Protect Your Brand As The Internet Goes X-Rated

ICANN, the non-profit organization that governs the internet, has approved the launch of a new generic top-level domain (“gTLD”) on the internet: “.XXX”. 

Obviously, this gTLD is geared specifically toward the adult entertainment industry, but brand owners in other industries, such as the fashion industry, can block their online brand from becoming x-rated. 

Fashion houses that don't want to be associated with the porn industry should take advantage of this opt-out provision in the launch of the “.XXX” gTLD. 

To give some background, a gTLD is the last component of a domain name (i.e. ‘dot-com’, ‘dot-net’, ‘dot-org’).  Until recently, there were 21 gTLDs.  With over 1.6 billion internet users, and every indication that this number will increase exponentially, ICANN became concerned that the internet highway would cease to be limitless.  The approval of the “.XXX” gTLD is the first step in creating more options for internet users.  CanadaFashionLaw previously explained the full ramifications for the launch of new gTLDs.

There is a priority period for registering new “.XXX” domain names, which also enables brand owners to block their trade-marks from becoming part of a 3^rd party “.XXX” domain name.  

This sunset period spans September 7, 2011 until October 28, 2011 and will be available in 2 phases, after which the “.XXX” domain names will be available on a first-come, first-serve basis. 

SUNSET PERIOD FOR REGISTRATION
Phase	Available to:	Comments
A	Brand owners in the adult entertainment industry	This allows companies in the adult entertainment industry to reserve their online space with the .XXX gTLD extension.
B	Brand owners outside of the adult entertainment industry	An opportunity is given to brand owners to block their trade-marks from being used with the .XXX gTLD extension by any party.

In order to qualify to block your company’s brand from becoming an x-rated website, the following are required:

a)         The brand owner must own a trade-mark registration for the proposed domain name;

b)         The trade-mark cannot be in the application stages;

c)         The trade-mark must be registered in a jurisdiction that the brand owner conducts substantial business or bona fide commerce;

d)         If a brand owner is seeking to “opt-out” (i.e. those is Phase B), the “opted-out” domain name must be identical to the trade-mark.

In addition to fulfilling the above requirements, filing fees are also incurred.

It is important to note that if a brand owner not in the adult entertainment industry successfully blocks the x-rated domain name, it is only valid for 10 years.  Domain name dispute proceedings are applicable.

Act quickly if you want to ensure that your company’s brand does not become x-rated! 

 

Increased Cost of Doing Business in Canada Felt by the Consumers

The summer has been good to Toronto’s fashionistas.  First, J. Crew takes its first steps to expand internationally, using Toronto as its guinea pig.  Second, Intermix follows suit.  Third, Ryan Gosling plays the bad boy in Crazy Stupid Love.  And the cherry on top?  The Toronto International Film Festival announces that Ryan Gosling will be in town for the debut of his movie, Ides of March.  As much as we love Ryan Gosling, let’s focus on what’s happening with J. Crew and Intermix.

Cashing in on J. Crew’s US halo effect with vacationing Canadian consumers, along with a surge of online Canadian consumers, J. Crew found Toronto to be a natural extension.  There was great anticipation over J. Crew’s launch of its first non-American location, which occurred last week.  Crowds swarmed the Yorkdale Mall location.  However, there was some back-lash.  J. Crew raised its merchandise prices by about 15% over its US prices.  The prices soared even higher for the online consumer in Canada, with an increase of over 50% compared to the US website.  There was significant criticism from the Canadian consumer, which J. Crew has advised will take under consideration.  

Despite a surge in the Canadian dollar, the price difference between Canada and the US seems to be increasing.  US retailers justify the increased retail prices in Canada on the higher cost of conducting business in Canada: import duties, higher taxes and the cost of expanding the business internationally.  Unfortunately, the Retail Council of Canada is not surprised by this, citing that retailers normally raised retail prices by an additional 12% to 25% in Canada.  Given the geopolitical differences in Canada, there are fewer economies of scale, creating higher costs to distribute products, which is reflected in higher retail costs. 

