Best Brands Consumer Products will not be able to recoup the attorney’s fees it was seeking in the lawsuit that it waged against Versace 19.69 Abbigliamento Sportivo, according to a recent decision from a federal appeals court. In a decision issued earlier this summer, the U.S. Court of Appeals for the Second Circuit shot down the consumer goods wholesaler’s bid for attorney’s fees in its breach of contract and fraud case against Versace 19.69, which stems from the latter’s infringement of the trademarks of the similarly-named but unaffiliated Gianni Versace brand.
The Second Circuit found that Best Brands Consumer Products (“Best Brands”) cannot be awarded attorney’s fees from Versace 19.69, which failed to respond to a lawsuit accusing it of selling the rights to use the “V 1969 Italia” trademark, even when it did not actually own the mark in the first place. This is due, in part, to the fact that the indemnification clause in Best Brands’ agreement with Versace 19.69 “does not include a traditional ‘fee-shifting’ provision,” a panel of judges for the appeals court held. Also, beyond the contract itself, Second Circuit judges held that New York state law mandates that indemnification provisions must be “strictly construed” – a fact that tipped the attorney’s fees ruling against Best Brands. The New York law states that each party is responsible for its own attorney’s fees unless it is “unmistakably clear” otherwise, the court ruled.
In this case, the Second Circuit found that the licensing agreement between Best Brands and Versace 19.69 made it so that “the indemnification process here does not contain ‘unmistakably clear’ language to support Best Brands’ position.”
The Second Circuit’s refusal to allow Best Brands to recoup its attorney’s fees comes seven years after it first filed suit against Versace 19.69. By way of background, Best Brands entered into a license agreement with Versace 19.69, in which it gained the right to use the “V 1969 Italia” in exchange for nearly $100,000 (as an advance against royalties). In addition to granting Best Brands the right to use its “V 1969 Italia” mark, Best Brands alleged that the company warranted that it had “full trademark rights” in the “V 1969 Italia” mark and that there were “no trademark issues with Gianni Versace or otherwise.”
Fast forward to June 2017 and Gianni Versace S.p.A and Versace USA, Inc. (collectively, “Versace”) sued Versace 19.69 for trademark infringement and dilution. (Versace 19.69 was also sued for trademark infringement by the Gap, which argued that it owns the famous “1969” trademark.)
After a federal court in California sided with Versace in its case against Versace 19.69, Best Brands filed its breach of contract and fraud lawsuit against Versace 19.69, which did not respond to (or otherwise participate in) the suit, thereby, resulting in a default judgment for Best Brands.
And while a magistrate judge recommended (and the court subsequently approved) an award of more than $91,000 for Best Brands, plus prejudgment interest of more than $45,000, an attorney’s fee award remained elusive. A New York federal judge later determined that the companies’ agreement only allowed Best Brands to recover $2,700 in attorney’s fees – money that Best Brands spent on a subpoena in Versace’s separate infringement suit against Versace 19.69. Anything more than that comes down to New York law and the lack of the fee-shifting statute, according to the court.
THE BIGGER PICTURE: The bigger picture here comes by way of the case that Versace filed against Versace 19.69 Abbigliamento Sportivo in court in Northern California in 2016 for trademark infringement, dilution, and unfair competition. Milan-based Versace 19.69, despite having a similar name and also being headquartered in Milan, has no affiliation with the renowned Gianni Versace brand, the latter argued. Versace maintained that the similarity in names and the types of goods sold by both companies could lead consumers to erroneously believe there was a connection between them.
To be clear, Versace argued that it has no relation to or affiliation with the “copycat” Versace brand or its founder Alessandro Versace.
The U.S. District Court for the Northern District of California granted summary judgment in favor of Versace, with Judge Hawood S. Gilliam finding that Versace 19.69’s use of the Versace name was “significantly similar” to that of Gianni Versace, resulting in trademark infringement. The court also sided with Versace on its claims of trademark dilution, ruling that Versace 19.69’s actions blurred the distinctiveness of the Versace brand and tarnished its reputation by selling products of inferior quality.
> In his decision, Judge Gilliam made note of the 2010 outcome in the trademark case that fellow Italian design house Gucci filed against Gemma and Jennifer Gucci for using their names on a wide range of products not associated with the once-family owned fashion brand. In that case, the court sided with Kering-owned Gucci, saying the relatives of Gucci founder Guccio Gucci could not use their last name on the products at issue, namely, housewares, cosmetics, hosiery, and handbags.
As a result, the court issued a permanent injunction in favor of Versace, ordering Versace 19.69 to cease all commercial use of the Versace name. The court also highlighted the need for further discussions regarding the destruction of Versace 19.69’s remaining inventory and a future bend trial to determine the financial damages owed to Versace.
The case is Best Brands Consumer Products, Inc v. Versace 19.69 Abbigliamento Sportivo, No. 23-1115 (2d Cir.)
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