Fashionably Legal: Fashion and Intellectual Property
This course will provide an overview of fashion law and how it intersects with intellectual property. The course will touch on more commonly known areas of fashion including apparel, shoes, and accessories. This course also will address how fashion is going beyond just the clothes or the accessories themselves and now reaching more into technology including supply chain optimization, virtual fitting rooms, and wardrobe recommendations using artificial intelligence (AI).
Kirby Drake: Pleased to be here to discuss with you today the topic of Fashionably Legal, highlighting issues that arise in fashion and intellectual property.
First we'll look at what is fashion law. Fashion law encompasses several legal practice areas including but not limited to patent, trade dress, trademark, copyright, licensing, and international law. Even employment and child labor law attorneys represent clients in legal matters related to the fashion industry. As the fashion industry makes a lot of money each year globally, fashion companies have turned to attorneys, particularly attorneys who practice intellectual property law, to help protect their ideas, brands and designs. In recent years, courts have been faced with several cases seeking to define and clarify how intellectual property laws should be applied to fashion-related products and designs. Successfully protecting fashion-related products and designs by utilizing intellectual property laws has long been a challenge that companies and designers have had to face.
So looking at what is fashion. Fashion companies who manufacture and or sell handbags, shoes, jewelry, and clothing, continue to explore how intellectual property may better protect their designs and creations. Some of the fashion companies that have been involved in high profile cases include Yves Saint Laurent, Adidas and Forever 21, to name a few. So fashion when it comes to intellectual property can include high fashion, as well as the regular clothes or shoes or accessories we may wear every day.
To get started in this topic, let's look at a trivia question. According to the joint economic committee of the U.S. Congress, how much money was spent on fashion in the U.S. in 2015? If you guessed C, $250 billion, then you would be correct.
So here's the second trivia question. How much money was spent on fashion globally in 2015? If you guessed B, $1.2 trillion, then you would be correct.
Fashion is a structurally diverse industry ranging from major international retailers, to wholesalers, to large design houses, to one person design shops. It employs people across occupations including fashion designers, computer programmers, lawyers, accountants, copywriters, social media directors, and project managers. Manufacturing is only a fraction of the modern apparel industry as it is highly sophisticated industry involving fashion market research, brand licensing and intellectual property rights, design, materials engineering, product manufacturing, marketing, as well as distribution. Let's look at some of the origins of intellectual property and fashion particularly here in the United States.
First case we'll look at is Cheney Brothers versus Doris Silk Corporation. This is a second circuit case from 1929, and it's considered to be an early fashion law case here in the U.S. The background is is that Cheney Brothers manufactured seasonal silks and various patterns releasing an array of designs each year. Even commercially successful patterns did not often last more than eight or nine months on the market. Copyright and patent laws made it impractical for Cheney to register and protect each print it produced every year. Doris Silk Corporation copied one of Cheney's successful prints and made it available for less than Cheney's price. Cheney sought to enjoin Doris Silk from copying its dress designs during the season.
The trial court denied this injunction request and Cheney appealed the decision of the Southern District of New York in which that court found in favor of Doris Silk, holding that Cheney's design had not been copyrighted and thus was not protectable. The Second Circuit held that because Cheney could not secure a copyright or patent on its patterns, they could not recover because of Doris Silk's copying. Since statutory authority pursuant to the patent or copyright law existed to protect Cheney's pattern, the court held that the property rights were limited to the tangible objects embodying the invention. Thus, although Doris Silk was found to have copied Cheney's patterns, the copying did not give rise to legal action against Doris Silk. Though this case was unsuccessful for Cheney Brothers at that time, this was a situation that emphasized the need for better legal protections for apparel or fashion such as through some amendments to the copyright laws or evaluations and how companies might use the protection.
Let's look at some different areas of intellectual property and how they intersect with fashion, starting with trademarks.
Christian Louboutin S.A. has produced luxury footwear. The vast majority of which features a bright red lacquered outsole. Louboutin applied to register the red sole, which we'll refer to here in this presentation as the red sole trademark, and they got federal registration by the U.S. Trademark Office in 2008. Some examples of the trademark registrations that Christian Louboutin obtained are shown on this slide.
In 2011, Yves Saint Laurent, or YSL, released a collection of monochrome footwear in various colors, including red. Various styles consisted of monochrome coloring, which would include a red sole and a red shoe, a purple soul purple shoe, et cetera. Some of these examples are shown on this slide along with some examples of Christian Louboutin shoes. Louboutin filed a trademark infringement lawsuit against YSL in the U.S. District Court for the Southern District of New York. Louboutin asserted that YSL was liable under the Lanham Act for claims, including trademark infringement and counterfeiting, false designation of origin, unfair competition, and trademark dilution in connection with Louboutin's federal registration for the red sole trademark. Louboutin sought a preliminary injunction preventing YSL from marketing its own red monochrome shoes or any other shoe incorporating the red sole trademark.
In response, YSL filed a counterclaim seeking to have the court cancel Louboutin's red sole trademark on the grounds that it lacked distinctiveness, and it was merely ornamental or functional, thereby making it ineligible for trademark protection. The district court denied Louboutin's motion for a preliminary injunction, finding that Louboutin had failed to establish that there was a likelihood of success on the merits of its claims. Primarily because single color marks are inherently functional and any such registered trademark, including the red sole trademark, would likely be held invalid. The Second Circuit court of appeals was then asked to look at the case and they reversed the district court finding, asserting instead that the fashion industry was accepted from the Supreme Court's holding on the protectability of a single color and thereby denied trademark protection to the red sole trademark for contracting red sole lacquered shoes.
