Fashion Companies’ Legal Issues and Cases in 2021
During the pandemic, many fashion companies and apparel retailers have spent time in bankruptcy court, generally working out concessions with landlords and lenders.
But beyond those existential legal concerns, which many in the industry will continue to face as the pandemic extends into the new year, fashion will be tracking changes in privacy and intellectual property legislation, monitoring cases whose outcomes will shape how companies apply for and defend trademarks, and bracing for more scrutiny over claims of sustainability.
Here are some legal issues, cases and areas of enforcement that fashion companies and their attorneys will be watching in 2021.
Legislation in Practice: The CCPA and the Trademark Modernization Act
The California Consumer Privacy Act, the state law that went into effect in January 2020, continues to have implications as companies observe how the California Attorney General’s office enforces certain provisions, attorneys said.
The CCPA is meant to give consumers in the state more control over how companies use their online information, and to give consumers a way to tell companies not to sell their data. Companies take the view that some of the language in the statute is still open to interpretation, particularly around what constitutes the sale of information.
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“A lot of fashion companies, and others, heavily rely on ad tech companies to advertise across the internet, and to track consumers and to do consumer profiles,” she said.
“[Under the CCPA], consumers can opt out of the sale of their information, but a ‘sale’ doesn’t mean, ‘here’s information, give me money,’” she added. “The definition of ‘sale’ is broad enough to encompass giving consumer information to advertising companies to advertise.”
In the meantime, the stimulus bill that Congress passed in December includes changes to intellectual property law under the Trademark Modernization Act. The changes under the law are meant to make it easier for brands to challenge inactive or bogus trademarks, and reinforce a central principle of U.S trademark law — companies have to be using a trademark in order to have the trademark registered, and using it on all the products listed in its application.
“It’s always been the way in the law for a long time,” Grieco said. “But the trademark office is really now enforcing it much more, and, under the Trademark Modernization Act, one of the big things it’s doing is making it easier for third parties to challenge these marks, so that they can be removed from the [trademark] register.”
Intellectual Property: Tiffany & Co. v. Costco Wholesale Corp. and the “Bad Spaniels” Case
Tiffany & Co.’s trademark infringement suit against Costco is over the warehouse retailer’s use of the term “Tiffany” in signage directing shoppers to its own engagement rings. Costco had been hit with a total $21 million damages judgment in a lower court, but in August, the Second Circuit federal appeals court reversed that judgment and sent the case back to the lower court.
On appeal, Costco had prevailed on its argument that it was not using the term “Tiffany” to evoke the Tiffany & Co. brand, but that it was using the term as a description of a particular type of ring setting. The appeals court recognizing that the term has a different, valid meaning beyond the name of the Tiffany brand is significant for fashion companies, said Melanie Howard, who chairs the intellectual property protection practice at Loeb & Loeb LLP.
“That’s a very important decision for luxury brands who are using a word mark that could have another recognized meaning,” said Howard.
Costco was also able to make its case that its use of the term “Tiffany” wouldn’t be confusing to customers since it wasn’t evoking Tiffany’s signature look, with its blue packaging, in any way.
“Tiffany has done a really good job of seeking and maintaining protection for its robin egg blue color package,” said Howard. “Their blue packaging was so well-known that Costco could use the Tiffany word mark, and not cause confusion because it’s not using the Tiffany blue color in its packaging and advertising. That was interesting to think about.
“Luxury brands referring to color as part of their branding should also make sure they’re reinforcing their use of the word mark in a distinctive way alongside the color,” Howard added.
Separately, a case that whiskey brand Jack Daniels is asking the U.S. Supreme Court to hear could affect fashion brands, if the court takes it up. In that case, Jack Daniels takes issue with a “Bad Spaniels” dog toy that it argues infringes on its brand in the name of humor or parody. The dispute evokes the 2007 dispute between Louis Vuitton and the maker of a “Chewy Vuiton” dog toy.
The “Bad Spaniels” case “could have an impact on the fashion industry where popular and luxury brands frequently face parody defenses,” said James Donoian, partner at McCarter & English LLP.
Sustainable Branding and the Federal Trade Commission
As fashion brands continue to append “sustainable” labels to their packaging, the FTC, the consumer protection agency overseeing advertising practices, may get more involved in pinpointing what the term means, attorneys said.
Companies sometimes argue that their use of positive, if nebulous, adjectives — like when touting the “wholesome” quality of their food items, for instance — simply amounts to “puffery” in the legal sense, and not misleading advertising.
But as “sustainable” branding proliferates, the FTC could push for specific standards or environmental and labor practices that brands must meet in order to use the term, said Anna Radke of Brand Counsel PC.
“Generally, the FTC doesn’t want brands to be misleading,” she said. “We might see some standards and some sort of clarification, because that’s what consumers need as well.”
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