LAW À LA MODE

LAW À LA MODE
Issue 9 – Spring 2013
Retailing landscape
in Australia
Industry Insight
with Arlene Tansey, Non-Executive
Director of Pacific Brands
One size does not fit all
Options for restructuring your business
when expanding overseas
Management within management
Employment issues arising out of
concession stores
The pitfalls of a parallel market
Growing up
A review of UK Children’s retail
sizing standards
Creativity required
Developing a legal strategy to protect
fashion in the United States
High Court reaffirms
Importance of confidentiality
3D Printing
A designer’s friend or foe?
Business round-up
Creating links in the fashion chain
Calendar
Fashion, Retail and Design Group
Contents
Retailing landscape in Australia
04
Industry Insight 06
with Arlene Tansey, Non-Executive Director of Pacific Brands
One size does not fit all 08
Options for restructuring your business when expanding overseas
Management within management 10
Employment issues arising out of concession stores
The pitfalls of a parallel market
We look at parallel: Imports in Australia
12
Growing up13
A review of UK Children’s retail sizing standards
Creativity required14
Developing a legal strategy to protect fashion in the United States
High Court reaffirms16
Importance of confidentiality
3D Printing16
A designer’s friend or foe?
Business round-up
The news and the views 18
Creating links in the fashion chain
DLA Piper joins the IAF
19
Calendar
Our round-up of what’s on where you are 20
02 | Law à la Mode
Editorial
The Australian editorial team is delighted to bring you the
ninth edition of Law à la Mode, the quarterly legal magazine
produced by DLA Piper’s Fashion, Retail and Design group for
distribution to clients and contacts of the firm worldwide.
perspective. It may sound like arcane science fiction, but 3D
printing may actually become a household item fairly quickly,
with the cost of 3D printers falling and the necessary software
becoming more readily available. Read more on page 16.
The Australian retail market has seen dramatic change
over recent years. On the fashion front, high street brands
based overseas such as Zara and Topshop are flooding to
our shores and establishing a competitive presence within a
market traditionally occupied by Australian domestic retailers.
The last few years have also seen a boom in luxury brand
presence within Australia, much to consumers’ delight. In this
edition, we examine what these changes mean for local
Australian retailers, as well as considering the challenges
faced by overseas players when entering the Australian retail
marketplace (page 4).
Protection of intellectual property and business goodwill is
a critical issue for brands and retailers alike. On this front,
we examine avenues for protecting fashion designs in the
United States (page 14), as well as a recent decision of
the UK High Court relating to protection of confidential
information by employers (page 16).
We also share with you some fashion industry insights from
one of Australia’s leading company directors, Arlene Tansey
of Pacific Brands. Pacific Brands has operations throughout
Asia Pacific and in the UK and is famous for marketing many
iconic brands such as Berlei, Bonds and Sheridan. We’re sure
you will enjoy our Q&A with Arlene, appearing on page 6.
Parallel importation is a hot topic around the world.
In Australia, the Australian dollar is strong and online retail
is booming when compared with sales in traditional bricks
and mortar stores. This has a range of implications for both
importers and brand owners, and may require them to adjust
existing operational models to maintain a competitive stance
and preserve the bottom line. We take an in-depth look at
these issues on page 12.
We also discuss the phenomenon of 3D printing and the
implications it has for mass manufacturers and retailers
the world over, particularly from an intellectual property
This issue also includes a look at the advantages and pitfalls
of the most common business structures used for overseas
expansion (page 8), employment and workplace issues
that may arise when operating a concession store within a
department store (page 10) and the results of the UK’s
ShapeGB review of children’s retail sizing standards (page 13).
Finally, we conclude our ninth issue with the usual business
round-up (page 18) and the calendar of upcoming fashion
events (page 20), to ensure you remain fashion-forward no
matter where you are.
We hope you enjoy this edition of Law à la Mode. If you have
any comments, please get in touch with the Fashion, Retail and
Design group via our email address: [email protected].
Australian Editorial Team
Melinda Upton
Stephanie Surm
Rohan Singh
Alex Chubb
www.dlapiper.com | 03
Retailing
Landscape
In Australia
By Jane Baddeley (Melbourne)
04 | Law à la Mode
Overview of the changing Australian
retail landscape
Until relatively recently, the Australian retail market was
occupied in the main by domestic retailers. Many such retailers
are long standing and are considered national icons, but gone
now are the days when those local retailers were the sole
drawcard to our major shopping centres. Now customers are
flocking to the new players – overseas brands like Zara and
Topshop, who have recognised that the time has come to tap
into the Australian market.
The winds of change
In the last few years we have observed two main changes
to the Australian retail landscape. First, we are seeing an
explosion of luxury brand presence: no longer just the domain
of flagship CBD or casino sites, luxury brands are setting up
shop in dedicated high end precincts in our suburban shopping
centres. Second, we are seeing the arrival of numerous
overseas high street brands, particularly in the fast fashion and
general apparel sectors.
Australians have long been familiar with both of these sets
of brands, having been introduced to them in the course
of overseas travel and more recently as a result of online
shopping sites extending delivery services to this part of the
world. But now these international retailers are more formally
entering our market, with their own bricks and mortar stores,
and bringing their experience and competitive pricing achieved
through economies of scale.
We cannot yet know the longer term effect on our local
retailers. Are these overseas retailers taking the consumer
dollar at the expense of home-grown traders or are they
injecting much needed renewal and confidence into a market
that is at the mercy of economic fluctuations?
Vacancy rates in major Australian shopping centres are at the
lowest levels in years and owners continue to have a healthy
appetite for renewal and redevelopment of those centres.
Development of brand-new centres has slowed in recent
years due to the economic climate, but we are seeing a revival
of CBD retailing with Westfield Sydney and the soon to be
completed Melbourne Emporium.
