Fashion Apparel Law Blog : Fashion Apparel Law Lawyer & Attorney : Sheppard Mullin Law Firm : Fashion Legal Issues

By Dawn Lurie

With comprehensive immigration reform on the horizon and the economy rebounding, the number of H-1B visa filings for foreign temporary professional workers is likely to significantly increase this year. American businesses recognize that to compete in the global economy, smart, competitively trained, and diverse talent is critical. In many industries, foreign workers, including H-1B degreed professionals, are an integral part of such a workforce. There are only a limited number of new H-1B visas issued each fiscal year, and how quickly they are utilized is tied to the economy and market demand. For the 2013 fiscal year, the H-1B cap was reached on June 11th 2012, five months earlier than in FY 2012 when it was not reached until November 23, 2011.

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As companies are presented with the ever-challenging goal of achieving and maintaining brand recognition, many fashion companies are now attempting to engage consumers in both the real and virtual worlds. Gaming represents one non-traditional avenue that has undergone recent growth, as brands find value in connecting with existing and potential consumers through interactive online means.

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Congress recently introduced the whimsically titled bill, the “Team U.S.A. Made in America Act,” which would require the United States Olympic Committee to ensure that ceremonial uniforms for the Olympic team are assembled in the United States with fabrics manufactured in the United States. Regardless of whether clothing is made in or imported to the United States, current U.S. Federal regulation requires that clothing bear its country of origin designation. Currently, around 98% of all clothing for sale in the U.S. is imported.

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Perhaps the most remarkable feature of the current hyper-digital age is the ever-shrinking gap between the celebrity and everyman. Nowhere is this phenomenon more apparent than in the realm of the celebrity tweet. Twitter, the pervasive microblogging website, promises thrilling accessibility to prominent public figures, particularly in the entertainment realm. By providing seemingly unrestricted access in 140 characters or less, Twitter affords a “candid” glimpse into the day-to-day life of a celebrity that previously had been reserved for publicist-controlled edited interviews. Twitter purports to permit celebrity access that is both instant and raw, in form and in content.

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Makeup ads in the UK for products by L'Oreal have been banned after the U.K.'s Advertising Standards Authority ("ASA") deemed the airbrushing used in post-production to be misleading to consumers.
 

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First Orion developed PrivacyStar™, a relatively new and increasingly popular smartphone app for the Android and Blackberry. The app's main purpose is to block unwanted calls and text messages, and to provide Caller ID for unknown callers so subscribers may take appropriate action by adding the numbers to their Privacy List. The app also provides a SmartBlock capability, which employs the data gathered from PrivacyStar™ usage to automatically block most blocked numbers; Do Not Disturb, which forwards all non-blocked incoming calls to voicemail; and more recently, SMS ID and Voice-Activated Directory Assistance functionality (in the Android smartphone).
 

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International arbitration is becoming the preferred method of resolving disputes in the fashion industry because international arbitration typically provides: (1) a private resolution so that the parties can still continue their business relationship in the future; (2) a neutral forum; (3) easy enforcement of the judgment throughout the world; and (4) a faster and cheaper dispute resolution than traditional litigation. Yet, not all international arbitrations are created equal.
 

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Shareholder lawsuits are practically inevitable in any going private transaction in today’s economic climate and under the current securities regulatory regime. Two major apparel companies, Gymboree and J. Crew, have recently gone private in very high profile transactions that have not unexpectedly spawned multiple shareholder lawsuits.  In connection with the proposed sale of J. Crew to Texas Pacific Group and Leonard Green & Partners, J. Crew shareholders have filed suits against the company’s management and directors alleging breaches of fiduciary duties. Shareholders similarly sued Gymboree after its sale to Bain Capital Partners, alleging breach of fiduciary duties. All companies attempting to go private can expect to be served with complaints challenging the process of negotiating an offer and the price of the offer itself within days of announcing a transaction.  However, there are several actions that companies can take when contemplating these types of transactions in order to limit exposure to this sort of costly litigation.
 

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On October 28, 2010, the Standing Committee of the National People’s Congress promulgated the “Law of the People’s Republic of China on the Application of Law for Foreign-related Civil Relationships” (the “Law”). It will become effective on April 1, 2011. Until now, China’s civil code had buried its choice-of-law provisions within the substantive laws, causing uncertainty and confusion. The Law established a clearer standard of what the applicable law is in foreign-related civil relationships. The most significant provisions of the Law are summarized below.

