Authored By: Ayushman Banerjee
Adamas University
Abstract
The counterfeit, trade dress infringement and brand dilution by online and other cross-border means has been an uncanny threat to the global luxury fashion industry with its over USD 1.5 trillion value.1 This essay discusses legal frameworks that regulate the protection of trade dress in luxury fashion industry, with specific focus on case laws in the international scene, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), and the means of enforcement in the European Union Intellectual Property Office (EUIPO). This paper presents counterfeiting cases and reasons why the current intellectual property models, despite being sound in the developed world, are still fragmented and fail to combat the systemic challenges of counterfeiting going out of upstart economies and electronic market spaces. Policy suggestions on providing a worldwide enforcement mechanism are solicited.
Keywords: trade dress, law of luxury fashion, counterfeiting, intellectual property, TRIPS, international case law, trademark infringement
I. Introduction
Luxury fashion industry is placed in the niche of the intersection of art, culture, business and law. The Louis Vuitton, Hermes, Chanel, and Gucci brands are able to commercially draw upon not only what physically they are creating, but rather the intangible qualities of heritage, exclusivity and aesthetic identity, a category of protection that the legal framework of trade dress offers. The total image and overall appearance of a product (in shape, colour, texture, graphics and arrangement of design) represent a subset of trademark law called trade dress.
The growth of fake luxury products has become one of the topical issues of law in the twenty-first century. The Organisation for Economic Co-operation and Development estimated that the amount of counterfeit and pirated goods was 2.5 % of the global trade – about USD 464 billion a year, of which the percentage of luxury fashion was again disproportionately high. The law has been responsive with different national trademark laws, regional intellectual property tools and the multilateral trade agreements.
The present paper is divided into six sections. Part II places the trade dress protection as it fits into the larger intellectual property context. Part III provides a critical case law analysis. It gets a special legal treatment in Part IV of a weak point in the system. Part V discusses findings. Part VI extends the proposals of reform. Part VII concludes.
II. Doctrinal Foundations of Trade Dress in Fashion Law
2.1 United States Framework
In the US, the protection of trade dresses is mainly regulated by Section 43(a) of the Lanham Act (15 U.S.C. § 1125(a)) which forbids its use in commerce, of a word or a term or a name or a symbol or a device or a false designation of origin that is likely to cause confusion to the consumer. To prove the claim on trade dress, the plaintiff should be able to prove: (1) that the dressing is design unusual or it has developed secondary meaning; (2) the dressing is not functional; and (3) as well there is the possibility of consumer confusion.
The non-functionality concept is notably very helpful in the fashion environment, where aesthetics and utility in many cases are intertwined. In contrast to the product packaging, the product design trade dress can only be registered on demonstration of having a secondary meaning among the consumers, a condition that presents an increased evidentiary burden to fashion brands whose aesthetic innovations must be proven to have acquired secondary meaning among the consumers.
2.2 European Union Framework
In the European Union, the concept of trade dress protection is executed by a mix of the European Union Trade Mark registration according to Regulation (EU) 2017/1001, the right to unregistered Community design, and the laws on unfair competition at the country level. The Court of Justice of the European Union has always pointed out that the exceptional nature of non-traditional marks in three-dimensional shapes, colors and configurations should be evaluated at the international level with considerations on the general impression based on the average consumer.
The CJEU also went further as to protect in L’Oréal SA v. Bellure NV (2009) to hold that the unfair advantage of the reputation of a well-known mark-so-called free-riding-is prohibited without consumer confusion. The concept is especially applicable to high-end fashion brands the business value of which lies not in its identification of its source but in reputational exclusivity.
2.3 International Framework: TRIPS Agreement
On the multilateral level, the trade-related aspect of intellectual property rights Agreement (TRIPS) provides minimum standards that should be adopted by all the member states of WTO. Article 15 and 16 are on the protection of rights of the trademarks on a general basis while Article 41 mandates procedures of enforcing the rights and this article is done in a manner that legal measures of the enforcing body are given a chance to do so effectively. Although TRIPS is fundamentally important, we find that there are enormous discrepancies in the effectiveness of enforcement by the minimum-standards approach to work and that certain countries play crucial roles in manufacturing as well as in transit.
