NEW YORK — Amid all the worries facing a fledgling designer or a new apparel company trying to launch a product or brand, legal considerations in regard to protecting intellectual property often get lost in the shuffle.
Intellectual property of a company or designer, which is the exclusive rights to its brand trademark and original designs, will be at the core of its business for as long as it operates. So protecting those rights is paramount in protecting the business.
WWD created a fictitious handbag to show what design elements could be protected and how much it would cost. WWD found that the price tag for protecting our intellectual property could be as high as $20,000. And for worldwide trademark registration, the cost could be in the millions [see related story].
But without protections in place for intellectual property rights, a company or designer becomes a “pig in a poke,” legal sources said. Essentially, you get what you pay for.
“We price for the new designers because their initial concern is obviously that they created a great design. They do realize they ought to protect it in some fashion, but their start-up budget is always a concern because they’d rather invest in start-up product,” explained Brian Brokate, partner, Gibney, Anthony & Flaherty LLP.
Protecting intellectual property has been a hot topic over the past few years. Sources estimate that the counterfeit goods market is a $450 billion, global business. And increasingly, counterfeiters are leveraging technology in their activities.
Questions were recently raised about IMG’s decision to broadcast runway shows during Fashion Week on the Internet. When asked if this would encourage apparel counterfeiters, Fern Mallis, executive director of 7th on Sixth and vice president of IMG, said Tuesday, “I think that that’s not an issue anymore. With media being so fast now … people can get on Web sites and see collections instantly. [Broadcasting the show] is really about the entertainment value and the energy and buzz of it.”
Meanwhile, an event scheduled today is aimed at keeping attention on counterfeiting issues. The second annual Harper’s Bazaar Anticounterfeiting Summit 2006, sponsored by Harper’s Bazaar in partnership with Kirkland & Ellis LLP, will take place at The Mandarin Oriental Hotel in Manhattan. Michael Bloomberg, Mayor of the Coty of New York is the keynote speaker. The agenda for the event includes a presentation about protecting brand integrity by strategizing on when and how to stop fakes, and a panel discussion with a number of counterfeiting experts.
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Experts say that before a company can prosecute sales of counterfeit versions of its products it must have legal protections and registrations in place on which to build its case. For fledgling brands faced with high start-up costs, the prospect can be daunting, but it is crucial to square away legal protections at the beginning, legal sources said.
“Intellectual property is one of the critical tools in the global marketplace. The fact of the matter is that so much is spent on acquiring it and so much is spent on protecting it, but so little is spent on putting together a strategic plan. You can waste a ton of money,” said Harley Lewin, chairman, trademarks and global brand strategies of the intellectual property group of Greenberg Traurig LLP, New York.
Brand protection strategies need to be in a defensive and an offensive position, legal sources said. Protecting yourself against getting sued should be imperative for a new company. “The first thing I do [for a client] is reduce the risk of them getting sued. That’s more important,” said Jane Shay Wald, partner and chairwoman of the trademark practice group Irell & Manella LLP, based in Los Angeles. “Not getting sued is more important if you don’t have a lot of money.”
Trademarks, copyrights, design patents, utility patents and trade secrets are the five kinds of intellectual property protection available to a company. Of those, some are more applicable for apparel and accessories firms than others. Focusing resources on selecting a trademark that is free for use and protecting that should be a priority.
“Patent protection only lasts 20 years in the United States, and copyright protection lasts almost 100, depending on when it was filed. Trademark protection is forever, as long as you are using it, it keeps right on plugging,” said Marya Yee, partner and member, Donovan & Yee LLP, New York.
To cover all one’s bases in filing and registering a trademark a search must be done of the U.S. Patent and Trademark Office’s database of registered marks and a full search of trademarks being used must be done. The USPTO’s database only covers federal registrations, and a full search covers both federal and state registrations and common law trademarks, as well.
“In the United States and most other countries in the world, trademark rights flow from use, not from registration,” said Lewin. A full search looks at everything from newspaper articles to business listings to determine if a trademark is available.
It is important that a designer establishes a trademark to protect its own brand image, sources said, but also to ensure that it is not infringing on an existing mark for which it might get sued.
A layperson can do what is called a “knock out search” using the USPTO Web site, said Steve Gursky, partner with New York-based Dreier LLP. A knock out search can establish whether a trademark is not available by establishing very quickly what is registered. After that a full search is needed, which can be difficult to accomplish and interpret without the assistance of a trademark lawyer.
It is possible for a company to file both trademark and copyright applications in-house, said Barbara Kolsun, senior vice president and general counsel for Seven For All Mankind. Both the USPTO and the U.S. Copyright Office Web sites are user-friendly and an initial search to clear a trademark can be done relatively easily. If there is no in-house capacity to do the searches, or if problems are encountered, that is the time to seek reasonably priced outside counsel’s assistance, Kolsun said.
Hiring a law firm to do a full trademark search results in an official opinion letter about the status of that specific mark, said Yee. The benefits of an opinion letter are numerous, but most importantly it shows that a company was operating in good faith, with no intention of willful infringement on someone else’s trademark or trying to trade on somebody else’s good will and reputation, if they are sued, she said.
“What you end up with in those circumstances is some protection from at least the worst case of liability that might be brought against you.”
Small companies will sometimes ask if they can cut corners, said Wald, but if you are planning to come out with a brand you need to do a good search because you can’t afford to be enjoined or have your goods stopped at the border for infringing on someone else’s trademark. You are viewed as an infringer regardless of whether or not you understood what you were doing, she said.
“Trademark laws aren’t set up for dabblers, the law presumes that you have a business,” Wald added.
Young companies and new brands can easily get caught up in the immediate needs of launching a brand, such as financing, sourcing and building a customer base. But industry lawyers say it’s critical to look ahead, to anticipate the brand’s position while putting in place legal protections before the brand is knocked off.
“The one thing you don’t want to do is play catch-up. Catch-up means it’s going to cost you an absolute fortune, if you can do it at all, because there are some rights that are lost forever,” Lewin said.
While the legal up-front costs might seem overwhelming, the legal costs to take a case to court is where the real expense comes in, said Kolsun. “Litigation is so expensive; I hate litigation, it makes my heart heavy,” she said. “No matter how you cut it, if someone sues, you need to hire the best lawyer possible, and those lawyers are expensive.”
The cost of a trademark litigation can vary from tens of thousands to tens of millions, said Lewin. A straightforward trademark litigation case in the U.S. can be done for $50,000, he said. “But a full-fledged, knockdown, drag-out litigation is a million-dollar fight. If you have a trademark in your pocket, 99 percent of the time you don’t have a fight. But you do have to take steps to threaten, and you do have to push people away from your mark.”
In looking to register trademarks internationally, there are additional considerations. With the exception of the European Union, each country requires it’s own individual trademark registration, with all the attendant fees and searches. Targeting resources to those countries where one needs the most protection is imperative, sources said. In particular, companies need to look for protection in countries where they manufacture, distribute and shop goods or those countries they plan to use in the future.