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Fordham Law School has founded the world's first Fashion Law Institute, marking a critical effort to advance the study and application of fashion law. The Institute, which officially launched September 8, 2010 during New York City's renowned Fashion Week, will be the "primary nerve center" for all things fashion, ranging from the academic study of fashion-related legal issues to offering pro-bono legal counseling for designers in need.
 

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Now more than ever workers are leading double lives, only not in the way that you might expect. The old distinctions of day job and night job, or office life and home life are fading to the background as we rapidly embrace a new double life: one actual and one virtual. It is almost cliché to cite statistics detailing the staggering growth of social media, but it is nevertheless instructive. Facebook, MySpace, Twitter and LinkedIn boast a combined 885 million worldwide users, with Facebook accounting for 56 percent of that figure despite first reaching 250 million users just last year.[1] Facebook is currently the second most visited Internet site in the United States behind Google, while MySpace, Twitter and LinkedIn each place in the top 20.[2] Combine all social media and blog sites, and suddenly 22 percent of all time spent on the Internet is accounted for.[3] If use of social media has not already permeated your workplace, perhaps the next IT roll out should focus on ditching the dial-up modems.

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The Council of Fashion Designers of America (CFDA) and Vogue announced that our client Christian Cota, was one of the ten (10) Finalists for the seventh-annual CFDA/Vogue Fashion Fund initiative, which provides financial support and business mentorship for emerging designers.

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We congratulate our client, Janie Bryant for her 2010 Emmy nomination for "Outstanding Costumes for a Series" for her work on the television series "Mad Men".

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Lovely ladies like these are likely protected by copyright due to their distinct personality and fashion flair, and creators should take steps to maintain protection particularly if there is a possibility of sequels, merchandising, and other licensing uses.

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Online sample sales often mean less drama and less trampling than the average warehouse sale, but this may not be a good thing for luxury brands whose products are all about exclusivity and that "gotta have it now" sensation.  Therefore, when contracting with internet retailers, luxury brands may find it necessary to mandate certain protections from the retailer to maintain a sense of excitement and to safeguard the brand.  These include requiring site memberships, restricting the sale period, supplying a limited stock, protection from search engines, and not to mention, ensuring that the website design and presentation of product aligns with the brand aesthetic. Read more here.

 

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WWD announced on February 16, 2010 that Chanel has continued its tradition of working with the world's most prominent movie directors by announcing its collaboration with Academy Award winning director Martin Scorsese to direct the television commercial for its newest Men's fragrance. The advertisements were filmed in New York and feature actor Gaspard Ulliel. Robert Darwell of Sheppard Mullin represented Chanel in this matter."

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Sheppard Mullin congratulates our clients and friends Janie Bryant and Doug Hall, who won awards for excellence in film and television at the 2010 Costume Guild Awards held February 25, 2010. Janie Bryant won for her work on the Mad Men television series and Doug Hall won the contemporary film award for his work on Crazy Heart. Congratulations to both!

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For the fashion industry, one of the must-have, but hard to come by, items this season is a favorable refinancing deal. The recent volatility in the fashion market has reflected not just the ever-changing tastes of the cognoscenti, but also the rapidly shifting economic landscape confronting designers and retailers. The fashion industry has suffered acutely in the global financial crisis as consumers curb their spending, particularly in the luxury goods market. In fact, analysts have estimated that 12% of fashion companies will not survive the recession. 
 

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On June 19, 2009, in Zino Davidoff SA v. CVS Corp., the Second Circuit enjoined CVS, a national retail chain, from removing unique production codes ("UPC") from Davidoff product packaging for its "Cool Water" fragrances on the grounds of trademark infringement.[1]  Davidoff, a high end luxury brand, imprints a unique UPC on every product for quality control purposes and to protect against diversion and counterfeiting.  The code contains basic information about each product unit, including "where and when it was produced, ingredients used, and distribution path."[2]  The UPC code ordinarily is used to track goods that are sold to and by unlicensed distributors.  The Davidoff UPC also allows Davidoff to spot defects easily and swiftly recall or remove products from the market when such defects are noted.  The UPC is used to protect the reputation of the brand and its trademarks.

