Paula Levitan and Carol Osborne,
Partners, Bryan Cave LLP, Law Firm
in conversation with
Pandora Mather-Lees, Director, IORMA Luxury
The World of intellectual property involves the protection of creative talent across many areas: art, music, writing, performance, manufacturing and all forms of design. Since the digital era the IP field is now a minefield as the proliferation of copying across the internet by so many with so little knowledge of copyright law has led to numerous infringements.
In the world of luxury, counterfeiting has been around ever since unattainable goods were sought after. Contrafacon in the Far East has exacerbated the global position. Intellectual property law exists not just to protect talent but importantly the valuable income stream that flows from it. As marketing matured some decades ago brand equity is now one of the most important assets of a company and determines market share, share price, purchasing power, not to mention public sentiment and perception.
Bryan Cave provides legal services to the luxury retail and consumer products industry through its 25 offices across the United States, Europe and Asia. In this ‘double interview’ I ask Carol Osborne and Paula Levitan, two of their most senior and experienced retail lawyers in their London office, about how they work in this now quite complex world and their approach to luxury and IP today.
PML: I understand you work in the luxury sector and retail – who are your typical clients?
BC: We work with a variety of retail and brand owners, many in cosmetics and toiletries, such as Diptyque, Swiss Parfumier Rado, Sephora, LVMH, Space NK, Burberry, Eileen Fisher, Estee Lauder, Georgio Armani and Ferragamo. We work with them for their US, UK and European businesses and act as outside General Counsel for many of them. We try to work comprehensively on various aspects of the business to allow us to understand their business models and objectives which, we believe, allows us to provide a better service. In addition to IP, we also do M&A and general commercial work as well as property work, website work, data protection, etc. In the context of acquisitions of companies, there is often a lot of IP due diligence which helps to identify (and hopefully avoid) future problems.
We believe our holistic approach makes Bryan Cave unique as many law firms represent luxury retailers and brand owners on specific matters such as counterfeiting issues, but few can provide the kind of full service with depth of experience in the sector that we provide – we try to be a sounding board for our clients and forge strong relationships with them.
PML: How did you come to get involved in this area of law? Is this a speciality of Bryan Cave?
PL: I was General Counsel for Body Shop and then Associate General Counsel of the Gap, and later General Counsel of Manzanita Capital which is the investment fund for the Fisher family in Europe; they are the founders of Gap Inc. Manzanita has focused on the premium and luxury sector of the retail and consumer products market. There definitely are differences in the luxury sector. For instance it is rare that they have seasonal items, their merchandise is largely part of a permanent collection and customers tend to buy statement pieces which means that they have a different relationship with the brand.
CO: I started working with DFS the duty free retailer operating in airports and on cruise ships as well as in stand-alone stores around the world. After the three founders sold their stake to LVMH I ended up working on retail entertainment projects for LVMH in Asia Pacific. Work for LVMH companies continued into the early 2000s. I provided the legal services for e-luxury.com, one of LVMH’s early experiments with an e-commerce platform to showcase their brands and began working with Sephora in the US at around the same time. Obviously the e-commerce world has changed substantially since then!
PML: What are the differences in advising on intellectual property for luxury brands as opposed to mainstream retail?
BC: For luxury brands you sit on one side of the aisle, so you are protecting not only their trademarks, but their copyright designs which are unique. With mainstream brands more often than not you tend to be defending designs ‘inspired’ by luxury brands. Most mainstream retailers take buying trips to Milan, Paris, London, Tokyo and/or Florence. They shop for ’inspiration’ and to identify the latest trends. They bring home samples and begin work on creating a new collection. Their internal buyers then decide what the next season is going to look like. If they get too close to the items they purchased for inspiration, they may have infringed protected rights. There is a great deal of protection on, say, a Chanel jacket.
However the reverse can also happen. It is possible for mainstream manufacturers who have distinctive and iconic designs to feel luxury brands are too liberal in their “inspiration” when showcasing collections on the catwalk.
The degree of investment in a design is generally the difference between mainstream and luxury, but this is not always the case.
Another aspect is that there are some luxury brands that don’t ever put their merchandise on sale. Any surplus will be limited to private sales for employees or family members. Obviously, this is not the case for mainstream retailers.
PML: What are the main issues for luxury clients in retail?
BC: One key issue that is currently topical concerns customer relationships and how you obtain data from the customer and what you can do with it. There used to be a relationship in store where your personal contact kept a client book on your preferences and shopping habits, in fact many high end retailers still do this. This was part of the element of “high service” so important to luxury brands. Our clients are now asking us, can we collect data when clients pay by credit card and use it for marketing purposes? Can we collect any data at all? Luxury brands want to thank you for your serious purchase, to send you a note acknowledging you for instance. With the proliferation of online sales, we are seeing most territories implementing laws restricting what data companies can keep and how they can use it, not only to protect privacy but also to clamp down on spamming customers.
Another big issue for clients concerns the proliferation of resellers. These are people who become high volume customers precisely because they have their own store on eBay or another resale platform. If a customer is reselling the client’s product in an inferior online environment, the urgent question is whether the client can refuse to sell to them in the first instance? Many of our clients address this by putting in place a maximum number of a particular product reference that a customer can buy. If the customer wants to purchase more of the same item (for staff gifts, for example) they must make the purchase through the client’s head office. This allows the client to keep much tighter controls and avoid these pop up resale online stores.
PML: Indeed and returns is another and this was the subject of a recent IORMA round table.
