Written by Vicki Y. Nee, Susan Natland, and Boris Zelkind

Edited by Loni Morrow and Catherine Holland

Over the last year, there have been some significant trademark and copyright cases in the fashion industry. Below are summaries of recent cases all brand owners should know and understand. These cases touch on important topics in trademark and copyright, including: copyrightability of surface decorations/designs on clothing or other useful articles, parody defense, punitive damages in trademark cases, tackling secondary meaning challenges in the ITC, and trademark registrability of edgy or offensive terms.

1) Star Athletica v. Varsity Brands (March 2017) – Copyrightability of Surface Decorations on Useful Articles

This was a copyright infringement case between Star Athletica and Varsity Brands. The Supreme Court considered whether Varsity Brands’ cheerleader uniforms contained two-dimensional copyrightable works of art that are capable of being infringed by Star Athletica’s cheerleader uniforms.

The Supreme Court sided with Varsity Brands and concluded that surface decorations or designs incorporated into a useful article, such as a cheerleader uniform, can be protected by copyright. In evaluating the creative element in the useful article, the decision maker should imagine the surface design apart from the useful article and consider whether it would qualify as a pictorial, graphic, or sculptural work either on its own or when fixed in some other tangible medium, i.e. conceptual separability. This is a big step in creating uniformity in this area of law. The case was remanded to the district court, so the battle between Varsity Brands and Star Athletica continues.

Brand owners should closely monitor the subsequent district court result. The Supreme Court did not hold that Varsity Brands’ chevron and stripe designs were copyrightable, only that they were eligible for copyright based on conceptual separability. This case will, hopefully, clarify what brand owners can protect in their fashion designs under copyright. Greater uniformity means brand owners should be better able to predict what can and cannot be protected, and enable them to better design around restrictions and/or avoid future litigation.

For a more in depth analysis of the Supreme Court arguments, please see here. For a more in depth analysis of the Supreme Court decision and opinion, please see here.

2) Louis Vuitton v. My Other Bag (December 2016) – Parody Defense

This was a trademark infringement, copyright infringement, and trademark dilution case between Louis Vuitton and My Other Bag. The Second Circuit considered whether My Other Bag was shielded from liability based on a parody defense. My Other Bag argued its use of look-alike drawings of luxury purses, such as Louis Vuitton purses, was a parody and not infringing. My Other Bag printed the look-alike drawings on one side of canvas tote bags, with the phrase “My Other Bag…” printed on the other side.

The Second Circuit held for My Other Bag on a Motion for Summary Judgement and concluded that the parody defense shielded the company from Louis Vuitton’s claims. The Second Circuit looked at factors such as the marketplace proximity and the use of the “My Other Bag…” as a designation of source. Louis Vuitton requested an en banc rehearing at the Second Circuit, but the appeal was denied on February 14, 2017.

For brand owners, this case reaffirmed the importance and effectiveness of asserting a parody defense. For Louis Vuitton, their fame may have worked against them because the Court found it less likely that a consumer of luxury products would mistake a My Other Bag tote with the genuine bag. Further, the unintended consequence of the suit may have been to increase visibility for My Other Bag, encouraging others to create similar products under the defense of parody.

For a more in depth analysis of the Second Circuit decision, please see here.

3) Tiffany & Co. v. Costco Wholesale Corporation (October 2016)—Punitive Damages

This was a trademark infringement case between Tiffany & Co. and Costco Wholesale Corp. The federal court in the Southern District of New York considered whether Costco’s use of the phrase “Tiffany setting” in connection with the sale of engagement rings was considered trademark infringement.

The Court held for Tiffany & Co. and a jury granted an award of $13.75 million dollars ($5.5 million dollars in profits and $8.25 million dollars in punitive damages to Tiffany & Co.). This case has two main takeaways. The first is that punitive damages are not recoverable under the Lanham Act and are only recoverable under state unfair competition laws. The second is that Costco’s arguments, although unsuccessful, attempted to attack Tiffany’s incontestable registration. Costco argued that it was using “Tiffany setting” not as a source identifier but generically to describe a type of setting that had been created by Tiffany & Co. Had they been successful, Costco’s assertions would have resulted in Tiffany’s brand name being held generic for a particular style of jewelry setting.

