Banking on Patriotism to Help Launch Your Brand?

Emerging Canadian designers oftentimes target the Canadian market before venturing off into more lucrative international pastures.  Pulling on the patriotic heartstrings of Canadian consumers can be a useful marketing strategy: “support Canadian talent, buy Canadian fashion”.  This is all fair and valid…but it is important to know that the Canadian Competition Bureau is watching you.

The Competition Bureau is an independent law enforcement agency that governs competition in the marketplace.  It wants to make sure that everybody is playing fair.  The Competition Bureau has taken it upon itself to ensure that Canadian product claims are valid.  Last year the Competition Bureau issued guidelines (“Made in Canada Claims” and “Enforcement Guidelines Relating to ‘Product of Canada’”).  These guidelines kick in only when you start to claim and promote that your merchandise is from Canada.  If you don't make any country of origin claims, these guidlines do not apply.  Also, these guidelines only relate to non-food products.

There are two possible patriotic claims, “Made in Canada” and “Product of Canada”, which have different thresholds to satisfy.

Made in Canada:

The requirements to make this claim are easier to satisfy:

a)                 the last substantial transformation of the goods must have occurred in Canada; and

b)                 at least 51% of the costs of producing or manufacturing the goods have occurred in Canada.

If you claim that your product is “Made in Canada”, a qualifying statement must also be included.  For example: “Made in Canada with imported materials”.

If you do not expressly include the term “Made in Canada”, the Competition Bureau may interpret suggestive marketing ploys to insinuate that the product was Made in Canada, such as pictures of the Canadian flag or the maple leaf.  Thus, these criteria apply.

Product of Canada:

This claim has a higher threshold to satisfy:

a)                 again, the last substantial transformation of the goods must have occurred in Canada; and

b)                 at least 90% of the costs of producing or manufacturing the goods have occurred in Canada.  

Breaking This Down

The “last substantial transformation” means that the goods are fundamentally changed in form, nature or appearance so that they appear new.

“Costs of producing or manufacturing” includes labour costs and costs to produce the materials.  It generally does not include overhead costs.

What Happens if you Don’t Comply?

The Competition Bureau can enforce the guidelines.  If you insinuate that your product is Canadian when it does not comply with these guidelines, the Competition Bureau can look to the Competition Act for enforcement.  False or misleading representations in relation to product advertising can elicit substantial monetary fines and, in some instances, criminal liability.  

eBay Irony: Liability in Europe, Anti-Counterfeiting Guru in America

In an ironic twist, the same week that eBay announces its joint anti-counterfeiting awareness and advocacy campaign with the Council of Fashion Designers of America, it was also held to be responsible for facilitating the sale of counterfeit merchandise on its website www.e-bay.co.uk in Europe.  Here’s a summary of the decision.

The case is interesting as eBay plays an interesting role in the dissemination of counterfeit product globally.   

The Parties

L’Oreal SA and its subsidiaries launched a proceeding against individual defendants and eBay Inc. and its subsidiaries with regards to the sale of L’Oreal products on the website www.e-bay.co.uk, without L’Oreal’s consent. 

The Facts

L’Oreal is the owner of a number of UK trade-mark registrations and Community Trade-mark Registrations, which grants Europe-wide trade-mark protection, for a myriad of products. The individual defendants were selling counterfeit L’Oreal products, as well as products intended for markets outside of Europe and products not intended for sale at all, on e-Bay. 

L’Oreal took issue with e-Bay’s capacity of facilitating the sale of counterfeit and unauthorized product in Europe.  Moreover, L’Oreal maintains that e-Bay’s sale of keywords and sponsored links further facilitated the sale of counterfeit product.

Judgment

Given that e-Bay is online, its reach is global.  The Court was clear that just because a website is accessible globally that may not be sufficient to impose liability.  If the website is targeted toward a specific geographic region, and the plaintiff has trade-mark rights in that country that are being infringed, it is appropriate to bring an action against the operator of the website.  In this instance, it was very clear that the website was targeted toward Europe and L’Oreal had trade-mark rights in Europe.  

