MEXICO CITY — True Religion is facing a multimillion dollar trademark suit in Mexico after Intellectual Property Institute IMPI sanctioned it, Sears and El Palacio de Hierro for illegally selling the brand in the country, lawyers working the case told WWD.
The ordeal began when Mexican retail entrepreneur Moises Harari filed a trademark nullity suit against True Religion’s local licensor Cole Collection and U.S. owner Guru Denim in October 2009, asking IMPI to remove a commercial license granted in 2005.
Harari claimed True Religion was hurting his key brand Dyn Religion’s sales, arguing the two were “similar to degree of confusion” while Dyn was registered since 1999. Harari also filed similar complaints against main distributors Sears de Mexico and El Palacio de Hierro.
IMPI agreed with Dyn Religion, removing True’s Religion’s commercial license in 2012.
However, True Religion and Sears de Mexico continued to sell the product, prompting Harari to step up his claim and IMPI to sanction the firms in April.
Cole Collection, Sears de Mexico and El Palacio de Hierro were each slapped with a $350,000 fine, according to plaintiff counsel Eduardo Birman of Mansur, Birman, Guakil, Castro and Wolf.
“True Religion does not have the right to sell clothing in Mexico,” Birman charged. “The fact that True Religion and Sears are selling the brand is illegal.”
Birman added True Religion, one of Mexico’s top-five premium jean brands, has dented Dyn Religion’s sales in 15 to 20 stores across Mexico.
Dyn Religion — Dyn loosely translated to Religion in Arabic — is seeking 40 percent of all True Religion sales in the country since 2005, an amount Birman would not quantify. Harari is seeking similar damages against Sears de Mexico and El Palacio de Hierro.
Retail analyst Miguel Angel Andreu estimated True Religion sold $20 million in the past decade, putting potential damages at $8 million.
True Religion’s counsel Roberto Arochi said the brand has appealed IMPI’s sanction and hopes it will rule in its favor when the case is resolved in three to four months.
“We want this decision [the nullity and sanctions] reversed,” said Arochi of Arochi & Lindner. “True Religion and Dyn Religion are not similar. True Religion is famous and recognized by 80 percent of Mexicans while Dyn Religion sells in 5-by-5 market stalls.
“Harari is just looking for money, to hurt True Religion’s growth trajectory,” he added. “It’s a form of extortion.”
Contradicting Birman, Arochi said the suit seeks to ban True Religion’s sales beyond clothing and also involves other categories including accessories, leather goods, perfumes and homeware.
Sears de Mexico also has similar hopes, in-house counsel Charly Ventura said. He added the 78-store chain, held by Mexican billionaire Carlos Slim’s retail arm Grupo Sanborns, appealed IMPI’s fine in May.
Venture added Saks Fifth Avenue, also run by Sanborns in Mexico, has pulled True Religion after receiving another preliminary suit from Dyn Religion. El Palacio de Hierro also pulled the merchandise in June.
Ventura said IMPI was wrong to favor Dyn.
“They made a mistake,” Ventura said. “IMPI has approved licenses for similar brands such as Coca-Cola, Red Cola and Pepsi Cola, all of which are selling in Mexico despite nullity claims.”
IMPI must be overhauled so judges issue more reliable and consistent decisions, he added.
“Imagine if they grant you a selling license and then suddenly remove it because someone had it before you?” Ventura said. “We are good-faith, third-party distributors. How much longer can we and other companies bear this risk?”
El Palacio de Hierro refused to comment. Guru Denim would not return messages seeking comment.
Birman struck down Arochi’s claims, saying: “I don’t doubt True Religion is much better known than Dyn Religion but that’s a useless argument. They can have the most famous brand in the world, but Dyn Religion was there before them. Our suit is right in time and form.”
Birman said Guru Denim has refused to settle the issue outside tribunals, despite several contact attempts from plaintiff lawyers. “We are 100 percent willing to negotiate a settlement outside the court. But they keep ignoring our calls,” Birman said.
If IMPI rules in favor the defendants’ favor, Dyn Religion will take its case to Mexico’s higher fiscal and district courts to ensure its case prevails, he added.
Guru Denim did not return messages seeking comment.
Several trademark suits have hit Mexico in recent years, Arochi said, adding that Elie Tahari and Quicksilver have also been involved in high-profile cases which he would not detail.
Meanwhile, a string of copycat brands are mushrooming in the country, potentially fueling similar litigation.
Observers point out Tommy Hill, Polo Sports and Greenland, which evoke Tommy Hilfiger, Polo Ralph Lauren and Timberland, as notable examples. The firms emulate not just the brand names but also use their identifying colors — Tommy Hill uses red, white and blue and claims to have the same quality as its international rival “but with much lower prices” — and other brand imagery.
“These could really affect the real brands,” said Mexican fashion expert Anna Fusoni, adding that the trend is worsening, with a rising number of look-alike entrepreneurs seeking a quick buck. “They have a pirate mentality. They don’t believe in design and just run around copying things.”
In a country worshipping foreign brands and mocking local ones, its easy to see how wannabe labels are winning hearts.
But Fusoni said their days may be counted.
“Consumers are becoming much more aware of these products and won’t eventually buy these brands,” she said. “They hurt the Mexican market and some local brands’ internationalization efforts.”
“It’s very sad,” added intellectual property lawyer Joel Gomez. “I know executives who travel to Europe to see what’s selling and then come to Mexico to copy the idea.”
Pursuing a nullity suit with the IMPI is also complex, discouraging international labels from filing similar suits, Gomez added.
“They [foreign labels] have to find a specialist attorney to help them with this process,” Gomez added. “Many big Mexican companies are out there to kill foreign brands.”