So in the Second Circuit, there were three key inquiries. First, was the district court correct in holding that single-color marks could never receive trademark protection due to the argument of functionality. Second, if single-color marks could be protected under the umbrella of trademark law, did Louboutin's red sole trademark merit protection? And third, if the red sole trademark was protected, did YSL's monochrome shoes infringe that mark?
The Second Circuit primarily focused on whether YSL is affirmative defense of functionality rendered the red sole trademark incapable of trademark protection due to the principle that functional features of goods may not be protected. Second circuit relied on the case of Qualitex Company versus Jacobson Products Company and noted that the Supreme Court specifically forbade the implementation of a per se rule that would deny protection for the use of a single-color as a trademark in a particular industry, including the fashion industry. Because an analysis of functionality necessarily requires an individualized fact-based inquiry into the nature of the trademark. The Second Circuit then turned its attention to whether the red sole trademark warranted protection as a distinctive mark, that it acquired secondary meaning in the mind of the consuming public. The court found that the red sole trademark was certainly not inherently distinctive. As according to Qualitex, a single color standing alone could almost never be inherently distinctive because such marks do not automatically tell a customer that it refers to a brand, but rather over time, customers come to treat a particular product color as signifying a unique source.
So in the absence of inherent distinctiveness, the court focused on whether the red sole trademark had achieved secondary meaning considering several types of evidence, including consumer surveys, Louboutin's advertising expenditures, unsolicited media coverage, and worldwide sales for footwear bearing the red sole trademark. With all these things in mind, the court found that the red sole trademark had in fact acquired secondary meaning. Despite this finding of secondary meaning, the court noted Louboutin's failure to show that the secondary meaning of its red sole mark extended to uses in which the sole did not contrast with the upper part of a shoe, i.e on monochromatic red shoes. For example, of the hundreds of pictures of Louboutin shoes submitted to the district court, only four were monochrome red. YSL on the other hand had produced evidence of its sale of monochromatic red shoes as well as other monochromatic colored shoes since the 1970s. Based on this evidence, the Second Circuit ordered the U.S. Trademark Office to limit the red sole trademark to just those situations in which the red lacquered outsole contrast in color with the adjoining upper of the shoe, finding that the red sole trademark was valid and enforceable only as modified. So let's look at another trademark case in the fashion industry that involves shoes.
And this case is LVL XIII Brands versus Louis Vuitton. Some examples of the shoes that issue are shown on the slide. LVL XIII filed a trademark application in 2013 with the U.S. Trademark Office for the look of a toe plate. It was described as a shoe toe design featuring a rectangular metal plate across the front of the shoe toe with the wording LVL XIII engraved in the metal plate and four small screws in the corners of the metal plate. The U.S. Trademark Office issued an office action or a rejection in 2014, stating that registration could not be approved because portions of the mark were functional. Functional features cannot be trademarked. LVL XIII then requested a suspension of the application pending the outcome of litigation that it had filed against Louis Vuitton. In its complaint against Louis Vuitton, LVL XIII claimed that by copying the toe plate, Louis Vuitton was exploiting the Goodwill of LVL XIII in an effort to mislead consumers and was making a deliberate attempt to divert sales away from LVL XIII. The court decided to grant Louis Vuitton summary judgment focusing on the lack of distinctiveness in LVL XIII's mark and the lack of a likelihood of confusion. In order to be registered, a mark has to have distinctiveness. The court said that the mark was not inherently distinctive where its intrinsic nature serves to identify for a particular source. It then assessed whether the mark had acquired distinctiveness by attaining secondary meaning where in the minds of the public, the primary significance of a product feature is to identify the source of the product rather than the product itself.
The following six factors were used to analyze the presence of secondary meaning in this case. First, advertising expenditures. The court found that LVL XIII had not engaged in any traditional forms of paid advertising. Second, consumer studies linking the mark to the source. Court found that LVL XIII did not provide any consumer studies in the case. Third, unsolicited media coverage of the product. Most of level thirteens media coverage had come as a result of a publicist. Thus it was not unsolicited. Four, sales success. LVL XIII sold 500 pairs of the shoes out of 1000 that were manufactured. The court did not consider that a success for the purposes of secondary meaning. Five, attempts to plagiarize the mark. LVL XIII could not show that there had been any attempts to copy the toe plate besides the alleged infringement by Louis Vuitton. Finally, six, the link and exclusivity of the mark's use. The court thought that LVL XIII's eight months of use was too short to acquire secondary meaning. So even though the mark had no distinctiveness and therefore could not be registered, the court still proceeded with the question of likelihood of confusion for consumers as to the source of the products, which must be proved for a trademark infringement claim to be successful.
The court used the Polaroid factors to determine likelihood of confusion, including the strength of the plaintiff's mark, the degree of similarity between the plaintiff's and defendant's marks, the competitive proximity of the product sold under the marks, the likelihood that the plaintiff will bridge the gap, actual confusion, the defendant's good faith, or lack thereof, in adopting its mark, the quality of the defendant's product, and the sophistication of the plaintiff's customers. The factors weighed in favor of Louis Vuitton and thus the court found that no likelihood of confusion would occur. With all of this in mind, some of the questions that were raised at the Court of Appeal included, did the district court air err in ruling in Louis Vuitton's favor on the issue of whether LVL XIII's metal toe plate is an inherently distinctive product label entitled to trademark protection, or on the issue of likely to confusion, particularly the similarity in the marks?
