint Laurent was already a passing fashion trend. Louboutin has aggressively enforced its trademark registrations, which have been filed in several iterations, through litigation in several European countries, with varying degrees of success. The outcomes of these cases, along with the litigation against Yves Saint Laurent in the United States, informed the trademark registration strategies adopted by Louboutin, and those strategies provide excellent guidance to fashion companies. Notably, for any fashion company color marks, where the color is used on underlying fashion articles, Louboutin s efforts inform that a specific description of the trademark, both in terms of placement on the article and reference to an international color code, such as Pantone, will lead to a greater likelihood of registration and future enforcement, even if such specificity could narrow the scope of enforcement. Also, any visual drawings of a shape or color trademark where the trademark is either applied to an underlying fashion article or integrated with a fashion article must show the trademark in a threedimensional (3D) visual representation. Ultimately, this issue of the exclusive right to use a color in a particular place on a fashion article highlights the difficulty in protecting fashion articles, even with respect to individual features of fashion articles that aim to operate as source identifiers to consumers. The complexities involved with protecting particular features of fashion designs militate strongly in favor of fashion companies aggressively protecting their branding, especially word marks and logos. Nevertheless, individual product designs should still be evaluated on a case-bycase basis for potential protection under all intellectual property regimes. Fashion companies often have protectable intellectual property for elements of a fashion article, including branding attached to the fashion article, even without registration. However, fashion companies should still consider registering the right to protect this intellectual property within the marketplace to enable efficient enforcement of these intellectual property rights against third-party infringers. Also, if a fashion company plans to exploit its intellectual property rights for a licensing program, it should proactively register such rights, particularly since licensees will expect to see registrations in place in all countries within the licensed territory before commencing sales 3
activities. This is especially true with respect to licensing outside the United States where the prospective licensee may race to register trademark rights before the licensor. In most countries other than the United States, the first person to register a mark has a right in the mark superior to others. Although some intellectual property rights including trademark and copyright are created without the need to register the right, additional enforcement and statutory damages are available through the various registration regimes available around the world. When determining if applying for additional protection is worthwhile, the fashion company should evaluate (i) the costs of protection assessed by each intellectual property rights system, (ii) the timeliness in receiving a review of the application by the appropriate examining entity, (iii) the licensing opportunities attached to the registered intellectual property and (iv) the enforcement opportunities against competitors once the intellectual property right matures, whether through registration of a trademark or issuance of a patent. Such cost-benefit analysis should take into consideration the shelf life of the fashion article and the volume of sales anticipated for that article. By example, a high-volume fashion article may merit more significant protection across multiple regimes, such as trademark and patent, if it is ripe for competitive interpretation by other companies. In addition, fashion articles that prove to be best-selling items for a company over multiple seasons provide the best opportunities for a return on the investment in long-term intellectual property protection over multiple regimes. A. Protecting Elements of Branding Associated with Fashion Articles through the Trademark System Fashion lends itself to a wide variety of opportunities for trademark protection, through adoption and use of word marks, including product style names used as trademarks, logos, branded hardware, and logo patterns. Branding can also extend to stitching on denim pockets or distinctive markings on footwear, particularly athletic footwear. Color protection and garment label protection may also be available to fashion companies, but likely these characteristics of fashion articles will require evidence that consumers associate that characteristic with the company, such that the characteristic operates as a brand or logo. Before reaching aspects of fashion articles that may merit additional protection through registration, beyond any common law or statutory rights that are available without registration, fashion companies should first seek to protect the brand name on their fashion article labels and/or hang tags as well as any logos, including logos that may function as a fashion article design element. An example of a word mark that is capable of receiving protection as a trademark is the celebrated American fashion brand RALPH LAUREN. Often, fashion brands will incorporate the first and/or last name of the designer who launched the brand or the initials of the founding designer (though not always). DOLCE & GABBANA, a famous high-fashion 4
