California Apparel News

It’s a whole new—and challenging—world. Today, a Facebook user who sees a “How was your day?” message on her Facebook feed might be seeing an advertisement that a business specifically tailored for that individual. With 3-D printers available for home use, allowing consumers to “print” just about anything—even 3-D homemade handbags—some companies are starting to worry about DIY copyright infringement. Holograms of celebrities—including those who have passed away—are being created to endorse products. Companies can recruit people from all over the world to post photos on social media for the companies’ promotional benefit. But all of these situations—which weren’t possible 10 years ago—leave people open to the risk of running into trouble with the law.

With that in mind, the legal ramifications of the continuous evolution of technology and social media and how they affect the fashion industry were discussed at two panel discussions at Loyola Law School in Los Angeles on April 15.

The panel discussion on technology was moderated by Staci Riordan, partner at Nixon Peabody and executive director of the Fashion Law Project at Loyola Law School. “The outcry when 3-D printers came out sounded very similar to when VCRs came out,” Riordan said, referring to concerns about copyright infringement. “I do think technology makes copyright infringement easier,” admitted Oliver Bajracharya, a panelist and partner at Lewis Roca Rothgerber Christie LLP, but he said industries adapt to new technology. According to Bajracharya, the movie industry ultimately benefited from the public having VCRs even though studio executives had originally been concerned with people selling copies of copyrighted material created at home.

Rather than focus on the possibility of someone at home creating her own copyright-infringing handbag with a 3-D printer, the panel suggested businesses use the technology to create their own innovations. The challenge is similar to the entertainment industry, which learned to accept the general public having the ability to record movies and TV shows at home, which eventually evolved into content-streaming businesses such as Netflix, Hulu and YouTube. For example, manufacturing companies might save time by using 3-D printers instead of a mold. Because the technology is still so new, the panel pointed out it’s not clear exactly how it will evolve.

According to panelist Justin Wolske, an entrepreneur, media producer and cofounder of Grid 110, when more people have 3-D printers at home, an enterprising company could enlist printer owners to create products for the company for free. If this sounds farfetched, Wolske pointed out that “the greatest trick Facebook ever pulled” was getting people around the world to “work” for the company for free (by providing personal data).

Turning back to copyright infringement, Wolske said when he was in film school in the days before YouTube, he was taught all about the need to get approval to use any kind of copyrighted material. Now, he said, go to YouTube and “You’ll see terabytes of intellectual property” that isn’t approved to be posted. But even if there’s a copyright issue with something on YouTube, you might find links to buy related products. “You’ll have to give a part of it away and find a way to monetize it,” Wolske said.

Still, the panel noted, intellectual-property protection still exists—even if the sheer volume of copyrighted material available on sites such as YouTube has led to a great deal of confusion by the general public. Some clothing designers, Riordan said, don’t realize they are not legally allowed to take images they find on the Internet and put them on a T-shirt without permission. That could be a costly mistake.

But there are less obvious examples of when a company might need to be careful when using a photograph for business purposes. Individuals have the “right of publicity” to control the use of their image or likeness when used for commercial purposes, and some litigators have a liberal interpretation of that right.

Christina Chang, counsel, business and legal affairs, for CMG Worldwide, said she had a case that was settled involving paparazzi photographs of a certain celebrity wearing a product that the celebrity had received for free. The company that sells that product posted one of the paparazzi photos on social media and the celebrity sued. The issue was not the traditional argument against the photos being taken in the first place. The celebrity’s argument was that the company didn’t have the celebrity’s permission to use her image to promote the product even though she had received the product for free and chose to use it.

“It doesn’t make any sense,” Chang said.

This right of publicity is not limited to celebrities, Chang said, and the laws vary from state to state, so businesses must be very careful and receive permission to use a person’s image for commercial purposes. This is especially true for companies experimenting with the new technology of using hologram-type images of people to sell products. Not just the name, image and likeness but even the use of the person’s voice requires approval.

In the panel on promotions and advertising, the panelists discussed how the evolution of social media has led to the rules becoming trickier. Panelist Caroline Dillingham, founder of Power On Digital, pointed out that in the past a typical advertisement would be something such as a Coca-Cola billboard. But nowadays, a message on Facebook that reads “How was your day?” could be a targeted ad. Similarly, a request to post photos on social media of you wearing a certain product could come directly from the brand owner. Because the technology is so new, rules are still being ironed out.

