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Accessories Cases Childrenswear Menswear Womenswear

Is the Country of Origin Labeling Requirement Unconstitutional?

ClothingLabel-MadeChinaThe constitutional rights of businesses are hot topics. Freedom of speech is a fundamental tenet of liberty, protected by the First Amendment to the Constitution, that benefits commercial entities as well as individuals. The right to spend unlimited money to support the election or defeat of particular candidates for office derives from the right to freedom of speech. But does the same First Amendment right protect businesses from being compelled by government regulations to speak on matters as to which they would prefer not to comment, whether or not they are “controversial” or “political”? Is there a freedom to refrain from speaking?

If you think this question has nothing to do with fashion, you would be wrong. Every manufacturer in the fashion and accessory business labels its products with their “country of origin”, guided by detailed regulations promulgated by the Federal Trade Commission. Decisions in two recent cases, which have nothing to do with fashion, but everything to do with government regulations compelling businesses to speak on the source of their products, suggest that the “country of origin” regulatory scheme for the fashion industry may be challenged on First Amendment grounds.

A federal statute requires country of origin labeling for meat to address the country where the animal was born, raised or slaughtered. New rules for implementing the statute were promulgated in 2013 to comply with a World Trade Organization ruling on a complaint from Mexico and Canada, requiring greater specificity in describing separately the country where each of these events in the animal’s life occurred. A group of trade associations, feedlot operators and meat processors filed suit to enjoin the rules, claiming they violated the First Amendment. The argument was rejected by a three judge panel of the Court of Appeals for the D.C. Circuit, holding that the First Amendment did not bar the government from compelling factual speech on a non-controversial matter that might be of interest to consumers. The full court, however, voted to hear the case anew before all eleven judges of the court. The parties were directed to address the scope of First Amendment protection for mandatory disclosure of purely factual and non-controversial commercial information, compelled for reasons other than preventing consumer deception.

The outcome of this review may be foreshadowed by the same court’s decision on April 14, 2014, striking down Securities and Exchange Commission regulations that required public companies to disclose whether they used “conflict minerals” (minerals from the Democratic Republic of the Congo used by warring factions to finance their operations) in products they marketed or manufactured. The three judge panel found that it was unconstitutional to compel speech in the absence of a need to prevent consumer deception.

So one might well ask whether it is unconstitutional to compel apparel manufacturers to say anything about the subject when they are not marketing goods based on the country of origin. What purpose does it serve and do consumers need the information?

Credit: Helene M. Freeman

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Accessories Childrenswear Footwear Licensing Menswear Womenswear

License to Kill (Your Business)

Licensing represents an opportunity for a fashion brand founded on one or a small number of product lines to stretch into almost any clothing, jewelry, beauty or accessories category—and beyond.  Moving into a broad range of products and services has been an especially successful strategy for luxury brands.  Consider that Ralph Lauren started as a maker of men’s neckties and that Hermès began as a maker of harnesses for carriage horses.  Although you sometimes hear the saying that, “No one ever got rich licensing a brand,” licensing can be a useful, even necessary tool to build brand awareness among both old and new classes of customers.  When you leap into categories that have specialized production requirements, unique distribution methods or simply just high barriers to entry—consider timepieces, fragrances and eyewear—licensing is about the only sensible way to make it happen.

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But what is a legal article without a warning about pitfalls?  (Just as designers are paid to create and merchants are paid to awaken and satisfy customer desire, lawyers are paid to worry.)

  • For the licensor, a key concern is that its licensing agent or licensees themselves may prove unmotivated or unable to bring the brand’s image to new product lines.  A licensor can find itself devoting an inordinate amount of time to servicing the product development needs of its licensees—to the point that, in extreme cases, the licensor can start to feel as if it is working for its agent or licensees.  On the other hand, licensees’ successes may kindle the temptation to over-license, risking dilution of the brand.
  • For the licensee, pitfalls can include disapprovals of products by the licensor that result in missed shipping dates, lost markets or revenue, confusing or incomplete branding direction or support (especially after a change of control at the licensor), and all the potential dangers that come from devoting your business to enhancing the goodwill of someone else’s brand.

Any one of those concerns can cause serious—and in extreme cases terminal—problems for participants in the licensing game.

In subsequent posts, we will review the ins and outs of licensing in more detail.  As with a good story, where the art is in the telling, with a good license, the art is in the drafting.