Italian brand, incorporates the surname of each of the two founding designers and thereby creates a unique label. In addition to the protection of fashion brands through word marks, fashion companies will seek protection for logos that may be used exclusively on labels or hangtags but may also form a distinctive element of design on a fashion article. For example, the VINCE CAMUTO fashion brand utilizes a logo derived from a family crest associated with the Camuto surname in close proximity to the VINCE CAMUTO word mark: This crest is used to convey a certain commercial impression to the consumer about the source of design inspiration for the brand, namely European design, to reflect the Italian ancestry of the founder of the brand, Mr. Vincent Camuto. While the Crest logo appears prominently on fashion article labels, hangtags, and packaging, it is used minimally on the fashion articles themselves, featured from time to time as a design element on such articles as riding boots, jewelry, and eyewear. B. Trade Dress versus Design Patent Protection Fashion companies have additional opportunities to protect a fashion article by clearly defining the traits of that fashion article that comprise a distinctive trade dress. While trade dress is often viewed as a visual means to convey the source of the product or product packaging to consumers, it can extend to the look and feel of a product or unique packaging if the fashion company can identify unique characteristics of that product or packaging. Trade dress can also extend to the visual appearance of a fashion company s retail store chains, such as through the use of distinctive fixtures, displays, color concepts, and signage. Fashion companies can identify elements that comprise the trade dress of the store and seek protection for the trade dress to ensure that consumers identify that store design solely with that company s brand. As a parallel to trade dress protection, many fashion companies will seek design patent protection for their fashion articles, which is a type of patent protection for ornamental designs of functional items (e.g., the ornamental design of a footwear article, which is otherwise functional as a means of protection for the foot). To obtain protection for trade dress rights in a product design, a fashion company must show that the trade dress in the fashion article is distinctive as to the source of the product and that it is aesthetic in purpose. The trade dress cannot be utilitarian or functional. If features of the 5
design merely serve to make the product more appealing to consumers and the primary purpose of those features is aesthetic, then the features (or overall fashion design) do not serve to identify the source of the product and are not protectable trade dress. Because a fashion article typically requires substantial advertising and marketing to qualify for protection as trade dress, necessitating many years of consecutive production and marketing of that fashion article, very few fashion articles are ripe for trade dress protection. This is in large part because of the very nature of the fashion industry, which demands product turn-over and innovation, with new styles introduced by fashion companies on a seasonal basis. Infrequently, a particular fashion design becomes sufficiently popular with the public that it remains, across multiple years and seasons, a best seller for the fashion company that produces it. For example, Hermes has been successful in its attempts to demonstrate protectable trade dress for the Birkin and Kelly styles of handbags, which have been in production for decades and have been marketed successfully through magazine and publication placements, as well as movie and television placements. As a consequence of the many years of advertising and marketing needed for a fashion design to qualify as protectable trade dress, many fashion companies turn to the patent system for potential protection of the design of a fashion article as an alternative to trade dress protection. The costs of establishing protectable trade dress are also high because the fashion company needs to submit evidence of many years of advertising and promotional efforts, which would require substantial corporate investment from the inception of the product design or packaging and throughout the years of production. An ornamental design is protectable under the design patent regime if the design is novel, original and non-obvious. In other words, the design must present new material as compared with other like-product designs. When seeking design patent protection, the fashion company will file an application with attached drawings of the design. These drawings are the exclusive embodiment or visual depiction of the claimed design patent. Where there have been numerous prior versions of similar types of fashion articles (e.g., multiple versions of a particular handbagbody style), the design will be afforded only a narrow scope of protection, if it is patentable at all. It takes time for design patents to issue, and no rights attach to this form of protection until the design patent issues from the United States Patent and Trademark Office ( USPTO or the Patent Office ). In May 2015, however, the United States implemented the Hague Agreement, which required changes to United States Patent Law. The United States now accepts applications for international design rights as a member country. This change in United States law and application process provides future patentees with the possibility of obtaining provisional design rights upon publication of the design application about six months after filing. Provisional rights will enable fashion companies to notify third-party infringers earlier regarding potential damages for design patent infringement, and the six-month timeline from application to publication is more in line with product development timelines. United States fashion companies will likely give more consideration to the merits of pursuing international design protection under the 6
