Can I Use The Photographs? (Part 3)

Cannes - 'Dreamgirls' Premiere

These days anyone with a cell phone is a photographer and the internet is flooded with photos of celebrities that go “viral” on social media. A photograph of a star wearing your garment, carrying your accessory or holding your shopping bag can be of tremendous value to your brand. Indeed, brands shower celebrities with gift items for the promotional value in their use. And contracts to promote brands are lucrative for the celebrities and those who serve as matchmakers. So it is very tempting to copy photos found on the internet to your website, Facebook page or ad. But if you do, you may run afoul of what has been variously described as the right of privacy or the right of publicity.

There is no uniform national law which protects an individual from unwanted exploitation of their name or image. Each state, however, has afforded protection, either by statute or as a matter of judge made “common law”, and sometimes by both. New York has long prohibited the use of the name or likeness of every living person—celebrity or not—for purposes of “advertising or trade”. While the New York statute offers no protection against the use of the image of a deceased person, even if a celebrity, other states do protect celebrities against commercialization for extended periods after death.

Use of a name or likeness for non-commercial purposes, however, is not prohibited. Because of the constitutional guarantee of free speech, newspapers, magazines and even TMZ are free to report the comings and goings of stars, and also to publish that embarrassing photo of you at a Giants game, with impunity. Your daughter can tweet her cell LadyGaga-InSunglassesphone photo of Britney Spears walking on the street without make-up or post-it to Facebook, and like-minded celebrity-obsessed fans then can circulate it freely. These uses are not considered uses for purposes of advertising or trade and so are protected free speech.

But what of a business seeking to use a celebrity image on its website, Facebook page or other social media channels? Is this protected free speech, or is it instead a violation of the right of privacy or publicity? On the one hand, the use of the image in a paid advertisement is clearly a violation of the right of privacy and publicity, including under the New York statute. And use of the image on merchandise, even if given away for promotional purposes, is also a clear violation which can lead to punitive damages and not merely compensatory damages.

Closer questions are presented by posting a photo on your own website. A website is a business promotional tool and can be seen as an advertising use. But websites can also report news and events relating to the business, and truthfully communicating newsworthy events is behavior protected by the First Amendment. Where celebrities are seen and what they are wearing is considered legitimate subjects of public interest meriting First Amendment protection. Does this mean that if your daughter can tweet her photo of Britney Spears, you can retweet it and point out she’s wearing the hat and scarf you sell? On this question the judicial authorities have not yet spoken. Last year Katherine Heigl sued Duane Reade under the New York statute, for tweeting a photograph of her carrying a Duane Reade shopping bag. The litigation was resolved privately without a court addressing the legal issue. While it is sorely tempting to opine that this sort of communication of truthful facts should not be actionable, the burden and expense of defending against such a claim and the damages to which you could be exposed counsel caution.

Credit: Helene M. Freeman

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I’m A Good Neighbor–Most Places

fashion designer

When licensing a brand, a fashion licensee naturally wants to know not only that the licensor owns the trademarks that identify the brand to the public and the trade but that the licensee will be able to use the marks without having to contend with adverse claims from third parties. The last thing that a licensee wants is to have many thousands of units manufactured and, just as they arrive in ports and warehouses, get hit with an action for trademark infringement, alone or together with trade dress, copyright or design patent infringement. Indeed, an infringement action could contain any of those claims in combination, resulting in a rather complicated federal lawsuit. And if that is not quickly fixed, there goes the spring/summer season, and all those units, made at the licensee’s cost, might just as well never have been produced. As sub-optimal results go, that is about as low as they come for a new fashion collection.

To help protect against that from happening, counsel for the licensee will typically ask for a warranty of non-infringement. In the practical world of transactional law, there are no prizes for originality in draftsmanship, so all non-infringement clauses are like bees in a hive—they all look pretty much alike:

Fashion Company represents and warrants that the Licensed Manufacturer’s use of the Licensed Marks referenced in Exhibit A as contemplated under this agreement shall not infringe upon or violate the intellectual property rights or other rights of any third party in the Territory.

Of course, if things were that simple, licensees would not need lawyers. (Spoiler alert to licensors and licensees reading this series: Do not rely on what you read here as a substitute for legal representation. Please do not attempt to conclude a complex fashion license without benefit of counsel.)

Indeed, contractual law is about nothing if not the hidden complexity found in words and phrases. As signified by its capitalization, the word Territory should be a defined term. If the license is for a Territory defined as the “United States, its territories and possessions, and Canada,” the non-infringement warranty would cover claims made within those specific jurisdictions. Consulting the United States Patent and Trademark Office database to be sure that the licensor’s trademarks are registered and that there are no pending challenges to those registrations is good self-help for the licensee and a prudent caution for the licensor. But if the licensed Territory is defined more broadly—covering all of the Americas, Europe or even the entire world—the licensor may seek to limit the warranty of non-infringement to those portions of the Territory in which it is reasonably confident that it has protected its licensed rights.

