Retailing in a Time of Greater Uncertainty

Alan Behr, Phillips Nizer LLP Partner and Fashion Practice Chair

There have been unique challenges for retailing since not long after Amazon.com first went live, but a worldwide disruption of supply chains and temporary but extended closures at points of sale is outside of all prior international experience. True, there had been speculation about such things one day happening, but it was almost always voiced in the context of war or terrorism, not disease. So no one should be surprised that contingency plans were not made to handle massive disruptions due to a microscopic, life-threatening menace. Similarly, no one with whom a retailer might now seek to renegotiate an existing agreement or otherwise alter a working relationship can claim not to understand the retailer’s problems or to insist that he or she knew better.

True, all consumer-facing businesses have similar challenges, but fashion and accessories retailing is unique in one key respect. If you own a restaurant and are forced to shut or to confine yourself to takeout and deliveries, the inventory you will lose will be, in the main, whatever was stocked for a few days at most. Fashion retailing, on the other hand, is a seasonal business, and if the store is forced—by order or by conscience—to shut for any length of time, imprisoned within it are this season’s goods—things that have to be sold or otherwise cleared out before the next season begins. The retailer may have a plan that indicates at each point along the way when each item will be discounted and by how much, but none of that is particularly useful with the doors shut. And if capital is an issue, as it is for many of us, if you cannot sell what you bought for spring/summer, it could be hard, if not impossible, to pay for what is scheduled to come in starting in late summer for fall/winter. And the incoming merchandise that, if you can pay for it and sell it in the ordinary course, will help get you out of this hole—as long as disrupted supply chains (notably from China and Italy) do not force you to tear up those plans as well. Of course, there is the no-less-critical problem about idle staff, particularly what to do about salespeople who live largely or wholly off commissions.

Modifying Shakespeare’s famous remark in a more pro-social way: in times like this, the first thing we do is call the lawyers. That is because a unified plan, formed around potential legal strategies and mindful of legal risks, is the best way to handle any multi-tiered crisis. Those tiers include the need to address, and seek to work out compromises for, vendor contracts, union contracts, employee relations, leases, insurance policies, utilities and maintenance agreements, government relations and public relations. Just as the business solution is not as simple as throwing all your inventory online and hoping for the best, a legal solution is not something that can be tossed out as a quick fix. Speak to counsel now, before the problems become financially daunting, and work out a plan that prioritizes your concerns and examines your potential responses based on best-case and worst-case scenarios. Are employees your first concern? Are they asking what personal time off means in the context of mandatory leave? That is for review with labor counsel now, we would suggest, not later. The landlord wants assurances that the rent will be paid? In fact, even if he or she has not yet asked, if that appears to be a challenge, the question should be discussed in advance with real estate counsel. And so on down the list. If ever there were a time when the ounce of prevention is the worth that pound of cure, we have all reached it now.


“Were you in Milan?” and a surprise fashion trend for 2020

Written by Lena Fleischmann

In what is by far the most significant event this year and, for many of us, the most significant challenge of our lives so far, a disease never before known or named, COVID-19, caused by the coronavirus, is currently spiraling around the globe. When the disease arrived in force in Europe and news broke of multiple new infections in Italy, it took a toll not only on Milan Fashion Week but on the entire fashion industry. Many fashion and beauty companies closed their stores in northern Italy, and several luxury brands’ stock prices fell rapidly. (Other stocks quickly followed.) American and Delta Airlines temporarily suspended all flights between Milan’s Malpensa airport and New York’s JFK. The term “Were you in Milan?” — previously a question about participation during fashion week — took on a new and ominous meaning. No longer an inquiry about first-hand exposure to the latest fashion trends in Italy, it became an entry level caution to see if you would risk a handshake, to say nothing of cheek kisses.

