Actress Meryl Streep and Chanel creative director Karl Lagerfeld dominated the conversation in connection with the Academy Awards red carpet, but what about the elephant in the room: What looks were paid for and what is the legality at play when an actress is paid?
Meanwhile, Christian Louboutin, a mainstay on just about every red carpet, was handed a loss in Switzerland this week in its quest to gain exclusive rights to its red sole trademark; Alibaba spoke out against Chinese intellectual property laws, and as retailers continue to file for bankruptcy, one form of intellectual property is taking center stage.
Full Disclosure
Regardless of the facts underlying the “How did Warren Beatty get the wrong envelope?” debacle and the spat between Karl Lagerfeld and Meryl Streep, Oscar night proves an interesting one in terms of truth-in-advertising laws. Behind-the-scenes deals between brands and actors’ stylists — at least some of which include compensating Hollywood elite to wear a certain designer — often determine what dresses appear on any given red carpet. As a result, such events likely give rise to the need for disclosures in accordance with the Federal Trade Commission Act and the FTC’s various disclosure guidelines.
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Because there is no specific rule regarding the disclosure of red carpet partnerships, the question is the same as in any other endorsement scenario: Are consumers likely to be misled as to the nature of the content (e.g., is there a commercial element at play when an actress walks the red carpet that consumers may not be aware of)? If that actress is being compensated to wear something, either by way of money or a free dress, the FTC’s disclosure rules very well may apply.
This is especially true given the lack of uniformity when it comes to red carpet dressing; just like with influencers’ Instagram posts, some looks are paid for and others are not, thereby leaving consumers with little to go by in terms of gauging why a specific dress is being worn. As such, this is an arena that is ripe for scrutiny when it comes to disclosures, or better yet, the lack thereof.
Louboutin and the Problem With Color Marks
Six years after waging war against Yves Saint Laurent over that brand’s collection of red soled shoes, Christian Louboutin has lost in its bid to obtain federal trademark protection for its famous “Chinese red” soles in Switzerland. In denying Louboutin’s trademark application for registration, the Federal Supreme Court of Switzerland in Lausanne held that the brand’s famed red sole is a “decorative element,” as opposed to an identifier of source — the latter of which is the purpose of trademark law.
The ruling is the latest development in Louboutin’s multinational quest to register and/or assert exclusive rights to the red sole. To date, the brand maintains trademark protections in the U.S., Russia and Australia, but its loss in Switzerland is not the first of its kind. Louboutin has been unsuccessful in persuading courts in Belgium and Spain of its rights to the red sole, which similarly held that the red soles are a primary selling point of the brand’s shoes and thus, the trademark is void in light of the European Union trademark provision that excludes registration of any characteristics that give substantial value to goods.
The unfavorable decisions shed light on the overarching notion that a trademark holder may not establish a monopoly on technical, functional or aesthetic qualities of a product, such as a color.
Alibaba Blames Chinese Law for Counterfeit Goods on Its Sites
Less than a year after Alibaba chairman Jack Ma praised the “quality” and price benefits of counterfeit goods, the Chinese e-commerce giant has spoken out again, urging Chinese lawmakers to incite “tougher laws, stricter enforcement and stiffer penalties to crack down on purveyors of counterfeit goods in China.”
Alibaba — which has repeatedly found itself on the Office of the United States Trade Representative’s “Special 301” Out-of-Cycle Review of Notorious Markets list and on the receiving end of lawsuits from luxury conglomerates, including LVMH Moët Hennessy Louis Vuitton and Kering — is blaming China’s “ambiguous counterfeiting laws” for the abundance of fake products on its platforms. The company alleges that insufficient national intellectual property laws are hampering authorities’ ability to build legal cases against counterfeiters, resulting in a low conviction rate that is “the fundamental reason for the inefficiency in combating counterfeiting and protecting intellectual property.”
Trade Secrets Prove Valuable in Recent Retail Bankruptcies
American Apparel and Nasty Gal both have filed for Chapter 11, and on Wednesday, BCBG Max Azria did the same. While the value of such bankrupt retail companies has been a continued topic of discussion, little has been made of what brands purchasing these entities are actually acquiring.
However, a clear trend has been emerging: The acquiring brands are shunning retail and distribution real estate in favor of intellectual property rights, including trade secret information. In acquiring Nasty Gal, for instance, U.K.-based Boohoo Group paid $20 million for “certain intellectual property assets and customer databases” from Nasty Gal. Not included in the deal? Nasty Gal’s two Los Angeles-based brick-and-mortar stores or its Kentucky-based distribution center. The sale of American Apparel to Canadian manufacturing company Gildan Activewear was structured similarly.
In addition to the most straightforward intellectual property rights, such as any branding-related trademarks and any copyright or patent rights, the buyers are set to acquire an array of trade secret information, including business strategies and customer lists.
Given that trade secret information is fiercely guarded by its holders — as required by law to ensure the information remains secret and thus, valuable in giving a brand a competitive advantage — such information, whether it be advertising strategies or supplier lists, represents a very real asset for acquiring entities. Such information can prove particularly valuable for companies, such as Boohoo, which are looking to expand into new regions, such as the U.S., where the bulk of Nasty Gal’s business takes place. With this in mind, it stands to play a significant — yet quiet — role in the bankruptcy proceedings at hand and those that are seemingly destined to follow.
Julie Zerbo is the founder of The Fashion Law.