III. International Case Law Analysis
3.1 Christian Louboutin S.A. v. Yves Saint Laurent America, Inc. (2d Cir. 2012)
A red lacquered sole of women high heels was trademarked (Christian Louboutin) in the United States. Louboutin desired an injunction in preliminarily when Yves Saint Laurent launched a pair of shoes in monochromatic red with a red outsole. The District Court refused to grant the injunction saying that no color can ever be a trademark in the fashion industry. The Second Circuit reversed on appeal and found this to be part of the case since the red sole mark can and is enforceable where the out sole was different in color to the upper section of the shoe.
This Court determined that Louboutin had established secondary meaning after 20 plus years of exclusive use, many years of substantial advertising and unpromptu media dispensation. But when the whole shoe is red (such as the red sole in the monochrome model designed by YSL) the red part is not actually working as a separate element, and thus should not be considered within the scope of the trademark. This very subtle possession was a gracefully poised statement between brand protection and the doctrine that colors within the abstract cannot be patented in the fashion market.
3.2 Gucci America, Inc. v. Guess?, Inc. (S.D.N.Y. 2012)
Gucci was awarded USD 4.7 million of the systemic infringement of the interlocking design of the letters G, the monogram, the distinctive green-red-green striped webbing design by the Southern District of New York over Guess. The Court established that Guess had, indeed, knowingly used confusingly similar marks with a view of free-riding on the luxury label of Gucci. Importantly, the Court affirmed the action of Guess in constituting trademark dilution by blurry through the Federal Trademark Dilution Revision Act of 2006 in retail market areas where Gucci did not actually compete.
Adidas AG Marca Moda (CJEU, C-102/07, 2008)
The case, dealings with by the CJEU, was whether the fact that the similar two stripe designs were widely used by third parties could be used as an indication that the three-stripe mark belonging to Adidas had turned into a generic mark. The Court found that the question of distinctiveness should be considered with reference to the registered mark and not to what third parties do in the marketplace, that will dilute it. That ruling strengthened the idea that famous marks are afforded a wider-ranging protection than marks that unfairly or are harmful to their unique character or reputation.
Hermès International Mason Rothschild (S.D.N.Y. 2023)
In a digitally monumental case, the Southern District of New York ruled that the creation of the digital fashion artist Mason Rothschild consisted of NFTs of his work titled MetaBirkins that are digital tokens of fur-adorned derivatives of Coach Hermes’ legendary Birkin. The Court used the Rogers v. Grimaldi test, which suffers the use of the trademark in a work of art other than where the use has no artistic significance or upon the use is obstructively deceptive about origin. The jury ruled that the commercial use of the Birkin by Rothschild pushed beyond the bounds of the safeguarded artistic expression into infringement, and that the rights of a luxury trade dress apply to the metaverse and NFT markets.
IV. Legal Analysis: Systemic Vulnerabilities and Doctrinal Tensions
It is demonstrated through a strict legal examination of fashion trade dress environment that there are three structural failure points in this environment: aesthetic functionality and the brand protection doctrines; the jurisdictional inconsistency which weakens the global enforcement; and the fact that current frameworks in use cannot deal with digital and metaverse counterfeiting. They should be discussed individually.
The aesthetic functionality doctrine portrays the most intractable doctrinal issue about the fashion trade dress law. Following the doctrine of functionality (as maintained by the United States Supreme Court in TrafFix Devices, Inc. v. Marketing Displays, Inc. (2001)) a feature of the product is considered functional and therefore not a protectable element, when, under the doctrine, that feature is either essential to the use or purpose of the article or has any effect on the price or the quality of the article. Within the fashion situational case study, this forms a paradox: aesthetic aspect of a product of luxury is at once an aspect of the product which is most commercial in its nature, as well as at risk of a failure in the functionality department. A case in point is the Louboutin lawsuit. The red sole is not functionally necessary to the shoe or structurally necessary, but the District Court had originally found the sole to be aesthetically functional grounding this finding on the fact that color in fashion is also aesthetically necessary in the decorative interest. The functional analysis which the Second Circuit has polished as limited to utilitarian instead of strictly aesthetic considerations was lawful but left intact the bigger question of where the demarcation is between the field where aesthetic distinctiveness can be protectable and where it cannot. It is this vagueness that brings about litigation uncertainties on designers and brands.