A number of runway shows and events of Milan Fashion Week were either postponed or canceled. At Giorgio Armani, the show was conducted like a FIFA football game banned to fans out of concern for violence: the models came into an empty theater, and the brand posted a video of the show on its website. Burberry postponed its fall 2020 runway show in Shanghai, Chanel similarly postponed its show in Beijing, and Prada postponed its show in Japan. Asian designers were particularly hard hit, and travel bans impeded participation by buyers from China. In the last week it has become all too clear that the problem would expand exponentially and continue during the coming months as buyers seek to make decisions about styles only available physically for private inspection, if at all for sale in stores temporarily shut to the public. While some brands took a wait-and-see approach, others have refused to cancel their shows. Virgil Abloh, designer of Off-White, said he never really considered canceling his show. “If we had, it would send a message of panic,” he is reported to have said. Just the same, at the doors of runway shows that did go on, it was possible to see employees handing out face masks and hand sanitizers. Of course, all that is in the past since we now face restrictions prohibiting all gatherings of more than a dinner party.

Indeed, facemasks are the new must-have accessory. Several New York Fashion Week attendees wore them, as did designers and stylists. But we’ve seen this trend before, over concerns about the flu, during New York Fashion Week in 2018.

From a legal perspective, can you sue someone who put on a show or invited you into a showroom where you contracted COVID-19? Under US law, a negligence standard would likely apply. What should the party inviting people to attend an event have known about the risks and reasonably done to mitigate them? An old North Carolina case held that, “it is a well-settled proposition of law that a person is liable if he negligently exposes another to a contagious or infectious disease.” In 2006, the California Supreme Court found a defendant liable for the negligent transmission of HIV when he or she “under the totality of circumstances, had reason to know of the infection.” Bear in mind that the concepts of contributory negligence and assumption of risk also would no doubt apply because, at this point, anyone attending an event that for some reason has not been cancelled would be hard pressed to argue that he or she was not fully aware of the risks.

Under German law, a person can sue another for damages and for compensation for pain and suffering (§§ 823 I, 253 II BGB). To succeed, the plaintiff has to prove that the transmission of the virus is a bodily injury, for which the defendant is responsible. The factual characteristics of a bodily injury within the meaning of the German code include the effects of viruses, such as COVID-19. The plaintiff would have to prove that, at the time of the transmission, the defendant either (a) was aware of being infected and nevertheless intentionally engaged in the conduct or (b) that the transmission was foreseeable and avoidable, but the defendant negligently failed to exercise the general duty of reasonable care. In addition to that, there is the possibility of the accused being charged with negligent bodily harm (§ 229 StGB) and even negligent manslaughter (§ 222 StGB) if death resulted.

In the case of coronavirus transmission liability, either in Germany or the United States,, a plaintiff would need to demonstrate that the defendant not only had actual knowledge that he or she was infected (which likely would exclude anyone without obvious symptoms) and that the defendant was the source of the transmission. These are high hurdles. Putting the law aside, the guiding principles for us all remain the same: be prudent, be kind and strive to keep all of us safe. 

1. Crowell v. Crowell, 180 N.C. 516, 105 S.E. 206 (1920).

2.  John B. v. Superior Court, 38 Cal. 4th 1177, 137 P.3d 153 (2006).

Lena Fleischmann is a German law student and a Referendarin at Phillips Nizer LLP.


Master Class

By Alan Behr

The designer and author Alan Flusser has published Ralph Lauren: In His Own Fashion, his long-awaited illustrated biography of the master of American style.  In the field of menswear, that is rather as if Jimmy Stewart wrote a biography of Clark Gable.  More authentically:  :Flusser is not just a designer but also a scholar of fashion.  That comes through in this intriguing work, which quickly broadens beyond its nominal subject, using the career of Ralph Lauren as a starting point for multiple meditations on style, social class and the American aesthetic.