Given Intermix’s already steep prices, it will be interesting to see whether Intermix consumers in Canada will have the same experience as J. Crew consumers.  If yes and the Canadian consumer is turned-off by the inflated prices, this may be good news for Canadian competitors such as Aritzia and TNT.  (If you're interested in learning more about TNT and pearls of wisdom from its owner, feel free to read this article).

By the way, Intermix has announced that it will officially open its Bloor Street location this Friday.  See you there!

Big Blow to Christian Louboutin

This is a long one, feel free to grab a glass of wine.

If you’re in the fashion world, unless you’ve been under a rock, you’ve likely heard about the rumblings between Christian Louboutin and Yves Saint Laurent.  CanadaFashionLaw has been covering this matter step-by-step with interest.

In a recent decision by US District Judge Victor Marrero, Christian Louboutin was given a hard blow.  

What is the Decision Deciding on?

Christian Louboutin was seeking a preliminary injunction against Yves Saint Laurent, which essentially means that Christian Louboutin was asking the court to ban Yves Saint Laurent from continuing the make the allegedly infringing shoes in the mean time until the court had made its final decision.  

In order to obtain a preliminary injunction in the US against Yves Saint Laurent, the onus is on Christian Louboutin to establish:

a) irreparable harm; and

either,

b) a likelihood of success on the merits,

or,

c) sufficiently serious questions going to the merits of its

claim to make them fair ground for litigation

(try saying that three times fast!)

In a Nutshell, What was the Decision?

No, Christian Louboutin was not granted the preliminary injunction.  Yves Saint Laurent can continue to market its red-soled shoes in the meantime until the court makes its final decision.  

What Did the Judge Have to Say?

The decision started off very complimentarily to Christian Louboutin.  It was almost novel-like:

            “Sometime around 1992 designer Christian Louboutin had a bright idea.”

“Whether inspired by a stroke of original genius or…copied from King Louis XIV’s red-heeled dancing shoes, or Dorothy’s famous ruby slippers in “The Wizard of Oz”…Christian Louboutin deviated from industry custom.”

“Over the years, the high fashion industry responded, Christian Louboutin’s bold divergence from the worn path paid its dividends.”

“When Hollywood starlets cross red carpets and high fashion models strut runways, and heads turn and eyes drop to the celebrities’ feet, lacquered red outsoles on high-heeled, black shoes flaunt a glamorous statement that pops out at once.”

“For those in the know, cognitive bulbs instantly flash to associate: ‘Louboutin’.”

It was at this point that I thought I was reading the sequel to The Devil Wears Prada…

And then, the judge goes on to discuss how intellectual property laws are created to reward innovation:

“The law, like the marketplace, applauds innovators.  It rewards the trend-setters, the market-makers, the path-finding non-conformists who march to the beat of their own drums.”  (Who knew intellectual property could be so sexy?!)

“To foster such creativity, statutes and common law rules accord to inspired pioneers various means of recompense and incentives.  Through grants of patents and trademark registrations, the law protects ingenuity and penalizes unfair competition.”

Such innovation, such recognition, such media attention!…and, yet, ultimately in this decision the judge questions whether Christian Louboutin’s registered trade-mark is even viable.

Huh, Come Again?

Here’s a summary of the judge’s reasoning:

1.        The judge recognizes that color can be protected as a trade-mark, but there is a functionality bar.  If the color has attained ‘secondary meaning’, whereby the color identifies and distinguishes a brand, it is protectable.  

2.         In some industrial markets, products are so standardized in shape, design and general composition that color can be a key distinguishing feature.  Doesn't the sole of a shoe fits under this analogy?  But, the judge held that the fashion industry is a different beast that should not be given the same benefits.

3.         Because color is so integral to the fashion industry, whose whole mandate is ornamental and aesthetic, color takes a more prominent role.  It defines seasons, trends and tastes. 

4.         In the fashion world, according to the judge, color advances expression of ideas through fashion more so than to identify the source of the design, which is a fundamental tenet of trademarks law.  

5.        The judge recognized that there are instances when color can play a greater role in a fashion brand’s life, citing Louis Vuitton and Burberry as examples.  Yet, in his opinion, these cases are different as the famed Louis Vuitton and Burberry are comprised of different colors in a design configuration.  Christian Louboutin’s claimed trade-mark is comprised of only one vaguely described color “lacquered red”.