Particularly, LVL XIII asked the appeals court to consider whether the district court erred in granting summary judgment on the issue of acquired distinctiveness, despite in their argument third-party customer testimony concerning actual confusion premised on their recognition of the LVL XIII brand and internet evidence indicating brand recognition including social media recognition. The court agreed that the mark had not developed secondary meaning. The toe plate was not unique in the shoe market and the toe plate was not indicative of the brand.
There are even more cases related to shoes and trademarks, including in the case of Converse versus the International Trade Commission. This slide gives some examples of various Converse sneaker trademarks. In 2014, Converse launched an aggressive campaign to revive its brand and protect the iconic Chuck Taylor and All Star sneakers. Converse filed lawsuits against 31 retailers and manufacturers, including Skechers, H&M and Ralph Lauren, to name a few, alleging that these retailers infringed its trademark registrations related to the Chuck Taylor sneakers. In particular, U.S. trademark registration number 4398753 was included in the lawsuits was directed to the mid sole and toe cap of the Chuck Taylor sneaker. This slide provides examples of the accused products, the accused Converse trademarks, and representative Converse shoes alleged to be covered by the Converse trademarks.
In November, 2015, the ITC issued an initial determination finding that some of the accused infringer shoes did not infringe Converse's trademarks, while other accused infringer shoes were likely to be confused with Converse's trademarks. Several of the accused infringers settled out of court with Converse after that ruling. The ITC later found that the mid-sole of the Chuck Taylor sneaker lacked secondary meaning and Congress appealed the ITC's reversal, including the mid sole. In 2018, the Federal Circuit vacated the ITC decision finding that the ITC applied an incorrect standard for finding secondary meaning and they also erred by not distinguishing between accused footwear launch before and after the 2013 registration date of Converse's main asserted trademark registration, and that trademark registration claim trade dress design rights in the Chuck Taylor upper design. On remand, the ITC issued a decision with respect to Converse's alleged rights and the claims against the remaining respondents, including Skechers, New Balance and Highline, it's the owner of the ASH brand.
In the ITCs decision on remand, the ITC ruled that Converse owns valid common law trade dress rights and valid trademark registration for the Chuck Taylor upper design, but they found that the footwear produced by Skechers, New Balance and Highline we're not infringing. Then odd twist, the ITC affirmed its earlier ruling that some of the respondents that had defaulted in the case that they had infringed Converse's intellectual property rights and were rightly prohibited from importing their footwear into the United States. In finding Sketcher's footwear to be non-infringing, the ITC acknowledged the similarity between the footwear designs but found that the likelihood of confusion was undercut by the determination that Skechers has a brand name that's well-known and recognized by consumers and their use of branding, labeling and marketing significantly reduces the likelihood of confusion, a finding that is likely to be controversial in the future. For New Balance's PF flyers footwear, the ITC found that the design itself was not infringing because it did not have substantial similarity to the asserted trade dress. And with respect to Highline, the ITC relied heavily on the fact that Highline has an accused higher-end shoe and it's sold to a more sophisticated set of consumers at a higher price point. It had been sold for seven years before Converse's upper trade dress registration issue. And also Highline has a very small market share compared to Converse and the other respondents.
Now we'll look a little bit at clothing and touch a bit on Adidas.
As you can see, Adidas has trademarks on a number of different products containing three stripes. However, Adidas has been accused of pursuing trademark infringement claims too aggressively against manufacturers who use any number of stripes on their products, could be two stripes, could be four stripes, could be more stripes than that. Adidas has not only targeted fashion companies with lawsuits, which we'll talk about in a minute, but some of Adidas's lawsuits have even targeted entities such as FC Barcelona and Tesla Motors Inc. With respect to FC Barcelona, Adidas became aware of FC Barcelona soccer club trademark and they immediately filed a notice of opposition with the trademark office. However, the resemblance and the three Stripe mark was not that similar. The trademark FC Barcelona applied for was a square that had seven alternating red and blue stripes, which is a divergence from the typical three stripes that Adidas sought to protect. Despite this weak connection, FC Barcelona pulled out of their application for a trademark, which was an apparent win for Adidas.
As for Tesla, when Tesla announced their car, the Model 3, they had plans to symbolize the number three with three horizontal bars. However, Adidas claimed that Tesla was intentionally trying to deceive consumers into believing the Model 3 was an Adidas-branded car. This is not so much an argument against how Tesla using the mark would hurt them but in the valuation into how established Adidas's three stripes have become in the world. In response to questions, Adidas said they were pursuing the case because Tesla was looking to put the logo on clothing and other products. It appears that under these circumstances, the case had a weak foundation. Tesla later decided to use the number three instead of the three lines symbol, thus resolving the dispute.
So now we'll look at Adidas and some of its other fights related to its stripes.
Adidas and Forever 21 have had over a decade-long history of fighting over stripes. Since 2006, Adidas has had a pattern of complaining about striped apparel that's been sold by Forever 21, and it has steadfastly increased its threats to encompass virtually any item of clothing with decorative stripes. This slide as well as the next slide shows some examples of clothing that Adidas believes to infringe its three-stripe mark. So looking at particularly at the case against Forever 21, in March of 2017, Adidas America sued Forever 21 as well as the group of suppliers in Oregon for using Adidas's registered three-stripe mark. The complaint alleged trademark infringement and dilution, unfair competition and deceptive trade practices.
