Embed Size (px)
Citation preview
The Other Shoe DropsAPPEALS COURT SAVES BUT TRIMS LOUBOUTIN “RED SOLE” TRADEMARK, GIVES FASHION A HELPFUL AESTHETIC FUNCTIONALITY RULE
The biggest news from New York Fashion Week — for lawyers anyway — is the arrival
of the much-anticipated decision of the U.S. Court of Appeals for the Second Circuit in
the Christian Louboutin “red sole” trademark case.1 The 31-page opinion by Judge Jose
A. Cabranes saved Louboutin’s red “outsole” trademark, but only when there’s a color
contrast between the red outsole and the shoe’s upper. The Second Circuit directed the
U.S. Patent and Trademark office to limit the Louboutin trademark registration
accordingly. The YSL monochromatic shoe — red upper, red outsole — over which the
lawsuit began and against which Louboutin had tried and failed to get a preliminary
injunction, won’t infringe the trimmed-down trademark. YSL seems to have a green
light to click the heels of its all-red shoes.
From a broader perspective, perhaps the most significant aspect of the decision for the
fashion and accessories world is its clarification of something called “aesthetic
functionality.” As a general rule, features are deemed functional if they are necessary
to make the product work or for the product to achieve competitive cost or quality
characteristics. The district court’s decision [InFashion, Fall 2011] found that color is
inherently functional for fashion items and prohibited claiming it as a trademark, no
matter how widely associated with the product. So while a maker of industrial products
could use a color as a trademark, a fashion designer could not. The district court
reasoned that the choice of color enhances the appearance, and therefore the
commercial appeal, of the fashion design, making the hue “aesthetically functional.”
The Second Circuit opinion rejects this special rule for fashion. It finds that a single color
trademark is not off limits to a fashion designer just because using a particular color
David Jacoby212.745.0876
Judith S. Roth212.745.0878
Stacie R. Hartman312.258.5607
Chris L. Bollinger312.258.5724
Amy M. Rubenstein312.258.5625
Marc Silverman212.745.0872
Harold S. Nathan212.745.0813
Hans F. Kaeser212.745.0818
Philippe C.M. Manteau212.745.0856
Rick Juckniess734.222.1504
Fashion in
Fall 2012
1 Christian Louboutin S.A. v. Yves Saint Laurent America Holding, Inc., 2012 WL 3832285 (2d. Cir.) (September 5, 2012).
22
may enhance the design, provided that it does not significantly restrict the ability of
others to compete. This stops short of the monopoly which a patent or copyright
confers, but also avoids “jumping to the conclusion that an aesthetic feature is functional
merely because it denotes the product’s desirable source.” (Slip op. at p. 21).
But don’t rush to trademark fuchsia, because you probably can’t make out the
exceptionally strong showing of secondary meaning Louboutin could (and did). As the
Second Circuit said, “we think it plain that Louboutin’s marketing efforts have created
what the able district judge described as 'a . . . brand with worldwide recognition.'"
(Id., p. 28).
The opinion also reminds us of fashion design’s lonely position outside most intellectual
property protection and acknowledges that this pushes designers to greater reliance on
trademark protection. The court also notes the so-far-unsuccessful efforts to create a
federal design right for fashion (n. 19) (For more on this, see p.7).
Still in the picture, if YSL chooses to pursue them, are its two counterclaims. One sought
to knock out the Louboutin trademark as being “functional.” While it discussed aesthetic
functionality as a general principle, the opinion never reached that specific question as
to the trimmed-back Louboutin mark. YSL could proceed, but it may judge it the better
part of valor not to press the point, lest the fashion house find itself on the receiving
end of the same argument down the road. The second counterclaim is for tortious
interference with business relations. Whether that proceeds could turn on a host of
variables, including whether any stores walked away from orders for the YSL shoe.
Certain cynics would not be shocked to see the counterclaims settled confidentially,
perhaps with some of YSL’s legal costs being defrayed as a result.
