Cases to Watch in 2022
In 2022, we look forward to decisions and developments on the following pending federal district court cases that will shed light on important issues in the fashion, apparel, and beauty space. These issues include: the resale of branded products; the scope of design patent and trade dress protection in clothing; and the application of trademark and copyright principles to non-fungible tokens (NFTs), a blockchain technology providing tokens representing ownership of digitized items.
Chanel, Inc. v. What Goes Around Comes Around LLC; Chanel, Inc. v. The RealReal, Inc.
The standards for evaluating trademark use, false advertising, and intellectual property policing may be implicated should decisions be rendered in litigation initiated by Chanel against The RealReal and What Goes Around Comes Around (“WGACA”), companies in the online luxury consignment market. Chanel brought claims for trademark infringement, unfair competition, trademark counterfeiting and deceptive and false advertising against WGACA and The RealReal, arguing that consumers would falsely believe that Chanel authorized the sale of its Chanel-branded luxury items or was otherwise associated with The RealReal and WGACA. Chanel’s case against WGACA has outstanding motions for summary judgment, with Chanel seeking a finding that WGACA engaged in false association and false advertising. In response, WGACA argues that Chanel has not been injured or otherwise suffered reputational harm; that its use of the CHANEL mark constitutes nominative fair use; and it had not engaged in counterfeiting. In the other pending case, Chanel has taken issue with the RealReal’s advertising of its authentication processes and the RealReal has raised antitrust concerns, claiming that Chanel has engaged in anti-competitive activities through seeking to exclude or overly limit resellers from using the CHANEL trademark. The implications of these cases could be broad-reaching, providing guidance to resellers on the parameters of a fair use defense to trademark infringement claims through a decision in the Chanel v. WGACA case and insights into the validity of antitrust-type claims in instances of claimed interference with the resale market in Chanel v. The RealReal as well as how resellers ought to describe the authenticity of the goods they sell. Whether and to what extent The Shop Safe Act — a proposed act to reduce the availability of counterfeit items by incentivizing online platforms to thoroughly vet sellers — is able to assuage fears of counterfeit sales such as those claimed against The RealReal remains to be seen, as the Act remains pending.
Lululemon Athletica Canada, Inc. v. Peloton Interactive, Inc.; Peloton Interactive, Inc. v. Lululemon Athletica Canada, Inc.
Peloton and Lululemon entered into a co-branding partnership for athletic clothing that lasted until September 2021. Upon termination of that partnership, Peloton launched its own private label clothing line. In November 2021, Lululemon sent a cease and desist letter to Peloton, alleging that items in its clothing line infringed its design patents and trade dress rights. Peloton responded by filing a declaratory judgment action of non-infringement and claiming that Lululemon’s design patents were invalid. The case raises interesting questions as to the scope of design patent and trade dress protections for clothing items, particularly athleisure, areas long subject to inconsistencies regarding the forms and bounds of intellectual property protection. A decision in this case may provide valuable guidance to designers in carefully selecting intellectual property protections to pursue and enforce, weighing in favor of, or against, pursuing trade dress, copyright, and/or design patent protection for clothing items.
Hermès International v. Mason Rothschild
Given its meteoric growth, discussions regarding NFTs are likely to remain a common topic in 2022. In Hermès v. Rothschild, Hermès objected to Rothschild’s sale of “Metabirkins” NFTs featuring furry renderings of Hermes’s iconic Birkin handbag. Hermès sent Rothschild a cease and desist letter and filed a lawsuit in the SDNY in January 2022 alleging trademark infringement, false designation of origin, trademark dilution and cybersquatting. In his Motion to Dismiss for Failure to State a Claim, Rothschild relies on First Amendment and artistic expression to claim his actions are not infringing. In particular, Rothschild argues that his depictions of fur-covered Birkin bags and use of “Metabirkins” is artistically relevant and not explicitly misleading such that Hermès cannot state a claim for trademark infringement. As of publication, the Motion to Dismiss remains pending. Without question, the intersectionality of NFTs, the First Amendment, and trademark as well as trade dress rights could provide valuable guidance to brand owners on how best to protect their branding in the ever-evolving digital age.
Miramax, LLC v. Tarantino
Quentin Tarantino announced a plan to auction exclusive scenes from the 1994 movie Pulp Fiction as NFTs. Miramax sent a cease and desist letter, claiming broad copyright ownership rights in Pulp Fiction and that any rights reserved under the contract between the parties were insufficient to confer an ability to Tarantino to sell exclusive scenes. After Tarantino did not agree to comply with Miramax’s demands, Miramax initiated litigation, claiming breach of contract; copyright infringement; trademark infringement; and unfair competition. Tarantino asserted defenses including fair use and that the copyright claims relate to materials not covered by the asserted copyright registrations, among others. In early February, the parties filed their joint Rule 26(f) Report, outlining each party’s statement of case. While in the entertainment space, this case may provide fashion brand owners valuable guidance on the scope of copyright claims for materials posted for sale as NFTs, which may assist in developing or defending against claims of copyright infringement and preventing the unauthorized dissemination of items in the metaverse.
All of the above cases, together with the continued evolution of technology allowing users access to items previously more difficult to acquire and creating completely new rights, highlight important intellectual property considerations and protections. 2022 is certainly poised to shed light on and possibly resolve them. Check back as the year progresses for further commentary on these cases, as well as other developments that affect fashion, apparel, and beauty brands.