The Court also held that as L’Oreal had clearly marked some of the product as “samples” or “not for sale”, it was clear that L’Oreal had specifically withheld its consent to allow these products from being sold in the marketplace.  

Some of the products available, although they may not have been counterfeit, were sold without the appropriate packaging.  The court held that especially in respect of perfumes and cosmetics, the packaging of the product is an integral component of the product branding.  The removal of the packaging negatively affects the goodwill and reputation of the brand.  Moreover, there are safety concerns as the packaging oftentimes contains important use guidelines. 

eBay, by selecting search words that corresponded to L’Oreal’s trade-marks to those counterfeit or unauthorized products, elevated the opportunity to buy those products.  The court held that eBay’s actions placed it as an advertiser of the online marketplace, which places eBay in an intermediary position, rather than as a passive by-stander.  I wonder if this decision would have been different if eBay did not provide the opportunity to buy sponsored links or keyword advertising.

European Union and Louis Vuitton Pledge to Break Through Gender Glass Ceiling

On March 1, 2011, the European Union Justice Commissioner issued a challenge to publicly traded European businesses in an effort to create gender equality:

increase women's presence on corporate

boards to 30% by 2015 and to 40% by 2020

Companies can support this initiative by voluntarily signing the "Women on the Board Pledge for Europe".  Acknowleding the influence that government guidance (or intervention, depending on your political leanings) has on encouraging (or mandating) gender equality in the workforce, the Commissioner also saw great value in encouraging companies to voluntarily institute programs to facilitate gender equality.  This Board Pledge is the first step.  

The Commissioner advised that she would use the 2012 International Women's Day as a marker for progress.  If there has not be sufficient progress relying on the corporate world's initiative, she would be happy to intervene in a regulatory capacity.  

Frankly, the facts are a little depressing and there is room for improvement.  Today, only 12% of board members are women and 97% of the time, the board is chaired by a man.  

Louis Vuitton is the most signatory to the Pledge, which is reflective of its corporate policy to support gender equality in the corner offices. 

LVMH: je voudrais dire, merci!

Fashion Industry Takes a Stand Against Counterfeiters

As Canada's largest anti-counterfeiting damages awards was issued this month (reported here), we are reminded that counterfeit products are rampant in the market.

In addition to pursuing legal protection, as demonstrated by Louis Vuitton and Burberry, it is also interesting to see how the fashion industry is taking matters in to its own hands to combat counterfeiting. 

Here are a couple of anti-counterfeiting campaigns out there that are note-worthy:

1.  Harper's Bazaar's "Fakes are Never in Fashion" Campaign

This powerhouse magazine has turned its mind to educating consumers about the perils of anti-counterfeiting.  There is more at stake when buying a counterfeit purse than shoddy workmanship and cheaper prices.  Although the Fakes are Never in Fashion campaign focuses almost exclusively on the American industry, the impact is astounding.  The global loss of sales to companies is in the hundreds of billions of dollars.  The economic loss is not constrained to businesses, loss of tax revenue is also a significant economic burden, in addition to the loss in employment opportunities.  The impact also extends beyond money.  Anti-counterfeiting revenue helps to fund criminal activities and even terrorism. 

The Fakes are Never in Fashion campaign's website is very comprehensive, providing updates and news that touch upon the counterfeiting world.  Also, the Fakes are Never in Fashion campaign hosts annual anti-counterfeiting conferences.  In its 7th year, the focus was on the impact of the internet on global counterfeiting.

2.  Christian Louboutin's Stop Fake Campaign

Christian Louboutin has has launched its own anti-counterfeiting campaign, which is an interesting comparison to other brands that are happy to have their anti-counterfeiting activities conducted behind closed doors.

At the close of its one year anniversary, Christian Louboutin proudly boasts that it has shut down 180,000 auctions selling counterfeit shoes, conducted numerous successful raids of counterfeiting factories, exploited customs seizures, tackled unauthorized domain names and launched a number of actions protecting its red sole (click here for a summary of Christian Louboutin's attack on Yves Saint Laurent).