This slide shows all of the trademark registrations that Adidas alleged were infringed by Forever 21. Adidas asked the court to order Forever 21 to stop selling the products in question and demanded damages, including lost profits, as well as punitive damages, a discretionary measure that the court can award as an extra form of punishment. Adidas specifically pointed out track pants and shorts that had the three-stripe mark, but also some other types of clothing were identified as you can see. The case eventually settled, however, even the filing of the case, shows how broadly a company such as Adidas may go to seek to protect and enforce its marks, even going after products including more or fewer than three stripes.
Now we'll turn and look at copyrights for a little bit.
Designers are increasingly utilizing copyright laws to help protect their work from being unlawfully copied. As copyright registration applications are relatively inexpensive and typically register quickly, the benefits of registering designs with the U.S. Copyright Office appear to be increasing. One of the most notable Supreme Court decisions and certainly in the history of fashion law is the decision in Star Athletica, LLC versus Varsity Brands, Inc. In this case, the copyright registration for the arrangement of colors, shapes, stripes and chevrons on the surface of the cheerleading uniforms designed by Varsity Brands was at issue. The registered designs are shown on this slide.
Varsity Brands accused Star Athletica of infringing its copyright registrations for two dimensional artwork on cheerleading uniforms. Star Athletica raised a counterclaim alleging that Varsity Brands copyrights were invalid because the two dimensional designs could not be separated from the cheerleading uniforms upon which the designs were applied. Examples and comparisons to the accused designs to the copyright registrations are shown on this slide. The U.S. District Court for the Western District of Tennessee entered summary judgment in favor of Star Athletica and held that the Varsity Brands copyrighted designs could not be separated from the utilitarian function of the cheerleading uniforms. However, the Sixth Circuit and later the Supreme Court disagreed. In their opinion, the Supreme Court explained that designs do not need to be physically separable from the articles and it is sufficient for designs to be conceptually separable.
On March 22nd, 2017, the U.S. Supreme Court held that a feature incorporated into the design of a useful article is eligible for copyright protection only if the feature one, can be perceived as a two or three dimensional work of art separate from the useful article. And two, would qualify as a protectable pictorial, graphical or sculptural work either on its own or fixed in some other tangible medium of expression if it were imagined separately from the useful article into which it is incorporated. And the Supreme Court found that that test was satisfied in this case. They explained that the copyright registration only applies to the design itself and does not extend to articles or mediums on which the design is applied. And he said, quote, "To be clear, the only feature of the cheerleading uniform eligible for a copyright in this case is the two dimensional work of art fixed in the tangible medium of the uniform fabric. Even if respondents ultimately succeed in establishing a valid copyright in the surface decorations, they have no right to prohibit any person from manufacturing a cheerleading uniform of identical shape, cut and dimensions to the ones on which the decorations in this case appear. They may prohibit only the reproduction of the surface designs in any tangible medium of expression, a uniform or otherwise." Consequently, many think that the Supreme Court's decision creates a stronger mechanism for more companies in the fashion industry to increasingly rely on copyright registrations to protect their designs.
Now we'll turn a little bit to patents. They're two different types of patents that may protect items in the fashion area. Utility patents are less common but can offer very strong protection if they're able to be obtained. They could be retained on some things such as a new configuration for a shoe, like an athletic shoe that provides a superior bounce. But if a utility patent is issued, it provides 20 years of protection from the filing date. In order for something to be protected through utility patent, the invention must be novel, non-obvious and useful. Design patents are more often seen with fashion such as with clothing or accessories. Maybe even with jewelry or watch designs, for example. When issued, a design patent offers 15 years of protection from the issue date, but they are limited to protecting new and non-obvious ornamental designs. From the designs on shoes to the construction of the soles and toe caps, the shoe industry has not been shy about filing design and utility patent applications and other industries are starting to catch on. So let's look at a few examples of patents. For example, in 1919, an inventor sought protection for draping and constructing an evening dress's skirt and was granted U.S. patent number 1313496. This is referred to as a battered pattern that you might find in clothing design even today even though the patent is no longer in force.
Today, patents have become a popular and common form of protection for the fashion industry. Of course, as you'll see here, Apple has protected its Apple watches. Patents and patent applications assigned to Apple Inc for its watch designs and accessories are interesting to monitor as Apple is known to file several patents at one time for its wearables. In March of 2017, Apple is granted several patents covering its watch bands. And then in another area of undergarments, as you might say, some of you may be familiar with Spanx, which has been protected through various patents, one of which is shown here. Some other accessories have been protected through design patents, including the ring wrap, as you see here, which is a piece of jewelry that can be wrapped around something like a class ring, as well as purse designs, in the case of Yves Saint Laurent.
I would say that Yves Saint Laurent is an example of the power of intellectual property law in the fashion industry. In 2016 alone, YSL was issued over 27 design patents for shoes and handbags in an effort to prevent others from making, using or selling products that could reduce their sales or harm their brand. While YSL may have found it helpful to gain patent protection, there are some challenges to the value of patent protection in the fashion industry. As we've mentioned earlier, the season in which articles of fashion are sold can be limited. And so the investment of money in patent protection may not be that helpful when the product may not benefit much from a 20-year term.