Hague Agreement, and fashion companies with an international presence, whether for manufacturing operations or retail sales, will also consider the opportunity to obtain an enhanced territorial scope of protection through the Hague application process. In the end, however, the fixed fifteen-year term for design patents cannot substitute for the continued protection available to distinctive and enduring designs and protectable design elements for trademarks under United States law. Design patent protection largely benefits only those fashion companies that develop novel styles that could trigger copying or styles that are likely to be used for multiple seasons. For example, luxury brands that develop novel, highfashion articles can use design patent protection as a tool against fast-fashion companies who will seek to offer consumers lower-priced versions of the high-fashion designs. With respect to filing for design protection for carryover styles from one season to the next, a company should consider filing immediately for design patent protection, if, after presenting a style to key retailers, sales orders for the style indicate high demand, justifying the expense in filing for such protection. C. Protecting Copyrights Associated with Fashion Copyright protection is also available for certain fashion articles if they meet the requirements to be a protectable work, which, for fashion, generally means that they are original and not functional. Typically, fashion articles are copyrighted as pictorial (visual), graphic, or sculptural works. They can be two-dimensional (2D) or 3D. Examples of fashion articles that have met the standards for copyright protection as a pictorial, graphic, and sculptural work include jewelry items, such as several works that have been protected by David Yurman and Tiffany & Co., and clothing and apparel items that have original pictorial, graphic, or sculptural features, such as intricate beading on a blouse or dress that forms a sculptural element or graphic illustrations that feature on the fashion article, such as holiday images for holiday-themed apparel. Also, some fashion companies, such as Christian Louboutin have submitted photographs of fashion articles to obtain visual protection for those photographs only. Such efforts can curb unauthorized Internet use of these images, particularly if a fashion company conducts photo shoots of its products for use as a marketing and sales tool for e-commerce sales. Motion picture works, such as video recordings of fashion shows, can also provide some level of copyright protection to a fashion company for a seasonal collection. Finally, fashion companies can also seek copyright protection for architectural plans associated with their retail stores to add another level of protection for the look-and-feel of their retail store concepts, both in terms of the physical attributes of the space and the visual components that are attached to the architectural works. It is generally not possible, however, to protect the cut of a garment as cut is functional and therefore not subject to copyright protection. Below is a summary of some of the types of branding that have been incorporated into or featured on fashion articles that have been afforded protection, as well as the types of fashion 7
articles or aspects of fashion articles that may be protectable under the trademark, copyright, or patent regimes. III. EVALUATING AND OBTAINING FASHION ARTICLE PROTECTION UNDER THE DIFFERENT REGIMES BY PROTECTING INDIVIDUAL ELEMENTS OF FASHION ARTICLES A. Apparel Articles When developing apparel articles, which typically are functional and therefore not protectable under the Copyright Act in the United States, companies need to evaluate whether aspects of the apparel articles are protectable using any of the available protection regimes, thus enabling a degree of protection for the article in its entirety. With respect to fashion articles, companies should evaluate the textile designs incorporated into the article, any ornamentation that mimics jewelry, and the use of any logo-branding on the article. Textile designs featured in apparel products, such as dresses, merit copyright protection under United States law. When the primary element of the apparel article is copyrightable, the company has a stronger position to enforce its rights in the overall article against other companies that attempt to copy the apparel article. Diane Von Furstenberg, of DVF, has been known for her intricate and bold textile designs that are often featured in her famous wrap dresses. While the wrap dress pattern is not protectable, by using original textile designs in these dresses DVF creates a position of strength with respect to its ability to enforce its commercial right to exploit these apparel designs against other companies. As copyright protection attaches at the time