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Not all diamonds are a girl’s best friend.  Conflict diamonds, for instance, are considered more of a rebel’s best friend.  Also known as “blood diamonds,” conflict diamonds are linked to rebel forces and factions opposed to legitimate governments, and are used to fund military opposition to those governments.  The international diamond community, including the U.S., has expressed zero tolerance towards such diamonds and has sought to regulate the rough diamond trade to assure consumers that their purchases are not used to finance overseas wars and rebel movements.  Further, U.S. diamond retailers can assist these efforts by keeping informed of the various diamond distribution laws and by effectively implementing self-regulating retail policies that will help curtail illegal trade.

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From Sgt. Pepper's psychedelic costumes to Run DMC's love of Adidas and Kanye West's shutter shades, fashion and music have visibly influenced one another for decades.  The global recession has only strengthened this bond by leading fashion brands to take on roles once exclusively reserved for major record labels.  As a result, labels and artists have begun to view fashion brands as a lucrative and logical business partner while brands' increasing ability to work with musicians has allowed them new and unique means of attracting customers, increasing consumer goodwill, and maintaining their distinctiveness.  

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On June 17, 2009, Judge Laura Taylor Swain of the Southern District of New York dismissed the copyright claims of jeans maker Do Denim against rival manufacturer Fried Denim Inc., holding that the mere filing of the copyright applications, fees and deposits did not satisfy the jurisdictional requirement that a copyright be registered before a lawsuit is initiated.  Do Denim v. Fried Denim, No. 08Civ.10947, 2009 U.S. Dist. LEXIS 51512, at *7 (S.D.N.Y. June 17, 2009).  This decision highlights the importance of copyright registration, as a jurisdictional prerequisite for plaintiffs hoping to protect their designs.

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Some fashionistas are trying to revive L.A. fashion week, while others say runway shows are pass? Several dozen members of Los Angeles’s fashion elite gathered recently on the rooftop of the hip Hotel Erwin on Venice Beach. Their issue of concern: the cancellation of the city’s fashion week in March.

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In June 2006, the Internet Corporation for Assigned Names and Numbers (ICANN) approved a plan that will allow private parties to create custom online domains. These domain names may be anywhere from 3 to 63 characters long and in nearly any alphabet, such as Arabic or Chinese. The Internet currently operates using 12 generic top-level domains (gTLDs) to direct traffic. The more common gTLDs include .com, .org, and .gov, of which "dotcom" is by far the most popular. The draft plan was released for an open comment period from October 24-December 15, 2008. There was a strong public reaction during the comment period, much of it negative.  In response, an amended plan was released on February 18, 2009, with a comment period through April 13, 2009.
 

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Multi-level marketing plans ("MLMs"), also known as "network" or "matrix" marketing plans, can be an effective way for the "little guy" or the "entrepreneur" to achieve financial success in the cosmetics or apparel industry.[1] By promoting individual autonomy and embracing the concept that the independent sales person is the main driver of success, it's no surprise that MLMs are attracting considerable talent. In fact, the Direct Selling Association, a trade group that includes the leading multi-level marketing firms, reports that the industry employed more than 15 million U.S. salespeople in 2007, and had an estimated $30 billion in U.S. direct sales. Further, the clothing, cosmetics, and personal care segment represented almost a third of all domestic sales, the highest of any major product group.
 

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Last month, the European Parliament approved new rules that will increase cosmetic safety and simplify regulatory procedures in the European Union. The legislation, which resulted from a compromise negotiation between Parliament and Council representatives, will take the form of a single regulation that applies to all member states simultaneously, and will replace the patchwork of 27 sets of national rules and 55 amendments that comprise the EU Cosmetic Directive of 1976. 
 

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Please join us for our upcoming 

Fashion & Apparel Confab-ulous
Networking Event

When: June 9, 2009, 5:30 p.m. - 7:30 p.m.

Where: Sheppard, Mullin, Richter & Hampton LLP
30 Rockefeller Plaza, Suite 2400, New York, NY 10012

Our Confabs are informal networking events where you can "meet and greet" your peers in the industry followed by a short "hot topic" presentation by various industry experts.

