This year, the filing of a particular handful of retail industry lawsuits and the continuation of previously-filed ones stood out in the crowded landscape of litigation. These included suits that see luxury titans and/or other industry giants seeking to preserve their places at the top of the retail totem pole, particularly in light of consumers’ increased reliance on the evolving e-commerce market. The rise of e-commerce and especially, marketplace models, over the past decade has caused brands lose some of the near-exclusive control that they once had over the terms of the distribution and sale for their products in the past.
This trend has seemingly resulted in lawsuits over distribution in the European Union, including the cases initiated in recent years by the likes of Nike, with the Amsterdam Court of Appeal holding this summer that sportswear giant (and others) may legally ban third-parties from selling its footwear on unapproved online marketplaces. The outcome in the Action Sports v. Nike European Operations Netherlands BV follows from the Court of Justice of the European Union’s 2017 decision that Coty, Inc. and other luxury goods purveyors can ban sales by authorized retailers on third-party online marketplaces in order to “preserve the luxury image of the goods” at issue.
This quest for control has also seen luxury goods brands, such as Chanel, take on domestic resellers like The RealReal and What Goes Around Comes Around over their sale of allegedly counterfeit and/or otherwise infringing goods, for example, while companies, including Rolex, Swatch subsidiary Hamilton Watch, and Ralph Lauren, have instituted trademark-centric lawsuits over originally-authentic but modified goods.
Faced with the disruptions that come with the influx of new competitors, including in the e-commerce space, luxury consultant Robert Burke told the AP early this year that brands are working hard “to control their future as they watch their products get discounted on resale sites” and/or more widely distributed alongside non-luxury goods by way of sites like Amazon. This new reality – and the lawsuits that have come with it – is a reflection of how significantly digitally-native companies and third-party marketplaces have disrupted the former status quo that brands once enjoyed that enabled them to control almost exactly how and where their products were sold, and at what prices.
Here is a look at some of the most noteworthy domestic lawsuits of 2020 …
1. Appeals Court Sides with Costco in $21 Million Fight Over “Counterfeit” Tiffany Rings
The U.S. Court of Appeals for the Second Circuit sided with Costco in the years-long legal battle that ensnared it with Tiffany & Co. In a highly-anticipated decision dated August 17, a 3-judge panel for the Second Circuit held that the U.S. District Court for the Southern District of New York erred in determining on summary judgment that the multi-national warehouse retailer ran afoul of federal trademark law by labeling and selling diamond engagement rings as “Tiffany” rings, and ultimately, requiring Costco to pay a jury-determined $21 million damages sum as a result.
In the 3-0 decision, Circuit Judge Debra Ann Livingston stated that the lower court was wrong to grant Tiffany’s motion for summary judgment, and thereby, prevent a jury from deciding key issues at the conclusion of a trial.
Tiffany & Co. first filed suit against Costco on February 14, 2013, accusing it of trademark infringement, counterfeiting, and unfair business practices, and seeking tens of millions of dollars in damages. According to Tiffany’s complaint, Issaquah, Washington-headquartered Costco had sold engagement rings – some costing upwards of $6,000 – using the “Tiffany” name to thousands of Costco members, who snatched up the sparklers (allegedly) under the false impression that they were authentic Tiffany products. Costco responded with a countersuit, in which it denied infringement/counterfeiting liability, asserted defenses – including fair use – on its behalf, and sought to have Tiffany & Co.’s federally registered “Tiffany” mark invalidated on the basis that it is generic.
2. Valentino v. Mario Valentino: What is Really at Stake?
Mario Valentino is “the real VALENTINO.” That is what the Italian accessories brand assert3e in the latest round of the case waged against it by the larger and more famous Valentino S.p.A. (“Valentino”). For more than a year now, the two Valentinos have been going back and forth in a legal squabble that got its start when Valentino filed suit, arguing that Mario Valentino is blatantly breaching the co-existence agreement that the two brands entered into in 1979 in an effort to avoid legal complications stemming from their nearly-identical names and similar offerings.