Another challenge when it comes to patent protection in the fashion industry is the time that it takes to get protection. Again, if the shelf or season life of a product is limited, it might be possible that patent protection may not be achieved before the useful life of the product has passed. So now we're gonna look a little bit back on some different areas of intellectual property and how they relate to things perhaps outside of clothing, more in the accessories range. And one of the cases that you may have heard of over the last several years deals with trademarks and jewelry.
So Costco and Tiffany & Company have had a long running lawsuit over the sale of Tiffany diamond engagement rings. Tiffany first sued Costco in 2013 claiming its trademark had been violated. Costco responded to Tiffany suit by arguing that the Tiffany setting had become a generic term in the jewelry industry to describe rings in which the gem is held in place by unobtrusive prongs. Costco further argued there was little chance that its customers would think that they bought an actual Tiffany & Company ring at Costco. A federal judge in 2017 rolled for Tiffany and awarded the company millions of dollars in damages, finding that Costco had acted in bad faith by using the Tiffany name and display cases to sell its rings. But that decision was later overturned. The Second Circuit found that it is reasonable that jurors could conclude that Costco's use of the Tiffany name in connection with the sale of six prong diamond rings was not likely to confuse consumers or lead them to believe that Tiffany & Company endorsed or were in some way connected to the sale of the rings. When they vacated the lower court's decision, the Second Circuit concluded that the evidence presented by Costco has been considered in the aggregate created a genuine question as to the likelihood of consumer confusion, namely due to the combination of Costco's evidence that Tiffany is a broadly recognized term denoting a particular style of pronged ring setting, and it's further indications backed by prior pronouncements of this court that purchasers of diamond engagement rings educate themselves so as to become discerning consumers. The decision was remanded to the district court for a new trial. However, the parties since settled the case while preparing for that trial and the terms were not disclosed.
Now we'll look at a combination of a trademark and copyright issues that can arise in a fashion case. Using another trademarks on your goods or services usually requires a license, but there can be exceptions to that general role. For example, under certain circumstances, you're not required to obtain a license in connection with trademark uses for the purposes of parody, such as in the case of Louis Vuitton versus My Other Bag.
In this case, My Other Bag sold everyday canvas tote bags with drawings of various luxury brand handbags on one side and the phrase My Other Bag in large print on the other side. Louis Vuitton took offense at My Other Bag's products that imitate a number of Louis Vuitton bag styles. And they sued claiming, among other things, trademark infringement and dilution. The district court granted My Other Bag summary judgment on all of Louis Vuitton's claims, holding that My Other Bag's products are parodies and as such are not actionable sources of trademark infringement or dilution. Louis Vuitton then appealed the decision to the Second Circuit Court of Appeals. On appeal, the Second Circuit affirmed the trademark infringement part of the summary judgment award finding no real likelihood of confusion as to the source or origin of My Other Bag's products. In arriving at its decision, the Second Circuit pointed to several items. One, the obvious differences in My Other Bag's mimicking of Louis Vuitton's trademark with a caricature drawing and replacing Louis Vuitton's famous interlocking L's and V's with interlocking M's, O's, and B's. Second, the lack of market proximity between Louis Vuitton's high-end luxury handbags with a bourgeois target market and My Other Bag's ordinary canvas tote bags with a proletariat target market. And three, the failure of Louis Vuitton to produce convincing evidence of consumer confusion between the two bags manufacturers.
With respect to Louis Vuitton's claims of trademark pollution, the Second Circuit held that My Other Bag's tip bags are a parody, bringing them within a fair use exclusion from liability for trademark dilution. The Second Circuit explained a parody must convey two simultaneous and contradictory messages, that it is the original, but also that it is not the original and is instead a parody. My Other Bag bags do precisely that. At the same time they mimic Louis Vuitton's designs and handbags in a way that is recognizable. They do so as a drawing on a product that is such a conscious departure from Louis Vuitton's image of luxury in combination with the slogan My Other Bag as to convey that My Other Bag's tote bags are not Louis Vuitton handbags. The fact that the joke on Louis Vuitton's luxury image is gentle and possibly even complimentary to Louis Vuitton does not preclude it from being a parody.
The key here is that My Other Bag was not using Louis Vuitton's trademarks solely to increase sales of their products by inducing consumers to mistakenly believe that the totes are Louis Vuitton bags or somehow sponsored or endorsed by Louis Vuitton. Instead, the trademarks were primarily being used to parody Louis Vuitton's high-end luxury image. On that basis, the Second Circuit affirmed the trademark dilution part of the award of summary judgment in favor of My Other Bag too. I think this case shows that brand owners need to diligently protect their trademarks from infringement, dilution, and other misuse, including unfair competition, passing off, false advertising, and cybersquatting that could harm the owner's goodwill and business reputation. But at the same time, brand owners may choose not to vigorously pursue all possible uses that might conflict or to immediately start a lawsuit against every possible infringer. Of course, a complete failure to enforce will lead to a weakening of a trademark, loss of distinctiveness over time, and potential forfeiture of certain available remedies.
Nonetheless, when potential infringements are identified, brand owners should investigate and evaluate all relevant factors, such as type of use and likelihood of confusion and consider whether there are defenses such as parody. As the judge held in granting summary judgment in the lower court, he said, "In some cases it is better to accept the implied compliment in a parody and to smile or laugh than it is to sue." This decision now affirmed by the Second Circuit should serve as an important lesson to companies as they seek to protect their brands under trademark and copyright law.