Credit:  Alan Behr

Categories
General / Musings Menswear Womenswear

Dressing Your Age

Jacket

Conventional wisdom holds that we all look best when our clothing is age appropriate.  But what does that mean now that people are living longer and rock stars bring their grandchildren to their concerts?  What is age appropriate for a nonagenarian anyway?  I ask that because, when I recently had to leave town suddenly, I went down to the Uniqlo flagship store (in the office building where this firm is headquartered), bought a pair of chinos and a pair of jeans and had them altered to grab and run that afternoon.  Should an American lawyer and dad step into clothes styled for Japanese teenagers?  Sure, if he has the build and taste of a Japanese teenager, which my experience convinces me I do.  As the actuarial meter is reset by advances in medicine and nutrition, and as we all hear that fifty is the new thirty (or was it sixty is the new forty?), we may need to rethink when it is that we time out of our clothes.  If I had to do it over, I would not have given away that supple suede bomber jacket when I hit forty, thinking I had aged out of it.  The way things are going, it may be time for me to buy another.

Credit:  Alan Behr

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Cases

I Didn’t Recognize You with Your Clothes On

That was a pickup line in the tavernas of the island of Mykonos back in the day, spoken to fellow vacationers fresh off the clothing-optional Paradise Beach.  In the ongoing and sometimes dysfunctional relationship between clothing and the law, the usual first requirement of the law is that you wear some.  Not that anyone on Mykonos asked what Greek law said about beach attire.  And Mykonos is not alone.  Nudity is forbidden on the fashionable Caribbean island of Saint-Barthélemy, but the island’s own website advertises the virtues of its two enchanting nude beaches.

Clothing on Beach 108288676_8Could it be said, where beaches are concerned, the law makes allowances?

Consider that, on a chilly May morning in San Francisco a few years ago, while I was attending the Annual Meeting of the International Trademark Association (INTA), I put on every piece of warm clothing I brought with me and left my hotel before breakfast to catch the start of the Bay to Breakers Race—which is more of a brisk constitutional in outlandish costumes than anything resembling a marathon.  As the race progressed, men and women dressed for Carnival passed by in great numbers and, within this crammed costume parade, a few were sauntering—not running—in the nude (save for sneakers).  San Francisco has since adopted an ordinance banning public nudity (something it had previously not bothered to do), but our Bay Area correspondent, the Fabulous Mrs. John, reports to us that the naturalist practice remains a feature of the race.

In People v. Santorelli, a case decided in 1992 by the Court of Appeals of New York (the state’s highest court), the law making it a crime for a woman to expose her breasts in public was ruled inapplicable to topless sunbathing in a public park on the grounds of discrimination based on sex.* More than two decades later, New York women are still getting picked up by overzealous police officers unfamiliar with the case law.

Suffice it to say that, around the world, this most simple of legal imperatives about fashion—when outside, put something on—has had a ragged enforcement history.  There are also laws about fabric composition and the identification of country of manufacture, among other essentials that apply to each article of apparel—and on and on from there.

The point is, starting with the simple insistence that we all wear clothes, the law has interposed itself into every aspect of the fashion business.  For that reason, consulting your lawyer before you get going on anything both new and important—or before getting yourself involved in something that your business judgment foretells may not sit well with someone else who might have reasons and the means to oppose you by resort to law—is the classic ounce of prevention that obviates that often painful (and expensive) pound of legal care.  In short,…

…when in doubt, call your lawyer before you get going with something new
or before trouble starts.

Do not wait until the vendor fails to deliver by the due date because no contract says he has to, until the cease and desist letter arrives, or until the competition poaches your key people.  For the sake of sleeping well at night, there is no better time to get your lawyer involved than at the earliest moment you can.  To do otherwise is like walking outside without your clothes on.  And we all know than where that can lead.

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* I am aware of the adaptation of the word gender to serve where sex was once employed. The English language is ever evolving, but here I will follow classic usage: nouns have gender, and people have sex.

Credit:  Alan Behr

Categories
Cases General / Musings Textiles

Do Product Labels Matter? Maybe.

BoxingGloves-ProductLabeling

Why is a can for Minute Maid juice like a coat? The answer: Because federal statutes and government regulations prescribe how each is labeled. In the case of juice, the label is prescribed by the U.S. Food and Drug Administration (FDA) regulations promulgated under the Nutritional Labeling and Education Act of 1990. In the case of the coat, as apparel manufacturers are all too aware, by the Federal Trade Commission (FTC) under either the venerable Wool Products Labeling Act of 1939 or the Textile Fiber Products Identification Act. The regulatory schemes share ostensibly the same goal: to assure a uniform national standard and to inform consumers of the content and the qualities of the goods. But what if prescribed rules do not further that purpose?