In accordance with the legally-binding agreement, Mario Valentino can use the “Valentino” name on leather goods, such as handbags, assuming it includes the full “Mario Valentino” name on the inside of the product. As such, Valentino – the undoubtedly bigger, mightier brand and the undisputed fashion force in the squabble at hand – lacks the legal ability to use its “Valentino” name on some of the most important products in its lineup, the very goods that it sells the most of.
While this has not stopped Valentino from building a big business out of leather goods and footwear, the brand’s inability to simply use the “Valentino” name on its own (i.e., without “Garavani” or “Couture”) in connection with certain categories of goods could have significant implications for the value of the brand, itself. This is particularly relevant given that much of the value of a fashion company – or any consumer-facing company for that matter – is intrinsically tied to its branding and the intellectual property rights that come with that. With that ind mind, this could prove to be a high-stakes battle.
In the latest round of the case, Mario Valentino argued that the Mayhoola for Investments-owned Valentino is “exert[ing] its massively superior financial position to use protracted, expensive litigation to crush MV” because its “senior trademark registrations for the MV trademarks presented an obstacle to [Valentino’s] growth in the leather handbag marketplace.”
3. One of Nike’s Most Iconic Sneakers is at the Heart of a New Lawsuit
In a swiftly-settled but closely-watched case in the sneaker world, Nike filed suit against Warren Lotas in October shortly after the streetwear brand garnered attention by revealing that it had teamed up with noted Nike collaborator Jeff Staple for what both parties characterized as a “reinterpretation” of the cult-classic shoe that is said to have “catapulted sneaker culture to the masses” when Staple released it with Nike back in February 2005 to intense fanfare and what has since been characterized as a full-blown “riot.” Consisting of Nike’s classic Dunk silhouette and adorned with a stylized version of the Beaverton-based titan’s swoosh on the side, the $300 Staple Pigeon x Warren Lotas Reinterpreted OG Shoes quickly led to litigation.
Setting forth claims of trademark infringement and dilution, Nike asserted that it was not in any way involved in the reintroduction of the lookalike sneakers – including the Warren Lotas X Staple Pigeon OG, as well as “the Warren Lotas Freddy Broccolini Chanclas, the Warren Lotas Toxic Green, [and] the Warren Lotas Jason Voorhees Dunk Low” styles – and did not authorized Lotas’ pre-sale offering or release of them.
Nike’s suit heated up shortly after its filing, with the sportswear giant seeking preliminary injunctive relief to bar Lotas from offering up and/or distributing any of the infringing sneakers, including a “replacement” pair, and Lotas responded with claims of its own before counsel for the Beaverton, Oregon-headquartered sportswear giant and the Los Angeles-based streetwear brand told the court this month that they “entered into a confidential settlement agreement that calls for final resolution of this dispute.”
4. Chanel’s Ongoing Legal Fights Against Resellers
2020 brought the continuation of the trademark-centric lawsuits that Chanel filed against two prominent resellers: The RealReal (“TRR”) and What Goes Around Comes Around (“WGACA”) in what the resale companies have consistently characterized as a “bad faith” quest by the French fashion house to stomp out the market for pre-owned Chanel products. In one of the most recent developments in the Chanel v. TRR case, TRR argued that Chanel is actively engaging in an “overarching anticompetitive scheme” in order to limit the supply of its products in the market, “inhibit the growth and development of competitors, and artificially raise and maintain [its] prices,” and it has had help from prominent publications and big-name luxury fashion retailers in doing so. Chanel has since argued in response that TRR has failed to adequately show that Chanel actually monopolized – or attempted to monopolize – the market, and that its tortious interference claims are either time-barred or without merit.
Meanwhile, one of the most interesting arguments in the Chanel v. WGACA case to date centers on the issue of what constitutes counterfeiting and/or infringement, or more specifically, whether bags made in an authorized Chanel factory but that not “were never received by Chanel for quality control and approval” run afoul of the law. And beyond that, whether WGACA’s practice of “sprucing up” otherwise genuine Chanel bags impacts their status as authentic goods.