5:30 – 6:30 Networking, Networking, Networking – Hors d’oeuvres and drinks

6:30 – 7:00 The Design Piracy Prohibition Act: Change Fashion Needs Copyright and Fashion Design at the Crossroads in 2009

In April, designers Jason Wu, Narciso Rodriguez, Maria Cornejo and Thakoon Panichgul –- all of whom have been worn by First Lady Michelle Obama –- traveled to Washington for one day to lobby Congress for support of the bill. On April 30, 2009, the "Design Piracy Prohibition Act" was officially reintroduced in U.S. House of Representatives. This bill, if enacted, would amend Chapter 13 of the U.S. Copyright Act and grant fashion designs a three-year term of protection, based on registration with the U.S. Copyright Office. Currently, fashion design does not receive explicit protection under U.S. copyright law and protection of certain types of apparel designs can only be found through trademark and patent law. This confab will discuss the proposed bill and its impact on the fashion industry both positive and negative.

Questions? Contact Amy Romaker at aromaker@sheppardmullin.com or 858.720.7403

To RSVP please click here.

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Diminish fine lines.” “Regenerate your skin.” “Stimulate cell renewal.” These days, a number of cosmetic products claim to do more than just hide blemishes. Rather, they promise “age-defying” results with ingredients that influence and enhance the skin’s biological function. These products, aptly termed “cosmeceuticals,” are a hybrid between cosmetics and pharmaceuticals. For instance, while cosmeceuticals are applied topically as cosmetics, they also contain pharmaceutical ingredients such as alpha and beta-hydroxy acids, copper peptides, or retinoids. And accordingly, behind each active ingredient lies an even more active product claim.

With cosmeceutical performance claims becoming more daring, and with cosmeceutical sales soaring in the billions, federal legislation is making sure that cosmeceutical manufacturers and advertisers are putting their money where their mouth is.
 

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Reduced retail revenue and omnipresent debt is causing many fashion companies to tremble in their stilettos; particularly as they watch their stock take a pounding on the market. Conspicuous spending tends to lose its luster as the market plummets and the fashion and luxury sector is being heavily penalized during this economic downturn. A quick recovery seems unlikely as analysts predict luxury revenues will drop in 2009 for the first time in more than a decade at constant exchange rates. Lowered valuations and slipping stock prices in the luxury sector present ripe buying opportunities for the fashion savvy investor. Deal makers in the fashion field predict that minority investments in fashion companies will be a prevalent trend in 2009.
 

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In August of 2008, President Bush signed into law the Consumer Product Safety Improvement Act ("CPSIA") which, among other things, mandated implementation of a certification protocol for all consumer products subject to safety rules under the jurisdiction of the Consumer Product Safety Commission ("CPSC").  Broadly, "consumer products" are defined as any product used in a residence, school, or for recreational or personal use (subject to enumerated exceptions).  Various CPSC bans and standards already in place will now operate in conjunction with CPSIA, such as the Federal Hazardous Substances Act ("FHSA"), the Flammable Fabrics Act ("FFA"), the Poison Prevention Packaging Act ("PPPA") and the Refrigerator Safety Act ("RSA").  While, for the most part, the CPSIA does not alter pre-existing safety standards for products, it does require that all such consumer products now certify compliance. Products not certified must be refused entry into the US and destroyed unless permission is given for re-shipment.  The CPSIA expands independent, state-level enforcement activities authorizing State Attorneys General to initiate proceedings in federal courts.  The CPSIA also imposes stricter civil penalties up to $100,000 per violation, with an overall cap on penalties of $15 million.  One area in which the safety standards have been changed is with regard to children's products, discussed in more detail here.
 

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The Consumer Product Safety Improvements Act ("CPSIA") imposes new requirements on manufacturers, importers and retailers of children's products beginning February 10, 2009.  The CPSIA defines "children's products" as a "consumer product designed or intended primarily for children 12 years of age or younger," which includes children's clothing.  A General Certificate of Conformity (""GCC") is required for goods starting November 12, 2008.  Under the new requirements, children's products cannot be sold if they contain more than 600 parts per million (ppm) total lead.  Those that resell products or continue to sell products in existing inventory in violation of the limit could face civil and/or criminal penalties. 

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In these troubled times for the fashion and apparel industry, with consumer spending falling dramatically, many brands in need of capital will be forced to place their companies up for sale.  This present a prime opportunity for companies looking to make a key acquisition.

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The following is an update to our November 10, 2008 blog post entitled, "Reasonable Minds Differ On Whether A Zip Code Is "Personal Identification Information" Under The Song-Beverly Act."