Challenges faced when entering
the Australian retail marketplace
Another challenge – unique to Australia – is its regulatory
framework for retail leases. Since the 1980s, attempts have
been made by state governments to redress the perceived
imbalance in bargaining power between landlords and small
retail tenants. Each state and territory now has its own
retail tenancy legislation, which is in the nature of consumer
protection legislation, designed to ensure small business
owners are informed and equipped to enter into formal leases
which are equitable and conducive to the success of their
proposed enterprise.
Unfortunately, the fact that the legislation differs across
internal Australian states combined with anomalies of
drafting, means that protection is distributed inconsistently.
For example, a retailer that is either listed in Australia on a
public exchange or is a subsidiary of a listed company will not
be protected in Victoria, but will be subject to the legislation
in NSW. The same quirks apply for an overseas retailer, with
bodies corporate whose securities are listed on a World
Federation of Exchanges stock exchange outside Australia, and
their subsidiaries, being excluded in Victoria, but not in NSW.
There have been recommendations for uniform national
retail tenancy legislation around Australia. It would appear
that achieving this is some way off, with state and territory
governments continuing to turn their attention to other issues.
Where the legislation does apply, it prescribes landlord
disclosure before the lease is entered into, minimum lease terms
of five years, compensation to tenants for disturbance and
redevelopments, rent review, operating expense and sinking
fund limitations, use of tenant’s sales information, procedures
for landlord consent to assignments of lease, relocation
requirements and dispute resolution processes. It is important
to realise that this regime is more than just a code of conduct
and, for the most part, it is not possible to contract out.
The regulatory overlay can make negotiating retail leases
somewhat complex in Australia because of the need to
understand how the statutes interact with and affect the
common law rights and obligations, both in contract and
tort, which govern commercial leases generally. It also can
be more expensive for both landlords and tenants because
of the need for state specific lease documentation and lease
advice. On top of that and quite apart from the retail leases
legislation, each state and territory in Australia has differing
land title regimes, meaning sometimes leases are registered
and sometimes they are not.
Australia is an obvious market for US, UK and European brands.
There are few of the language or cultural barriers that are
faced in entering other markets. But supply chain and reverse
season issues are challenging, and several companies have faced
difficulties with local distribution and licensing relationships.
www.dlapiper.com | 05
INDUSTRY
INSIGHT
with Arlene Tansey, Non-Executive Director of Pacific Brands
For this edition, we caught up with one of Australia’s leading company directors,
Arlene Tansey. From growing up in New York as the daughter of two doctors (one of
whom became an entrepreneur whose business manufactured aircraft parts), to her
current role as a director of one of Australia’s iconic brand manufacturers, Pacific Brands,
Arlene’s journey is a fascinating one.
Arlene, can you please tell us a little
about your role at Pacific Brands and
your career highlights so far?
Customers still love quality brands that
reflect their lives and aspirations like
Bonds and Sheridan.
In your experience, what is the most
significant change the fashion industry
has experienced?
At Pacific Brands, I am one of five
non-executive directors and a member
of the Remuneration Committee. I met
the former Chair and Managing Director
of the company through business when
I was still working full time as a banker.
The highlight of my Pacific Brands career
was to be invited to join the board after
working through some challenging times
with the company.
Before Pacific Brands, your experience
was more in the banking and financial
services sector. What has been the
most important thing that you learnt
from the fashion industry?
The most significant change the fashion
industry has experienced in Australia is
the ability to compare the best with the
rest on a global basis and the access to
purchase globally.
I come from institutional banking and
the fashion industry has a more personal
connection with the community. Like
retail banking, it is more about how we
live with our product. We run in our
Berlei bra, we relax in our Bonds hoodie,
we feel luxurious in our Sheridan sheets.
It’s all personal.
Where do you see the retail sector
going, and how will this impact on the
fashion industry?
What do you see as the main
challenges for the fashion industry in
the next five years?
The fashion industry has changed
dramatically and it is the rate of change
and the required speed of the response
that I believe will continue to be the
greatest challenge for the industry.
06 | Law à la Mode
I think there are some positive signs
coming through in the economic cycle
that will flow through to increased
discretionary spending. Having said
that, I think consumers have become
more value conscious and that change
is here to stay. This is great news for
Pacific Brands because we deliver
design, innovation and quality – the key
ingredients our customers want.
How is Australia performing compared
to the rest of the world in terms of the
fashion industry?
Australia is a leader in innovation and
design. For example, Pacific Brands,
particularly in some of our fabrics for
workwear and technology in bras, have
delivered year on year improvements.
Serena Williams – who could certainly
wear any sports bra in the world,
chooses our Berlei bra.
The under-representation of women in
senior board roles is well documented.
Do you think that quotas might be a
good way of redressing the balance?
Quotas are a charged issue in
Australia today. I think they are not
well understood. Sheryl Sandberg in
her new book quotes a US statistic
of women moving from 14 percent
to 17 percent of board directors
in ten years. I believe the statistics
in Australia are similar. I also believe
quotas can be an effective means to
correct persistent under-participation.
The key is in the implementation.
The main objection is that unqualified
women will be appointed to fill quotas
– if properly implemented, I don’t
believe that would be the case.
On growing up in New York:
New York is a city of boundless energy
and optimism. I love living in Sydney but
always love being in New York.
On your first trips overseas: I spent
a lot of time in Paris growing up and
I have family there. Another great city,
particularly for fashion. I love the French
sense of style.
On having children: I have two teenage
daughters and they give me lots of tips
on how to be a better parent! Actually,
as they grow up they’re becoming great
friends and fashion co-conspirators.
They’re great fun to shop with.
First impression of Australia: I came to
Australia in 1994. I was an investment
banker at the time. My first impressions
were how beautiful Sydney was,
how much lower the density was and
how few female executives I met when
I went to work.
Favourite Pacific Brand: Very hard. It’s
Bonds…no, Sheridan…no, Berlei…. I’m
afraid I can’t choose!
Pacific Brands has come a long way from manufacturing Dunlop bicycle tyres in 1893.