6.        The judge seems to put a fair amount of emphasis on the artistic nature of the fashion industry, thereby differentiating from other consumer products industry, using terms such as “fanciful business” and then launches into an analogy between artists and fashion designers (Monet and Christian Louboutin are, apparently, one and the same), which is a little outside the scope of the matter at hand.  

7.        Moreover, emphasis is placed on the transient, trend-obsessed nature of the fashion industry: “it is susceptible to taste, to idiosyncrasies, and whims and moods…”.  Yet, Christian Louboutin consistently uses his red-soled shoes regardless of the whether red, white or pink is the new black.  

8.        Again, the judge states that color plays an important and unique role in fashion – its ornamental nature draws the consumer’s attention.  But isn’t this the same with any other widget that employs color are part of its branding?

9.        The trade-mark registration covers “lacquered red soles” for women’s high fashion designer footwear.  This is an ambiguous color claim and could have significant ramifications for competition.  Should any company be precluded from using any shade of red on any type of shoe.  Would a welly-boot sold from Wal-Mart be an infringement of Christian Louboutin’s trade-mark rights?  This is a valid point.  I wonder if Christian Louboutin had pin-pointed the shade of red or the type of shoe, would the judge have reasoned differently?  

10.      Ultimately, the judge questions whether a color in the fashion industry can be functional and, therefore, not eligible for trade-mark protection.  Christian Louboutin admitted that there were reasons for choosing red.  It’s a flirty, sexy, engaging, eye-catching color.  But just because there is a rationale for choosing a color, does that mean that it’s functional?  Would an anti-anxiety tablet that was blue, because of the color’s soothing qualities, not qualify for trade-mark protection on account of the color’s functionality?  The judge also stated that the color was functional because adding the lacquer to the shoe increased the cost of production for the shoe, which validated the increased retail price.  But wouldn’t the affixing of any trade-mark likely increase the production cost?  Nike’s swoosh mark is embroidered into its t-shirts.  The thread is an increased production cost.  Does this make the trade-mark functional because it enables Nike to increase its retail price?

I Wonder…

Would this decision have been different if Christian Louboutin had obtained a slightly different trade-mark registration, eradicating the general nature of the statement of wares and color claim.  If “footwear” read “high heels” and “lacquered red” was a specified Pantone color, would the judge have been persuaded that Christian Louboutin’s trade-mark rights were valid?  

What Can we Expect?

Appeal, appeal, appeal.  First, let’s remember that this is not the final decision in the matter.  (Although, it’s not looking good for Christian Louboutin).  But, it’s likely that Christian Louboutin will appeal this to higher courts – he’s got a lot riding on this case.

Is Canada a Counterfeiting Safe Haven?

A very savvy, stylish and respected fashion journalist recently posed an interesting question to CanadaFashionLaw:

“Why is Canada a counterfeiting safe haven?”. 

Being a bit of a fashion geek, this question got my fashion legal “mojo” going.  Wearing my prudent lawyers’ hat, let’s just say…there’s room for improvement. 

Counterfeiting is big business in Canada.  In fact, studies indicate that the market value of counterfeiting is in the $20 to $30 billion range.  This is a shockingly significant amount.  Moreover, given the intrinsic clandestine nature of counterfeiters, these may be conservative estimates.  Some consumers may take the position:

“So what? 

Louis Vuitton makes enough money from those Bloor street babes. 

What does it matter if I buy a knock-off?” 

But this is narrow sighted.  The implications of counterfeiting goes well beyond the brand owners’ purse strings:

1.        There are health and safety risks with using counterfeit products.

2.         There is a loss of sales revenue throughout the fashion industry chain.  Not only do the brand owners lose out, the distributors, importers and retailers of legitimate product are also impacted.

3.         Less revenue throughout the fashion industry chain, means less jobs in the fashion industry.

4.         The government is also negatively impacted: less sales revenue equals less sale tax revenue.

5.         Counterfeiting is also largely associated with organized crime and even terrorists groups.

6.         In a bigger sense, counterfeiting also affects Canada’s reputation internationally.  Some countries or international brands may be less willing to trade with Canada, if they believe that counterfeiting is rampant in Canada.