The second capital weakness is the territoriality of intellectual property rights. The protection of trade dress right is national registration as well as adjudged by the national laws; marks registered in France, Germany, and United States are not legally of effect in India, Vietnam or Brazil. This jurisdictional fracturing opens a loophole in enforcement in just those jurisdictions that are both significant manufacturing centres and as well as rising markets of consumption of fake luxury goods.
Article 41 of TRIPS creates a duty to offer effective enforcement mechanisms, though its minimalist remedies regime and damages quantum regime leaves much to be desired by national legal systems as to the available remedies, the amount of such damages and procedures of seizure at the borders. The resulting uncertainty would be that rather than the luxury brand obtaining injunctive relief and a large damages award in the United States, it would be prohibitively costly or, in most cases, impossible to obtain the same injunctive relief and damages award against the same infringement assailant in a developing jurisdiction. The consistent harmonization of laws is hence not only a policy dream unless it is a structural concept of the effective global brand protection.
The third and the most innovative challenge is the introduction of digital counterfeiting as well as the NFT-based trade dress infringement. The Hermes v. Rothschild case will be a legal acknowledgement by the courts of a special commercial identity of a luxury brand–characteristics of a unique product trade dress–which is nonetheless alive legally in virtual space. Nevertheless, there are also limitations in the current doctrinal models as the decision can reveal. Rogers v. Grimaldi test considers the overall test created regarding traditional works of art, it does not concern the functions of the programmable digital objects that also can be a piece of art, a financial asset or a commercial commercial. The use of an old-established examination to the NFT ecosystems endangers generating erratic and unforeseeable data. In addition, due to the decentralized and pseudonymous structure of blockchain platforms, enforcement is an even greater problem: the infringers, service, and the realization of verdict in jurisdictions are much more complicated in Web3 settings than in conventional e-commerce. Legislators and
The digital economy requires new doctrinal instruments by the courts, rather than the use of old instruments, to ensure protection of luxury trade dress is achieved.
All three structural vulnerabilities are between the improperness of platform liability frameworks. Only during the course of a year, millions of fake luxury products are located in major e-commerce platforms. Though the Digital Services Act of the European Union has elevated affirmative risk-mitigative requirements on very large online interfaces,16 the Section 230 of the Communications Decency Act maintained in the United States keeps the interfaces out of the proximate responsibility of infringing information posted by their users. Such a difference in the platforms liability standards in the two largest regulatory blocs in the world results in a race to the bottom situation where counterfeiters can use lax-enforcement platforms as distribution platforms of their products around the world. An international legal thinking would use a coherent approach to place the trade dress protection not just in bilateral or regional agreements on intellectual property protection but in the overall framework of digital market regulation.
V. Case Law Discussion and Findings
Taken together, the cases analyzed indicate some important legal propositions that have far-reaching implications on the practice of fashion and luxury law.
The single-color trade dress is first of all defendable in the fashion industry, in addition to the fact that the color must have attained secondary meaning and must have undertaken a notably source identifying role in the context. The establishment of context sensitive test which gives iconic color marks meaningful protection and opposition to unreasonable monopolization is a fundamental change to the paradigm of color marks in fashion by Louboutin. The brand experience here is that the rights can be created through a sustained exclusive and personally recorded use of a unique color through advertising spending and evidence of a consumer survey.
Second, copying between market segments is deliberate differentiation in neighbor market segments with which there is no direct competition but, nonetheless, with dilution through blurring intermediaries. The results of the Gucci v. Guess case show that a court is not going to restrain.
dilution analysis to the factual market segment that the plaintiff is in. The fact that a luxury brand is at a lower price point does not mean that the brand loses its dilution claim. This observation has tremendous consequences upon the mid-market brands applying design elements that are close to the known luxury house aesthetics as a strategic market tool.