the work is fixed in a tangible medium, the textile design attains copyright protection as early as the first prototype sampling stage in the design development process, if not sooner, such as use within computer-aided design (CAD) sketches. Should litigation under the Copyright Act become necessary, the company can file for a low-cost copyright registration as a visual material work and open up a pathway to statutory damages and federal court venues. Similarly, intricate designs incorporated into an apparel article may qualify for copyright protection. This could include illustrations used on the article, such as an illustrated baby onesie or an intricate holiday scene depicted on a theme sweater. Some companies, such as Valentino S.p.A, have attained copyright registrations for ornate studding and jeweled motifs on simple fashion apparel articles as visual material works or for patterned decorative elements. Another opportunity for apparel article protection is through use of the company s trademark or logo on the article or incorporated as part of the article design. Examples include the use by Hermes of its H logo within patterned men s ties or as an ornamental belt buckle. Such uses of the company logo extend a certain degree of protection to the overall apparel article under the Lanham Act, providing an enforcement means against potential trademark infringers. 8
Several companies have used their logos as the primary design feature on an otherwise simple apparel article, such as a collared knit shirt or a pair of slacks. For example, the Ralph Lauren polo logo is a prominent design feature on Ralph Lauren articles: This polo logo is used as the single marking on the company s polo shirts and on various other fashion articles, such as above rear pockets of pants and shorts and on the side of casual footwear. This usage spans all variety of apparel sizes as well, ranging from infant and toddler apparel through to the men s and women s apparel lines. Similar to the use of the polo logo adopted by Ralph Lauren, Vineyard Vines has integrated its whale design, into its fashion articles as a prominent design feature, whether through single uses such as on polo shirts, or through repeating pattern uses, such as on flip flops, tote bags, pants, and shorts. The Vineyard Vines whale design is shown below: These logo uses help distinguish otherwise ordinary apparel articles from those of another company, but also attach brand significance, which again strengthens future enforcement positions when trying to shut down potential infringers. B. Denim Apparel Many denim apparel companies have vigorously and successfully protected, the stitching patterns on the back pockets of their denim apparel, which consumers have come to closely associate with individual fashion companies. The most litigious of these companies has been Levi Strauss & Co., which has pursued perceived infringers to protect the goodwill it has built up in its pocket-stitching pattern, protected under trademark law. This pocket-stitching pattern may be the most recognizable and oldest pocket-stitching pattern of all denim-apparel brands. 9
By establishing trademark protection over stitching patterns for pockets, these denimapparel companies have found a means to convey brand messaging to consumers through their apparel products and also to create enforcement opportunities against potential infringers for an otherwise basic apparel design, such as a standard four- or five-pocket denim jean. Denim companies can also explore trademark protection for unique denim wash names, unique denim styles, and even garment labels. Levi Strauss & Co. is pursuing rights to protect a distinctive and long-in-use garment label in connection with its fashion denim articles. Although many aspects of this label might not be inherently protectable, it has likely acquired distinctiveness through many years of use on the rear waistband of denim-apparel articles. Apparently, the USPTO agrees. On March 24, 2015, the USPTO approved publication of this application and required only the entry of a disclaimer with respect to certain terms incorporated in the text of the label, namely, that Levi will not have the exclusive right to use the terms denim overalls, jeans, denim, and clothing apart from the mark as shown. In addition to trademark protection, denim companies can explore utility patents concerning technology incorporated into unique denim stretch fabrics, though investments in such patents may be fleeting, as the technology continues to evolve and change. The cost of a utility patent application coupled with the prosecution expenses may not bear out if a denim apparel company is constantly changing its denim stretch fabric technology with enhancements. C. Athletic Performance Apparel Articles While some denim-apparel companies have successfully protected pocket-stitching design trademarks by linking the pattern of the stitching to the company brand messaging, other fashion companies, including athletic performance apparel companies, have been unable to protect stitching patterns used on their fashion articles. In these failed instances, the companies have not been able to prove that the stitching design on the article of clothing creates a commercial impression or consumer brand message. When evaluating whether to register a stitching design, companies in the fashion industry must ensure that if the design element is aesthetic, the company has sufficient evidence to show that consumers recognize the stitching pattern as a symbol of the company, thus proving acquired distinctiveness. 10
