By and  on March 29, 2012

NEW YORK — After nearly three years of trading trademark barbs, Gucci and Guess Inc. finally squared off in a federal court here Wednesday.

At issue in the class-versus-mass trial — which could last up to three weeks and promises to explore how designers create and fashion companies operate — is whether or not Guess infringed on Gucci’s rights by using a variety of design elements, including a block letter “G,” a combination of green and red stripes and diamond-logoed motifs.

Gucci filed the suit in New York federal court in 2009. Marc Fisher Footwear, Guess’ exclusive licensee for footwear, is also a defendant.

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In his opening remarks, Gucci’s attorney, Louis Ederer of Arnold & Porter LLP, said the Guess designs in question were “studied imitations of Gucci trademarks” and that the company had “knocked off” over $200 million in Gucci product.

“This case is not about following fashion trends,” Ederer said, noting the defense argued that it was just keeping up with emerging designs. “It’s about a massive, complicated scheme to knock off Gucci’s best-known and iconic designs.”

Ederer told U.S. District Court Judge Shira Scheindlin that the “midmarket” Guess copied the luxe firm’s wares, including a popular logoed messenger bag with a red and green stripe, with the “clear intent” to make consumers “think it’s Gucci.”

Ederer said that the infringement was a company-wide effort, which implicated the senior executives and managers of Guess.

“May 9th marks the three-year anniversary of this case…it’s about time Gucci had its day in court,” Ederer said. Guess’ attorney, Daniel Petrocelli of O’Melveny & Myers, said the jeans brand was “staying true to its original unique image.”

“Guess is not Gucci,” he said. “It has no reason to be like Gucci and it did not scheme to be like Gucci.”

Petrocelli held up a red-and-green-striped shoe in court and said that prior testimony in the case had shown the Gucci executives saw the shoe and their perception of Guess was changed. The shoe later caught the attention of one of Guess’ intellectual property experts, who had production of the design stopped.

“Much has been made of these shoes,” Petrocelli said. Guess sold 844 units of the style for a total of $61,165, while Marc Fisher sold 10,000 pairs for total sales of $536,000.

Gucci’s beef with Guess is now much broader, encompassing 1,495 stockkeeping units and 6.8 million units, he said.

“They now want to go back years and years and make Guess pay,” Petrocelli said. He also noted that Gucci reached out to complain to Guess only one time, in a separate matter involving a watch.

The attorney also emphasized how different the two brands are, with Guess overstated and Gucci understated.

“Guess doesn’t slap a house name on a product, Guess screams its name, it surrounds you,” he said, adding later, “Gucci uses leather, Guess uses plastic, that’s why it costs 100 bucks.”

In the opening remarks there were numerous references to internal Guess e-mails touching on the design process. Petrocelli said Gucci had taken snippets of information from those e-mails out of context and that what ultimately counted was the styles Guess actually produced.

“At the end of the day, it’s got to show up in the product, the proof is in the product,” Petrocelli said. “Gucci fabric, Gucci this, Gucci swatches. This is how they talk. That’s how they identify looks and feels and fabrics.…This case is built on a house of cards. That you can create intent from whole clothing and run it back and collect $220 million.”

It is relatively rare for a trademark case to go to trial, and already the case has yielded some interesting insights.

Under cross-examination, witness Matteo Mascazzini, an executive at Gucci America, answered a series of questions about the profitability of the division’s various lines of business.

Mascazzini said Gucci America’s profit margins this year tally 80 percent at retail and 20 percent at wholesale, with an overall profit margin of 50 to 51 percent. The company makes less money on its licensing deals.

Mascazzini said that Gucci’s 10-year licensing deal with Safilo Group for eyewear allowed for royalties of 15 percent, 15.5 percent and 16 percent in the first three years, with an up-front payment of 20 million euros, or $26.7 million at current exchange. The brand’s five-year deal with Procter & Gamble in beauty also had an up-front payment as well as royalty payments of 9 to 9.5 percent.

The case continues today. Gucci parent PPR has been making a lot of legal news lately. The firm’s Yves Saint Laurent division has been battling it out with Christian Louboutin over Louboutin’s claims that a YSL design infringed on its trademark for red-soled shoes.

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