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

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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