Wow, time does fly fast!
THE FASHION INDUSTRY LAW BLOG IS CELEBRATING TWO YEARS!
On May 19, 2014, our Fashion Practice launched The Fashion Industry Law Blog. Two years and 72 posts later, we are widely read and re-posted. We hope you have signed up to receive our posts in your inbox automatically as they are published* or have visited our site from time-to-time.
During the last two years, we have published posts related to copyrights and trademarks, licensing, real estate, labor and employment and notable cases of interest to the fashion and luxury goods communities. We have also published posts classified as “general musings” — light commentary about the goings-on in fashion that may be hip, trendy or controversial.
We will continue to share timely posts targeted to designers, senior executives, entrepreneurs, in-house counsel, fashionistas and fashionistos.
We would be nothing without our readership, so, “Thank you” from all of us who have shared our thinking with you in these past two busy and exciting years for the fashion industry.
Please consider sharing The Fashion Industry Law Blog with those in the industry and others who may enjoy it.
Thank you for reading!
The Fashion Law Team at Phillips Nizer LLP
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During the course of negotiating a license agreement, a licensee may propose certain changes that may appear logical and reasonable. However, a licensor should be on the lookout for seemingly innocuous proposals that could impede its ability to operate its business.
- “I need a longer sell-off period after termination and the types of customers to which I can sell during the sell-off period [e.g., only closeout accounts] is too limiting.” Agreeing to these requests may not be problematic if no new licensee is in place, but the license agreement must contemplate the possibility that there may be a new licensee; and extended and extensive sell-off rights may make it more difficult to conclude a new license and may increase the pressure to give financial and other concessions to the new licensee. (In a later post, we will discuss the substance of sell-off provisions, including circumstances of termination that could result in a bar to a sell-off beyond the date of a termination of the license agreement.)
- How much time does a licensee actually need, particularly considering that, for a seasonal business with a typical December 31 contract year/term end, sell-off actually could be starting as early as September?
- While selling off prior seasons’ inventory should not seriously compete with a new licensee’s business and while closeout accounts may be the only meaningful customers for closeouts, it cannot be good for the licensor’s brand or the new licensee’s business if the former licensee’s products, whether or not they include “basics,” are being offered to the new licensee’s regular customers at the same time that the new licensee’s business is being launched.
- “I would like an option to renew the license agreement.” While renewal options are quite common, and sometimes may even be offered by a licensor, accepting some common licensee complaints can have unintended consequences.
- “The date by which I have to exercise the option is too early.” Depending on the length of the term, this could be a fair point, but a licensor must keep in mind that, if the option is not exercised, it will need time to locate, negotiate with and conclude an agreement with a new licensee and the new licensee will need time to develop its initial collection, which, for a seasonal business, will have to go to market well before the end of the current licensee’s agreement. (In a later post, we will discuss the need for provisions in an exclusive license allowing the licensor to engage a new licensee during the term and the new licensee to start business before the end of the term.)
- “The conditions for renewal are not objective.” As noted in an earlier post, a licensee will want only objective standards when it comes to the conditions it will have to satisfy in order to exercise its option. However, is it unreasonable for a licensor to be able stop doing business with a licensee that, while not technically having defaulted in its obligations, has been a terrible partner and exceedingly difficult to deal with?
- “I would like a right of first refusal for additional products or countries or trademarks.” A right of first refusal, in effect, requires the licensor to make a deal with a prospective third party licensee and then offer the current licensee the right to match it. There is not much chance that a prospective licensee will be willing to devote the time and expense of negotiating a license agreement in these circumstances. If pressed, giving the existing licensee a first right to try to make a deal with the licensor – a right of first negotiation – is a better, and reasonable, alternative.
- “I want more countries in my licensed territory.” If a prospective licensee can demonstrate the wherewithal to properly exploit the proposed additional countries, the inclusion of the additional countries is often just a question of business judgment. (There may, however, be legal considerations to be addressed in the license agreement depending on the status of the licensor’s trademark rights in the additional countries.) If additional countries are included, though, a licensor should retain the right to take back countries that the licensee does not exploit adequately; and any such reversion right must be carefully drafted, particularly to take into account that getting back a few countries in a region may not be of any real value to the licensor. (What potential new licensee is going to be interested in a license for a few scattered Asian or European countries if the existing licensee retains the major markets in the region?) A possible compromise here might allow the licensee to keep the entire region if it is appropriately exploiting the major markets in the region, but to lose the entire region if it is not.
Credit: Jonathan R. Tillem
See previously published posts:
In business law, whatever the business might be, commercial considerations come first. An airtight contract or brilliantly argued appeal means nothing if it showcases the lawyer’s prowess but fails to deliver on the client’s business objectives. For anyone practicing fashion law, the first rule, after knowing the law, is to know fashion and the fashion business.
Our Fashion Practice Group represents designers, manufacturers, brands and retailers. That translates roughly into hope, expectation and reality. Design has every right to be seen as one of the applied arts; as with all the arts, practitioners must be mindful of the marketplace but not be a slave to market expectations. Overall, I see designers as optimists by nature; they are energized by hope even as they labor to fulfill our dreams.
In representing designers, we borrow methods from our art law and general business practices, working to defend originality in design with the legal tools of copyright, trade dress and design patent protections. In contracts, we help designers in their relationships with the makers of the fashions they conceive and in the protection of their names as brands.
For a manufacturer or brand owner, the designer’s work has transformed into expectation–of sales, market share and ultimately of brand enhancement. Here is where we devote much of our work to trademark protection, contracts with suppliers ranging from manufacturing sources to advertising agencies, to factoring deals, and contracts with retailers.
What is retail if not a bucket of true reality for every fashion design ever to make its way to the judge and jury of all fashions—the eye and wallet of the consumer? To make that a successful encounter, we help with store leases; the employment of sales staff and others; stop-in-shop deals; and, of such increasing importance, website development and maintenance, and social media utilization. However inspired the vision, however brilliant the execution, and however clever the marketing and display, if the customer does not buy it, what you have on the racks are rags, not riches. The job of the fashion lawyer is to do what he or she can to bring each fashion fairytale to a close in the way that all fairytales should—with a happy ending.
Credit: Alan Behr
The members of the Fashion Practice of Phillips Nizer
are all here for one very good reason:
We love fashion.
Some of us may have entered the field from working with those on the design side and others from representing participants on the business end of fashion. Because the law and the business are always evolving, we are all busy staying on top of what is happening with both. At times, we may not agree even with each other on what the law provides on a particular point or what the law should provide. In our personal lives, some in our practice group may gravitate toward casual dress, others may prefer more formality. And some may prefer checks and others stripes. But no matter. We are all here, working every day to assist our clients at all levels of the fashion trade.
We are aware that certain other areas of the law may be seen by some as possibly having greater social weight such as (just perhaps) defending the Bill of Rights or trying capital offenses. But we submit that no one in any other area of law will see so many plot twists while rendering services or have such an interesting experience in doing so.
Fashion, after all, affects everybody. You simply cannot avoid it. Even someone who claims to have no use for fashion, who deliberately dresses down and snubs every trend and fad is making a fashion choice by doing just that. What other area of the law so fully combines the law of art, design, licensing, leasing, employment, franchising, lending, music, personal rights, privacy and publicity, electronic facilities and so much more? And as for being a venue for the full enjoyment of the human comedy—please, don’t get me started. So feel free, in the coming weeks and months, to join us on these pages as we review and, on occasion, even attempt to understand and explain, the law, the business and the joy of fashion.
Credit: Alan Behr