5. Burberry is Suing Rapper “Burberry Jesus” for Trademark Infringement, Dilution
A Chicago-based rapper has landed on the receiving end of a lawsuit from Burberry over his stage name and various elements of his branding, which the 164-year old British fashion company claims infringe its world-famous trademarks. According to the complaint that it filed in an Illinois federal court late last month, Burberry asserts that Marvel Yarbrough – a musical artist using the name “Burberry Jesus” – is engaging in “willful trademark infringement and dilution of the famous BURBERRY trademarks, as well as copyright infringement of Burberry’s copyright-protected design.”
According to suit, Burberry alleges that Yarbrough “adopted ‘Burberry Jesus’ as his stage name – which he often shortens to ‘Burberry’ – with an intent to replicate the Burberry brand and copy its well-known trademarks that have been used exclusively and continuously by Burberry and its authorized licensees for more than 160 years.” Yarbrough “uses the fame and renown of the BURBERRY trademark for his own personal gain,” the fashion brand claims, as well as “to promote his music, garner media attention, grow a fan base, and unfairly trade off of Burberry’s goodwill, all to Burberry’s detriment.”
The interesting – albeit legally unimportant (from a trademark infringement defense perspective) – twist: ten days after Burberry sent its first cease-and-desist letter to him, Yarbrough went so far as to “surreptitiously file a request in the Circuit Court of Cook County to improperly change his legal name from Marvel Yarbrough to Burberry Jesus,” presumably in an ill-advised attempt to avoid liability.
6. Off-White is Suing an Ice Cream Chain Over Allegedly Infringing Merch and Store Décor
Off-White is suing a California ice cream chain, arguing that the unrelated party has run afoul of the law by selling products that bear – and adorning its outposts with – marks that are “confusingly similar” to Off-White’s own well-known trademarks. In the complaint that it filed in a California federal court in early November, Off-White claims that Afters Ice Cream is offering up merch and using “retail fixtures, signage, [and] interior décor” that is meant to “confuse consumers into believing that [its] products are Off-White products and/or that [it or its] business is affiliated with Off-White” when there are no such ties between the two companies.
“The Off-White brand has been recognized for its distinctive graphic and logo-heavy apparel designs, including a unique design mark comprised of alternating parallel diagonal lines, which has been used on or in connection with Off-White products since at least as early as 2013,” Off-White asserts in its complaint. As a result of its “use, advertising and promotion of” its graphic marks, including the aforementioned multi-diagonal stripe mark, as well as “the word-of mouth-buzz generated by its consumers,” Off-White alleges that its products and its various trademarks are “prominently placed in the minds of the public.”
According to Off-White, Afters is piggybacking on the esteem and appeal of its brand by way of an array of “merch” offerings, namely t-shirts and sweatshirts, and decorative store elements that make use of diagonal stripe motifs and in some cases, other aspects of Off-White’s trademarks.
7. Amazon Takes on Counterfeiters in a Number of New Lawsuits
This year, Amazon took to cracking down on the sale of counterfeits on its platform by way of a handful of new lawsuits. The Seattle-based e-commerce giant first teamed up with Valentino to wage a legal battle centering on the sale of fakes on its sprawling third-party marketplace platform. In the trademark infringement, counterfeiting, and patent infringement complaint that they filed in a federal court in Washington in June, Amazon and Valentino allege that defendants Kaitlyn Pan Group, LLC and Hao Pan “introduced a line of shoes” on Amazon that blatantly copies “the iconic look and design of Valentino Garavani Rockstud shoes,” and makes use of one of Valentino trademarks, thereby, “infringing Valentino’s trademark rights and design patents.”
Shortly thereafter, Amazon partnered with another brand, KF Beauty, to file a joint trademark action against a group of defendants, including Sirowl Technology, for allegedly “conspiring and operating in concert with each other to … advertise, market, offer, and sell counterfeit products as genuine WUNDER2 products to Amazon,” thereby, running afoul of KF Beauty’s federally registered trademarks.”