That is a question posed by a case that the Supreme Court heard on April 21, 2014 Pom Wonderful LLC v. The Coca-Cola Company. Pom’s business revolves around marketing beverages featuring pomegranate juice. Coca-Cola, wishing to cash in on the craze for such beverages, introduced a Minute Maid juice it called “Pomegranate Blueberry.” Notwithstanding the name, pomegranate juice constituted only 0.3% of the contents, and blueberry only 0.2%. The 99.4% of the contents which consisted of apple and grape juice was uncredited in the product name and the graphics decorating the label. Pom sued, claiming that the name “Pomegranate Blueberry” constituted false advertising and unfair competition, as consumers would naturally infer that the product’s main ingredients were pomegranate and blueberry juices. Unfortunately for Pom (and, one might add, for consumers seeking the health benefits of pomegranates and blueberries), FDA regulations specifically permit naming a product for ingredients so minor that they could be described as no more than flavoring.

So, now, the Supreme Court will decide whether a competitor can sue for false advertising and unfair competition when the contents of a label are authorized (or sometimes even required) by government regulations, no matter how misleading. In the language of the law, do the specific provisions of federal labeling law preempt federal and state laws that more broadly and generally protect consumers and competitors from deception as to the contents or quality of the goods?

Should the Court find for Pom, attention will have to be given not only to technical compliance with legal requirements, but also to whether consumers are likely to be misled. One might think Coca-Cola has the better argument. After all, if your labels comply with federal regulations, you should not have to worry about what consumers think. If there is a problem, the fault lies with the government and its regulations. But that conclusion might be wrong. Some of the justices appeared to view the labels as very misleading. Others wondered whether the FDA considered anything other than health and safety in promulgating the regulations and questioned whether assuring that consumers are not misled was the responsibility of the FDA.

Of course, that is the responsibility of the FTC and it is the purpose ostensibly served by the FTC labeling rules for textiles. But even under the FTC rules, you can name your line of sheets “Bamboo,” as long as that is just the name and the fine print on your label states that the fabric is rayon made from bamboo fibers. After all, this is consistent with a regulatory scheme that requires you to state the country of origin of a coat but not that of vitamins or toothpaste.

Credit:  Helene M. Freeman

Categories
Accessories Real Estate

Preventing Trouble From “Popping Up”

For lease signPop-up stores have become fashionable among small businesses and large companies alike because they offer a company the opportunity to sell merchandise and to test retailing concepts with minimal investment.  They are also advantageous for landlords who hope to rent space that is temporarily being carried without rental income.

From the perspective of tenant counsel, however, there can be difficulties.  Because the whole point of the exercise is to offer customers a temporary retail experience at minimal financial exposure, the client is seeking to avoid expending large sums on legal fees.  If the client concludes that there is very little financial risk due to the short-term commitment, there can be a tendency to ask for minimal or even no involvement by counsel.

Complicating matters, the landlord is also looking to minimize legal fees, with similar pressures on its counsel to hold down fees.  The attorney for the landlord will therefore often send its standard lease form with only minimal modifications to tailor the lease to the pop-up concept.  Because standard form commercial leases typically impose maximum liabilities on the tenant (which is contrary to the pop-up concept, at least from the tenant’s point of view), the tenant’s lawyer may well find it difficult to deliver a fair lease at the right price.

As an example, the lease form from landlord might provide that, in the event of fire damage, the landlord has a substantial time to rebuild.  That makes no sense for a pop-up store.  The draft lease may also provide for tenant to make all sorts of repairs to the premises, often including building systems.  That is hardly an expectation of the tenant when signing a lease for temporary space.  Compliance with law can prove tricky under the best of circumstances.  Even a long-term tenant must protect itself from expenditures in case the premises need to be brought up to code.  Although the pop-up tenant must of course comply with applicable law, it likely will not want to be responsible for any expense to the pop-up due to deficiencies in the building or the leased premises.  The date of delivery of the leased premises is also an issue.  A landlord typically wants a grace period if it is late in delivery.  For a pop-up tenant, for whom every day of a short-term rental will likely count, any delay in delivery could spoil everything.

Fighting out the applicable clauses concept-by-concept and line-by-line with the landlord’s attorney cannot lead to satisfaction for anyone due to time constraints and the desire to keep down legal fees.  In my experience, the best way to handle the problem is to put in an “omnibus” clause such as:

Notwithstanding anything in this Lease to the contrary, the parties agree that Landlord shall be responsible for all repairs, ventilation, utility lines, maintenance and compliance with laws regarding building repairs that commercially reasonable parties would expect a landlord to perform, taking into consideration the length of this lease and the demised premises’ use as a “pop-up” store, and all other provisions of the lease (including, without limitation, casualty, condemnation, access to premises for improvements, failure to timely deliver possession, and use of existing facilities such as electrical wiring and meters) shall be deemed so modified in the light of the same reasonable expectations.  No “To Let” or “For Sale” signs shall be permitted at the Premises.

Credit:  Steven J. Rabinowitz

Steve is counsel in Phillips Nizer’s Real Estate Law practice.