As with the unique denim stretch fabrics, athletic performance apparel companies have ample opportunity to seek utility patent protection for the fabrics, including performanceenhancing technology, used in the apparel items. D. Footwear Hardware designs have provided fashion companies with the opportunity to apply branding as a design element, through the use of logo hardware, to otherwise unprotectable fashion articles, such as a basic ballet flat. Two famous examples of protected hardware designs are the Salvatore Ferragamo horseshoe or horse-bit design and the Tory Burch TT design logo. Salvatore Ferragamo horseshoe or horse-bit design: Tory Burch TT design: Both companies have featured these protected hardware designs prominently on their footwear styles, providing them with a stronger enforcement position against potential copiers and infringers. Trade dress also comes into play with footwear designs, but for a fashion company to leverage purported trade dress rights in a fashion style, the fashion company must have significant evidence of consumer awareness that the style in question originates from the fashion company. Such evidence will likely need to be in existence for at least five years, including five years of prominent advertising and promotional use. Because many fashion styles do not have a shelf life of five years, trade dress claims are often difficult to prove, though many fashion companies continue to allege trade dress rights in fashion styles. As an alternative path to protection, fashion companies can pursue design patent protection in the United States for the fashion article design. Many footwear companies utilize design patent protection for styles that 11
have attained a degree of commercial success and renown and are carry-over styles that will be re-ordered for multiple seasons by retailers. Under these conditions, the cost investment and wait time for the issued design patent, typically a year or longer, will be recovered through continued sales of the style over several years. Among fashion-forward footwear companies, Stuart Weitzman has been an industry leader in identifying footwear styles that merit design patent protection. While the dual opportunity for protection through trade dress and design patent regimes is unique to the United States, fashion companies can pursue design protection outside the United States in individual European countries, and, as of May 13, 2015, U.S. applicants can file an International Design Patent application with the United States Patent and Trademark Office. This application process enables U.S. applicants to obtain protection for designs in multiple countries; issued patents have a 15-year term instead of the current 14-year term for U.S. design patents. This change was implemented as a result of the U.S. ratification of the Geneva Act of the Hague Agreement concerning International Registration of Industrial Designs with passage by the United States legislature of the Patent Law Treaties Implementation Act of 2012 on December 18, 2012. While the member countries and regions of the Hague Agreement are still limited, applicants can gain access to registration not only in the United States but also in the European Union and Japan. Future members are likely to include Canada, China and Russia. With this new opportunity, fashion companies will likely give more consideration to the merits of international design patent protection for their fashion styles, recognizing the opportunity to obtain an enhanced territorial scope of protection through the application process. Finally, fashion companies should not disregard opportunities to invest in utility patent protection for technological advancements and developments that evolve through the footwear sampling and production processes. Recent technological advancements protected by utility patents include improved stitch-and-turn construction technology, comfort foam systems, and technological methods for outersole construction that utilize fabric or other materials that obtain lower import duty rates. E. Athletic Footwear Another area of fashion article protection that is the subject of frequent trademark litigation is the protection of the branded markings on athletic footwear styles. Such famous brands as ADIDAS and NEW BALANCE have pursued trademark infringement actions against other athletic footwear brands to enforce their exclusive right in the designs that they have protected as trademarks. Examples of these markings, which for ADIDAS includes the three stripes on the side of the athletic shoe and for NEW BALANCE includes the distinctive N logo, are shown below: 12
More recently, Nike, through its subsidiary Converse, filed litigation in both the International Trade Commission ( ITC ) and the Eastern District of New York against approximately thirty defendants for infringement of multiple trademarks, including the Converse All Star footwear style described as the Converse MIDSOLE trademark shown below. While many of the defendants 2 negotiated settlements with Converse, the case proceeded due to the continued involvement of some of the original defendants, including Wal-Mart Stores, Skechers, as well as New Balance, which petitioned to join the case at the ITC as a respondentintervenor due to its ownership of the PF FLYERS brand and associated trade dress, which is 2 With the naming of Tory Burch as a defendant in this action, the author of this Industry Perspectives article was involved in this litigation because of the design, sourcing, and manufacturing relationship between Camuto Group and Tory Burch for footwear products. Tory Burch and Camuto Group reached a negotiated settlement with Converse to exit this ongoing case. 13