Flusser traces Lauren’s upbringing in a middle-class home in the Bronx to his early days in the fashion business – most notably the not quite six months during which he worked at Brooks Brothers, absorbing in its entirely a style, quite firmly grounded in a distinctive worldview, that was to become the guiding light for his professional life.  It was in 1968 that Lauren launched Polo – as a necktie maker.  With vision and exquisite timing, he presented wide, arrestingly colored ties made from unique fabrics just as the market was moving away from the conformity and predictability of the sack-suited my-wife-picks-my-clothes era that had preceded it.  

Lauren could have gone from that good start straight into participating in the sartorial theatricality (all too often expressed as low comedy) that was to characterize the next dozen years.  Instead, as Flusser carefully documents, Lauren took upon himself a virtually one-man mission to save the American look -variously known as Ivy League or preppy style – then falling rapidly from favor.  First, he had to rescue it from the Scylla and Charybdis of the corollary hippie and “Peacock” movements of the late 1960s.  When that was done, he next had to fortify it against the excesses of the 1970s.  Of the latter decade, Flusser says with concise precision, “For many, the seventies  will be remembered as the nadir of style and sophistication.”*  By the 1980s, Lauren had so unquestionably reinvigorated the American look that, from then on, it was mostly about refreshing and reworking it.

For Flusser, Lauren was paradoxically blessed by having received no formal training in fashion.  As did an equally unschooled Steve Jobs, in a very different industry, Lauren learned to trust his own instincts above all else – a trust that proved supremely well-founded.  His self-appointed mission for menswear and, later, his women’s and home collections, was not to deliver fashion but something much greater and harder to achieve:  style. 

Flusser notes that America invented sportswear in the traditional sense of the word, meaning coordinated separates.  In practice, that involves natural-shouldered sports jackets and comfortable jeans, khakis and button-collar shirts that work together without appearing to have been coordinated with any great effort (especially when efforts had been exhaustive).  If any of it should start to look a bit lived in, all the better.  Flusser is aware, however, that those points, often repeated in fashion publications, are both correct but tangential to the real message:  American style, properly executed, Is a tactile manifestation of a New World can-do attitude.  Call it approachable self-confidence.  Lauren understands that, if you build your clothing line around the attitude and the style that the attitude articulates, the world will come, literally to buy in.

From the perspective of a fashion lawyer, the career of Ralph Lauren underscores the importance of what stands behind a truly great brand:  its story.  Most of what Lauren has designed, being based on classics, is not protectable under American copyright, design patent or trademark law.  No great matter.  To enter a Polo company store or shop within a shop at a department store is to enter into a story – of American style, American ease, American aspirations and, ultimately, American success.  It comes at you from the scent in the air, from the Ella Fitzgerald songs on the sound system or the jazz played by a combo at the entrance.  It works at all levels, from wide cowboy belts to boardroom-ready pinstriped suits.  The legal strategy evolved from the design and business strategies:  you don’t need to worry about protecting the pieces; if the whole is so strong, nobody could infringe on the pieces and do it well enough to make much difference.  After all, brands as diverse as Uniqlo and Gap make attractive and easily wearable clothes in the American idiom, but you would never confuse them with Ralph Lauren or Polo.  That is the genius of good branding – something that, in the apparel business, is always best forged on the anvil of style and good taste.

Ralph Lauren: In His Own Fashion, by Alan Flusser, Abrams (352 pages)

* As I have reflected upon elsewhere, that was true in other disciplines. In Western architecture, the 1970s represented the lowest point since the Age of Pericles.


Will Barneys New York Retail Makeover Work?

Alan Behr, Fashion Law Group Chair, Phillips Nizer LLP

Authentic Brands Group’s legally approved bid Nov. 1 of bankrupt U.S. department store chain Barneys New York isabout intellectual property, not inventory or real estate.

The sale of the trademark, along with appurtenant goodwill, is what is at issue. Great brands are sold and reborn, such as Abercrombie & Fitch becoming Abercrombie, with different products to a different market.

