Hermès Suit Against LVMH Undergoes Preliminary Inquiry

Last month, we covered the legal dispute that arose between two of the largest French luxury power-houses out there after Hermès accused LVMH of insider trading, collusion and manipulating stock prices. Hermès filed the complaint after LVMH surprised markets in 2010 by revealing that it had acquired a 17.1 percent stake in Hermès via cash-settled equity swaps that allowed it to circumvent the usual market rules requiring firms to declare share purchases.

We also reported on LVMH's countersuit against Hermès for slander, blackmail and unfair competition. This week, online reports have indicated that the Paris prosecutor’s office has opened a preliminary inquiry into the complaint to determine whether the prosecutor will dismiss the case or hand it over to an investigating judge. The French stock-market regulator AMF will also continue to investigate the matter separately from the prosecutor's office to determine if LVMH respected market rules. The results of the AMF investigation will be revealed early next year. As to whether the case gets dismissed by the Paris prosecutor's office remains to be seen. Either way, TFG will be sure to keep you posted. 

Burch V. Burch

When fashion law overlaps with family law, it can become quite complicated. Last week, Tory Burch's ex-husband, Christopher Burch, filed a lawsuit against his former wife in an ongoing battle over their respective businesses. As a cofounder of Tory Burch, LLC, Christopher Burch is seeking a declaration from the Delaware courts that the defendants cannot stop him from pursuing other business ventures. The defendants include Tory Burch herself, Tory Burch, LLC, and individual board members of Tory Burch and Isla Coral, a subsidiary of the Mexican private equity firm that took a stake in Tory Burch in 2009.

Tory Burch and Christopher Burch

After their divorce in 2006, Christopher Burch went on to launch his own concept line, C. Wonder. Tory Burch threatened to sue him for trade dress infringement. In legal terms, trade dress is used to describe a certain distinctiveness, whether by physical appearance or packaging, in which there is sufficient similarity between two businesses that consumers may get confused. While the suit never materialized, Christopher Burch is claiming that his ex-wife and her team at Tory Burch have interfered in multiple ways with his ability to operate his new business. 

C. Wonder Store

According to the court documents, Christopher Burch is claiming that his ex-wife and her team have manipulated third-party bidders by requiring a pre-condition to any transaction with Christopher Burch and his new company C. Wonder that they reach an agreement with Tory Burch. Allegations of interference also included the defendants contacting suppliers and factories throughout China to inform them of confusion between the C. Wonder and Tory Burch brands.  

Tory Burch Store 

Christopher Burch remains confident that his new concept C. Wonder does not infringe on Tory Burch's trade dress, arguing that the functional and commonplace style elements such as green carpets and brass buttons are neither owned by Tory Burch, LLC nor recognized by the consumer public as distinctively identifying Tory Burch, LLC. He further contends that C. Wonder does not aim to be a competitor of Tory Burch, something he has tried to assure his ex-wife by making changes to his retail format and emphasizing a lower price point that aims to target a different consumer. 

Christopher Burch also goes on to claim that his business experience in fashion and personal financial investment was pivotal to the launch and success of Tory Burch, LLC, making his ex-wife's interference with his current business even more unfair.

However the Burches decide to resolve their differences, one thing is clear- if you're going to start a fashion business with your spouse, make sure you account for the possibility of a dissolution of the marriage in a contract. An exit strategy will always make things easier. What do you think? Do the two concepts seem similar to you? Does Tory Burch have a valid trade dress claim against Christopher Burch's new business venture?

Chinese Court Sentences Hermès Counterfeiter To Life

For a country that sources a lot of counterfeit goods and fast-fashion knock-offs, China’s Heyuan Intermediate People’s Court certainly doesn't mess around when it comes to punishing counterfeiters. A few weeks ago, the Heyuan court sentenced Xiao Zhenjiang to life in prison for counterfeiting almost 100 million yuan (about $15.7 million) worth of Hermès handbags. The court ordered for all of his belongings and property to be confiscated.