Today, Pacific Brands is famous for marketing iconic everyday brands its consumers
love including Berlei, Bonds, Clarks, Dunlop, Everlast, Grosby, Hard Yakka, Holeproof,
Hush Puppies, King Gee, Mooks, Mossimo, Razzamatazz, Sheridan, Slazenger, Tontine,
and Volley.
www.dlapiper.com | 07
One size
does not fit all
Options for structuring your business when expanding overseas
By Polly Owen (London and Hong Kong) and James Hickling (London)
The retail press has in recent times been
full of articles about UK-based businesses
expanding overseas. Expansion overseas can
offer businesses a chance to compensate
for the current difficult conditions
experienced on British high streets. It can
also provide access to untapped markets,
such as the rapidly growing Asian, BRIC and
Middle Eastern markets, and exposure to a
more favourable business climate or simply
an opportunity to increase brand exposure
and test new business propositions.
Implementing the right operating model can be critical when
expanding into new overseas markets. This article sets out,
in high-level terms, the principal structures underpinning the
most common operating models and highlights some potential
advantages, as well as pitfalls.
Concession and distribution
arrangements
Using a local distributor is one of the simplest ways to
expand into new markets. Distribution can take the form of a
concession arrangement (typically, a business operated under
a contract or licence within someone else’s premises) or a
wholesale model.
Distribution is a relatively cheap and low risk way of testing a
new market and raising a retailer’s profile in a new location.
Flagship department stores overseas may be seeking brands
new to their market and may be attracted by product ranges
not previously seen by shoppers in their country or location.
Franchising
Franchising has been used as part of an international growth
strategy by numerous companies including Marks & Spencer,
Burberry and Zara. A franchise involves the grant of a right
to use a product, trademark or logo held by the franchisor in
return for the payment by the franchisee to the franchisor of
a fee.
The franchise model is fairly common; it represents a relatively
easy and low-cost means of launching in a new market.
Sometimes it is employed out of necessity since in some
markets (such as the Middle East) other structures are not
available to foreign-owned businesses.
As with concessions, lack of control can be a disincentive to
some franchisees. Progress is also heavily influenced by the
identity and behaviour of the franchisor, for whom preserving
brand reputation can be paramount.
08 | Law à la Mode
Joint venture
Mergers and acquisitions
A joint venture – or JV – involves each partner bringing certain
assets and/or expertise to the venture. As with franchising, the
JV model is often used in countries where foreign entities are
not allowed to own businesses outright.
Building a retail operation overseas organically may present
too many obstacles for some. Establishing a presence
by merging with – or acquiring – a local retail chain may
therefore be an attractive option. An example is the
acquisition by Louis Vuitton Moet Hennessy of Sacks, Brazil’s
leading beauty retailer.
A JV offers a higher level of control than franchising, involves
a relationship with a single local partner and provides access
to the JV partner’s knowledge of their country and the ability
to share cost and risk.
Practical disadvantages for a brand owner may include
relinquishing some control and flexibility (both financially and
operationally) to the JV partner, tensions arising from the
legal JV agreement governing the relationship between the
venturers – for example around consent or control rights –
and a clash of corporate and national culture.
Organic growth
Building an own-store retail portfolio afresh may be an option
for some retailers. Launching a new brand and acquiring or
building a real estate portfolio is, however, an expensive and
high risk way to enter a new market.
While organic growth is an option which offers tight
operational, brand and financial control for a retailer, the cost
may prove prohibitive when weighed up against the benefits.
Advantages include the retailer having full control of the
undertaking from the outset, as well as giving immediate
presence, market share and impact in the new territory.
The acquisition process itself can, however, be an expensive
and time-consuming way to move into a new market and
subsequent ownership can be high risk and can continue to
be costly.
Online expansion
This is a relatively low cost way of accessing a new market
and testing local appetite for a brand. Retailers will need to
invest time and money in ensuring that they are compliant
with all local laws and regulations for the territory into which
they are selling, that their website is translated into the local
language, that the currency options open to customers are
flexible and that their distribution infrastructure can support
sales made.
Other considerations
Numerous other matters need to be considered on a
case-by-case basis, including local employment and real
estate laws, brand protection, insurance and tax. The range
of different operating models mean an appropriate
solution should be available for all those retailers wishing
to take the next step in the evolution of their business by
expanding overseas.
www.dlapiper.com | 09
Management
within management
Employment issues arising out of
concessions stores
By Katie Sweatman (Melbourne)
The operation of a concessions store within a department store can often be an
attractive alternative to opening a stand-alone retail store for market entrants or
retailers seeking to promote their brand in an established retail location.
However, operating what is effectively a “store within a store” can create some
interesting challenges around the management of staff, where the retailer as
concession holder does not maintain full control over the environment in which staff
work and the way in which staff perform their work.
Managing the employment relationship
In most cases, the concession holder will hire its own
staff to operate the concession store, whether this is an
internal business decision or a requirement imposed by the
department store under the concession agreement.
Notwithstanding that staff are direct employees of the
retailer, there remains a strong element of control and
influence exercised by a department store over the presence
of employees of the retailer, which will affect the ability of
the retailer to effectively manage employment relations.
This may go so far as a department store requiring that final
approval be provided by it to any person being employed
within its premises.
This control over who is employed by the retailer,
including where the department store requires staff of a
particular look can create issues around direct or indirect
discrimination. In Australia, protected attributes around
which an employee or prospective employee may not be
discriminated include (but are by no means limited to)
gender, age, race, pregnancy and, in a number of states,
physical appearance.
While a directive that a prospective or current employee
does not fit a desired look may come from a department
store, any final decision not to employ a particular employee
10 | Law à la Mode
will rest with the retailer employer, and any proven
allegation of discrimination will render the retailer employer
liable in respect of that discrimination.
In the day-to-day management of staff employed in a
concession store, the department store will generally
require that concessions store staff comply with policies and
procedures of the department store. It is important that the
retailers’ own policies and procedures with which staff are
expected to comply are not inconsistent with the policies
and procedures of the department store.
Where inconsistent requirements operate under competing
policy and procedure documents, the retailer risks a situation
whereby a particular policy or procedure may not be able to
be relied upon in circumstances where non-compliance raises
disciplinary matters.
