‘Knockoffs’ Don’t Violate Trademarks, Justices Rule
Attention, Wal-Mart shoppers!
The Supreme Court handed a victory Wednesday to cost-conscious consumers, ruling that most “knockoff” products cannot be knocked off the market by the original designers.
Shoes, jewelry, golf clubs or other merchandise that simply copy the distinctive look of a famous brand do not violate the nation’s trademark protection laws, the justices said.
To win protection, designers must show that customers may be fooled into thinking that they are buying the brand-name item, the court said.
The 9-0 ruling overturned a $1.6-million verdict against Wal-Mart Stores Inc. for having sold a line of children’s clothes that copied the look of an innovative designer.
The case before the court (Wal-Mart Stores vs. Samara Brothers Inc., 99-150) has been closely watched by fashion designers and by retailers who do an estimated $40 billion annually in sales of store brands.
Wal-Mart’s lawyers called the outcome a victory for consumers. “This sends a message that the focus of the law should be on consumer welfare, not the welfare of trademark owners,” said William D. Coston, a Washington attorney who defended the retail giant. “It ensures that lower- and middle-class shoppers can purchase contemporary fashions at reasonable prices.”
Samara Brothers had designed and marketed distinctive seersucker outfits that featured bright appliqued flowers, fruits and hearts. Chain stores, including JCPenney, contracted to sell the clothes.
In 1995, Wal-Mart buyers sent photographs of the clothes to another garment maker, who copied the designs and produced a line of knockoffs for the nation’s largest retailer. The next year, Wal-Mart undercut their retail competitors--including JCPenney--and earned more than $1-million profit doing so.
Samara sued, seeking a court order barring further sales of the knockoffs, as well as damages for lost profits.
In a federal court in New York, the designer won on all counts. A jury handed down the damages verdict in 1997, and the U.S. Court of Appeals upheld the judgment on grounds that the “inherently distinctive” look of Samara’s clothes deserved trademark protection.
On Wednesday, Justice Antonin Scalia disagreed, saying that the trademark laws are intended to protect consumers and competition, not just brand-name manufacturers.
Trademark protects a brand name, such as “Nike,” and its symbol, the “swoosh,” he said. But this protection does not automatically extend to the distinctive look of a Nike shoe. The trademark laws come into play only when a design is “likely to cause confusion . . . as to the origin” of the product, he said, quoting the Trademark Act of 1946. Also called the Lanham Act, the measure provides for the registration and protection of trademarks.
“Consumers should not be deprived of the benefits of competition,” Scalia said, by allowing a flood of lawsuits against the sellers of knockoff products.
New York attorney Arthur Handler, who represents a coalition of 3,000 makers of generic and store-brand products, called the ruling “an excellent decision. We believe in open competition, and we don’t think a single manufacturer should be able to get monopoly protection for a product design.”
But other legal experts stressed that designers whose products are instantly recognized by fashion-savvy customers can still win protection.
“Suppose you look at a watch and say, ‘That has to be Rolex,’ or look at the grille of a car and say, ‘That’s a Rolls-Royce,’ ” said Atlanta attorney Jerre Swan. In such instances, a consumer would think he or she is looking at a brand name. The trademark laws offer protection against that kind of confusion in the marketplace, he said.
“I do think these cases [against knockoff products] can be brought, tried and won in the future,” said Swan, who filed a brief on behalf of the International Trademark Assn.
“I don’t think the ruling is fair to designers,” said Edie Locke, regional Los Angeles director of Fashion Group International, a worldwide trade group of fashion, beauty, costume and interior designers.
“Music, books, toys, even pharmaceuticals are protected, why not fashion? Granted, designers have always been knocked off, but to have the higher court say ‘It’s OK guys to knock off’ is surprising and disturbing.”
Los Angeles designer Cynthia Vincent, whose clothing line is called St. Vincent, said that “if just moving a button” means that a garment can be knocked off, then “it will definitely make it harder for designers to sue.”
“Everything is generated so fast, and trends are so quick. I’m not even talking about the third and fourth tier of designers. These days Calvin Klein is inspired by Prada,” she said.
Barbara Bundy, vice president of education for Los Angeles’ Fashion Institute of Design and Merchandising, said that the Supreme Court’s ruling “is the best news in the world for the consumer because it gives them the opportunity to have fashion at a price they can afford. Normally, the person who buys a knockoff is not going to buy the high-priced, out-of-their-reach original.”
Wednesday’s decision did not encompass counterfeit goods, which are clearly illegal. Nor did it involve copyrights or patents. Designers sometimes seek copyright protection for their works, and Scalia stressed that they remain free to do so.
However, he cautioned judges to think twice before allowing manufacturers to bring lawsuits based on trademark claims.
“Competition is deterred not merely by successful suit but by the plausible threat of successful suit,” Scalia wrote. Unless designers can show consumers are being fooled, judges should throw out their claims of protection at an early stage, he said.
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Times fashion writer Michael Quintanilla contributed to this story.
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