For brand owners, this case reminds litigants that state laws may offer punitive damages that are unavailable under federal law. Also, this case is a reminder that despite the fact Tiffany’s registrations were incontestable, they were still vulnerable to attack on the ground the marks may have become generic. Trademark owners should be vigilant in guarding the use of their marks, regardless of how famous they may be, and prevent both their internal marketing team and the public from using them generically.

For a more in depth analysis of the Southern District of New York decision, please see here.

4) Converse Inc. v. ITC (Ongoing)—Trade Dress, ITC, and Secondary Meaning

In October 2014, Converse, owned by Nike Inc., filed lawsuits against thirty-one companies over alleged infringement of various elements of its shoes, including the bumper toe, striped midsole, and toe cap, in the Eastern District of New York. Separately, Converse also filed a complaint with the International Trade Commission (ITC), which can stop infringing products from entering the United States.

In June 2016, the ITC handed down its decision. The ITC invalidated some of Converse’s most important trademarks: the bumper toe, the striped midsole, and the toe cap. The ITC stated that Converse’s shoe design lacked necessary secondary meaning in the eyes of the consumer and was not protected by trade dress. The ITC nevertheless issued a general exclusion order for shoes with the diamond sole pattern. This general exclusion order applies broadly, not only to the thirty-one defendants named in the New York litigation, but to all potential importers. A general exclusion order prevents any shoes with the infringing diamond sole pattern from entering the United States, regardless of the source. In February 2017, Converse appealed the ruling to the Federal Circuit.

This case is ongoing and should be closely watched by brand owners. Fashion companies, including Tiffany & Co. and Christian Louboutin, have contributed to an amicus brief on behalf of Converse. They argued that the ITC improperly found Converse’s trademarks invalid because it improperly weighed the exclusivity of use factor by making it determinative, rather than just one of many factors to consider in a finding of whether a trade dress has acquired secondary meaning. For brand owners, the outcome of this decision can have broad implications on how courts will evaluate the validity and the strength of existing trademark and trade dress registrations.

5) In Re Tam (Ongoing)—Disparaging Marks

The Supreme Court is currently considering the U.S. Patent and Trademark Office’s (“USPTO”) refusal to register the mark THE SLANTS for “entertainment in the nature of live performances by a musical band.” The USPTO’s decision was made on the basis that “slants” is a disparaging term referring to individuals of Asian descent. Under the Lanham Act, Section 2(a), trademarks that “[consist] of or [comprise] of immoral, deceptive, or scandalous matter; or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute” are barred from registration.

The applicant, Simon Tam, is a member of an Asian-American band called The Slants. In his appeal to the Trademark Trial and Appeal Board (“TTAB”), he argued that Section 2(a) unconstitutionally infringed his free speech. The TTAB affirmed the USPTO decision. Tam then appealed to the Federal Circuit, which held that the USPTO’s refusal to register disparaging marks violated the First Amendment by discriminating against disparate viewpoints.

The U.S. government petitioned the Supreme Court for writ of certiorari (i.e. review of the case), and it was granted on September 29, 2016. On January 18, 2017, the Supreme Court heard oral arguments. The justices generally appeared to focus on the ramifications of their decision on free speech broadly, the issue of whether trademark registration is considered governmental speech, and the level of scrutiny that should be applied. While this case focuses on the registrability of a disparaging mark, the First Amendment issues raised here may potentially impact immoral and scandalous marks as well. This case will also impact the ongoing REDSKINS trademarks case, involving the National Football League (NFL) team and the cancellation of its trademark on the basis that the mark is “disparaging” of Native Americans. Together, both cases have the opportunity to clarify this area of law.

This case is relevant to the fashion industry because the USPTO has been inconsistent when applying the Section 2(a) standard to brands. Pending the Supreme Court’s decision, the Commissioner of the USPTO has issued a directive that applies to all §2(a) refusals, including, immoral, deceptive, scandalous, or disparaging marks. The directive calls for the suspension of all applications for marks where the primary issue is a §2(a) refusal. Fashion and beauty brand owners interested in using edgy branding and trademarks may want to start filing applications to register these marks now, while we await the Supreme Court decision. The filed application will provide defensive blocking against third parties and secure a priority date until the Supreme Court decision is issued and there is more certainty in this area.

For a more in depth analysis of In Re Tam, please see here.