competitive with Converse s brands. Judge Bullock of the ITC issued the public version of the initial determination on violation of Section 337, which found valid rights in Converse s federal trademark registrations, though he narrowly enforced those rights against only footwear styles that contained all three aspects of the Converse MIDSOLE trademark ( CTM ). Judge Bullock did not find that Converse held valid common law trade dress rights. 3 Athletic footwear companies also often pursue utility patent protection to cover technological advancements in their footwear products and pursue design patent protection to protect designs covering their footwear products. F. Handbags Many fashion companies have developed repeating patterns using their protected logos and then applied these repeating patterns to fashion articles for both an element of design and to convey a strong brand message. While the use of repeating patterns is made across all types of fashion articles, it most often occurs as a branding application for handbag articles. Examples of famous uses of such repeating patterns include the Coach CC pattern and the Louis Vuitton LV patterns shown below: 3 In the Matter of Certain Footwear Prods., Inv. No. 337-TA-936, U.S. Int l Trade Comm n, Nov. 17, 2015 (J. Bullock). 14
By registering these repeating pattern trademarks, and applying them to handbag designs, the fashion companies reinforce their ability to assert exclusive design rights against potential infringers and strengthen their ability to seize counterfeit goods. Much like with fashion footwear, handbag companies also use ornate hardware and closure clasps to add a branding element to the designs. Versions of logos, which can be protected under trademark regimes, are integrated into handbag closure clasps and handle hardware and are otherwise featured prominently on the handbag styles, strengthening brand messaging and design protection. G. Jewelry Unlike many fashion articles, which in and of themselves are generally excluded from design protection as a whole, jewelry articles are often eligible for copyright protection. David Yurman has successfully obtained copyright protection for numerous designs, as has Elsa Peretti for Tiffany. Copyright protection attaches at the moment the design is fixed in a tangible medium, i.e., at the moment the design is sketched or molded, but protection must be secured through registration for the right owner to be able to sue for infringement and recover statutory damages. H. Color Features Used in Fashion Articles Although twenty years of notable use of a red lacquered sole by Christian Louboutin did not aid Louboutin in establishing exclusive rights for all uses of the red lacquered sole in footwear, Louboutin still retains some protection for its trademark in the United States with respect to the color red as used on outersoles of fashion footwear for women. Internationally, this issue has been more heavily litigated, with mixed results; however, Louboutin has been more successful in its enforcement efforts by refining its approach to registration of its mark. In its more recent registrations, Louboutin has added greater specificity to the description of the trademark with respect to both the Pantone shade of red and the exact placement of the trademark on the fashion footwear. Courts do not want to limit the freedom of expression inherent with fashion articles by allowing a fashion house exclusive use of a creative characteristic, such as color, of a fashion article, so this added specificity to the trademark 15
registrations leaves room for artistic expression by other fashion designers. Generally speaking, while the use of a color feature as an element of a fashion brand s collections can help raise brand awareness, the current status of law indicates that the expense of advertising this feature may not translate into earned exclusive rights. As a result, fashion companies will likely be better served by developing exclusive rights through other aspects of fashion article design, such as use of original logo-branded hardware or intricate visual designs and textiles that could be protected under copyright. I. Product Style Names While product style names are not part of the fashion article, it is important to review the issue of product style names when evaluating intellectual property concerns in the fashion industry. Fashion product style names typically do not function as a trademark, as they do not operate to identify to the consumer the source or origin of the product. However, some style names gain trademark significance through advertising and use in commerce as a trademark. There are a few examples of this occurrence within the fashion industry, with one of the most famous examples being the Reva product style name owned by Tory Burch. This name was first attached to a ballet flat adorned with the double TT logo owned by Tory Burch as a hardware medallion affixed on top of the toe of the shoe. Through strength of advertising, including (at one time) a REVA-branded shop on ToryBurch.com, this product name was strategically used as an adjective and properly used as a trademark (often without the Tory Burch name