What would Barneys mean under different owners? The answer is: whatever the market accepts. It is all about building from what was left to create something more durable. However, it is obvious that the new owner of Barneys is going to reposition the brand and align its retail business
with another department store chain, Saks Fifth Avenue.

Will the overall repositioning of the Barneys retail brand, as outlined by Authentic Brands Group in its bid, work?

Retail brands can be repositioned if it is done properly. Indeed, that happens all the time. Many retailers have longworked, for example, to reposition themselves to draw in younger customers.

Vendor brands are not necessarily pliable in any event. A brand must tell a “story” to its customers to keep their loyalty. To rebrand is to change the story, and that is not easy to do. Chanel was a clothing brand that, for American customers, came in time to be little more than the brand of a
fragrance, Chanel No. 5, only to return in a big way as a label for premier fashions. That took effort. As for retailers, first, some history.

My family owned one of America’s regional department stores, and dinner conversation from my father, who in time became chief merchant, was focused on retail store management: theory and practice. A book was published about the history of the store.

From Father, who knew best: a true department store is a “one-stop-shopping” destination. It provides a selection of most things you will need, rather than a comprehensive product line. That is, a bike shop may have dozens of different bicycles, every commonly needed accessory and a repair facility.A department store bicycle department will have a small selection of bicycles and accessories, typically at a lower price point than the specialty stores, but you can buy your bike on the same shopping trip for buying back-to-school clothing for the kids, winter boots for yourself and a bed for the guestroom, getting your hair done at the store’s salon, picking up the latest best seller in the book department, and getting the battery changed in your watch in the jewelry department or at customer service.

In those days before designer names were well known, the brand that sold the shopping experience was that of the store. The store was the destination and your respect for its brand, as the umbrella under which all else was
provided, drove the sales of all those products and services. Harrods still operates generally that way, and Macy’s still does much of the same.

Most of what we call department stores these days are effectively large women’s clothing stores with ancillary departments for menswear and childrenswear, and perhaps toys and gift items. Consider as well that, in place of what might have been a lunch counter or small restaurant, stores now may have multiple venues for different styles of dining and other food services. Add the shop-in-shop model, by which the store is essentially real estate for a department built out and operated by a particular vendor.

Throw in the fact that major brands now dominate consumer thinking, and – putting aside private-label and even white-label goods – most of the major stores are competing for customers by selling them things that are available from competitors and the vendors’ own chain of retail stores.

As it has been from the start, what is now called the “edit” is the key to success: the store will not have all of a particular designer’s line, and success during any given season depends on the skills of the buyers in selecting themost saleable pieces from each vendor. Competition is, therefore, increasingly based on service – personal shopping, same-day delivery – rather than product.

Finally, consider the increasingly successful integration between the physical stores of a chain and its online sales channels. SO THE ANSWER is that department stores have already repositioned their brands by substantially changing how they do business – quite beyond recognition from the perspective of what a chief merchant during the last century might have seen as sound practice.

That process will continue, and repositioning will be a part of what stores will be doing for the foreseeable future.The store brands will come to be increasingly identified by the services provided: editing, styling, delivering,
repairing, accepting returns, and more.

So, yes, they can rebrand in fundamental ways into reliable services providers who maintain entertaining places to shop, dine or simply to visit, all in the service of the shopping experience. There is good reason to believe that the best will do that in an effective manner in the years to come.



Advising a Department Store on Its Brand Strategy? Get Creative or Go the Way of Barneys

Alan Behr, Fashion Law Group Chair, Phillips Nizer LLP

Whenever I wanted my grandmother to reveal a deep secret—such as what I was getting for my birthday—she would reply by asking, “Does Gimbels tell Macy’s?” That was when the Gimbels and Macy’s department stores battled for market share like colossi astride Herald Square. Gimbels is long gone from the New York metropolitan area retail market—as are, from all levels of pricing—Alexander’s, B. Altman and Company, Bamberger’s, Bonwit Teller, Galleries Lafayette, E. J. Korvette, the Lord & Taylor flagship on Fifth Avenue, Stern’s, Takashimaya, and Two Guys, among others. And to that list we can now add Barneys.