BC: In terms of online purchases, companies have to accept returns as the recently updated distance selling regulations require this, so it will become very tricky for the brands to ensure that customers do not use the merchandise they buy and then return it. Net A Porter has gotten around this issue because they have a clever tagging system where their items are tagged in a way that the customer cannot take off the tag or claim that it fell off – it is always on the outside of the garment (without damaging the product) so the product cannot be used and then returned.
PML: What new legislation is emerging to assist luxury brands protect their copyrights? Perhaps you can comment further on the new distance selling legislation that came out in June?
CO: The time period for returns of product purchased on-line has been extended. Many items are not able to be excluded from the requirements. Grey areas have been clarified. There also are new amendments to distance selling; for example, it is clear that brands can no longer ‘check’ the box on behalf of the customer to permit companies to send them marketing materials, the customer HAS to opt in.
PL: The changes to the law can make it quite difficult for online retailers. For example for a home furnishings client, there is a bespoke element to their work because a fabric choice is available online, but because the item is offered online, it is no longer considered bespoke which means it now cannot be excluded from the regulations allowing returns within 14 days of delivery. A customer can effectively return an item even if it is a sofa that has been made for them with a special fabric.
PML: How has the opening up of emerging markets, particularly the BRIC territories and the race to capture the Chinese HNW consumer impacted your work?
PL: This has impacted our work because the brands are looking at going into China so we have been helping with the issues of market entry. For example, all cosmetics products in China have to be tested on animals and this may be counter to a brand’s ethos. If they decide to go ahead, then that product cannot be brought back as, once tested on animals, the product would be illegal to be sold in the EU. In addition, China has been ripe for counterfeiting and it is the biggest market for that and they do it well!
CO: Although we have worked with Indian companies investing in the UK in the luxury sector, it is not clear that India itself is perceived as a luxury market. In Brazil and Mexico, luxury beauty retailers have been expanding fairly rapidly and is doing well. Considering the demographics and differences in style and trends is very important; clients in one country might be more focused on colour so nail polish, eye shadow and lipstick may perform better than skin care. The challenge for brands in entering these markets is getting the right local partners who are sufficiently sophisticated to understand the premium sector.
We ask our clients, ‘how are you going to do business locally? The USA and European merchants are very sophisticated. They have been doing it for so long. Their counterparts in the BRIC countries may not be experienced – or have had a very different experience with little premium retail background or consumer oriented experience at a high level.
PL: When I was at Gap, the Founder and Chairman, Don Fisher, went over to look at the first luxury mall in China. He stood at the bottom of the escalator and watched for two hours counting the number of people coming down with bags. There were many people, but few bags! So, Gap decided to put off its Chinese entry at that time. But, times have changed and all the brands want to enter the Chinese market now.
PML: What about the trademark registration process? Do you assist clients with this and is it easier now with the Madrid Protocol?
PL: The Madrid Protocol has been around for many years. It did make it easier. But, registering in many territories in all of the classes that cover your relevant goods and services is still incredibly expensive. And, even if a company does this, if they don’t use the registrations within a period of time they become vulnerable to cancellation for non use. It is also very expensive in countries such as China and Japan where there are multiple languages. Clients have to decide if they are going to register their marks in all of these languages which can really be prohibitively expensive. But, if they don’t do it, someone else may and it will undoubtedly be even more expensive to try to get the mark back from them in the relevant courts.
PML: I came across some research that suggested the owners of luxury goods did not care about the fact that fake copies existed – although the manufacturers themselves do of course! Please comment.
PL: In fact I have noticed that some people will buy one genuine brand item but purchase fakes too. For instance a customer may buy a canvas Maison Goyard bag, but also want it in other colours. So then they may also buy good Chinese ‘knock-offs’ in the other colours rather than investing in more originals. If the genuine articles are more readily available, this could help to curtail the purchase of fakes.
CO: When you are purchasing online, as so many of us do now, sometimes it is hard to tell if you are actually buying the original. The counterfeit websites are so good that you think you are ordering the genuine article.
PML: Are you involved in experiential luxury? This is deemed to be growing at 15% per year.
BC: Yes, for example, we have a new client with hi-tech beds with many applications and we also handle a lot of hotel work. We recently assisted a client in completing the acquisition of a worldwide luxury resort portfolio with a very unique portfolio of properties. That client is now exploring how they can move the brand forward through the use of digital media and how they can accelerate access and growth of their luxury resort concept through their online presence.
PML: Can you give me one fascinating fact about IP law and Luxury?
PL: Surprisingly, even though these are luxury brands that spend a huge amount of money on their brand image, they don’t like spending money on lawyers! Therefore we need to give focused advice.
For example, some of the largest luxury brands with head offices in France are not necessarily going to the big law firms. They tend to have relationships with the smaller offices and smaller firms. They are less interested in the “brand” of their lawyers than the ability of their lawyers to give the right advice. Diptyque is a good example of a client not motivated by the brand of the law firm –– they are frequently asked why a Parisian company instructs lawyers in London when there are so many good French firms!
CO: The crux of this is the importance of “relationship” to luxury brands and this applies to their own client relations too. IP is certainly the foundation for the relationship; it is the strength of the brand. They are constantly asking themselves, ‘How do we retain our customers?’. It is the most important question for them because the product their customers buy is durable. Customers buy from a brand because of the name and reputation (for example, Hermes or Burberry). The brand can only maintain that high standing through their IP.