As high-profile fashion collaborations continue to steal the spotlight, it is important for brand owners to understand what opportunities, risks, and challenges such collaborations may bring in the field of trademark law. Part I of this article discussed how brand collaborations may – and, in some cases, have already started to – change the contours of how courts assess likelihood of confusion in trademark infringement cases. Specifically, by collaborating with companies outside of their industry (for example, the Issey Miyake x Dyson vacuum cleaner collaboration), fashion brands open the door for infringement plaintiffs to argue that seemingly disparate products are in fact related or that “bridging the gap is likely.”
Collaborations may also impact a court’s analysis of the sophistication of a brand’s consumers, at once training consumers to be savvier about brand recognition and loyalty while also potentially making confusion more likely. Here, we focus on two other areas of trademark law that may be affected by fashion collaborations: dilution and naked licensing. In these spheres, too, the existence of collaborations and the form they take may have both direct and indirect consequences of which trademark holders should be aware.
The Risk of Dilution
Fashion collaborations frequently involve the use of fashion trademarks in non-fashion industries and/or the use of blended or altered versions of the distinctive logos, styles, or brand names of the companies involved. While often attention-grabbing and clever, these unconventional uses of trademarks may leave a company vulnerable to accusations that it has diluted its own trademark.
There are two distinct types of trademark dilution. Dilution occurs either via blurring, in which a famous mark’s distinctiveness is impaired by association with another similar mark, or via tarnishment, in which a famous mark’s association with a similar mark harms its reputation. Fashion collaborations have the potential to impact dilution by blurring in particular. Dilution by blurring occurs when two companies’ divergent uses of a mark are not likely to cause confusion as to source, but instead are likely to make consumers think more about or question what the trademarks signal. For example, two companies’ contemporaneous uses of LOUIS VUITTON – one in connection with luggage and one in connection with coffee – could impair the distinctiveness of the famous LOUIS VUITTON luggage trademark and require additional consumer attention to determine to which company the mark refers.
By this logic, dilution by blurring is often used in trademark suits against non-competitors – and some state laws limit its use to these instances.
When a fashion company licenses its mark in collaborations, it may weaken its position as the claimant for any claims of dilution by blurring. One factor courts consider in assessing dilution by blurring is whether the owner of the established mark is “engaging in substantially exclusive use of the mark.” Id. If a fashion brand uses its marks on toys, furniture, kitchenware, and exercise equipment and in collaboration with numerous other brands, it may be harder to argue that, as a practical matter, the brand is “engaging in substantially exclusive use.”
Though a dilution plaintiff in this situation could argue that brand-authorized collaborations are not the same as other, unauthorized parties using the same or similar marks (which is conventionally what the “exclusive use” factor contemplates), and the specific facts in each case will need to be closely analyzed, the existence of multiple collaborations may still weaken the strength or singularity of the plaintiff’s mark in the marketplace. As such, the expansion of a trademark holder into too many territories – with too many collaborators – risks self-dilution, potentially undermining the trademark holder’s ability to use the dilution statutes to police future third-party uses of similar marks.
Another statutory factor courts consider in claims of dilution by blurring is the “degree of inherent or acquired distinctiveness of the famous mark.” Under this factor, the plaintiff’s use of its own mark in divergent industries and inconsistent ways may undercut how distinctive the mark is in the eyes of consumers. In traditional blurring cases, courts have observed that when multiple parties use marks that are the same or similar to the plaintiff’s mark, such widespread use undercuts the plaintiff’s claim. For example, in an action brought by the grocery chain Star Markets, the court found extensive use of “Star” and “Star Market” within and outside of the food industry indicated that the mark was insufficiently distinctive: “The more times the word ‘Star’ is used in connection with a variety of goods and services, the less likely Plaintiff’s mark could signify something unique, singular or particular.” Star Markets, Ltd. v. Texaco, Inc., 950 F. Supp. 1030, 1035 (D. Haw. 1996).
In the context of collaborations, the authorized use of the plaintiff’s mark across industries or in modified iterations (such as the altered Coach “C” monogram in the Champion x Coach collaboration) may be used as proof that the original mark is not so distinctive or singular after all. If the central question in a dilution by blurring claim is whether the defendant’s use affected the distinctiveness of a famous mark, the proliferation of cross-industry or modified uses of the mark may undermine the theory of harm.