And that is how licensees can find themselves with a predicament that is endemic but the fault of no one: there may be parts of the Territory where the licensor cannot be sure claims of infringement will not be made—as anyone who has seen, to his shock, that his trademark has been registered in another country by someone else for use on the same goods.

The solution? There are various methods that can be used here, but key is for the parties to identify the likely most important countries into which the licensed goods will be delivered (and where they will be manufactured—also an important consideration); they should work together to refine the warranty into something that is reasonable and fair under the circumstances. If that is done, the license should also provide a mechanism for the parties to cooperate in the event that the licensee will seek to introduce its products into areas in the Territory for which the warranty would not apply on execution.

The bottom line: It is a big world. Rights and remedies regarding licensed intellectual property can be very different from one nation to another. Care must always be taken to match the business plan for a license with the realities not only of the market but of the law. In the end, it is in the best interest of both parties to see that works out successfully. That proves again why all licenses are, if nothing else, documents of cooperation for the common good of the parties involved.

Credit: Alan Behr

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I Own It — I Mean, Really, I Do!

BlackPolkaDot-RedAccessories

In our exploration of the representations and warranties often seen in fashion agreements, we come to one that is at the core of licensing and distribution agreements, and it typically looks like this:

Fashion Company represents and warrants that it owns and maintains trademark registrations in the Territory [the scope of which should be clearly defined] for the licensed marks set forth in Exhibit A to this agreement.

Similar warranties can be made, as applicable, for rights to trade dress (which is an important trademark derivative for those fields, such as fashion, in which designs can be important assets) and in copyright and design patents. Those will be discussed in subsequent posts.

For trademarks, the important thing is to clarify what is actually being licensed. Scheduling the licensed marks, particularly if any involves specific colors, fonts, devices (logos) or other design elements in how they are presented, is very important because the warranty of ownership will apply only to what is specifically listed, and with trademarks, any change or variation in more than a “de minimis” or token amount may be deemed to have created a different mark—one that is not covered by the warranty.

Pitfall: licensees beware. Licensors may change their branding indicia during the term of licenses. If that happens, and the licensed trademarks are listed in the agreement, the new versions may not be covered by the contractual warranty. As an example, the mark FASHION COMPANY registered in the stylized form FASHION COMPANY will likely not be seen as the same stylized mark as FASHION COMPANY when used in the latter form. The license agreement should therefore be drafted to include any new versions of the listed trademarks within the definition of the “licensed marks”—and to require the licensor to give fair notice when any such changes in branding may be forthcoming. Financial issues concerning the costs of the changeover to the licensee can become the subject of additional negotiations.

Although due to the oddly backwards way in which United States trademark law developed (which is a long story in and of itself), it is not necessary to have a federal trademark registration to claim ownership of a mark in the USA. It is therefore common, and indeed usually prudent, for a licensee to insist on a warranty that the licensed marks have been registered for the specific goods covered by the scope of the license. Where things can get tricky is if such registrations have not yet been granted in the USA or in other jurisdictions in the territory covered by the license. The licensor may, in certain instances, be able to warrant ownership of marks that have not been registered (although it cannot so warrant ownership of the registrations themselves), or it may demand that it limit its warranty to those portions of the territory where it has registrations in place and is confident the use of the mark as licensed would go unchallenged. The business and legal risks, and the operational considerations implicit in partially encompassing warranties, should be carefully considered by both parties.

The key takeaway here is that, in the USA, trademark protection tends to be quite specific, exact and exacting. It is therefore prudent for the licensee to do due diligence to comfort itself that the licensor or other trademark owner’s warranty of ownership (and registration) is valid and accurate—because once you sign the agreement and start acting under it, you will likely be spending your money to make things happen, and no one likes throwing away money due to promises (that is, warranties) that cannot be honored.

Credit:  Alan Behr

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I Hereby Promise That You Are My One and Only-ish

Agreement-Torn

In our explorations of representations and warranties that are typical to contracts in the fashion business, we now come to one of the classics: the warranty that, by signing the contract, the party is not violating any other contracts it has signed. A typical such warranty would look like this:

Fashion Company represents and warrants that, by entering in to this agreement, it shall not violate the terms and conditions of any other agreement, arrangement or understanding to which Fashion Company or any of its affiliates is a party.

What is that about? Remember Mel Brooks’ The Producers (in any of its forms as movie, Broadway musical or movie of the Broadway musical)? The hero (loosely speaking) was Max Bialystock, a down-on-his luck Broadway producer who, with his accountant partner, tried to make a killing by selling far more than one hundred percent equity investment interests in his musical Springtime for Hitler. All he had to do to make the scheme work was to be sure that the show failed—which would not prove as easy as it first appeared.

If someone contractually sells interests in anything to different people so that they collectively have rights to more than all of what could have been sold, the seller has certainly made agreements that violate the terms and conditions of each of the sale agreements, resulting in a breach of this important warranty each time—if the seller was foolish enough to compound his problems by making such a warranty. Another all-to-common example: any Ponzi scheme or similar scam.