ahead of it), supporting trademark protection (and registration) in the United States. As noted through this small sampling of examples of fashion article protection through the various types of intellectual property regimes, there is a wide variety of opportunities for the protection of fashion brand names, logos, and even characteristics of fashion articles, such as pocket-stitching designs, hardware designs, and athletic footwear designs. In determining which opportunities for trademark protection a fashion company should pursue, a company should take into consideration the relatively low cost to register a trademark (between $225 to $325 per class of goods or services in the United States for government filing fees, depending on the applicant s ability to meet certain application requirements, with varying costs in countries around the world), the long-term opportunity to maintain trademark rights through continued use, and the significant benefits in owning trademark registrations to enforce rights against infringers and counterfeiters alike. Even for fast-fashion companies, the cost-benefit analysis for trademark registration clearly tilts in favor of pursuing registration for fashion brands and related fashion article elements. The new opportunity to secure international design patent protection through the U.S. patent system may result in an increased volume of such applications, as the opportunity to protect multiple designs in a single application may ease the burden and expense of filing, helping to achieve a greater return on this investment. IV. LICENSING OF FASHION BRANDS AND OTHER INTELLECTUAL PROPERTY RIGHTS ASSOCIATED WITH FASHION ARTICLES 16
A. What Is Licensing? Licensing is the expansion of a brand across multiple product categories, typically through exclusive grants of specific use rights to third parties. Licensing provides a mechanism for growth of a brand beyond the brand owner s area of fashion design and manufacturing expertise. The licensed third parties have design, production, and sourcing expertise, as well as sales expertise, for individual fashion article product categories. Typically, a brand owner will grant an exclusive license, covering an initial term spanning a few years, with options for renewal terms, contingent upon meeting benchmarks for sales during the initial term. The license grant will provide the rights to the licensee to develop, design, produce, sell, market, and distribute products within a specified product category bearing the licensed trademarks and associated logo, as well other licensor-owned intellectual property rights used in conjunction with the trademarks, including trade dress, design and utility patents, and copyrights. The fashion brand owner and licensor retains significant, absolute approval rights over product development, the use of the trademarks, logos and other licensed intellectual property rights as well as approval rights over distribution channels and individual customers and retailers approved within those channels. The rights are further defined by an exclusive sales territory, usually granted on a country-by-country basis or for regions of the world, such as North America. While not as common, a licensor may elect to grant worldwide rights to a licensee that has an established global distribution network for the product category at issue. The licensor receives monetary compensation in the form of a trademark royalty, which may include separate full-price and off-price rates and a pooled marketing fee, if negotiated, which is combined with all other pooled marketing fees collected from licensees to promote the brand. Also, the licensor may collect image-fund or photo-shoot fees to support seasonal photo shoots for all product categories offered under the brand name. The licensee will have to commit to a minimum marketing expense to support retailers, which is not paid to the licensor directly, but is documented through expenditures made in support of the licensed products. When negotiating a license, the brand owner will focus on maximizing the minimum sales commitments, the royalty and pooled marketing rates and acceleration of these commitments at the termination of the license to ensure substantial guaranteed payments in exchange for granting exclusive rights to the licensee for the product category and the territory. As well, the licensor may seek an advance against the guaranteed royalty and pooled marketing payments. Licensors will also want to build in extensive approval rights to control the development of the brand and to ensure that the goodwill that the fashion company licensor has already built into its trademarks and intellectual property rights is insulated from potential damage by poor-quality products that might be introduced by the new licensee. The licensee will often seek opportunities to exit the license early, with minimal penalty, if the new product category is not adopted by retailers, such as a termination right without paying steep guaranteed fees if the licensee does not meet the stipulated first year of minimum sales. 17