According to the court documents, Zhenjiang was the leader of a major counterfeiting gang and a repeat-offender. Relative to their leader, the other gang members got off with much lighter sentences, ranging from seven to ten years imprisonment and fines ranging from 500,000 yuan to 800,000 yuan ($79,000 to $126,000). In deciding the sentences, the Heyuan court took into consideration the market value of the goods had they actually been genuine. The sentence is related to a broader regional crackdown launched in February to fight market manipulation, counterfeit products and bribery. Authorities have said the crackdown is aimed at increasing market innovation and social stability. While the harshness of the sentence has surprised many IP lawyers, it is also interesting to note that China is taking the initiative to crack down on its own counterfeiters. The Communist Party chief of Guangdong province, Wang Yang, has strengthened protection of intellectual-property rights in what is considered to be one of the epicenters of China’s counterfeit production. "If it was foreigners demanding that we protect IPR [intellectual-property rights] five to 10 years ago, now we are demanding this ourselves,” stated Yang. While we here at TFG are happy to see a crackdown on counterfeit goods by the Chinese, perhaps a life sentence is taking things a bit too far? What do you think?

French Court Fines Chanel for Counterfeiting

Last Friday, the Paris Court of Appeal ordered Chanel to pay 200,000 euros, or $258,400 to World Tricot in a counterfeiting suit it filed in 2009. According to the original complaint, the plaintiff manufacturer was one ofChanel's suppliers of a series of crochet designs. Chanel eventually terminated the business relationship, but continued to produce one of the white crochet designs as part their collection (see image below). The plaintiff accused Chanel of copyright infringement and breach of contract. 

Unlike the U.S. copyright regime, France's IP system does offer fashion works copyright protection. Nevertheless, fabric patterns such as those found in lace, knits, or crochet designs, have been found to becopyrightable in U.S. courts. (See Eve of Miladay v. Impression Bridal Inc.; Knitwaves, Inc. v. Lollytogs Ltd.). So even if the suit had been filed under U.S. courts, World Tricot would have had a viable case. 

The original 2009 Commercial Court decision went in favor of Chanel, ordering World Tricot to pay 200,002 euros for "public disparagement." On Friday, this decision was reversed - with the Paris Court of Appeal ordering Chanel to pay out. The French fashion house has said that it is thinking about appealing the Supreme Court's decision, believing that World Tricot originally filed the lawsuit to gain publicity and because desperate times have fallen local manufacturers as designers continue to outsource their work. 

Senate Judiciary Committee Approves and Sends IDPA to Senate

The fashion copyright protection bill is on its way to the Senate. In the midst of all the excitement surrounding NYFW a couple weeks ago, Senator Chuck Schumer brought fashion law to the forefront and introduced thenewest version of the fashion design protection legislation originally proposed in 2006 and currently pending in the House of Representatives. The bill's title changed from "Innovative Design Protection and Piracy Protection Act" (IDPPPA) to  the "Innovative Design Protection Act" (IDPA). Other changes to the bill included (1) a provision requiring detailed written notice to alleged infringers; and (2) a 21-day moratorium on commencement of an action after that notice. To view a copy of the new bill, click here.

This morning, the Fashion Law Institute provided twitter coverage as the Senate Judiciary Committee reviewed the IDPA and sent the bill to the full Senate with only 4 opposing votes. Of course, there were a few expressed concerns. Senator Michael Lee proposed an amendment to have the losing party who files a designer copyright infringement suit to also pay attorneys fees in order to discourage opening the floodgates of litigation, but the suggested amendment was shot down. Senator Schumer pointed out that the 21 moratorium on litigation commencement will provide enough protection against increased lawsuits, a safeguard that other copyright laws do not have. Senator Schumer went on to state that IDPA is a balanced bill that "protects couture design [and] allows others to proceed in a way that ensures survival." 

Senator Charles Schumer

The next steps for the IDPA is to pass the full Senate and then the House before the congressional session ends in January. We here at TFG are very excited to see the legislative efforts of those who believe in copyright protection for fashion come to fruition and will be sure to keep you updated on IDPA's further progress.