Maintaining a safe working
environment
As the employer of staff engaged in a concession store,
the retailer has responsibility under workplace health
and safety legislation to eliminate risks to the health and
safety of concessions store staff, so far as is reasonably
practicable, or if it is not reasonably practicable to
eliminate risks to health and safety, to minimise those risks
so far as is reasonably practicable.
In a small working area within a broader department store,
it is important to ensure that concessions staff have proper
access to first aid facilities and other safety devices.
The concessions store retailer is not, however, alone in this
responsibility. The department store itself will retain also a
particular obligation to eliminate any risks to the health and
safety of all workers within its store, including the staff of
concessions holders that are not their own employees.
Department stores will generally have established policies
and procedures around the safe performance of work
as well as procedures around consultation to ensure the
ongoing identification and management of health and safety
risks and hazards.
Australian workplace health and safety legislation varies from
state to state, but is gradually becoming harmonised under
uniform adopted legislation. Small, but important differences
between each state do make it important for advice to
be obtained in the particular state in which a concessions
store is to be established to ensure full compliance with risk
management and consultation obligations.
When things go awry
Under its concession agreements, a department store will
generally reserve the right to assert that a particular person
is not welcome to work in its premises.
Under Australia’s primary workplace relations legislation,
the Fair Work Act 2009 , many employees are eligible to
apply to the Fair Work Commission for a remedy if a
dismissal is unfair, that is, a dismissal that is harsh, unjust or
unreasonable. Employees will be eligible to make an unfair
dismissal claim after completing a minimum employment
period of six months (12 months for a business with less
than 15 employees), if they earn up to a prescribed salary
threshold (currently AU$123,300, indexed annually) or if they
are covered by a workplace agreement or Tribunal made
order setting minimum conditions (known as an award).
In determining whether a dismissal is harsh, unjust or
unreasonable, the Fair Work Commission will have
regard to factors including, but not limited to:
whether the employer can evidence that there
was a valid reason for the dismissal related to the
employee’s capacity or conduct
■
whether the person was given an opportunity to
respond to the reason for dismissal and
■
the size of the employer, that is, whether the
employer should have sufficient human resource
capabilities to follow a thorough process based
around procedural fairness.
■
These considerations become particularly relevant in a case
in which an employee is excluded or otherwise banned
from a particular department store following allegations
of misconduct. While a department store will generally be
empowered to exclude an employee at its discretion, the
retailer employer must undertake its own investigations,
provide the employee with a full opportunity to respond and
consider whether termination of employment is appropriate
before proceeding to do so on the basis of allegations
presented by the department store alone.
Maintaining a great relationship
The operation of a concessions store is a great opportunity
for a retailer and the department store granting the
concession to leverage off each other for the mutual benefit
of each business.
Maintaining a strong working relationship with the department
store and working closely for the seamless integration of
concessions store staff with the staff and environs of the
department store provides the best opportunity for a smooth
and long standing working relationship.
www.dlapiper.com | 11
The pitfalls of
a parallel market
By Melinda Upton and Jessie Buchan (Sydney)
The practice of parallel importing is a hot topic in Australia
at the moment, particularly given the tough economic
environment for traditional bricks and mortar retailers and
the strong Australian dollar. Price is an important factor for
many Australians, and the effect of the strong Australian
dollar is two-fold: consumers are enjoying access to cheaper
prices for a wider range of goods online, prompting a
downturn in traditional sales; and the strong dollar has
made purchasing from overseas markets more attractive
prompting many retailers to source supplies from outside of
the official distribution channels.
Although the parallel importation and sale of goods in
Australia is a legal practice (mostly), it gives rise to a whole
host of issues for both importers and brand owners to
consider. For brand owners, this has required an adjustment
to their overall commercial policies in order for them
to maintain a competitive stance in the marketplace and
to preserve their existing supply chain arrangements.
For importers, the high Australian dollar, local distribution
and retailing overheads has created more price pressure
and less incentive to maintain the existing status quo.
This tension prompts consideration from both brand owners
and importers alike.
Know your limits and remember –
consent is key
Parallel importation of goods into Australia is not a practice
which should concern Australian brand owners alone.
For international companies who enter into exclusive
distribution agreements with Australian companies,
or establish subsidiary companies in Australia, parallel
importation is a live issue which has real potential to affect
the bottom line, particularly in the form of licensing revenue.
In recent years, intellectual property holders in Australia
have sought to rely on either trademark or copyright
infringement as a method of preventing the importation
of parallel goods, with a majority of cases being decided in
favour of the importer. However, a recent string of cases
in the Federal Court of Australia have created uncertainty
for importers over whether or not products can be
parallel imported risk free.
For importers, these recent decisions place the onus
squarely on them to ensure that they make the necessary
inquiries about the conditions of supply and consent prior
to importation. For brand owners, these decisions reinforce
the merits in having strong contractual terms regarding
manufacturer and licence agreements, and highlight the
12 | Law à la Mode
importance of ensuring that well-considered intellectual
property protection and licensing strategies are in place
so as to maintain the status quo and preserve existing
supply channels.
Keep your eyes open
One of the most frequently cited arguments against
parallel imports is that they raise serious concerns about
quality assurance and product safety. In addition, customs
compliance, uncertainty in supply, defect and warranty issues
and consumer protection concerns have all been raised
as potential risks of parallel importing from a consumer
quality perspective.
Questions for importers to keep in mind include:
■
Where have the product’s materials been sourced from?
■
Under what conditions have the products been stored?
Have the products been tested and if so, under what
conditions?
■
Have the products been manufactured for your country?
■
Do the products contain ingredients which breach laws
in your country?
■
How will the consumers obtain spare products/
replacements of the products?
■
Do the products come with guaranteed warranties and if
so, who is responsible for honouring them?
■
The risks raised by the answers to these questions are even
more heightened for the genuine brand owners themselves.
For companies who have invested a significant amount
of expertise and money in research and development of
their products and brands, and take their commitment to
deliver the highest quality products very seriously, parallel
imports can have a profound effect on brand integrity and
corporate reputation.
