Luxury Brands Retail Forum, London, September 2015
A report from Pandora Mather-Lees, Director, IORMA Luxury
The International Copyright Council estimates that the global trade in counterfeit goods is now around $1.77 trillion worldwide. The MIP forum is therefore timely and was one of the more useful and enlightening conferences this year on the subject of luxury, being specifically aimed at in-house counsel and the key legal drivers underpinning the luxury industry.
It should be no surprise that the topics included registering patents, trademarks and designs, the proliferation of counterfeit goods, the challenges presented by wearable technology, social media, emerging markets and managing one’s valuable brand equity and flawless reputation online.
Much ground was covered in the one day which hosted speakers from Britain’s most prestigious brands. The scene was set by Duncan Hinnells of Aston Martin who spoke with incredible clarity about the complex issues for legal counsel of luxury brands in tracking and tackling the industry’s concerns. Duncan highlighted the importance here of preserving brand image for sustaining market capitalisation and leveraging finance. It requires skill to maintain authenticity, consistency and desirability whilst managing scarcity.
This was an opportunity to provide valuable advice and to share lessons learned in a world where the purveying of infringing goods, parody and the passing off of established brands has never been so easy.
It is helpful to illustrate a few case studies to highlight the depth of the problems faced by the legal profession.
A fascinating instance was presented by Pernod Ricard’s Group IP Director, Mathieu Prot, who is responsible for protecting a range of prestige spirits. This was a heart-warming story about how one company turned the infringement problem on its head by encouraging its customers to fight a real cause affecting their enjoyment of the product.
Customers of luxury brands are among the most loyal of purchasers and this is put to good use in the case of Royal Salute and other spirits with the innovation of the ‘connected bottle’. Fake bottles of spirits are not good for the imbiber. So what Pernod Ricard has now done is to embed QR code technology in the bottle which can be scanned (via WeChat) so that the customer can prove the authenticity of their favourite tipple, simultaneously becoming an active defender of the brand. Apparently this seems to work with 42% of their key drinkers being aware of the technology and some 2000 consumers a day scanning the codes and being rewarded for finding infringements. It seems that IP perpetrators however collect genuine empty bottles, filling them with cheap equivalents and that is tricky to control.
Lee Gage, Chief Legal Counsel with Myla lingerie cited that the designs are not so much copied as are the fabrics and patterns. Spectra Systems, an American company and IORMA Associate, just launching in the UK provides anti-counterfeit technology embedded into fabrics so that the design can be authenticated easily with a scanner. Spectra has considerable success with luxury brands because this concept, like Pernod Ricard’s, makes it easier to spot infringements using a simple smartphone app.
Cases of parody were mentioned, one of the most famous being the Greenpeace copy of a Shell oil campaign whereby the copy was almost identical in look and feel to the original, but bearing a very different message. In the luxury sphere, Luxury Goods International which owns Yves St Laurent has filed a trademark lawsuit against Jeanine Hellier of What About Yves. The infringing item, a black t-shirt was a protest about the brand dropping the word Yves from its name. The case was won, for the parody was seen to dilute the YSL brand through its use of inferior materials and also because it represented unfair competition.
Keeping a strong dialogue with your marketing department is vital to ensure everyone in the company is pursuing goals that are aligned and using a tone that is appropriate, whatever the purpose of the communication, from legal to social. Furthermore, in a global world, one’s sensitivity to place, time and culture is vital to avoid misrepresentation.
Darren Gillan of Georg Jensen, a brand passed down from generation to generation, spoke about trust issues and personalization in the jewellery industry. Jensen used social media successfully when Deborah Meaden tweeted about a new purchase and was immediately followed and tweeted back by the marketing team. This led to a deeper dialogue which continues and has built and reinforced a positive perception of Georg Jensen, not to mention a significant following.
On the negative side, trolling of sites and social media has been an issue for luxury brands. There is the recent case where Jane Birkin removed her name from Hermes’ famous Birkin bag because of appalling torture of live crocodiles on farms. There was a torrent of abuse from an outraged public across social media which still continues. Hermes has chosen to leave up these comments, rather than take them down and have a possible backlash – something which can often happen. In such a case social media mediation needs to be handled sensitively and however carefully it is managed, the wrong messages can still slip through the net.
Speaking of slipping through the net, teasers on social media and indeed any advertising are to be rolled out with caution. The panel advised brands to tread carefully so as to avoid designs being revealed before adequate protection has been arranged globally.
Twitter hashtags need to be created with thought so they are distinctive and less likely to be copied and taken over.
More social media campaigns today encourage a dialogue so as to engage with the customer. Whilst this is positive, it is really important to think it through so that brands are not left open to an array of unwanted repercussions. Brands with a strong Facebook presence are closely watching the roll out of the new DISLIKE button given this could have a negative impact on brand perception and become incongruous with the dialogue they are trying to initiate.
Vertu presented a horrifying revelation on the blatancy and scale of infringements, not only of their exquisite prestige handsets, but also service centres, accessories and store fronts. Being the only luxury phone company in a world where mobile phones and luxury goods have both grown exponentially, Vertu has its work cut out in a continual round of shutting down shops in Russia and elsewhere that bears the logo or something passing off as this. It goes beyond the logo to store styling and colouring to the extent that it confuses the consumer.
The same has happened in China with ‘fake’ Apple stores right down to staff contracts and every detail being duped.
