CFA Breaks Down Intellectual Property Landscape
The California Fashion Association broke down an ever-widening field of intellectual-property issues for a group of apparel manufacturers and retailers at a recent strategy session featuring several legal and insurance experts.
The Aug. 9 event, held at the Los Angeles Chamber of Commerce in downtown Los Angeles, featured a panel that included Oliver Bajracharya, a partner with Lewis Roca Rothgerber Christie LLP; Robert Ezra, partner with Freeman Freeman & Smiley; and Kaleigh Kemmerly, vice president of Hub International Insurance. Ilse Metchek, president of the CFA, moderated the discussion, which covered the differences between copyright, trademark and patents as well as some recent developments that are poised to affect apparel manufacturers.
The Varsity Brands Inc. v. Star Athletica LLC case went all the way to the U.S. Supreme Court, which found in favor of Varsity. The case revolved around the chevron and striped patterns on cheerleader uniforms, which the court found to be a copyrightable design element.
“Could it stand almost as a work of art? It’s a little bit of a mental exercise,” Bajracharya said. “But that’s the concept the Supreme Court was trying to illustrate. The Supreme Court said a design like that could be registered.”
In this case, Star Athletica knew their garment was similar to the Varsity garment, Ezra said.
“They said a cheerleader outfit was only a cheerleader outfit because of the stripes. Those stripes were utilitarian,” he said. “If you took away those stripes, you would end up with a tennis dress.”
The case of Unicolors Inc. v. Urban Outfitters Inc. involved a print Urban Outfitters used that was found to be substantially similar to one created by Unicolors.
“The judge said nobody would believe these two complicated prints were created independently,” Ezra said.
The judge filed summary judgment and the case never went to trial.
“If you’re a defendant, you may never get to jury. You may never get to tell your story,” Ezra said.
Converse lost its bid to protect the use of the rubber toe cap on its athletic shoes even though the footwear giant had held a trademark for that feature for 50 years. Because the company had not fought to protect that feature, the International Trade Commission determined that the rubber toe cap had become so ubiquitous in the footwear market it had become commonplace.
“It’s called policing your mark,” Metchek said.
Ezra said that guideline doesn’t just apply to trademark, it’s also true for copyright and patents.
“If you don’t police it, you can lose it,” he said.
New cases, new issues
Adidas recently filed suit against Forever 21 over a three-stripe rib-knit trim that Adidas claims infringes on its three-stripe trademark.
Another recent Supreme Court case that is likely to ripple through the apparel industry is the case of the musical act The Slants , who sued the U.S. Patent and Trademark Office over the use of the band’s name, which the Patent Office originally said was a violation of its disparagement clause. Instead, the high court found that the disparagement clause violates First Amendment free-speech rights.
This decision paved the way for a more recent example, in which KA Designs began selling T-shirts emblazoned with rainbow-hued swastikas. The company said it wanted to restore the symbol’s original meaning of peace and love instead of its association with the Nazi party. After much publicity and negative public reaction, the company stopped selling the T-shirts.
“You may be able to get a registration, but the swastika is so stigmatized that nobody is going to associate it with your product. It may never achieve secondary meaning,” Ezra said.
The right of publicity is another issue with the potential to directly affect manufacturers and brands. Companies that use photos on their website or in other marketing materials showing celebrities wearing their clothing could be in violation of the right of publicity if they don’t have the proper clearance to use those photos.
This is a copyright issue because the photographer is the author of the original work of art (the photo), and the magazine that purchased the rights to use the photo may also have a claim against the company. And the celebrity pictured in the image can also sue the company arguing that the likeness was used to promote a product without permission.
In a similar vein, the Federal Trade Commission has been enforcing its guidelines for bloggers who do not disclose when their posts are paid endorsements.
“It has to say ‘paid for’ or ‘advertisement,’” Metchek said.
Manufacturers should also be careful to protect their brand in China—even before they begin selling in China.
“Even if you are not selling in China but you are making it in China, do yourself a favor and call a trademark attorney,” Ezra said. “If a product is made by an authorized manufacturer with specific specs and the U.S. buyer cancels the order, the [Chinese] manufacturer can sell that product—with the label in it.”
“Prints are the biggest source of litigation in copyright,” Ezra said. “Most people don’t have their own print designers. They go to their mills. If you are going to buy a print, you need confirmation that the mill actually owns the copyright. Even if they have the copyright, you might ask to see the original authorship. You can get indemnity from them.”
Ezra recommended factors take a look at their clients who use prints in their lines.
“They should have insurance,” he said. “They should be doing their due diligence. Just the way you should audit their receivables, you audit whether they do prints.”
The danger, he said, is the factor could lose its collateral if the manufacturer is unable to sell the inventory and the factor could lose the receivables if the retailer cancels the order.
There is insurance available to protect apparel manufacturers and brands from intellectual-property disputes. Kemmerly explained there are set procedures a company must follow, including creating a design file that shows the “A-to-Z process” of creating the print.
Kemmerly noted that her company only insures manufacturers and brands that design their own prints in-house.
“All intellectual-property insurers have been burned before,” she said. “There was no risk management. We don’t want insurance to be a treasure chest for trolls and attorneys.”