It pays to check your Target
A recent and on-going case in Australia between one of the
world’s most iconic cosmetic brands, Estée Lauder, and one
of Australia’s largest retailers, Target Australia, serves as a
timely reminder of the importance of having good professional
relationships with suppliers and manufacturers, and proves
that businesses should tread carefully when it comes to
parallel importing. While alternative supply channels may
be more cost effective in the short term, importers should
be wary of the complex compliance issues associated with
parallel importing and the potential risks involved.
Growing up
A review of UK children’s retail sizing standards
By Julie Brunn and Jean-Louis Kerrels (Brussels)
On 28 February 2013, Shape GB published the results of
the first comprehensive measurement survey carried out
on children, which aims to update the publicly available
British Standards Institution (BSI) standard based on 1978
data, and the 1990 children’s retail sizing (private) standards
of Marks & Spencer.
What – A two phase process: First the measurement of
2,500 boys and girls aged 4-17 throughout the UK over
two years using 3D body imaging scanners. Second, analyzing
the measurements of the target group of new-borns to
four year olds – results of which are expected to be published
by Shape GB in Autumn 2013.
Who – Shape GB is a collaborative project between six major
UK retailers – Tesco, Marks & Spencer, Next, Monsoon,
Shop Direct and George at Asda, jointly accounting for
48 percent of the UK children’s wear market – five UK
universities, and specialists in retail sizing surveys and
3D scanning (Alvanon and Select Research).
Where – Because the Shape GB study focused on UK
children only and was initiated by UK retailers and universities,
it remains to be seen whether this excellent initiative will
result in similar (harmonized) measurement projects within
continental Europe.
Why – As the last standards for children’s wear measurements
were based on data from 1978 and 1990, the participating
UK retailers agreed there was a pressing need to update the
existing standards, and to ensure that these new common
standards accurately reflect body shapes of children nowadays.
One of the findings of the study carried out by Shape GB is
that while children have only slightly grown in height since
the study carried out by Marks & Spencer in 1990, they have
grown significantly larger in girth. The average 11-year-old
boy, for instance, now has a chest measurement of 78.5 cm
(10 cm wider than captured by the 1990 study), with a waist
of 70 cm (8.5 cm wider) and hip measurements of 80.2 cm
(7 cm wider); the average height of an 11 year old boy has gone
up by just 3.6 cm since 1990. Similar evolutions in measurement
were found for 11-year-old girls during the study.
Another interesting finding is that there is less variation within
sizes when children are grouped by height rather than by age:
it is more likely that a 104 cm tall child will have a waist of
X cm, rather than a 10 year old being 104 cm.
Ed Gribbin, president of fit solutions specialist
Alvanon, expressed the advantages of the Shape
GB study as follows: “Everyone will benefit.
Manufacturers will have a single common standard
for gauging fit, improving speed and accuracy in
the quality control process and ultimately saving
money. Retailers will have fewer returns due to fit,
while consumers will find that children’s sizing is
more accurate and consistent regardless of where
they shop.”
The Shape GB report (phase 1), as released on 28 February 2013,
is available to any interested brand, retailer or manufacturer and
can be downloaded – upon payment –from www.shapegb.org.
www.dlapiper.com | 13
Developing a Legal Strategy to
Protect Fashion in the United States
Creativity
Required
By: Ann K. Ford (Washington, DC), Paul A. Taufer (Philadelphia), Michael Burns IV (Philadelphia) and James Stewart
(Washington, DC)
Fashion designers in the United States have struggled to develop legal strategies that
adequately protect their work while still recognizing that fashion is an evolutionary art
that draws on what has come before it. As such, fashion does not fall squarely under
the complete protection of any of the three statutory US intellectual property schemes:
patents, trademarks, and copyrights. Consequently legal strategies for protection must
balance creative combinations of these laws, with business goals, and, of course, budgets.
PATENTS
Patents, an often overlooked area
of protection for fashion, grant US
designers the limited right to exclude
others in the marketplace from making,
using, offering for sale, or selling the
invention or design. By specifically
employing utility patents and design
patents, designers can create new
revenue streams through licensing, sale
or enforcement of the patent.
Utility patents, the most common
type of patent in the United States,
offer the strongest form of protection
for functional features of clothing or
manufacturing processes. Designers
holding utility patents are able to
prevent competitors from replicating
their patented product and entering
the market. For example, Levi Strauss
uses its utility patented rivets to secure
pocket openings on Levi Strauss
clothing. Competitors could not use this
method for a period of time to create
pocket opening on clothes unless their
competitor licensed the technology
14 | Law à la Mode
from Levi Strauss. While utility patents
are a powerful tool, the expense and
three year period of time to obtain
them can be prohibitive. In light of the
market’s demand for seasonal changes,
securing a timely utility patent is a
challenging form of protection because
few designers enjoy the market success
to justify the investment in a utility
patent.
Design patents – a less costly and
quicker alternative to utility patents
– provide protection for novel,
ornamental product designs. The key
here is that the design is in fact, novel.
While design patents usually issue in
about one year, they offer more narrow
protection. Designers are limited to
the drawing of the product or feature
as it appears in the patent application.
A familiar example of a design patent
for footwear is the shoes produced
by Crocs, Inc. Although a design patent
offers more limited protection than a
utility patent, designers find the more
economical costs associated with
securing it very appealing. And design
patents can be a potent method for
retaining rights in unique designs.
TRADEMARKS
Designers create their commercial
identities through trademarks.
Trademarks allow designers to
distinguish their goods in the
marketplace and communicate unique
and distinctive value to the consumer.
Therefore, the fashion designer’s most
valuable asset is the trademark, name,
or logo which imbues designs with the
power of their brand. Nevertheless,
trademarks offer limited protection.
A trademark application must be
tied to specific goods or services.
Consequently, if a designer procures
a US trademark registration for shirts,
the trademark protection does not
automatically extend to other goods
(unless of course the registration also
covers other goods or one makes the
argument that the mark carries over to
all apparel). Therefore, it is key to work
with a legal advisor when planning a
trademark strategy.