Yellow, a major conference sponsor, presented a case study from Rolex showing how the anonymity of online B2B selling is equally confusing. There are companies offering fake Rolex timepieces in large quantities. Yellow continually pursues thousands of cases of fakes across the internet globally and despite the plethora of copies of luxury brands, it claims you can regain control. Yellow helps brands to find and flush out the perpetrators and warns purchasers to watch out for country of origin, large quantities offered and special offers which are generally warning signs of fakes.
Delegates were warned to scan property leases carefully when negotiating concessions at airports and luxury shopping centres. An example was given by two delegates where they have faced contractual issues in negotiating bricks and mortar contracts at Westfield.
Tricky clauses have been inserted imposing a % of returns for click and collect sales too. The line Westfield has taken is that it is offering a benefit for the ‘collect’ aspect of this. Generally prospective tenants have these clauses removed from their contracts and moreover, they are cumbersome to prove and manage. Nevertheless, this highlights some issues with the convergence of the clicks and bricks concept.
On a pure e-commerce front, Yieldify overcomes some of the legal issues with customer retention and attribution. Yieldify places ads on social media which take you to their proprietary site where you sign up to T&Cs, legally allowing yourself to be tracked and tagged.
When you subsequently visit a website and are attempting to leave before completing an online purchase, you are served up a message with an offer in an attempt to retain you – maybe a bespoke luxury handbag. Yieldify claims to have mastered the art of managing “exit intent” by converting customers back into buyers just before they abandon the site.
A tag allows them to report on user behaviour so that offers can be tailored and they do so legally without infringing data protection. Given Yieldify claims that 75% of customers abandon carts when they actually intended to make a purchase, this must be worth considering.
Wearable technology was an important part of the conference discussion as it is a growing phenomenon extending far beyond the Apple watch. Infringements have come into play in cases such as the Ralph Lauren “Smart Shirt” where the clothing retailer has been pursued for copying a special textile using compression technology to measure heart rate and breathing. Pioneered by Sarvint Technologies using speciality fibres, the Smart Shirt is one of the first cases where technology and fashion converge and Sarvint claims that Ralph Lauren is preventing it from being able to raise capital and build its brand. In another case G-Star Raw has brought a case against Rhodi clothing company for copying its design for specially creased jeans technology.
Key concerns facing luxury brands
Case histories, then, are a plenty and new examples hit the media weekly. At the MIP conference these examples clearly brought to light serious issues having a bearing on the future of brand protection and posing difficulties for legal counsel.
The first issue is the extent to which companies have to go in an international world to protect their brands and the limited resources they have to do this. Even large global retailers cited budget as a restriction in being able to pursue every infringement discovered. Budget restrictions also require you to choose carefully what your portfolio of IP protection will be – especially when working in an international arena where you may have to register a mark in multiple languages in just one country (China for instance).
Second was the blatant extent to which criminals will go to make money out of a brand as seen in the case of Vertu.
Third is the importance of making the right decision as to whether to license a design or a patent or trademark. In many cases designs are not registered, however it can afford better protection. Surprisingly, in China it appears to be the only real means of protection and must be done first, in China, before any other market otherwise it does not pass the ‘novelty’ factor of being a new innovation. Land Rover came a cropper as a result of this ‘first to file’ idiosyncrasy in China as have other automotive brands including Ford in Russia when attempting to trademark its logo. Ben Wright of Land Rover also warned against attempting to register partial designs such as a line on a car – this is not possible to do in China.
In China there are also many horror stories of companies registering their brands in English and not in Mandarin as in the case of Michael Jordan sports brand vs. Qiaodan. In this case another local party registered the Mandarin equivalent as a result of which they now have a strong market legally selling similar products or virtual copies of the original. As if this is not bad enough, the principal luxury proprietor can even be sued for introducing their original product and corporate identity into a market where a perpetrator has pre-registered it!
Another issue is bureaucracy, especially in India. Where time is critical in launching a brand in a new market, it is not unusual for commercial decisions to have to be weighed up against legal expediency.
Finally, it is horrifying to hear just how far criminals will go to line their pockets. Stories were cited such as acquiring shipping manifests, factory managers running moonlighting nightshifts, manufacturers stealing CAD files sent in good faith and copying designs were all not uncommon.
On the plus side, it does now hold true that intentional infringement of a registered design has serious repercussions and that rights across the portfolio of options for legal counsel are being shored up.
The luxury industry is enjoying 10-15% yoy growth and with one third of these sales taking place in Asia, managing intellectual property is serious business. According to PWC 31% of British consumers who bought fakes, thought they were buying the genuine article.
Use it or lose it was the motto of the day and protecting a luxury brand is becoming more complex in the global market. Persistence is advised, keep going as far as your budget allows. Both design and trademark rights are an important part of you IP portfolio and developments in technology such as wearable tech (a market estimated by TMR to be $5.8bn by 2018) creates added complications for in-house counsel.
A final piece of advice from Nick Kounoupias, Chief Counsel of ACID an organization fighting copyright infringement is apt to conclude this conference: Don’t try and do everything on your own; all luxury brands face similar problems and have made the same mistakes so collaborate and pull together to tackle the problems.
This was the inaugural MIP Luxury forum and the entire programme and conference organization was excellent. The venue and facilities were appropriate, the content and topics entirely relevant and the calibre of delegates and speakers second to none. Pressing issues were faced head on and the nitty gritty dealt with from differing perspectives.