Surely, one of the most important places in the fashion business for such a clause is in a license agreement. The licensee needs to be very sure that the grant that it has received is valid and does not conflict with any grant made by the licensor to any other licensee; and the licensor needs to be equally certain that it is not granting conflicting rights to different persons. For example, if you are about to sign as the exclusive licensee for a brand in the “sportswear” category, would you feel that a license to another party for “activewear” violates your exclusivity? The answer, on those possible facts alone, is a resounding “maybe.” If you define sportswear broadly enough, even redundantly enough, to include, “all casual, active and athletic wear,” any license granted by the licensor to a third party for activewear would violate the warranty made to you for sportswear—and you would therefore have the basis of a claim and, if necessary, a lawsuit.

Here again, doing your diligence on your counterparty—and defining your terms—will go a long way toward making your contract into the protective blanket that you and your attorneys intended it to be.

Credit: Alan Behr

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Oil, Economics and the Fashion Industry

CrowdedShoppingMall-Escalators

I’m not an economist; I’m not even a market watcher. In fact, my stock picks notoriously underperform the Dow and the S&P. So, a January 3, 2015, article in The New York Times by Nelson D. Schwartz about dead shopping malls and how they reflect the nation’s economy should not have captured my attention. But it did, as did the www.deadmalls.com website referenced in the article.

Mr. Schwartz theorizes (with abundant support) it is a clear reflection of the national economy that many A-rated, high-end flagship malls that cater to the wealthy are thriving, while mid-level malls with stores like Sears, Kmart and J. C. Penney as their anchors that serve the working class falter. It’s just another testament to the widening income gap between the haves and the have nots.

Mother-ToddlerDaughter-ShoppingBut that may be changing. Gasoline prices have dropped significantly in the past five months. According to the U.S. Energy Information Administration, the average price for a gallon of gas on March 16, 2015, was $2.45. It was even lower at the end of January, just above the $2 a gallon mark, but it’s still much lower than it was last year, when gasoline prices during the summer hovered around $3.70 a gallon.

What does this mean for the fashion industry? Up to now, the economic recovery has disproportionately aided the wealthy, so it’s no surprise that thriving malls are those that serve the wealthy while dying malls are those that sell to the working class. But with the drop in gasoline prices, working families (at least those whose jobs are not tied to the oil industry) suddenly have some money left over after filling up their tanks. That means that many working class families should have something extra to spend on what would have been an indulgence until very recently, and some of that will be spent on new clothes and accessories.

My completely unscientific expectation (and I reserve the right to be wrong), therefore, is that fashion companies and retailers that focus on middle income brackets will experience a little bump from first (and hopefully second) quarter 2015 sales. Whether this trend will continue into the second half of 2015 and beyond is anyone’s guess, and my crystal ball remains broken. But worldwide overproduction of oil, if it continues, would keep gasoline prices down, and would leave more money in the wallets of many families. That could lead to a little rally for big box retailers and their suppliers.

I’m rooting for an improved economy for everyone.

Credit: Jeremy D. Richardson


Can I Use the Photographs? (Part 2)

You’ve hired the photographer and have a written agreement that makes you the owner of all photographs taken.  But if you think nothing could go wrong now, you may not have thought of everything.  Attention must be paid to what is in the photographs themselves.

Through the Viewfinder of an Old Medium Format CameraThe scope of copyright extends to many two and three dimensional designs.  So, if you manufacture useful products made from a fabric that has been lawfully made by, or with the permission of, the design’s creator, then you are entitled to publish photographs of those products.  The key words here are “lawfully made” and “with permission”.  Claims of copyright infringement in fabric designs are a growing problem. But this is not the only danger.

Outdoor urban settings, featuring graffiti, murals, or sculptures, also can produce claims.  Ask Just Cavalli or the US Postal Service.  Just Cavalli is confronting a suit in California by graffiti artists, who claim their work was copied on Just Cavalli’s apparel designs.  And the United States Postal Service has to pay millions to the sculptor of the Korean War Memorial for using a photograph of the sculpture on a stamp.  Both the graffiti and the sculpture were protected by copyright.  Therefore, any use of them without permission in a photograph, including as a cool setting for your fashion, would be infringing.

Props and “set decoration” have also generated litigation.  Rug and quilt patterns, crib mobiles, stuffed animals and dolls can enjoy copyright protection and their designers have brought suits when they have been used without permission in films and advertisements.  So take care that the adorable baby modeling your clothes is not holding a protected toy or other prop that you didn’t create.  Even items such as lamps can be protected by copyright, if they include sculptural forms which could exist independently.

Finally, while you want your photographer to be the next Richard Avedon, it is not a good idea to copy the composition of a famous photograph.  That too can be copyright infringement.

Credit: Helene M. Freeman

See previous post…”Can I Use the Photographs? (Part 1)


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