Now we'll look at another case, this is actually a footwear case, but a little bit different than some of the others that we've talked about before. So Aquazzura is a high-end shoe company and they filed suit in June of 2016 against Ivanka Trump, her company, IT Collection, LLC and its footwear licensee, Marc Fisher Holdings, alleging that a shoe that was being offered by Trump was virtually identical to Aquazzura's Wild Thing design. As you could see here. According to official court documents, Trump's shoe copies nearly every detail of plaintiff's well-known and coveted Wild Things shoe, from the shape, to the silhouette, to the fringe covering the toes, to the tassel on the heel in a nearly identical color palette. As a side note, Aquazzura's Wild Thing shoe was available for $698 on a site like Net-a-Porter, whereas the Ivanka Trump she was made in China, costs literally a third of the price right now for $208. During this lawsuit, Aquazzura's founder took to Instagram with the side-by-side pic and captioned it, "One of the most disturbing things in the fashion industry is when someone blatantly steals your copyright designs and doesn't care. You should know better, shame on you Ivanka Trump. Imitation is not the most sincere form of flattery. Hashtag Aquazzura, Hashtag Ivanka Trump. Proud of mine, hashtag Made in Italy, hashtag Italians do it better." Eventually after the court issued a requirement for Ivanka Trump to testify, given her past public statements about heading operations and approving designs related to the shoes, the case soon settled and their terms of the settlement were disclosed.
So now we'll look at some things in a very different field, as it relates to your street art and graffiti and intellectual property and how that relates to fashion. So graffiti artists sometimes can be successful in maintaining causes of action despite the illegality of their work. Pop musician Katy Perry attended the Met Gala wearing a dress designed by Jeremy Scott who replicated a mural by Joseph Tierney or Rime for the dress's fabric. Scott also attended the event in a similarly designed suit. Tierney, Rime, he sued for copyright infringement, falsification of copyright, unfair competition, appropriation of name and likeness, and negligence. The defendants, Scott and the brand Moschino asserted that they were exercising their constitutional rights as a matter of public interest. The court found the dress qualified as public interest because the designer and apparel brand are household names in high fashion. Tierney also alleged falsifying copyright management information in a work of authorship under federal law because putting Moschino or Moschino on the dress with his graffiti falsely suggested that the fashion brand made the design rather than Tierney.
Tierney said his credibility as a graffiti artist was compromised by the inclusion in such a crass and commercial publicity stunt. He also alleged that his graffiti tag was reproduced by Moschino on a number of garments but Scott claimed he did not design the graphics. The graffiti in question, which was referred to as vandal eyes, had been painted on the side of a building in Detroit in 2012. Tierney claimed he had permission to create the mural but in the motion to dismiss the case, Moschino and Scott described Tierney as an unabashed felon who had painted the work illegally. Lawyers representing the defendants also referred to one of the most notorious unsolved crimes in Los Angeles, the so-called Black Dahlia Murder in 1947 to illustrate their copyright argument. Quote, "When photographs of the killer's criminal handiwork were distributed by police and media, could the Black Dahlia's killer sue them for copyright infringement? In a word, no," close quote.
With the case being settled out of court, the question of whether graffiti should be protected by copyright law in the U.S. as is the case in Australia, looks like it will remain unanswered. Courts tend to analyze cases regarding unsanctioned graffiti on the premise that such works are copyrightable though they've not held explicitly that such works hold valid copyrights. They focused on copyright defenses and dismissing causes of action rather than defense of illegality. Courts have had ample opportunities to rule that unsanctioned art is not copyrightable and thereby end the debate, but they've chosen to analyze the cases as copyright infringements and dismiss or allow them to continue on grounds of statutory copyright law. This widespread judicial approach gives weight to the argument that unsanctioned graffiti is copyrightable. While courts have not explicitly stated that unsanctioned graffiti deserves copyright protection, the incentive-based theory of intellectual property requires this protection for graffiti. This theoretical foundation constructs copyright as necessary to provide an incentive for authors to create and disseminate works of social value. The American IP regime widely accepts the incentive-based theory as the primary justification for copyright. That the IP clause in the constitution states that IP laws are to promote the progress of science and useful arts by securing for limited time to authors and inventors the exclusive rights to their respective writings and discoveries.
American courts tend to interpret the IP clause of the constitution as authorizing Congress to legislate to confer rewards on creators that will incentivize them to make and disseminate works, thereby contributing to the progress of society. This argument asserts that of free writers are allowed to appropriate another's work, then authors will cease to create. As applied to the graffiti movement, copyright protection is necessary to encourage artists to continue creating graffiti without the fear of free writing copious. Harm to reputation can disincentivize an artist to continue work. In the context of the graffiti movement, reputation is a key component of a graffiti artist's identity and work. In the case of Katy Perry's dress, Tierney argued that he was accused of selling out by appearing to have endorsed Katy Perry in a high-end fashion collection, which harmed his credibility in the art community. In a world where many artists attempt to remain anonymous and keep an air of rebellion, appropriation of graffiti artist's work for commercial gain could disincentivize artists from continuing their work by harming their reputations.