Designers are increasingly adopting as
trademarks non-traditional elements
repeated throughout their collections.
Consumers recognize and associate
these repeated elements with a
particular designer. Through consistent
use as a source identifier and consumer
recognition of the same, designers may
be able to protect this element as a
trademark through federal registration.
For example, women’s high heel shoes
with red soles bring to mind the
designer Christian Louboutin. A designer
may adopt a colour as a trademark so
long as the designer can show that the
colour is recognized by the public as
a source identifier for the designer’s
goods. A designer will not be given an
exclusive right to a colour or element if
it has a functional aspect (such as, the
slimming function of black). For example,
a trademark owned by a single designer
in the colour black for use in connection
with dresses would unfairly prevent
other designers from making use of the
colour black and its “slimming” function.
Another challenge for designers seeking
federal registration of a non-traditional
trademark is that it may be deemed
ineligible because the proposed mark
is merely ornamental or decorative.
Designers, who attempt to feature a
large or atypically placed design, logo,
or other element on a product, often
find their applications rejected on the
ornamental, decorative basis. The
difficulty for designers arises because
a bright line between trademark and
ornamental does not really exist. In
determining whether the element can
function as a trademark, much weight
will be given to the size, location
and dominance of the proposed
trademark as it appears on the goods.
Consequently, smaller traditionally
placed trademarks (e.g., a small logo on
the left breast of a collared shirt) have
more readily been granted registration
as consumers have come to expect and
recognizes trademarks in those places.
Nevertheless, recent case suggests that
larger logos can be protected when
placed in a non-traditional location so
long as the public identifies that logo as
emanating from the designer.
COPYRIGHT
Designers’ inspirations for their creative
works (designs) derive from a myriad of
sources including daily life observations
and the work of other designers from
the past and present. Designers seeking
copyright protection must therefore
avoid infringing on another party’s rights
in a similar design.
US copyright law allows designers to
seek copyright protection for jewellery,
fabric designs or patterns. Much
litigation swirls around the protection
of fabric designs and patterns, this is a
potent area of protection in the fashion
industry. Copyright protection does
not extend to “useful articles”1 such as
clothing. If the purportedly useful article
design incorporates graphic or sculptural
features that can exist independently
of the utilitarian aspects of the article
(clothing), then the designer may be able
to obtain copyright protection.
DEVELOPING AN EFFECTIVE
LEGAL STRATEGY
Developing an effective legal strategy
to protect a fashion line in the US
(and, indeed, anywhere in the world)
requires an investment of time, money
and creativity. Patent, trademark and
copyright provide varying degrees
of protection that each has its own
costs and limitations. Nevertheless,
developing and implementing a
successful strategy can generate new
revenue streams for designers and
keep the designer’s vision unique
and distinctive in the marketplace.
Working with an experienced fashion
lawyer allows a designer to develop a
comprehensive strategy that properly
balances the protection offered by
each of these legal tools with the
market reality.
Defined in the Copyright Act 1976 (United States) as “an article having an intrinsic utilitarian function that is not merely to portray the appearance of the article or to convey
information.”
1
www.dlapiper.com | 15
English High Court
reaffirms
importance of
confidentiality
Premier Model Management v. Bruce [2012] EWHC 3509(QB)
By Vinita Arora and Stacey Holloway (London)
In our last article “Using a haute couture approach to
protecting business secrets,” we explored methods that
companies use to protect their confidential information.
The issue has recently come to a head in the case of Premier
Model Management Ltd v Bruce [2012] EWHC 3509(QB).
In this case, Mr Bruce was a senior model booker for Premier.
During the course of his employment, he was prevented from
competing with Premier and from poaching staff and models.
He was also subject to 12-month non-poaching covenants
post-termination. Lastly, Mr Bruce was bound by the common
law duty of confidentiality which applies to all employees both
during employment and indefinitely post-termination.
After handing in his notice, Mr Bruce took sick leave for
the majority of his notice period. In that time, he set up a
rival agency with his partner and began sending confidential
information to his personal email address, including details
of models, work opportunities and terms of business. As a
result, Premier summarily dismissed Mr Bruce and sued him
in the High Court for breach of contract. They also sued his
partner and their new company for inducing the breaches.
The High Court held that by sending confidential business
information to his partner, Mr Bruce was clearly in breach
of his duty of confidentiality. They also held that he was in
breach of his obligation not to compete with Premier during
employment, as his rival agency was incorporated some
six months before his employment ended. The court held that
Mr Bruce’s partner and company were both liable in tort for
inducing these breaches.
This case demonstrates a robust approach and a willingness by
the courts to safeguard these critical business issues. However,
on a practical point, Premier was lucky that Mr Bruce had
been careless, as it had a wealth of evidence to support its
claim. The penalties imposed by the court on this occasion
are draconian, so in the absence of significant evidence, judges
tend to be cautious about finding that an employee has engaged
in unlawful behaviour. Generally, employees who choose this
path tend to be more careful and covert about their activities.
As such, finding evidence to support a claim for breach of
covenants is notoriously difficult and can be expensive if
forensic IT experts have to be brought in.
Premier’s claim was also bolstered by the fact that Mr Bruce
had been competing while still employed by Premier. As such,
his obligations towards his employer were beyond dispute.
The court did find that the 12-month non-poach covenants
were valid and enforceable in this case (because that duration
reflects the usual length of contracts in the industry), however
covenants must always be carefully tailored for each business
to ensure enforceability. Undoubtedly, competitive behaviour
post-termination will be harder to police and claims for
breach will be more difficult.
16 | Law à la Mode
3D
printing
a designer’s friend
or foe?
By Rebecca Kay (London), Rohan Singh (Sydney)
and Dominic McKean (Liverpool)
In March 2013, burlesque star Dita Von
Teese grabbed the headlines yet again, but
this time for modelling the world’s first
fully articulated dress produced with a
3D printer. While the concept might sound
like the stuff of fantasy, the 3D printing
age is closer than one might think and has
profound implications for retailers.