I know from personal experience how sad that can be. My family owned one of the regional department stores that closed in the same manner as the New York-area stores had done: with much nostalgia dusted over cold business calculation. The long goodbye invariably comes in the form of a going-out-of-business sale. (Barneys has started that process, offering everything-must-go discounts of between 5% and 10%—a markdown that is as well-received by New Yorkers as would be a pub’s invitation to Dubliners to have their Guinness taken in shot glasses).

The reasons for the closings varied. Consolidation of the retailing business into national brands was a factor, and now we have online shopping as the great equalizer, turning what a generation ago might have been deemed warehousing and logistics companies into retailing superheroes.

Finding the Brand Story
As I never tire of advising our clients, trademarks are the awards that the law bestows upon a well-operated brand, and brand—in fashion and luxury, and in retailing of all but the most elemental variety—is about story. That is, the brand has to tell a story that is clear and identifiable to the customer—a story so compelling that he or she will elect to participate in it by making purchases. Enter an Hermès and you are sharing in a gentrified vision of France as authentic to the XVIe arrondissement as to a canter on horseback through the fields of the Loire. Walk down the block to Salvatore Ferragamo and inhabit that world of Florentine grace and worldliness that has guided the West since the Renaissance.

Paradigm Shift
Back in the day (until even after most of us had been born), a department store brand was built upon what later came to be known as private label, upon broad-ranging services from shoe repair to hair dressing, and upon a product line stretching from fine jewelry to bicycles. Except for the high end, all of it was made in the USA. By their size, their seeming permanence and their product range, big stores were comforting, reassuring—the retail equivalent of banks and insurance companies. To give legal protection to the store’s intellectual property, attorneys mainly had to keep an eye on a few key trademark registrations—for retail store services and for major clothing and accessory items. And that worked—until it no longer did.

With a few exceptions, most department stores now feature women’s clothing, accessories and cosmetics shops with smaller departments for men, children, housewares, and gift items. Nearly all brands of merchandise sold there are international in some form or another because nearly everything is made outside the USA. With the exception of private label and a typically small amount of space given to emerging designers, most of what any one store sells are the same brands and merchandise sold by its competitors. And everyone does more and more business online.

It’s All About the Experience
How does a department store compete in that environment and not get its name added to the list that opened this article? It is less and less about what is sold that helps a retailer stand out. It is the services it provides that increasingly make the difference: personal shopping/style consulting, event planning assistance, cooking lessons, a spa for those who relax a certain way, and a Champagne bar for those who relax as I prefer. The story of the retail brand is now the story of what you do and how you feel when you are in the store and on its website and social media pages.

The trademarks of the store will likely brand a broader range of services than before, and IP protection by copyright, trade dress, design patent, and even utility patent, all of which were once of minor importance, if needed at all, should be carefully examined as tools to protect the store’s brand and the goods and services it identifies. Seen another way, time was that the creative person in the retail chain was the designer; those on the business side were the hard-nosed “garmentos.” Today, it is the retailer who sees himself or herself as not merely a merchant but as a creative force in the delivery of experiences to customers who is likely best able to adapt to the new retailing world.

And the lawyers? Creativity is not taught in law schools, but it is just what an attorney needs to bring to retailing clients now.

Maintaining a distinct brand image is often challenging for a manufacturer/design company, especially if it operates its own boutiques. But it can by even more demanding for a large, multi-brand retailer, especially now.