Instead of asking if graffiti artists would be incentivized to innovate though, a better question exists, what is the incentive for copyright law to exclude graffiti? As previously established, graffiti should on its face qualify for protection under the copyright act, as it is an original and fixed worth of authorship since it satisfies these statutory requirements for protection. And the question becomes, what reason copyright law has to refuse it protection, which can only be rationalized based on the illegality of the act. So then we're gonna look at the future of fashion, which I think is a very interesting and open-ended part of the world when it comes to intellectual property. Fashion these days is going beyond just clothes or accessories, and they always reaching into more technology, including supply chain optimization, virtual fitting rooms, and wardrobe recommendations using artificial intelligence.
Blockchain technology is something we're hearing more about recently, but it is even coming up in the fashion industry.
One example of blockchain and fashion deals with Babyghost. Babyghost is a trendy fashion label that paired up with a blockchain as a service company to provide a multi-sensory feast for a fashion crowd at the Shanghai Fashion Week a couple of years ago. Here, blockchain technology was used to put unique ideas on the blockchain to verify if an item is unique or not. The result is called fashtech where a clothing collection can be verified on the blockchain through near-field communications or by scanning a QR code on a label. A small chip is embedded inside the clothing or accessory and when it's activated, it tells a story to the consumer. This is evidence that blockchain technology has the potential to be disruptive to more than just finance. So now we'll look at a couple of other examples and particularly thinking about who actually owns the rights to some of these fashions, especially when they get put into a technology context.
On this slide, we see several examples of different ways that technology is being used in the fashion area. We'll see we have the DressX. It's a situation where clothing in the loose sense of clothing designs as created just for a digital use. So maybe something where you do submit your own picture and you have the clothing fitted to your image in the picture, and then it's available for you to use, you know, those pictures of you in the designs on your social media, for example, but you'll never receive the clothing in an actual physical form.
Second example shown on the slide is Zeekit which is a virtual fitting room and is allowing that everyone to be able to model and try on clothes online. So you can see here, you have various people shown all with the same dress on, and then you get to see how it looks with different body types and looks, and facial features, and hair colors, and the like. A third type of technology that's shown here on this slide is Browzwear, which is a 3D fashion design situation where you can create and fit and you can even get a digital catalog put into place for your designs. And then ultimately those 3D fashion designs can later be put into manufacturing. And finally there there's a ViewAI, which is model customization. So this is similar to you, something like Zeekit but you may be looking at particular models to model certain fashion or accessories or, you know, things for your website. And you can look at different models, types of models, their sizes, their ethnicities, as well as their backgrounds and see how they would look in the different clothing in order for you to move forward with your selections.
So those are just some of the different technologies that we see. But a question that often arises with respect to digital transformation of fashion is who actually owns the rights. Usually the designer is thought to own the design rights to the garment pattern and the physical appearance, but what about if there's a digital twin that's later developed? It may depend on the software and the legal agreements that are in place. For example, a designer may hand over the design or pattern to the 3D designer who then use a software to recreate or even animate the garment. The software license holder may very well own the 3D garment, not the original designer, but there may be contractual rights provided to the designer or a licensed agreement to allow the designer to use the 3D garment. Then there are situations where several agencies work on the 3D output, the design, the animation in combination into a 3D environment, for example. You may have needed licensed agreements with all the parties for any party to be able to use the content. But is it likely in practice for the original designer to lose the rights? Well, as the industry shifts towards digital fashion creation, the likelihood of losing those rights to use the digital assets is an eminent risk. You may want to consider a transfer of digital design rights from the 3D designer back to the brand or a license that ensures the brand can use the the digital content.
Also, you may be able to use the software subscriptions where freelancers can create 3D assets for the brand. Just need to make sure these issues are addressed upfront to avoid loss of control of the digital assets and the right to use them for commercial gain as appropriate. Hopefully, this feature of fashion discussion provides a good segue to discuss a couple of other things that are a little bit further from fashion but deal with a lot of the fashion companies. So one of the areas that I think has become a lot of the talk in industry in general and in the technology area are NFTs, which are non-fungible tokens or blockchain-backed unique digital assets. So we hear about that sometimes in terms of creation of different works of art or other things that people are buying to have their own copy. So let's look at an example in the fashion area. So you're getting ready for your party and you're putting on your Rolex, you're putting across your body your Louis Vuitton cross body bag, but all of these things aren't items that you actually have in real life. It's all virtual gear that's worn by your digital self who's about to be teleported into the metaverse.