Unfortunately, the last point is poignant for Canada.  The US Trade Representative issues an annual report examining its trade partners.  The US Trade Representative has consistently ranked Canada as a country to watch.  In fact, Canada is up there with other noteable counterfeiting hotspots countries, such as China. 

So why is America perturbed by Canada’s counterfeiting situation? 

Canada is not known as a great manufacturer of counterfeit product.

Canada is known as a great importer of counterfeit product.
 

Canada has a history of perceiving counterfeiting as a private civil matter: the negative effects of counterfeiting are constrained to the brand owner.  Therefore, it is up to the brand owner to act as its own police force.  But, as we have seen above, there are wide-reaching ramifications to counterfeiting.  

Although there are criminal sanctions possible for counterfeiting, the RCMP is oftentimes less involved in the combat against the importation of counterfeit goods.  There are limited financial resources and a lack of specialization in identifying counterfeit products and prosecuting against counterfeiters.  All in all, counterfeiting is a lesser priority for the RCMP.  And when the RCMP is involved, it targets the large scale importers, distributors and manufacturers.  

So it is largely up to the brand owner, in conjunction with the Canadian Border Services Agency (“CBSA”), to police the Canadian borders.  The CBSA processes the importation of goods into Canada.  You would think that this would be a key player in combating the importation of counterfeit goods into Canada.  Unfortunately, the CBSA is a bit of a sitting duck.  It is has not been given the unilateral right or authority to detain counterfeit product.  The process to block counterfeit goods from entering into Canada is somewhat involved:

• The brand owner must obtain a court order allowing the CBSA to detain the goods for the brand owners’ inspection.  
• In order to obtain a court order, the brand owner must compile significant evidence about the incoming shipment to Canada – not an easy task.
• The court may require the brand owner to post security (basically a deposit with the court) for possible storage/handling charges relating to the detainment of the counterfeit goods.
• Once the detention order is granted, the CBSA can intercept the shipment and hold the goods for inspection by the brand owner.
• The brand owner must inspect the goods within 14 days and commence an additional legal action to determine the validity of the counterfeit products.

As you can imagine, this process is financially and administratively cumbersome for the brand owner.  

Compare this process with other countries that allow brand owners to proactively register their intellectual property with the border controls, who are allowed to unilaterally act upon this information, you can see that Canada’s border control system could use a little work.

I am not a doom and gloom kind of girl.  I do not think that Canada’s intellectual property law system is a failure; it works and it’s operable.  But, Canada’s border controls are running at half steam and, let's face it, everything could use a little “nip and tuck” once in a while.

Lessons Learned: Harvey Nichols & Co. loses Trade-mark Rights in Canada

I am a London girl at heart (born and raised) so when I came across a recent Canadian decision about Harvey Nichols, it caught my attention.  (Visions of a glass of bubbly at Harvey Nichols’ rooftop café danced in my head).  I digress. 

I was not shocked by the decision: Harvey Nichols does not operate in Canada (tell me something I don’t know!) and, therefore, its Canadian trade-mark registration is not valid.  But the decision is useful in illustrating the importance of use in acquiring (and maintaining) trade-mark rights in Canada.  So, we shall file this case under “lessons learned”. 

The Facts

Harvey Nichols & Co. (the famed high-end London department store) was granted a trade-mark registration for HARVEY NICHOLS in association with a wide range of clothing, toiletries, jewellery and luggage and also retail department store services.

The Canadian Trade-marks Office, on the behest of a third party, issued a Section 45 expungment notice, requiring Harvey Nichols & Co. to demonstrate that it is using its trade-mark in Canada in order for the trade-mark registration to remain valid.

What is an Expungement Proceeding?

Canada is a “use it or lose it” jurisdiction.  In order to have trade-mark rights in Canada, you have to use the trade-mark in Canada.  (It does not have to be immediate use.  If you are seeking a trade-mark registration, you can base the application on proposed use – but there has to be use of the trade-mark in Canada at some point before it registers).  Use is also critical in maintaining rights to the trade-mark in Canada.  If you stop using the trade-mark, you stop having rights to the trade-mark: “use it or lose it”.  