Data PrivacyFTC TWEAKS PROPOSED CHANGES TO KIDS’ PRIVACY PROTECTION RULE, FINES GOOGLE $22.5 MILLION FOR PRIVACY CONSENT ORDER VIOLATIONS
School may have been out for summer, but the Federal Trade Commission was busy just
the same on the privacy front. On August 1, it published a supplemental notice of rule-
making, tweaking previously proposed revisions to (and expanding the scope of) its rule
under the Children’s Online Privacy Protection Act (COPPA), intended to catch up with
developments since the law was passed in 1998. The supplemental notice modified a
proposal initially made in September 2011 in light of some 350 public comments that
had been received.
3
in Fashion
COPPA requires parental notice and consent to collect personal information about
children under age 13. What information is covered, who has responsibilities for
protecting it and what they are all change somewhat under the proposed modifications.
While originally site operators were responsible only for information they themselves
gathered, they now would be on the hook for data covered by COPPA that is collected
by third-parties through plug-ins, social networking buttons (think Facebook’s “like”)
and widgets, even if the site operators don’t own or control them or even have access
to the data. The third-party collectors, such as ad networks, will also have duties under
COPPA if they “have reason to know” the data they get is children’s data; then they, too,
would need to get parental consent. The rule applies to sites that knowingly target
individuals under 13 or the content of which is likely to attract them. However, the
modification takes up a proposal made by the Walt Disney Company and would allow
sites that screen for age to treat only those under 13, rather than all visitors, as
children. What constitutes personal information under the proposal includes a category
called “persistent identifiers,” such as IP addresses, cookie data and unique device
identifiers, as well as information that can be correlated with other information to pick
out a particular user. The modification would carve out of the rule things like “screen
names,” as long as they don’t amount to online contact information.
As to Google, we reported previously [InFashion, Spring 2012] that it was in hot water
because the FTC claimed that while Google was telling folks using Safari web browsers
(typically installed on Apple’s iPads and iPhones) that its default settings automatically
would keep them cookie-free, in fact Google had taken advantage of a software wrinkle
in the Safari program to do the opposite. Safari doesn’t block cookies for forms (for
instance, your usual shipping address). The FTC said Google had fooled Safari into
allowing any cookie to be inserted by submitting pseudo-forms.
It was not so long ago that Google entered into a long-term, fairly onerous consent
decree with the FTC over privacy problems with the roll-out of its now-defunct Buzz
feature [InFashion, Spring 2011]. Part of that order barred Google from misrepresenting
what information it collects from consumers and how they can control it, and the FTC
said the Safari affair was a violation. The result was the largest civil penalty ever
assessed by the FTC for violating one of its orders, $22.5 million.
Further legal controversy arose because the FTC’s consent order with Google over Safari
said it neither admitted nor denied the FTC’s allegations. This prompted a dissent from
one commissioner. The other commissioners said that going forward, express denials
will be “strongly disfavored” in consent orders. A federal court has granted a public
interest request to force the FTC to justify its action.
Just to keep things in context: the $22.5 million Google will pay is probably more than
the total of all the fines assessed in the 19 COPPA cases ever brought by the FTC.
4
'NAKED' in the 'Lower East Side'FIGHTING THE GOOD FIGHT OR MONOPOLIZING DESCRIPTIVE MARKS?
Litigations over the trademarks “NAKED” and “LOWER EAST SIDE” were in the news this
summer, and the cases shine a light on two big issues: the problems presented by
choosing a mark that’s “descriptive,” as both those marks are; and the special challenges
a small business faces in proving that the public recognizes that mark as identifying the
product source (what the lawyers call having developed “secondary meaning”).