So this is an introduction to the new world of luxury where you may have avatars that are wearing Burberry skins and carrying Gucci handbags that are not leather totes, but non fungible tokens or NFTs. Some of the biggest designer groups are having a really hard time trying to figure out how to approach the virtual and augmented reality of this new universe. That the new universe promises to help capture lucrative sales and win over young fans. It also could hedge against some of the issues that we're seeing with countries like China, because it may be harder for the government to crack down on conspicuous consumption in another world. So far, some of these luxury brands have just ventured into the big gaming platforms. Probably one of the best known is Balenciaga's collaboration with Fortnite, which sells skins or virtual clothing and accessories for avatars. Usually the cost less than $10, but then they also have a real life collection of t-shirts, hats, and hoodies that cost multiple times more. They're so keen on virtual fashion that they're creating a dedicated business unit to explore opportunities in the metaverse. But Balenciaga is far from alone. LVMH Moët Hennessy Louis Vuitton SE, Burberry Group, Ralph Lauren and Gucci have all participated in gaming collaborations. Although not a luxury brand, Zara is even making its first foray into the metaverse through the Zepeto platform. Some of the statistics with it is according to Morgan Stanley, luxury brands could generate sales of about 10 billion Euros or $11.3 billion from gaming by 2030. Although this could be as high as 25 billion Euros in an optimistic scenario. But the most lucrative luxury metaverse play is creating NFTs. They could generate sales of 11 billion Euros by 2030, according to Morgan Stanley. That this could reach as high as about 22 billion Euros. W
hat's really interesting about NFTs is that the profit margins could be extremely high 'cause it costs far less to make a digital watch or a handbag than it does to make the real thing. I think we've really only seen some of the luxury brands just dip their toes into NFTE waters so far, with Dolce and Gabbana, Burberry and Gucci among those exploring possibilities. Some of the Louis Vuitton brands, including Louis Vuitton, Givenchy, Bulgari and Ranelle are also experimenting but their efforts have been more about testing concept rather than trying to get sales. We've even seen Adidas, they've announced an NFT collection. And then Nike has one, which is the RTFKT, which is a pioneer fashion NFTs with virtual sneakers. I think that the sweet spot with a lot of these and probably where some of the issues will arise will come when FTS can be moved between different virtual platforms. It's gonna make them more useful and more valuable, but it also could be more challenging to manage, particularly from a protection standpoint. We have seen some places where this is already taking place. There's a website, Artsy where jewelry is available to rent in the mall of the metaverse and AltspaceVR, which is an app owned by Microsoft. And on Altspace, these objects are known as mixed reality extensions because they're designed to work across different virtual worlds. So there's parallel efforts going on NFT market and this could enable your avatar to wear digital clothing and accessories in all these different settings. And why do you need to buy a real Louis Vuitton handbag when you can show off your simulation at a virtual concert with your avatar pals? Of course, this comes with risks. The most pressing is how to break into it without losing that exclusivity or devaluing the brands. One option that has been considered is issuing NFTs that are tied to the purchase of physical luxury goods. So you buy your watch, you have it's authenticity certified on the blockchain, and then you have the bragging rights for that virtual wearing of the watch too. But there's danger of unauthorized NFTs that are clogging the space. So look at an example, as I said, Gucci is trying to get into this whole virtual world with NFTs and they introduced a $12 pair of digital sneakers that could be worn in Roblox, an online gaming platform. This is one where we're not just Gucci is there, but Nike, Burberry, Chanel, Prada, Dior, Louis Vuitton, seem to be on there and seem to have items that users can buy. Although some of those brands have not really participated in the creating or selling of most of the items. There's some tension that starting to rise over what's being used on the platform.
Recently, the National Music Publishers Association filed a lawsuit against Roblox accusing it of using songs from artists like Ariana Grande and Ed Sheeran without compensating writers or copyright holders. And Roblox stated it was passionate about protecting intellectual property rights and does not tolerate copyright infringement. Some of these other sites where users can buy and sell digital clothing, including Animal Crossing, OpenSea and others, are also looking at these areas and have shown concern for copyright rights. But it's hard to know how they're going to actually enforce the rights that creators may have. Because there may be some designs on these sites that are created by brands and others that are created by fans. So there may be potential confusion among consumers as to whether what they're buying is actually created by the brand or if this is a knockoff, as we would refer to in the physical clothing or accessory world. We see the rules about if you're creating counterfeits, if there's physical counterfeits, generally the rules are pretty clear, but the rules in the virtual world are still a bit murky. As I said, who owns the IP on a digitally created or mutated physical product? You know, we have these conversations and so the question is gonna keep arising, who owns the intellectual property for that, and how does that change? And this can be really, really challenging for a lot of established manufacturing companies. But as the sales and usage of these digital items in fashion and accessories increase, we see that legal action could be one route to tackle it.
As we talked about with the music case with respect to Roblox, they said that creators are responsible for clearing the rights to the content they upload, and they rely on legal protection, specifically the US's Digital Millennium Copyright Act, which provides immunity to online service providers for infringing content, and section 230 of the Communications Decency Act, which says that platforms are not responsible for screening what their users say. A Roblox spokesperson said, "As a platform powered by a community of creators, we are committed to protecting intellectual property rights from independent designers and creators to fashion and lifestyle brands. We do not tolerate copyright infringement and expeditiously respond to any valid Digital Millennium Copyright Act requests by removing any infringing content." So with respect to NFTs, we say that the NFT is not the image, it's the metadata that's pointing to the image.
So if you're using the Gucci trademark to sell an NFT, using that mark would legally be considered infringing. But if Gucci doesn't have a presence in the NFT market, then there's a question as to whether it would be seen as a counterfeit. So will the artists try to stake a claim to the Gucci mark for NFTs? But on the other hand, we have seen that Gucci has recently sold a fashion film NFT. So it would not be surprising if Gucci were to protect its rights against infringing uses of its marks, as they seem to be more player in this market. Finally, a brand may be motivated to wanna participate in NFT sales because the resales of NFTs would allow them to continue making money on secondary sales and all future sales. This could be very important. So in Roblox, a Gucci branded item created the brand was recently sold among peers for more than $4,000. While Gucci benefited from the original sale, it did not capitalize on the resale. So in this area, the question really comes down to, how much will consumers spend on NFTs for high-end fashion or accessories? And then also, how the intellectual property laws are going to change, if at all, to account for virtual reality protection, such as things like virtual design patents?
So I hope you learned a little bit of something here today. I really appreciate your time and attention. And if you do have any questions or would like any further information on fashion and intellectual property, please feel free to contact me. Thank you.