Third, trade dressing is transferred to the world of ideas of digital and virtual spaces, although the applied doctrinal tools have to be adjusted to new nature of new spaces. Hermes v. Rothschild confirms that the Rogers test is applicable in the NFT context, but also indicates the exhausted boundaries of the frameworks. That commercial use of trade dress even in the digital form – regardless of artistic context – may amount to infringement is a strong message to digital artists, NFT platforms and metaverse creators that rights to luxury brands apply even in online commercial contexts.
Fourth, the coherent application of the CJEU case law relating to the protection of luxury brand reputation against free-riding such as in Adidas v. Marca Moda, and on the protection of luxury brand recognition against confusion via the confusion-based paradigm of US trademark protection, supports an explicitly European approach to the concept of brand protection. Such a difference in doctrine between EU and US structures poses some complexity to compliance in the global luxury brands and raises a significant cog towards international harmonization.
VI. Reform Recommendations
Resting on the above analysis, three main reforms are promoted. The international community must, first, investigate a specialized multilateral instrument on the luxury goods trade dress protection, beyond the minimum-standards approach that TRIPS provides, to a sui generis framework with harmonized registration, cross-border recognition and remedies standards. Second, the frameworks of the digital platform liability need to be improved worldwide by introducing constructive active monitoring responsibilities on obviously infamous luxury trademarks, in accordance with the EU Digital Services Act. Third, a structured capacity-building in the developing nations is expected assistance via WIPO and the TRIPS Council of the WTO to develop special intellectual property enforcement institutions.
VII. Conclusion
One of the hottest areas of modern intellectual property law is fashion and luxury law. The examples of Louboutin, Gucci v. Guess, Adidas v. Marca Moda and Hermes v. Rothschild all help to demonstrate the effectiveness of the current legal regulations as well as their crucial inadequacies in responding to the scope and nature of contemporary infringement of trade dress.
The intellectual property property fragmentation into territories, the discovery of digital piracy (that is growing literally explosively), and the development of virtual commercial space require the international commitment to consistent and efficient measures. Luxury brands are curators of cultural legacy and aesthetic trend that contribute to the global culture; a strong legal protection of their trade dress is a public policy issue more of commercial interest as opposed to individual interest. The global legal fraternity has to rise up to the occasion by being ambitious and well-organized as the global luxury fashion industry has to be.
Reference(S):
Adidas AG v. Marca Moda, C-102/07, EU:C:2008:61 (Court of Justice of the European Union 2008).
Christian Louboutin S.A. v. Yves Saint Laurent America, Inc., 696 F.3d 206 (2d Cir. 2012).
European Union. (2022). Regulation (EU) 2022/2065 of the European Parliament and of the Council of 19 October 2022 on a Single Market For Digital Services (Digital Services Act). Official Journal of the European Union, L 277, 1–102.
Gucci America, Inc. v. Guess?, Inc., 868 F. Supp. 2d 207 (S.D.N.Y. 2012).
Hermès International v. Mason Rothschild, No. 1:22-cv-00384-JSR, 2023 WL 1458126 (S.D.N.Y. Feb. 2, 2023).
Kapferer, J.-N., & Bastien, V. (2012). The luxury strategy: Break the rules of marketing to build luxury brands (2nd ed.). Kogan Page.
Lanham Act, 15 U.S.C. § 1125(a) (1946).
Libertel Groep BV v. Benelux-Merkenbureau, C-104/01, EU:C:2003:244 (Court of Justice of the European Union 2003).
L’Oréal SA v. Bellure NV, C-487/07, EU:C:2009:378 (Court of Justice of the European Union 2009).
Moseley v. V Secret Catalogue, Inc., 537 U.S. 418 (2003).
OECD/EUIPO. (2019). Trends in trade in counterfeit and pirated goods. OECD Publishing. https://doi.org/10.1787/g2g9f533-en
Raustiala, K., & Sprigman, C. J. (2012). The knockoff economy: How imitation sparks innovation.
Oxford University Press.
Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989).
TrafFix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23 (2001).
Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763 (1992).
United States Trademark Modernization Act of 2020, Pub. L. No. 116-260, 134 Stat. 2200 (2020).
Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205 (2000).
World Trade Organization. (1994). Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Annex 1C of the Marrakesh Agreement Establishing the World Trade Organization, 1869 U.N.T.S. 299.