Interestingly, Christian Louboutin publicly sets out its plan of attack to execute its zero-tolerance policy against counterfeit products, identifying both collaborators and avenues of legal attack.  Such full disclosure is not often seen outside of corporate and law offices.

3.  CFDA and e-Bay combine forces

The Council of Fashion Designers of America, along with e-Bay, recently launched a joint venture: "You Can't Fake Fashion".

CFDA member designers, such as Diane von Furstenberg, Tommy Hilfiger, Tory Burch, Jason Wu, Kenneth Cole etc., have each designed one-of-a-kind tote bags emblazoned with the slogan "You Can't Fake Fashion", in an effort to raise awareness of the perils that counterfeiting poses to the fashion industry.

It is interesting to see e-Bay so publicly involved as this medium has oftentimes been criticized as being a key vehicle of distribution for counterfeit product.

Opportunity for Yves Saint Laurent To Go On Offensive

A previous article by CanadaFashionLaw discussed the pending trade-mark infringement case in the US between Christian Louboutin and Yves Saint Laurent.

To quickly recap, Christian Louboutin, a luxury brand notorious for its shoes that have red soles on the exterior of shoes, is suing Yves Saint Laurent in New York for trade-mark infringement, based upon Yves Saint Laurent inclusion of red shoes with red soles in a fashion show earlier this year.  At the time the action was commenced, Christian Louboutin was the owner of a registered trade-mark in the US for the red soles, however, trade-mark applications were still pending in Canada and Europe.

Interestingly, Christian Louboutin's trade-mark application has progressed in Canada to the advertisement stage, which signifies the start of the opposition period. 

This is significant as it may provide an opportunity for

Yves Saint Laurent to go on the offensive and attack the registrability

of Christian Louboutin's trade-mark.

In Canada, in order for a trade-mark to register, the trade-mark application is subjected to a rigorous and lengthy process.  At first, the trade-mark is filed with the Canadian Trade-marks Office.  The trade-mark application is examined by the Canadian Trade-marks Office for substantive and administrative issues.  Substantive objections may be raised at this point, for example the trade-mark may be "clearly descriptive or deceptively misdescriptive", the trade-mark is confusingly similar and therefore conflicts with a previously registered third party trade-mark etc.  Once (or if) the trade-mark application moves beyond the examination stage, the application is then advertised in the Canadian Trade-marks Journal.  This signifies the start of the opposition period. 

The opposition period places the onus on other brand owners to protect their own brand as it affords "any interested party" the opportunity to police third party trade-marks that may register in Canada.  If a brand owner wishes to contest the registrability of the trade-mark, it may oppose the trade-mark application.  An opposition is essentially a tribunal that has been set up within the trade-mark registration process.  It is akin to court in that pleadings are submitted, evidence is compiled, arguments are put forth.  There is also an opportunity for cross-examinations and oral hearings.  The Trade-marks Opposition Board determines whether the trade-mark application is registrable or not.  It can pose a significant obstacle to the trade-mark applicant. 

There a number of possible grounds of opposition identified in the Trade-marks Act.  Yves Saint Laurent may be most interested in the following:

a) the trade-mark is not registrable; and/or

b) the trade-mark is not distinctive.

If Yves Saint Laurent wishes to act, it must do quickly.  A statement of opposition must be filed with the Canadian Trade-marks Opposition Board within two months of the date of advertisement of the trade-mark application.  (However, there is always the possibility of requesting a limited extension of time). 

It will be interesting to see whether anything will materialize or is Christian Louboutin's exclusivity over its red soles will be statutorily recognized in Canada.

Below is a summary of Christian Louboutin's Canadian trade-mark application:

Trademark	App. No. & Date	Wares	Description
	1,469,797 February 17, 2010	Footwear namely shoes, ballet flats, boots, ankle boots, thigh boots, pumps, sandals, sneakers, clogs	The trade-mark consists of the colour red applied to the entire outer surface of the sole, as shown in the drawing.