The licensee will also likely want a blended trademark royalty rate for its guaranteed trademark royalty payments, which would represent the blended rate based on a higher royalty rate for the full-price business and a lower royalty rate for the anticipated (and capped) off-price business. As an example, a licensee might try to obtain a blended guaranteed trademark royalty rate of 6% if it has a full-price royalty rate of 7% with an off-price royalty rate of 4%, with such off-price business capped at 30% of the total sales (gross or net, depending on how negotiated). The licensee will also expect the licensor to make appropriate investments in protecting the fashion brand and the associated intellectual property rights, through various registrations covering such brand and intellectual property in key countries within the licensed territory, as well as enforcing those rights against infringers. B. Types of Licensing Opportunities 1. Product Category Licensing Controlled by the Licensor The most traditional licensing opportunity is the agreement between the trademark licensor/brand owner and the licensee to apply the trademark and brand to products that the licensor does not have the operational and manufacturing experience to develop, or to services, such as retail store services, if the trademark owner licenses its brand name to a company that will oversee the operation of retail stores. In fashion, examples of this type of licensing would be through the grant of a license by an apparel company that does not have footwear or handbag expertise to a licensee that has in-house design teams and technical teams to successfully oversee the product development for these categories. In exchange for the license grant, the licensee will typically pay the trademark royalty against the net sales of the products sold under the license as well as any additional advertising, image and/or other trademark and brand support fees negotiate by the licensor, such as those terms already discussed in Section III.A, above. 2. Master License Another licensing opportunity often found within the fashion industry, particularly for celebrity brands, is the master license. This opportunity arises when the owner of the trademark elects to license all management and development of products under the trademark to the licensee, who may also be granted the right to make all or some of the products within the grant of the license, as well as grant sub-licenses to third parties to develop other products within the grant of the license. By example, the owner of the JESSICA SIMPSON trademark, granted a master license to VCJS, LLC, a Camuto Group entity, to develop various product categories under the JESSICA SIMPSON trademark. While Camuto Group itself develops the fashion footwear, it held the rights, for nearly a decade, to present sub-licensing partners to With You, Inc. (the owner of the mark) for approval to expand Ms. Simpson s fashion empire. To date, this program has successfully matured into a high-performing celebrity license that spans more than 18
thirty product categories ranging from various women s apparel and accessory products to maternity and baby apparel to home goods. 4 In April 2015, With You, Inc., Corny Dog, Inc., and Ms. Simpson negotiated the sale of a 62.5% majority interest in the JESSICA SIMPSON brand, including the transfer of the master license rights from Camuto, with Camuto Group s consent, to Sequential Brands for more than $117.5 million and 97,087 shares of common stock of Sequential. 5 3. Co-Branding Co-branding initiatives provide an opportunity to present two brands side by side to consumers, often in connection with a special collection of products. Typically, these cobranding initiatives will use the format of Brand 1 for Brand 2, such as JONATHAN ADLER for SKIP HOP diaper bags or TORY BURCH accessories for FITBIT fitness devices. Often co-branding enables a mass market retailer to bring a high-end luxury fashion brand to its consumers without risk of the brand s dilution of its status as a purveyor of higher priced, higher quality fashion articles. The exposure at a mass-market retailer for a high-end luxury fashion brand may also reinforce the aspirational nature of the luxury fashion brand and acquire new consumers for the higher price-point fashion articles. This might be achieved, by example, through abbreviated capsule collections at mass market retailers such as Target for high-fashion designers or through the extension of a fashion brand to a unique, unexpected product category such as those mentioned above. 4. Charitable Co-Ventures Like co-branding initiatives, charitable co-ventures provide fashion companies with the opportunity to license a charity trademark and develop unique fashion articles that promote the charitable efforts of that charity. For example, fashion companies might develop pink-themed fashion articles that are offered solely during the month of October, which is Breast Cancer Awareness Month, to support the charitable efforts of a breast cancer research organization. Contributions would then be made by the fashion company to that charity based on sales of the special promotional products. V. THE PROTECTION OF FASHION TRADEMARKS ON SOCIAL MEDIA For fashion companies, social media outlets present important opportunities to build, enhance and protect their intellectual property rights. Companies should look to establish official brand pages on key social media sites, such as Facebook, Twitter, Instagram, and Pinterest, to interact directly with consumers and fans of the companies fashion brands. Social media pages 4 See http://www.forbes.com/sites/clareoconnor/2014/05/16/jessica-simpsons-1-billion-retailempire-i-understand-women/ (visited Sept. 28, 2015). 5 See http://wwd.com/fashion-news/fashion-scoops/sequential-brands-reveals-details-of-jessicasimpson-purchase-10108960/ (visited Sept. 28, 2015). 19