And still yet, Amazon made headlines in November when it filed suit against two influencers and nearly a dozen Amazon third-party sellers over an alleged scheme to peddle fakes under the radar of its increasingly robust anti-counterfeiting controls. According to the complaint that it filed with the U.S. District Court for the Western District of Washington on November 12, Amazon claims that influencers Kelly Fitzpatrick and Sabrina Kelly-Krejci, along with 11 Amazon marketplace sellers, are on the hook for the “unlawful and expressly prohibited advertisement, promotion, and/or sale of counterfeit luxury products on Amazon.com” in violation of Amazon’s policies, and federal and state law.
All three cases are currently underway, and are likely part of a larger public relations push by Amazon aimed at chipping away at mounting criticism by brand and consumers, alike, in connection with its role in the widespread availability of counterfeits on its site, likely in connection with its quest to win over luxury brands and their fans.
8. Coty is Being Sued for Allegedly Overpaying for “Inflated” Kylie Cosmetics, Deceiving Shareholders
In May 2020, almost two years after Forbes crowned Kylie Jenner the “youngest-ever self-made billionaire,” the business magazine had another story to tell: Jenner and her team had been “inflating the size and success of her [Kylie Cosmetics] business for years.” The article – which is still live on Forbes’ website sans any corrections or retractions – proved to be an internet sensation in much the same way as Jenner’s initial “Billionaires” cover. But beyond proving inherently clickable and share-able, the article prompted the filing of a lawsuit accusing Coty and a handful of its highly-ranking officers and directors of running afoul of U.S. federal securities laws in connection with the acquisition of Kylie Jenner’s cosmetics collection.
In a proposed class action lawsuit filed in a New York federal court on September 4, Coty shareholder Crystal Garrett-Evans argues that the defendants engaged in “a fraudulent scheme and course of business that operated [to deceive] purchasers of Coty shares by disseminating materially false and/or misleading statements and/or concealing material adverse facts … about Coty’s business, operations, and prospects.”
9. Playboy is Suing Fashion Nova Over its Lookalike Bunny Halloween Costumes
After being sued last year by Versace over a Halloween costume that looked a lot like the jungle print dress that Jennifer Lopez wore to the Grammys in 2000, Fashion Nova was on the receiving end of a similar lawsuit this year – albeit over different Halloween costumes. This time around, Playboy is suing Fashion Nova over certain bunny costumes that it says the Southern California-based fast fashion company has marketed and sold in an attempt to “piggyback off of the popularity and renown of Playboy’s iconic Bunny Costume®, which Playboy has cultivated for more than six decades.”
In the trademark infringement and dilution complaint that it filed in the U.S. District Court for the Central District of California on October 28, Playboy asserts that “throughout the peak of the Halloween costume season,” Fashion Nova has been “prominently featuring” and selling costumes that look a bit too much like its trade dress-protected bunny costume, including the “iconic bunny ears, tail, ribbon name tag, wrist cuffs, corset, and bowtie collar.” (Playboy’s various enduring registrations for the costume specifically list the trade dress as consisting of “a three dimensional bunny costume worn by a woman,” which “includes a corseted bodice, bunny ears worn on the head, a bunny tail on the back of the bodice, a name tag on the front of the bodice, wrist cuffs and a bow tie collar.”)
10. In the Fight Against Modified Luxury Goods, Vortic’s Win is Telling
As Chanel is in the midst of a fight over “counterfeit” and allegedly modified bags with luxury reseller What Goes Around Comes Around, and on the heels of Rolex and La Californienne settling their differences over the legality of the latter’s sale of altered-but-otherwise authentic watches, a September 2020 decision brought the issue back to the forefront. In a decision from the U.S. District Court for the Southern District of New York on September 11, 2020, Judge Alison Nathan sounded off on a 5-year fight between Swatch subsidiary Hamilton International and Vortic LLC, a watch company that converts antique pocket watches into wrist watches.
Issuing her findings of fact and conclusions of law, Judge Nathan sided with Vortic on the basis that “the product at issue” – a restored and modified watch consisting of original Hamilton parts and parts produced by Vortic, itself, and which bore the branding of the original Hamilton watch – “was unlikely to cause confusion.” Why are consumers unlikely to be confused as to the source or Hamilton’s association with the modified Vortic watch? According to the court, “Vortic’s advertisements and marketing materials, as well as the watch itself, provided full disclosure” in accordance with the standard set out in the Supreme Court’s 1947 decision in Champion Spark Plug Co. v. Sanders.