Three years after your trade-mark registers, it is possible for “any interested party” to lodge a request with the Canadian Trade-marks Office to seek evidential confirmation that you are continuing to use the trade-mark in Canada.  This is an expungement proceeding.  It is then up to the trade-mark owner to provide appropriate evidence to demonstrate that the trade-mark has been used in Canada.  If the evidence does not satisfy the Canadian Trade-marks Office, then it is possible that the trade-mark registration will be “expunged” (essentially, deleted).

How did Harvey Nichols & Co. React?

Dutifully, Harvey Nichols & Co. filed affidavit evidence attesting to the continued use of the trade-mark HARVEY NICHOLS in Canada.  The evidence was largely based upon its online store, which is facilitated through its website.  The affidavit included evidence that gift vouchers and Christmas hampers are bought online from Canadian consumers.  Moreover, there was evidence of online traffic from Canadian IP addresses and purchases by credit cards owned by Canadians.

Where did Harvey Nichols & Co. Go Wrong?

First, evidence was produced with respect to Christmas hampers and gift vouchers – yet neither of these were itemized in the trade-mark registration.  The screenshots of Harvey Nichols & Co.’s website did not display pictures of the Christmas hampers, nor was the evidence of delivery of these Christmas hampers to Canada.  Thus, there was no evidence of use of the trade-mark with any of the wares listed in the Canadian trade-mark registration.

In today’s digital age, the Court recognizes stores do not have to have a “brick and mortar” presence to be using a trade-mark in Canada.  Online retail stores can satisfy the use requirement.  However, in reviewing Harvey Nichols & Co.’s website, there was no information that was pertinent to Canadian shoppers.  There was no Canadian pricing, no Canadian contact information, no shipping policy directed to Canadian deliveries etc.   Moreover, there was no evidence submitted that proved that Canadians bought merchandise from Canada for delivery to Canada.  

Lessons Learned

First, carefully draft the trade-mark application to fully reflect all of the wares and services that the trade-mark will be used with.  Then, regularly conduct audits of your trade-mark registrations.  Has your product line/business plan changed?  Perhaps additional trade-mark registrations should be obtained.

Second, if you are going to operate an online retail component to your business, include an explicit Canadian presence.

Third, keep accurate and comprehensive evidence of use of your trade-mark in Canada.

Desperately Seeking Salvation: Louboutin Makes Last Ditch Effort to Save Red-Sole

The Christian Louboutin v. Yves Saint Laurent debacle has caught the attention of the fashion law world.  These are heavy hitters in the fashion industry that are scrapping it out over the infamous red-soled shoe (or generic - depending on whose team you are on).  CanadaFashionLaw has looked at this matter indepth: click here and also here for summaries. 

Pleadings have been plead, submissions have been made, evidence has been compiled (and ripped apart) and Christian Louboutin's counsel is ensuring that it gets the final word in.  In fact, Christian Louboutin's counsel recently submitted an "after the fact" letter to the court confirming its position.  To be honest, a lot of the details are redundant.  Here's a quick snapshot of Christian Louboutin's position:

• Christian Louboutin's are notorious and iconic.
• If the court does not grant a preliminary injunction against Yves Saint Laurent, it will create a flood gate for other infringers, thereby further diluting Louboutin's brand.  (If you're interested in learning about injunctions from a Canadian perspective, I give a quick explanation here).
• Christian Louboutin's trade-mark registration covers red on the bottom of the sole.  There is no requirement under the US Trademarks Office's guidelines to specify exactly which shade or tone of red the registration covers.  It is up to competitors to sufficiently differentiate themselves from that color to avoid confusion in the marketplace.
• Christian Louboutin's trade-mark registration is valid - there is no evidence that challenges the enforceability of the trade-mark registration.
• The fact that Yves Saint Laurent largely started use of the red sole in relation to its shoes after Christian Louboutin demonstrates infringement, rather than happenstance or competitive necessity.

Stay tuned - I expect there will be more movement with this case.  Is anyone else reminded of a cat fight between Krystle and Alexis in Dynasty, or have I just dated myself?