The Danger of Naked Licensing
For some fashion collaborations, one company will license the use of its trademark to another company in exchange for royalties and will leave the work of manufacturing and distributing the products to its collaborator. Especially when both companies operate in the luxury space or have a reputation for quality, they may feel confident that goods produced will be up to their respective standards. But even in the most rarefied collaborations, a trademark holder cannot simply trust its partner to ensure quality control.
Rather, the licensor has the obligation to actively monitor the licensee’s use of its trademarks to ensure that the latter is meeting the quality and use standards agreed upon. The absence of this monitoring is referred to as a “naked license,” and a company can even lose its rights in the trademark if it fails to ensure the quality of the licensee’s goods. In Eva’s Bridal Ltd. v. Halanick Enterprises, 639 F.3d 788 (7th Cir. 2011), for example, a wedding dress shop licensed the use of its name to the defendant for its bridal store in exchange for an annual payment. When the license expired and the wedding dress shop sued to prevent the defendant’s further use, the court held that the plaintiff had abandoned its mark via naked licensing because it did not exercise sufficient authority over how the defendant used its mark and ran its business under it.
To avoid naked licensing, fashion companies engaged in any collaboration should draft licensing agreements with precise quality control terms governing the use of their marks and establish monitoring protocols to ensure compliance with those terms. (See LPD New York, LLC v. Adidas America, Inc., in which the E.D.N.Y. found that adidas did not nakedly license its mark to a potential collaborator in part because it “maintain[ed] several contractual provisions through which [it] retain[ed] the right to control the nature and quality of goods or marketing bearing [its] Marks”).
But the obligation to monitor the quality of products using the licensor’s trademark may be complicated by collaborations on products far afield from a company’s normal offerings. For instance, in the Miyake x Dyson collaboration, Miyake likely has very little experience or expertise in the production of vacuum cleaners, making it difficult for Miyake to ensure that the products in that collaboration are up to its or industry standards.
Even adjacent companies, like Gucci and North Face, may not have expertise in the standards and expectations specific to their collaborator’s niche in the industry.
In both cross-industry and intra-industry collaborations, it is especially important that the terms of the trademark license are clearly defined with quality measures and monitoring mechanisms and that the companies do their due diligence on what is expected of and standard in the new industry (or new sector of the industry) ahead of time. Companies interested in cross-industry collaboration should be especially attentive to the reputation of their collaboration partners before entering an agreement and to consumer feedback once the products hit the market.
Some Final Considerations
Fashion companies looking to collaborate with competitors or unconventional businesses do so for good reason – collaborations are effective methods of stimulating consumer interest and generating excitement for a brand’s new products. But they should carefully consider possible risks in doing so, such as how far they should expand beyond their current realm of protection, i.e., where their marks are most distinct.
One way to guard against these risks is for a company to demand robust protections in its collaboration agreements. For example, contract provisions that prevent licensees from selling through certain distribution channels or establish specific territories for sales can help make licensee use easier to monitor. These provisions also help maintain brand identity. For instance, if a fashion company’s identity is partially based on exclusivity or high-end offerings, then prohibiting marketing through wholesale clubs or discount stores would help preserve that identity during a collaboration, which may head off third-party dilution or infringement arguments down the road.
Other helpful contractual terms may include clearing only specific terms in advertising, defining with particularity the permitted uses of marks by each brand, setting a clear duration of such mark use, and maintaining termination rights in the event of a breach of the terms of the contract. By creating clear contract terms, fashion companies can collaborate knowing that their trademarks are protected.
Further protection for brand identity can be established by making sure that any use of a trademark or design in a collaboration is presented in a clear, distinct manner consistent with prior uses so that there is continuity in the brand presentation. For example, a sneaker company collaborating with a snack food brand may want to ensure that its name, distinctive logo, and any familiar color scheme be clearly visible on the snack food’s packaging near the snack food brand’s own marks (thus highlighting that the product is a specific collaboration or offshoot).
Companies should also think carefully about how each collaboration fits into and furthers their own brand identity and, where possible, highlight those aspects of their identity in any advertising or marketing. In the LEGO x Levi’s collaboration, for example, press coverage has consistently identified the two brand’s respective positions and reputations and positioned the products as a marriage of two distinct brands. Clearly curated and selective collaborations, rather than seemingly random ones, are more likely to help the company maintain its distinctive brand position.
By insisting on consistent marks and brand identity, companies can help ensure that their marks remain strong, even in a crowded field, and that consumers will continue to trace any collaboration back clearly to the mark owner.
Megan K. Bannigan, Kate Saba, Grace McLaughlin, and Chris Zheng are lawyers at Debevoise & Plimpton LLP.
Share