“In my mind, it’s still the Wild West,” she said.

But the panel also explained that new technology can lead to more regulation. Panelist Alan Friel, partner at BakerHostetler LLP, said that from the point of view of regulators such as the Federal Trade Commission, if the person posting the promotional photos receives something in return—even free movie tickets—then more rules apply. “Once you give them something of value, you’re going to be responsible for what they say,” he said.

Several years ago Cole Haan ran a “Wandering Sole” contest on Pinterest in which people were asked to post photos of their Cole Haan shoes in unique locations. The FTC ended up investigating the matter. The FTC argued that even though the people posting the images of the shoes were incentivized by the chance to win a shopping spree, anyone looking at the photos would not necessarily know this and might view the photos as independent endorsements of the shoes. The FTC said even having participants list the #WanderingSole hashtag under their photos was not sufficient because that did not adequately disclose the nature of the relationship between Cole Haan and the people posting the photos.

Now if a company asks people to post photos of their products on social media and there’s any type of sweepstakes-type incentive for them to participate, the company must require participants to include a #sweepstakes hashtag. “Even #sweep would be a problem,” Friel said.

The issue of transparency when it comes to disclosing that the person received something of value in exchange for the promotion is also relevant to celebrities and bloggers. If a blogger is invited to a fashion event, receives some kind of gift from the company and posts photos from the event, could this be interpreted as an endorsement of the company? Fashion blogger Alkistis Tsitouri, who also sat on the panel, pointed out that brands will invite many bloggers. While the host may consider some bloggers more “valuable” than the others in terms of publicity, she said, all the bloggers “receive the same gift” for attending the event. Friel suggested a blogger in such a situation should post something to the effect of “This brand invited me to their event. Here’s a picture of me there.”

“There’s a way to organically give a disclosure,” he said.

But it could be more complicated. What if the blogger posts, “This brand gave me this shirt, and I love it—and I got paid to be there”?

“That’s an area that hasn’t been fleshed out,” Friel said. Still, he said, he advises clients to take the safe route and give disclosure when any type of compensation or incentive is given to someone else to promote the company’s products—even if the company’s marketing department would prefer not to be so overt. Otherwise, the company might run the risk of being the “low-hanging fruit” that is chased by regulators and class-action litigators, Friel said.

Many people new to the business will have to go through the school of hard knocks to learn about regulations and class-action litigation, said the panel’s moderator, Deborah Greaves, partner, Brutzkus Gubner Rozansky Seror Weber LLP, and adjunct professor at Loyola Law School. Some small businesses aren’t able to recover from legal costs resulting from such mistakes. “It’s a disadvantage for the less-educated,” she said.

For smaller companies that can’t afford high-priced legal counsel, Friel recommended looking to industry associations for their guidelines. “They were probably developed by an expensive outside lawyer and translated by a great copywriter,” he said.

Friel also gave the example of when he represented Frank magazine in its collaboration with Donna Karan. The magazine had a completely separate section for Donna Karan’s content, which was made to be clearly independent of the magazine’s layout featuring Andy Warhol photographs of celebrities. “Not a single claim,” Friel said, explaining that this method allowed Frank to avoid being sued by any of the celebrities featured in the Warhol photographs who might have claimed that the magazine was falsely implying the celebrities were endorsing Donna Karan.

In addition to the issue of transparency with endorsements, as social media evolves, the FTC is taking a harder line on regulating deceptive advertising, Friel said.

“It’s being extended as advertising looks less and less like advertising,” he said. “It’s not just explicit deception. It could be implicit deception.”

Still, Friel said that the advertising industry has its own self-regulators, such as the Advertising Review Council of the Better Business Bureau, which “have a pretty good track record of being able to informally resolve matters.” Plus, he said, it’s in the advertising industry’s best interest to self-regulate because the alternative is more-restrictive laws.

And from a nonlegal perspective, Dillingham said it wouldn’t make good business sense for a company to try to be deceptive on social media. “I would feel less inclined to buy from them,” she said.

These panel discussions were part of a daylong “Fashion Law Symposium” titled “Green Is the New Black: Sustainability in Fashion,” presented by Loyola Law School’s Fashion Law Project. Other topics included “Good Things Come in Green Packages: Sustainability in the Supply Chain” and “Tough Love: Sustaining a Fashion Brand From Startup to Staple” as well as a “Fireside Chat” with Chelsea Grayson, general counsel, American Apparel.