In the hierarchy of protecting trademarks, invented marks (think Kodak) rank at the
top; descriptive ones are at the bottom. Descriptive marks are generally weak. Lots of
products or services may be in or from the Lower East Side or offered “naked” in a
colloquial sense. Therefore such marks aren’t necessarily associated by consumers with
a particular company. You prove secondary meaning by showing that you bought
advertisements, sold the product with the mark in significant volume and for significant
amounts, that there’s awareness of the mark among the relevant consumers and so on
— and, critically, having the evidence to back that up. Having gotten that far, the
trademark owner also must prove likelihood of consumer confusion between the
protected mark and the allegedly infringing mark.
Lower East SideRobert Lopez owns L.E.S. Clothing Co. and lives on New York’s Lower East Side. For
more than a dozen years, he has been designing and selling t-shirts bearing the marks
he claimed, “Lower East Side,” “LES” and “LES NYC.” Lopez has filed half a dozen
trademark infringement suits against a host of well-known brands offering t-shirts that
refer to Lower East Side including Macy’s, J. Crew, Aeropostale, Payless and Urban
Outfitters. In Lopez v. The Gap, Inc., 1:11-cv-03185-PAE (S.D.N.Y. Aug. 2, 2012),
District Judge Paul A. Engelmayer rejected similar claims by Lopez, finding they flunked
the test for trademark protection.
Lopez had tried to register one of his Lower East Side-related trademarks federally, but
it was rejected for being “primarily geographically descriptive of the origin of the
applicant’s goods.” He did secure New York State registrations for all three and also
claimed common law rights from use.2
As a small, independent business, with only modest historical product revenue, Lopez
likely would have had an uphill battle to show that his marks had the consumer
2 The court noted that as the result of the settlement of one of his earlier suits, Lopez was limited to selling “Lower East Side” items in New York State.
5
Fashionin
recognition necessary to show either secondary meaning or likelihood of confusion.
Worse he lacked detailed records, proof of revenue, proof of advertising, and proof of
copying (or even awareness) of his products by Gap. The court found that “LES,”
written in interlocking and stylized letters, could be weakly inherently distinctive, but
found no likelihood of confusion with the design sold by Gap affiliate Old Navy. The court
also dismissed Lopez’ claims to “Lower East Side” and “LES NYC” marks on the same
grounds.
At first glance, the case has David and Goliath echoes: Lopez the underdog—an
underground, indie entrepreneur who has been selling clothing mostly on the streets, in
barbershops and in local stores, using flyers and word of mouth to advertise, dealing
mostly in barter or for cash, going to court pro se (self-represented).3 But perhaps the
better parallel is Don Quixote, because Lopez’s task doubtlessly was made tougher
because he chose to tilt at descriptive trademark windmills. Quixote’s idealistic view of
Dulcinea made for heroic poetry; Lopez’s unsupported view that his use of “Lower East
Side” had sparked so many others to copy him — well, not so much.
Naked
By contrast, the second, still-pending case involved a suit between two large, well-
known businesses. Urban Decay Cosmetics and Victoria’s Secret are currently litigating
over the use of the mark “Naked” in connection with cosmetics. Both companies have
name recognition, and generally market to overlapping target audiences. Both
companies have significant resources. Urban Decay has held a federal registration for
“Naked” in combination with its name since 2010 for cosmetics. Victoria’s Secret has
held trademarks for “Nakeds” since 2010, but in connection with lingerie and swimwear.
Urban Decay sent a cease and desist letter to Victoria’s Secret after learning of its plans
to launch a cosmetics palette using the mark “NAKEDS.” Victoria’s Secret quickly filed
a pre-emptive declaratory action in federal court, seeking a judgment that Victoria’s
Secret’s use of the descriptive phrase “THE NAKEDS” does not infringe any trademark,
does not constitute unfair competition, is not a false designation of origin, and does not
infringe any trade dress. Victoria’s Secret Store Brand Mgmt. v. Urban Decay Cosmetics,
LLC, 2:12-cv-00693 (S.D. Ohio) (complaint filed July 31, 2012).
