Archive | Gray Market RSS feed for this section

Val Colbert: Who’s got the button?

A great all-around IP question is raised by Marty Schwimmer.  [UPDATE:   Note that the link to the words “sites like this one is now to a pretty much dead page.]

val-colbert-chanelHere’s an interesting fact pattern. Who is the source of the jewelry pictured above? This jeweler. Jewelry companies purchase luxury clothes and ‘re-purpose’ the buttons (bearing the logo) into jewelry, and sell them on sites like this one. [Button Jewelry by] Val Colbert[, which manufactures this,] has brought a [declaratory judgment] action against Chanel.

Here is a post from Prof Goldman’s blog on the First Sale doctrine with several useful links.

The button designs might be copyrightable, too. If you’re so inclined, you can begin your reading with Lee v A.R.T.

This is law-school-exam-quality stuff.  What’s the role of a potential dilution claim here?

Let’s do some issue-spotting, then.  Here’s the money quote from the Goldman link:

In our article, Mr. Wilson and I argue that, in the context of the Internet secondary market, whether the distributor is affiliated with the manufacturer is irrelevant as long as the goods are genuine. Courts should apply a presumption of no affiliation between the reseller and the manufacturer, and for any successful Lanham Act claim, actual deception regarding this affiliation should be required. We also propose the elimination of initial interest confusion as a cause of action under the Lanham Act, as well as legislatively strengthening trademark first sale and nominative fair use doctrines, so that making use of those defenses does not create a higher bar to scale when the resale occurs online versus in a brick-and-mortar setting.

Of course, they had me at “no chance of affiliation” but I’ll take a double “kill initial interest confusion and make it practical to defend infringement claims” chaser any time.

The labels we apply to this business can be confusing, and this is true whether we analyze the problem via copyright or via trademark.  The claim of the Big Brand Equity player — in this case, Chanel — would hit these points, I imagine:

Chanel logo

  1. You didn’t build that — Chanel did.  Your jewelry confection would have no value to the consumer and produce no revenue to you if it didn’t integrate not just our product but all the brand messages [trademark] and originality [copyright] Chanel has invested in that object.
  2. You say the consumer won’t be confused [classic trademark] and won’t believe that Chanel has approved, endorsed or is affiliated with [latter-day trademark] you or your product, but how can you say that in an era when the extent of IP enforcement rights are so well articulated?
  3. Finally, your use of our trademark is in connection with fashion-related merchandise.  Your “repurposing” argument, Val Colbert, would never impress us — but it would be bad enough if you were repurposing buttons from our clothes on goods that are unrelated to to our market, if such a thing exists.  We don’t have to even figure out if such a thing exists, however, because you’ve hardly “repurposed” at all.  This stuff is right in our breadbasket, and if anyone’s going to make a Chanel bracelet it’s going to be Chanel… which we already do.

Val Colbert Button JewelryThe responses?  Maybe Val Colbert says this:

  1. You built it, all right, and you did a nice job doing so.  Then we, or our predecessor, bought it.  You got paid, and we’ve got the buttons. Thanks!
  2. Your consumer expectations argument proves too much,  It would essentially bring the line of where consumers will or won’t be confused to infinity.  Decades of brand overreaching, even where it has been successful, shouldn’t effect a change in the law.
  3. You’re forgetting about the heart of the first sale doctrine, Chanel.  That doctrine is not in the least offended by use of an IP-encrusted doodad in the same or similar category of goods by a subsequent purchaser as by the original markholder and seller; in fact, it’s more or less the premise of the doctrine.  So button it up!

Great pickup, great issues.

Despite my normal orientation, however, on both the law and the litigation reality of it — given, after all, that the Second Circuit and Google aren’t involved — I think Chanel wins this one.

I’m not even sure I wish I were wrong.

UPDATE:  Well, we’ll never know!

Grey is OK

The Business Review (Albany) reports (reg. required) on what could be a very important decision relating to the importation of grey goods:

The U.S. Court of Appeals for the Federal Circuit has directed the U.S. International Trade Commission to reconsider its ruling prohibiting domestic sales of John Deere harvesters that were produced for the European market…

At issue is whether the products intended for the European and U.S. markets are materially different. In its decision the appellate court directed the trade commission to require Deere to prove that sales were based on the differences in the products….

The European version was less expensive because the marketing climate in Europe caused the company to reduce prices there, [a partner from the winning firm] said.

The story is evidently really a press release from the winning law firm. Anyone with a link to the actual decision is invited to send it along to <likelihoodofconfusion at  gmail>.

UPDATE:  It’s still going on. And it’s… confusing!  Again:  Someone tell me when it’s over.  And also, what “over” looks like.

Canada: Copyright law not meant to protect distribution networks

Canada Coat of ArmsThe Gray Blog reports that the Canadian Supreme Court has rejected an attempt — the sort made all day all over North America — to utilize IP law as a “guaranteed distribution network protection act.” It’s the “grey market” or “parallel market” issue: Does a company have the right to demand that its goods be sold only through “authorized dealers”?

The law is pretty clear that it can’t, but firms cook up all sorts of causes of action — tortious interference with contract, trademark infringement and dilution — to try to make get around the free market and to protect their distributors. This, in turn, protects their ability to control both retail prices and brand placement. These are completely legitimate business goals, but misusing the IP laws to achieve them is crooked. Unfortunately, the courts — typically dizzied by the assertion of the strong trademark rights that companies big enough to have this isue are likely to have — go along with this all too often.

Copyright, if you can make it work, is the best for this, because it has those famous teeth: Attorneys’ fees and statutory damages. The prospect of losing a copyright case is devastating for a small business. So big firms claim that all sorts of things, such as product descriptions, labels, the way the sun reflects off the bottle — are “protected works.”

Well, in Canada at least, that goose won’t fly.  In this case, the focus was on the applicability of the first-sale doctrine (which gives someone who owns stuff to sell it to whomever he wants once he himself bought it lawfully) to an overseas sale:

The Court explained that “[f]or KCI to succeed, it must show that Euro imported works that would have infringed copyright if they had been made in Canada by the persons who made them.” However, in the case of KCI, the products at issue were Toblerone bars bearing copyrighted works which where first manufactured and sold in Europe by the Licensors and owners of the copyrights. The Court reasoned that under section 27(2)(e) of the Copyright Act KCI as a licensee may not sue the owners of the copyrights for copyright infringement. Its only remedy is for breach of contract. Accordingly, no cause for copyright infringement exists against the legitimate purchaser.

“Toblerone bars bearing copyrighted works.”  It’s preposterous that the court even got this far.  The distortion of the IP regime seems irreversible.

UPDATE:  Related developments, and otherwise, in places closer to home (regular readers can skip those links!  you’ve seen them already).