On December 19, 2008, the Fourth Appellate District of the California Court of Appeal in Party City v. Superior Court (Palmer) No. D053530 held in a published decision that zip codes are not "personal identification information" under the Song-Beverly Act.  The Court held that Party City was entitled to summary judgment and granted its writ petition on the following grounds: (1) the plain language of the statute did not include zip codes; (2) related federal regulatory definitions of the meaning and purpose of zip codes showed they are not personal or identifying in nature; and (3) the legislative history and the principal statutory purposes of Song-Beverly did not support an interpretation that a part of an address, which is not by itself private or personal in nature, was meant to be covered by the Act.  Since the parties in Party City have settled that action, this decision will probably stand unless and until the issue reaches the California Supreme Court in another one of the many Song-Beverly actions currently pending in the state.

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Bankruptcy filings are skyrocketing as more and more companies are going deep into the red.  For retailers or their landlords holding leases in commercial property, there are special considerations to keep in mind.  This post will provide some basic information on the rights of non-debtor tenants and landlords under unexpired non-residential property leases when a debtor–landlord or –tenant, respectively, files a chapter 11 bankruptcy petition.

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New fashion trends might not be the only thing to watch coming down the runway as the fashion industry heads into 2009.  The new economic landscape is posing interesting challenges for both fashion brands and those private equity groups that have historically dominated investment in the industry.  With consumer confidence and spending at record lows, brands are finding it difficult to generate the cash needed to break-even, let alone prepare for long term success by diversifying and expanding.  Many brands in need of capital will be forced to place their companies up for sale; however, the buyers who ultimately capitalize on this investment opportunity might look different than in the past.
 

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Over twenty major retailers have been sued in class action lawsuits in California for allegedly violating the Song-Beverly Credit Card Act.  The claimed offense involves requesting and recording their customers’ zip codes at the point of sale.  The issue is whether a zip code constitutes “personal identification information” as that term is defined under the Song-Beverly Act.  Recently, for the first time in California, Superior Court Judge Ronald Prager agreed with the defendant retailer[1] that a zip code is not “personal identification information,” and held that requesting and recording zip code information in connection with a credit card transaction is not a violation of the Song-Beverly Act.  Pineda v. Williams-Sonoma Stores, Inc. (Oct. 3, 2008) No. 37-2008-00086061.[2] 

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The liaison between fashion and contemporary art has been continuously growing changing over the years.  Painters, photographers, visual artists, illustrators, performers and creative artists, are commissioned by top luxury brands of fashion and trendy stylists to create new collections, to design their websites, to redesign the concept of their stores, to bring elements of innovation to their catwalks, showrooms and fashion show or to contribute to publications.

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The Sheppard Mullin Fashion & Apparel team represented Inform Ventures, producer and niche marketing/advertising agency that works closely with the fashion industry, in connection with the production of the documentary. The documentary called "FutureFashion" showcased top designers presenting cutting-edge, eco-friendly fashions. The documentary was underwritten by Lexus.

Click here to view the documentary.

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Following the examples of Madrid and Milan, the Independent Model Health Inquiry proposed new rules to ban designers from using models under 16 during London Fashion Week.  The Independent Model Health Inquiry consists of a panel of fashion industry experts appointed by the British Fashion Council to investigate the health of catwalk models, following the death of two underweight models last year.  The panel concluded this month that models under 16 are in danger of being exploited because they are made to represent adult women and work in an insufficiently monitored environment.  Working hours for children aged 15 and 16 are restricted by law, yet the long hours teenage models spend at casting sessions are not considered paid employment. In addition, the average age for the onset of anorexia is 16.  The panel also called for greater protection of 17 and 18-year-old models, who should be chaperoned at shows.

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The fashion and apparel industry will confront many interesting and important issues in 2007. The following is a list and brief description of some of the most significant issues facing the industry this year:

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The concern for anorexic models in the fashion industry gained renewed global prominence after the eating-disorder deaths of two young South American models last year. The controversy over these deaths led Madrid government officials in September to ban models below a certain body-mass index from working on city-sponsored fashion shows. Milan followed with a similar ordinance, and in a December deal with the Italian fashion industry, designers agreed not to hire models younger than 16, and to require all models to submit medical proof that they do not suffer from eating disorders as a condition to work.

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