Both parties’ word marks are in similar capital letters, and the trade dress is similar. A
quick look at the products on which they are displayed (at right) clues you into why
Urban Decay sought to protect its mark against Victoria’s Secret and its entry into the
cosmetics market. As you can see from the photos, the rectangular shape, the use of
“NAKED” in all capitals, the particular stylization of the K on each box, the similarly
placed name of the source in small letters under the bottom of the word “NAKED,” as
3 In this case, the court asked a law firm to represent Lopez in briefing the summary judgment motion against his claims.
“
“
At first glance, the case has David and Goliath echoes...but perhaps the better parallel is Don Quixote.
6
well as the fact that the same products are being sold, appear, at least at first blush
(pun intended), to factor into a possible finding of likelihood of confusion.4 A TV ad for
the earlier “NAKEDS” lingerie did not, for example, have the same stylized “K” as the
cosmetics do.5 Victoria’s Secret has been accused of infringement previously, for marks
such as “Delicious,” “Angel Dreams” and “Fantasies.” Urban Decay has not yet
responded.
The Take-AwaysThink twice before you adopt a merely descriptive mark, and then think about it once
more, especially if you are a small outfit. The road to establishing secondary meaning
will be longer and costlier than for a more distinctive mark. If you decide to embark on
that path nevertheless, make sure you have in place the systems to preserve the proof
of all your promotional and advertising work and sales results.
If you are seeking to expand the use of a mark from one class of products to another
class where someone else already has a well-publicized similar mark, think about
avoiding similarities in the font, stylization and other aspects of the mark. Precisely
because you are both able to afford more advertising and promotion, it may be far more
likely that awareness and perhaps even copying of the senior mark in the field you are
seeking to enter can be shown.
This article was written by Christine Feller, an associate resident in the firm’s New York office. She can be reached at [email protected] or 212.745.9549.
Rights ReduxFASHION DESIGN RIGHTS BILL RE-INTRODUCED IN SENATERegular readers of InFashion are aware that, since 2006, federal legislators have
introduced bills in the House and Senate proposing design rights protection for fashion
creations. On September 10, 2012, in the midst of New York Fashion Week, Senator
Chuck Schumer of New York introduced S. 3523, the Innovative Design Protection Act
of 2012, a bill that is similar to the legislation proposed in the last Congress but adding
new limitations and conditions to assertion of any fashion design rights claims.
This new bill would amend the Copyright Act and create a three-year term of protection
for original articles of apparel. Like last year’s bill, it also creates a claim for infringement
where fashion items are “substantially identical” to an original work, defined to mean
“so similar in appearance as to be likely to be mistaken for the protected design and
contain[ing] only those differences in construction or design which are merely trivial.”
4 Other companies also use the word “NAKED” in connection with cosmetics. For example, a quick Internet search turned up “naked cosmetics,” a seemingly unrelated line of cosmetics and beauty products. But that mark is written in lower case letters, with stylization that helps to distinguish it from Urban Decay’s mark.
5 http://www.youtube.com/watch?v=mjd1czCN648 (last viewed on September 5, 2012).
7
Fashionin
The bill adds a new subsection requiring that the design rights owner provide written
notice before suing a suspected infringer. The design rights owner would have a 21-day
waiting period before being able to go to court. The bill also would exempt
telecommunications and internet service providers from fashion rights infringement
liability for the transmission, storage, retrieval and hosting of allegedly infringing
communications provided that the service provider did not select or alter the content of
the communications. This new subsection expressly provides that the exemption
provided parallels the exemption contained in Section 230(c) of the Communications
Decency Act. Stay tuned.
Social Media PoliciesDOES YOUR SOCIAL MEDIA POLICY VIOLATE THE NATIONAL LABOR RELATIONS ACT?A September 7 decision of the National Labor Relations Board, Costco Wholesale
Corporation, Case 34-CA-012421, teaches that a seemingly innocuous handbook or
employee policy provision about what employees can do on-line can run afoul of federal
labor law, even if your employees are not unionized or the subject of an
organizational campaign.