11. Boohoo, Nasty Gal, PrettyLittleThing Face “Deceptive Pricing,” Fraud Suits
Over the course of a few weeks this spring, Boohoo, Nasty Gal, and PrettyLittleThing were each individually sued and accused of fraud for allegedly inflating the original prices of their fast fashion wares in order to “deceive customers into a false belief that the sale prices [that they advertise on their e-commerce sites] are deeply discounted bargain prices.” Plaintiffs Farid Khan, Haya Hilton, and Olivia Lee argued in their respective complaints that the Boohoo Group brands are actively engaging in a “scam” to “lure unsuspecting customers into jumping at a fake ‘bargain.’”
In the first of such suits, all of which were filed in the U.S. District Court for the Central District of California, Khan claimed that “on a typical day, Boohoo prominently displays on its landing page some form of a sale where all products or a select grouping of products are supposedly marked down by a specified percentage—for example, 40, 50, or 60% off.” The problem with that, he asserted, is that such a “sale” is “not really a sale at all” and that “all the reference prices on Boohoo’s website are fake” since the retailer never offered up the garments at issue for their original, pre-sale prices.
In response to the three lawsuits, the Boohoo Group defendants – which generated $1.55 billion in revenue in 2019 with their trendy and cheap wares – filed a combined motion, seeking to have the cases dismissed in their entirety, or at least, to have an array of the plaintiffs’ claims struck down. The defendants argue that despite claiming that they “fell victim to the deception” of the retailers’ various sale events, they do not allege any tangible harm. Khan, for instance, claims that he was duped by Boohoo’s “50% Off Everything” advertising, but “does not allege that he is out-of-pocket anything, e.g., that his $6 t- shirts were worth less than the rock-bottom price he paid for them.” With that in mind, Boohoo and co. argue that the plaintiffs lack standing to bring their suits since “they do not plausibly allege that they suffered any damages, i.e., that the price they paid was more than the value received.”
12. The RealReal Directors, Execs. Sued for Allegedly Misleading Investors About Authentication Process
Since getting its start in 2011, the message from The RealReal has been simple: all of the pre-owned luxury goods it offers up are 100 percent authentic. In furtherance of its title as the world’s largest online marketplace for authentic luxury goods, the San Francisco-based company boasts what it calls “the most rigorous authentication process in the marketplace” for the pre-owned luxury goods it sells, making it “the only resale company in the world that authenticates every single item it sells.” In short: thanks to its “multi-point authentication process,” every product offered up on its e-commerce site and in its brick-and-mortar outposts is the real thing.
Those are the virtues that have enabled TRR and its sweeping selection of Chanel bags, Celine wares, and (relatively) hard-to-come-by Hermes Birkin bags to find fans in a growing – and often dedicated – pool of brands and consumers, alike, and nab a valuation of $1.6 billion when it first listed on NASDAQ in late June 2019, raking in $300 million in funding to fuel further growth. Those very same virtues are now coming under fire, as one of the company’s shareholders is calling foul by way of a strongly-worded shareholder derivative lawsuit.
In the complaint that she filed in a Delaware federal court on September 10, TRR shareholder Iwona Grzelak claims that a number (but not all) of the company’s individual Board members – from founder Julie Wainwright to PVH Corporation president Stefan Larsson – and executives like Chief Financial Officer Matt Gustke and Chief Accounting Officer Steve Lo intentionally or recklessly breached their fiduciary duties as directors and/or officers, and violated the U.S. Securities Exchange Act in the process.
The parties have since agreed to a temporary stay of the case because Grzelak’s lawsuit “challenges substantially similar alleged conduct and involves substantially similar questions of law and fact as alleged in the federal securities action” that The RealReal shareholder Michael Sanders filed in November 2019, in which he accused the company and its initial public offering (“IPO”) underwriters, of misleading investors about the nature of it authentication process.