What is 3D printing?
3D printing (also known as additive technology) is the
manufacture of three-dimensional objects from a computer
file (CAD) using a specialised printer. Watching footage of
the process brings to mind the gadgetry of science fiction
(YouTube has many examples), hence most people are
surprised to learn that the invention has in fact been around
since the 1970s. The main reason for its apparent obscurity is
that, until recently, the costs of 3D printers and the underlying
software far transcended the reach of most of businesses,
let alone the average consumer. However, now prices are
dropping rapidly, the number of brands investigating the
potential of 3D printing is on the increase.
Embracing change
The Von Teese dress was the creation of designer
Michael Schmidt, architect Francis Bitonti and printing firm
Shapeways. While this particular design was customised to
the model and made for purely promotional purposes (not
least because it was embellished with over 13,000 Swarovski
crystals), retailers have already started using 3D printing for
more commercial projects. At Paris Fashion Week this January,
Dutch designer Barend van Herpen’s eleven-piece collection
featured two 3D printed ensembles, including a form-fitting
dress. Meanwhile, in February 2013 Nike Inc unveiled its Nike
Vapor Laser Talon, a shoe incorporating a 3D printed plate
enabling it to be contoured to the particular player and increase
efficiency. Even young designers are getting on the bandwagon,
with 3D printers being installed at fashion schools such as the
London College of Fashion.
The risks
With the price of 3D printers now falling (one brand of
domestic 3D printer in Australia currently retails for around
AU$1,800), an obvious commercial risk for mass manufacturers
is that they are cut out of the supply chain. While consumers do
need appropriate CAD files in order to print, websites such as
www.thingiverse.com are making this an increasingly easy hurdle
to overcome, providing free 3D files for a vast array of objects,
including fashion accessories, jewellery, spectacle frames, juicers
and even a model Predator unmanned military aircraft.
In addition, 3D printing presents challenges for retailers in
the context of their intellectual property rights. If illegal film
or music downloading was a problem for copyright owners,
imagine the consequences of teenagers being able to “print”
Nike trainers in their bedrooms. The Pirate Bay, a notorious
file-sharing site in a music and film context, has already
created a new category for files that allow 3D printers to
create physical objects. Moreover, in many cases, IP regimes
will offer defences to copiers, whether on the grounds of
domestic use or exclusions for “must fit” designs or industrially
exploited copyright works.
Friend or foe?
Creative genius or space-age nightmare, 3D printing is an
innovation which is unlikely to disappear soon. Retailers are
therefore advised to add 3D printing to the ever-increasing
watch list of IP exposures, to ensure they stay ahead of
the infringers’ game. At the same time, the concept offers
a brave new world for creative business who capitalize
on the opportunity to produce highly complex and
customized designs.
www.dlapiper.com | 17
Business round-up
The news and the views
Unhappy news
for trade marks
travelling
through
Germany
by Dr. Stefan Dittmer and
Dr. Annemarie Bloss (Hamburg)
The German Federal Supreme
Court (BGH) determined in
its “Clinique Happy” decision
(BGH I ZR 235/10), that imported
counterfeit articles traveling
through Germany intended for
sale in a foreign market (so-called
“unbroken transit of custom
sealed goods” – zollverschlossene,
ungebrochene Durchfuhr von Waren)
are not subject to the protection
of German trade mark law, even if
the mark in question is registered
in Germany or the EU. Such
marks are not being used as trade
marks pursuant to the German
Trademark Act during the mere
transport of the articles through
Germany to a foreign destination
market. Furthermore, the principle
of territoriality foreign trademark
law in connection with German
tort law does not grant protection
to marks merely travelling
through Germany.
The BGH made it clear that
counterfeit goods, protected by
German trade marks and merely
travelling uninterrupted through
Germany do not violate German
trade mark law as it does not
constitute a required “use in
commerce”. Furthermore, the
court also denied protection
against this transit under German
tort law. As a result, to claim
for preliminary injunctive relief,
trade mark owners must now
18 | Law à la Mode
demonstrate that an infringement of
their trade mark rights also threatens
in the country of destination of the
goods and that the import of those
goods may be prohibited under the
laws of the country of destination.
ONEL/OMEL:
“genuine use” of
EU trade marks
by Claire Bailey and John Wilks
(London)
The Court of Justice of the EU
has ruled that, where a European
Community Trade Mark (“CTM”) is
only used in a single EU country, the
trade mark owner may still be able to
establish “genuine use” of that CTM in
the EU. CTMs which have not, within
five years of registration, been put to
“genuine use” in the EU in connection
with the goods or services in respect
of which they are registered may be
subject to revocation.
Hagelkruis Beheer applied for a
Benelux registration for the word
mark OMEL. Leno Merken, owner of
a Community word mark ONEL for
two of the same classes, opposed the
registration. In response, Hagelkruis
requested that Leno provide proof
of use of the ONEL mark. Leno had
proved use of the earlier mark ONEL
in the Netherlands, but not in the rest
of the EU.
The Court rejected an arbitrary rule
on territorial scope of genuine use,
stating territorial borders should be
disregarded.
The Court concluded that an
assessment of genuine use should
take account of “all relevant facts
and circumstances”. These include
the characteristics of the market
concerned, the nature of the goods
or services protected by the mark,
and the territorial extent, scale and
frequency of use.
Brand owners who have taken the
trouble to register a CTM must
ensure they have a strategy in place to
maintain it, through genuine EU use on
a sufficient scale.
Pucci v.
Tucci: Latest
developments in a
protracted legal
saga
by Stefania Baldazzi and
Giulia Zappaterra (Milan)
At the end of 2012, the EU Court of
Justice rendered three decisions on
the legal fight between El Corte Inglés
S.A and the Italian fashion designer
Emilio Pucci, involving word trademark
“Pucci” and figurative trademarks
“Emilio Pucci” and “Emidio Tucci”.
The passionate legal saga started in
1977, when El Corte Inglés elected to
operate in Spain, with an imaginary
Italian name Emidio Tucci. Emidio Tucci
was a trademark intended to be more
attractive to consumers in conveying
an image of Italian elegance.