At issue was a rule telling Costco employees that "statements posted electronically ...
that damage the Company, defame any individual or damage any person’s reputation,
or violate the policies outlined in the Costco Employee Agreement," could lead to
discipline or firing. You ask: what’s wrong with that? The National Labor Relations Act,
Section 7, guarantees employees, union or not, the right “to engage . . . in concerted
activities for the purpose of collective bargaining or other mutual aid or protection.”
Section 8(a)(1) bars employer rules that would reasonably tend to chill employees’
exercise of those Section 7 rights. The NLRB found Costco's rule violated Section 8(a)
(1). The Board’s general counsel previously had taken a similar position in authorizing
various proceedings, but this is the first time it has been adopted by the Board. Time
to take a look at what’s in your employee manual?
SHORT TAKESMacy’s won a preliminary injunction from a New York State court against Martha Stewart
Living Omnimedia (MSLO) in July, barring MSLO from going forward with contemplated
products for J.C. Penney for which Macy’s has “exclusives” (soft home, housewares,
home décor, furniture and cookware). MSLO has appealed. Meantime, Macy’s also sued
J.C. Penney, which avoided an injunction by agreeing to obey the July order against
MSLO. The cases will present interesting issues of contract construction — for example,
one of MSLO’s defenses has been that the Martha Stewart “store within a store” Penney
plans to establish at its location are allowed under the MSLO-Macy’s deal as an “MSLO
Store” or MSLO Direct-to-Customer channel . . . . New York State adopted a new law,
amending parts of General Business Law §399 (the “Do Not Call” Law). Taking effect
in mid-November, the changes subject out-of-state telemarketers to registration with
the Secretary of State, require the posting of a bond, and assert jurisdiction over the
out-of-staters. The law also bans “robocalling” unless the consumer has given prior
written consent. (Do you know anyone who would?) . . . . The U.S. Court of Appeals for
the Ninth Circuit affirmed a ruling we discussed [InFashion, Fall 2011] that Shirley
Jones (depending on your generation, the mom on The Partridge Family or Librarian
Marion in The Music Man) had no right-of-publicity claim against photo agency Corbis
for its use of her pictures snapped at red carpet events . . . . The Internet Corporation
for Assigned Names and Numbers (ICANN) extended the deadline for comment on
applications made for new general top-level domains (gTLDs) [InFashion, Winter
2011-12] to September 26, even as members of the U.S. Senate Judiciary Committee
wrote to ICANN to gripe about inadequate safeguards. Meanwhile, an antitrust claim
that ICANN’s new “.xxx” gTLD was nothing but a conspiracy to monopolize the
“defensive registration” market by forcing adult Web site operators to pay to get .xxx
registrations to fend off imposters survived a motion to dismiss in August. The court
didn’t buy ICANN’s argument that the millions of dollars in fees it was collecting didn’t
amount to commercial activity, Marwin Licensing International S.A.R.L. v. ICM Registry,
LLC, 11 CV 9514 (C.D. Cal. August 14, 2012). This could raise problems for any other
new gTLDs ICANN authorizes, too — potential antitrust liability could be scarier than a
Senate letterhead . . . . Google tweaked its algorithms, saying that Web sites having
too many takedown removal notices will be displayed lower down in search results. How
many is too many? Google didn’t say.
Coming in the next issue:Made in the U.S.A.
Ann Arbor Atlanta Boston Charlotte Chicago Lake Forest New York San Francisco Washington
Fashion in
ww
w.s
chif
fhard
in.c
om
© 2012 Schiff Hardin LLPThis publication is for the general information of clients and friends of our firm. It does not provide legal advice for any specific matter. Readers should consult a lawyer directly for such advice. This publication, or parts of it, may be considered attorney advertising material under professional conduct rules applicable to lawyers.
