IP in the Fashion Industry 2015: Part 1

Opening today's IP in the Fashion Industry conference at London's Holborn Bars, fellow Kat Nicola gave an account of the economics of IP in that sector. Starting with the social contract theory, giving a limited right in exchange for the encouragement of innovation, she explained that IP had to be sufficiently protective of existing innovations if it is to stimulate future ones -- but that there also has to be enough room to innovate, which is one of the important features of the public domain. Copyright, registered and unregistered design rights fit this model -- but trade marks don't fall into the public domain and don't fit into the scope innovation stimulus policy. This doesn't matter: the function of the trade mark is to provide information for the consumer and thereby save time, by redressing the imbalance of information asymmetry. The brand communicates in short form the quality, nature and source of branded goods and services. However, trade marks might have an innovation incentive dimension too.

Nicola then gave a brief history of the past couple of centuries of the Western world, explaining how the industrial revolution, mass production and the rise of disposable income fostered growth in the clothing and fashion sectors. The availability of new materials (with a special mention for the Lycra polyester-polyurethane copolymer) was also noted.

Economists can't measure the fashion industry without first defining the sector, which is no easy thing. Does it, for example, include retailers who sell fashion goods? Recording the sector's growth, and its contribution to a country's economic activity, is also difficult. It is clear however that fashion sustains considerable employment, particularly among women.

Nicola next addressed the culture of copying.  There's a trickle-down from haute couture to High Street manufacture and consumption (there's also the effect of trickle-up). There is no evidence that mass copying causes any loss to the high fashion sector, at least where there is a reasonable time lag between catwalk and copycatting. Fashions come in cycles, as do colours, and the existence of  public domain is vital in the maintenance of this cyclical pattern.

In terms of status, this is a zero-sum game: money spent on status is either spent on legitimate products than on counterfeits. And more money is spent by people who don't have status and crave it than by people who already have it, which favours the counterfeits.  Where counterfeiting is extreme, it can prompt greater innovation by manufacturers of original goods which attempt to create a distance between themselves and their copiers.

Next to speak was barrister Stuart Baran, who gave a round-up of some recent trade mark and passing off cases. Rather than do a race through the cases, his approach was to pick out a small number of cases which were either misrepresented and misunderstood or which have not been given much attention -- but first came an appraisal of the framework of the relevant law, starting with the attempt to rewrite the law relating to goodwill and reputation in the Starbucks v Sky litigation [noted by David Brophy in the IPKat here]. This attempt failed: essentially the UK Supreme Court affirmed that goodwill and reputation on the part of foreign consumers count for nothing when suing to protect that goodwill, though the claimant doesn't need to have a place of business in the UK, just to have customers there.

Not Moroccanoil, it seems

Stuart observed that, when protecting a brand, the same evidence was often needed both for proof of trade mark infringement and for substantiating a passing-off claim. However, the two sets of actions had different criteria for infringement and worked in different ways. Stuart related the sad tale of Moroccanoil [mentioned in numerous IPKat posts], where the claimant -- unable to invoke its strong trade mark claim since its registration's validity was being challenged -- failed in its passing off action.

The chocolate wars came next, with Cadburys' colour purple [noted here] and the Kit Kat chocolate biscuit shape [see CJEU ruling here] being two types of non-traditional mark.  The basic principle in passing off, and indeed in opposing trade mark registrations on the basis that use of the applied-for mark would constitute passing off, should be that of "crooks lose": this doesn't require OHIM Boards of Appeal to go trawling the internet for evidence of misuse of marks, but it does require them to pay attention to evidence that has been put before them, as the Master Cola case indicates.

Stuart concluded with an account of the HENLEY/HENLEYS dispute and how much the owner of an infringed mark can recoup by way of an account of profits [on which see the IPKat here]. Basically, the courts have to adopt a broad-brush approach, awarding only those profits that were specifically derived from the infringement itself -- and not recouping licence royalties since they are not damage caused by passing off.