Despite the opposition of Emilio Pucci,
the trademark was finally granted as a
Spanish trademark to El Corte Inglés,
on the ground of lack of similarity
between the names.
The fight re-ignited when both
companies sought to register their
trademarks at the community level.
Creating links in
the fashion chain
In the first round, the EU General
Court (sentences T-357/09 and
T-373/09) refused the registration
of figurative trademark “Emidio
Tucci” in classes 3 and 21 due to its
detrimental impact on the exclusivity
of the reputed trademark
which was well known in Italy
and used to cover high-quality and
luxury goods.
In the second round, the EU General
Court (sentence T-39/10) confirmed
the registration of the word
community trademark “PUCCI” for
original classes 3, 9, 14, 18 25 and 28,
notwithstanding the opposition of El
Corte Inglés. The Court stated that
the likelihood of confusion between
trademark “PUCCI” and figurative
trademark
has to be evaluated through
consideration of the overall
impression given by the signs to
the public and suggested that the
two trademarks are visually and
phonetically different.
How will the saga unfold? Could
there be more to come? Follow us in
future editions.
DLA Piper has joined the IAF, the International
Apparel Federation, generating exciting
opportunities for DLA Piper’s clients and IAF
members
By Marchien Hoogenrad (Amsterdam)
DLA Piper’s Fashion, Retail and
Design group covers an interesting
and broad group of clients worldwide
who focus on optimising their playing
field and on combining their forces in
the apparel industry. This approach
matches the objective of the
International Apparel Federation
(“IAF”). The IAF is a federation
founded in 1972 in Williamsburg,
Virginia, in the United States, whose
current headquarters are in Zeist,
near Amsterdam, the Netherlands.
DLA Piper recently joined the IAF as an
associate member. We spoke with the
IAF’s secretary general, Han Bekke, to
find out what this new cooperation can
offer our clients.
■
T
he IAF’s mission is to develop
business contacts to foster
dialogue and knowledge exchange
between individuals active in the
world apparel value chain, and in
international practice by promoting
common business interests.
For instance, the IAF encourages
best practice and the support
of apparel manufacturers and
marketers worldwide. Members
of the IAF can share information
on recent developments regarding
the advancement of technology
and the promotion of its use, the
encouragement of innovation and
new ways of thinking and the growth
of apparel trade worldwide. Further,
the IAF provides market information
to its members. A relevant topic
that has been covered by the IAF is
the improvement of social, health
and safety, and environmental
conditions relating to the apparel
chain worldwide.
■
The IAF aims to be the premier
worldwide knowledge network
dealing with a variety of apparel
industry issues including design,
manufacturing, distribution,
sourcing, trade, technology and
education. The development of
business contacts worldwide
remains a main target of the IAF.
The IAF also offers trade missions
worldwide which members can join.
A
s an associate member of the IAF,
DLA Piper provides legal services
to the apparel supply chain. In
addition to this, and to the various
national trade associations which
represent apparel manufacturers in
their respective countries which are
IAF members, there is an option to
become an individual member. This
is useful when your core business
involves the design, marketing and/or
manufacturing of apparel products.
■
■
O
nce a year, a large convention
is held for all members. The next
convention will be in Shanghai from
23 to 27 September 2013. DLA Piper
will attend that convention and will
give a presentation on legal issues.
More detailed information on this
convention can be found in the next
Law à la Mode edition.
For more information see www.iafnet.com
www.dlapiper.com | 19
Calendar
Our round-up of what’s on where you are…
Compiled by Tessa Kelman(Sydney)
March
Stall Wars!
The Retail Brunch at MIPIM 2013
The London office of DLA Piper recently held a
Corporate Social Responsibility event to raise money for
Barnado’s charity. Entitled “Stall Wars”, the event saw
different teams within the office setting up “stalls” in
the auditorium and competing to see which could raise
the most money in a two hours, Lawyers and support
staff took on the task with gusto, with creative stall
concepts including a “DVD lucky dip”, a mini fairground
and a classic British “White Elephant” stall. The event
raised over £2000 – thanks to all who participated.
On 13 March 2013, DLA Piper hosted The Retail Brunch
at MIPIM, the world’s leading real estate conference.
The event was very well attended and provided an
excellent opportunity to network with international
investors and developers and to reinforce our
commitment to the retail sector.
April
Audi Fashion Festival Singapore – Singapore
May 15 – 19
(http://audifashionfestival.com/calendar/)
Mercedes-Benz Fashion Week Australia – Sydney,
Australia
April 8 – 12
(http://australia.mbfashionweek.com/home)
Mercedes-Benz Fashion Week Mexico – Mexico City,
Mexico
April 15 – 18
(http://www.mercedes-benzfashionweek.mx/mbfwm/)
Aurora Fasion Week, St Petesberg,
Russia
April 15 – 21
(http://afwrussia.com/en/)
May
INTA’s 135th Annual Meeting – Texas
May 4 – 8
(http://www.inta.org/2013AM/Pages/Overview.aspx)
Milan Seminar: Global expansion of retail brands
On 20 May 2013, DLA Piper’s Fashion, Retail and Design
team is hosting a seminar at the Four Seasons Hotel
(Milan), which will give an insight into the legal issues
surrounding the global expansion of retail brands.
DLA Piper experts from Europe, Middle East, Americas
and Asia will be joined by a distinguished panel from
leading International fashion brands. If you would like to
attend this event, please email [email protected].
Modaprima – Florence, Italy
May 24 – 26
(www.pittimmagine.com)
Rio de Janeiro Fashion Week – Brazil,
Rio de Janerio
May 30 – June 4
(http://www.fashiontv.com/fashionweek/rio-fashion-weekspring-2013)
If you have finished with this document, please pass it on to other interested parties or recycle it, thank you.
www.dlapiper.com
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DLA Piper is a global law firm operating through various separate and distinct legal entities.Further details of these entities can be found at www.dlapiper.com
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