(originally published)


Copyright Protection of Designs in the EU

By Wendy Donkor

On September 6, 2019, in an important decision affecting the protection of fashion designs throughout the European Union, the Court of Justice of the European Union (CJEU) issued a preliminary ruling on the question of compliance of national law with an EU directive.  The case was C-683/17 Cofemel – Sociedade de Vestuário SA v G-Star Raw CV.  At issue was whether the court’s interpretation of Art. 2 (a) of Directive 2001/29 precludes enforcement of national (in this case, Portuguese) legislation that grants copyright protection to a design that, beyond any utilitarian function, has a distinctive aesthetic effect.  Simply, the question was whether the design could be protected under national copyright law while giving due regard to EU copyright and design law.  In this case the answer was no.

One of the core objectives of the EU is the establishment of an internal market.  Pursuant to Art. 26 (2) of the Treaty on the Functioning of the European Union (TFEU), the internal market comprises an area without internal frontiers in which the free movement of goods, people, services and capital is ensured.  One of the techniques used to provide consistent legal treatment throughout the EU is the requirement that national laws meet the requirements of EU directives.  That is, upon the issuance of an EU directive, the constituent nations have to adjust their internal laws to implement it.  According to Art. 288 TFEU, although a directive is binding upon each member state to which it is addressed as to the result to be achieved, it is left to the separate national authorities to devise the legislation to attain that result.

In Cofemel, the Court addressed the question of whether G-Star RAW, a Dutch company that designs and sells clothing, could enjoy copyright protection for its designs of jeans, sweatshirts and T-shirts.  G-Star RAW proceeded in a Portuguese court against Cofemel, a company that designs and sells clothing under the brand “Tiffosi”, accusing the defendant of copying G-Star RAW’s designs.  The CJEU held that, under Directive 2001/09, the fact that a design produces a specific aesthetic effect is not, by itself, enough to qualify it for copyright protection.

Complicating the case is that, unlike the United States, the European Union has specific rules protecting designs independently of copyright law.  The Court in Cofemel therefore had to examine the competing purposes and potential effects of the application of Directive 2001/29 (for the legal protection of copyrights and related rights) on the one hand and, on the other hand, Directive 98/71 (for the protection of designs within member states) and Regulation 6/2002 (for the legal protection of designs on the EU level) in deciding if the same design would be granted protection in both ways.

The Court noted the different purposes behind the two different forms of protection.  The purpose of the protection of designs is to provide exclusivity for a limited period of time (up to twenty-five years for registered designs; and three years for unregistered Community designs) to the owners of new, distinctive and functional designs that are liable to be mass-produced, giving the owner the chance to obtain a return on the investment without unreasonably limiting competition.  Copyright protection, however, is of far greater duration (for the life of the author plus seventy years) and, generally speaking, relates to artistic expressions of intellectual creation, known simply as “works.”

In order for a design to be classified as a “work” protectable by copyright within the meaning of Directive 2001/29, two requirements must be met.  First, the design has to be original.  In other words, it has to be “the intellectual creation of the author reflecting his personality and expressing his free and creative choices.”[1]  Second, the design must be “the expression of the author’s own intellectual creation”[2].  It “must be expressed in a manner which makes it identifiable with sufficient precision and objectivity, even though that expression is not necessarily in permanent form.”[3]

As the Court in Cofemel observed, although aesthetic considerations are a part of the creative process, the aesthetic effect of a design, by itself, cannot be considered when determining whether the design is an intellectual creation that reflects the author’s freedom of choice and personality and therefore meets the first (originality) requirement for copyright protection.  It also stated that the aesthetic effect of a design is the product of an essentially subjective sensation of beauty, which means that a design could never be identified with the precision and objectivity required to make a functional design protectable under EU design law.

In short, in this case, at least as to obtaining double protection, the beauty of fashion is self-defeating.  The clothing designs at issue will remain protected as such but will not also enjoy the benefits of copyright protection.


[1] Painer, C‑145/10, p. 94; Renckhoff, C‑161/17,p. 14

[2] Levola Hengelo, C‑310/17, p. 37

[3] Levola Hengelo, C‑310/17, p. 40