Legal Decision: US

Handbags at dawn
THE CASE:
Gucci America, Inc v Guess?, Inc et al US District Court for the Southern District of New York 21 May 2012

Gucci has won its trademark infringement suit against Guess, but Charles E Coleman says the damages awarded were relatively paltry, with limited injunctive relief
Many New York trademark litigators are undoubtedly feeling warm and fuzzy about French conglomerate PPR, owner of luxury-apparel brands Gucci and Yves Saint Laurent1. (Gucci led a lawsuit against Guess for infringing and diluting Guccis trademarks in 2009.) Evidently, the same cannot be said of Judge Shira Scheindlin of the US District Court Southern District of New York. In both her original and revised opinions resulting from a bench trial in Gucci America, Inc v Guess?, Inc, Judge Scheindlin concluded by expressing her hope that this ugliness which she noted was all in the service of fashion would henceforth be limited to the runway and shopping oor, rather than spilling over into the courts.2 After presiding over the messy, factintensive dispute for three years, the courts apparent disdain for the case was perhaps understandable. But given the relatively paltry damages award and limited injunctive relief granted to Gucci, more ugliness may well lie ahead. the Repeating GG Pattern with a pair of inverted Gs in each corner rendered in a brown/beige color combination. As the contested imitations of these marks had been used in connection with items in various categories of goods, a host of Guess licensees were named as additional defendants. Some, like the companys footwear licensee, Marc Fisher Footwear LLC (MFF), would feature prominently in the proceedings. Guccis theory of the case was that Guess and its Licensees [had] knowingly and slavishly replicat[ed] Guccis world famous design elements and designations [in order to] take advantage of the markets and demand Gucci has created for such designs without having to incur the developmental, promotional and advertising expenses that Gucci has incurred.3 Over the course of discovery, Gucci succeeding in unearthing evidence that arguably if only partially supported its allegations, like an e-mail from Mark Fisher Footwear explicitly requesting that a supplier please reference the GUCCI sneaker for the stripe color of one shoe, and make sure that the webbing [would] be Green/Red/Green as on [the Gucci] sample.4 the remaining marks.) As empirical research would predict, this bad intent, where present,6 seems to have carried the day for Gucci on federal and state infringement and dilution theories counterfeiting excepted7 as applied to several dozen (though not an actual numerical majority) of the products at issue.8 So specic were the courts ndings that separate appendices detailing the infringing and diluting SKUs proved necessary.9 However, Guccis vindication of its rights, while producing a narrowly tailored injunction against the defendants,10 did not result in signicant monetary damages. Judge Scheindlin awarded the plaintiff an underwhelming $4,613,478 US (roughly half from Guess and the rest from its licensees), just a fraction of the $100-200 million it had sought. While the courts lengthy analysis cannot easily be boiled down, it appears that the two major obstacles to signicant monetary recovery by Gucci were : rst, its delay in enforcing its rights against Guess and its licensees, which Judge Scheindlin found had prejudiced the defendants ability to locate and/or obtain certain evidence regarding product development, priority of use, and sales volume.11 And secondly, the courts perception of fatal aws in the methodology employed by many of Guccis experts, on issues of both liability and damages.12 It is also worth noting that Gucci claimed only post-sale confusion.13 This was likely a strategic necessity, given that few reasonable consumers could be confused at the point of sale (ie, Guess stores) about whether its products had been manufactured or endorsed by Gucci. Still, the approach had ramications ; as Judge Scheindlin observed, the fact that post-sale observers

The allegations
At issue in the Gucci v Guess lawsuit, led in Manhattan federal court on May 6, 2009, were approximately 1000 Guess stockkeeping units (SKUs) (product types varying by shape, colour, size, etc.) that allegedly infringed and/or diluted four of Guccis US Patent and Trademark Ofce-registered trademarks, as well as its unregistered trade dress. The marks, referred to by largely selfexplanatory names, are a Green-Red-Green Stripe mark; a Repeating GG Pattern, a Stylized G Design mark; a Script Gucci Design mark; and a Diamond Motif Trade Dress. This was described by the court as

The ruling
Documentary evidence like the quoted e-mail, bolstered by deposition and trial testimony, ultimately persuaded Judge Scheindlin the factnder in this bench trial that Guess [had] intended to copy the upscale look of the Repeating GG Pattern and the Diamond Motif Trade Dress, as well as the Green-Red-Green Stripe.5 (With a few minor caveats, the court was not convinced of any intent to copy, or even of any actionable similarity in commercial impressions made by

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are removed from purchasing decisions makes post-sale trademark cases inherently difcult to prove, speculative, and subject to increased scrutiny.14

The lessons
It is, of course, dogma of trademark law (if not law, generally) that one should not wait to enforce ones rights. This case provides a concrete example of the potential consequences of waiting. While Guccis tactical delay here did not ultimately prevent the enforcement of its trademark rights via an injunction, or provide a sufcient basis for the defendants afrmative defences of laches or acquiescence (among many others raised),15 the court explicitly took that delay into consideration in calculating damages. This case also demonstrates the importance of educating company employees about how to talk about and/or use competitors designs, whether as inspiration or otherwise. It would be nave to believe that the practice of using inspiration boards or looking to industry trends during product development will cease. Nevertheless, incidents like those cited as particularly signicant by Judge Scheindlin (see eg, above quotes; id at *31 [MFF] sent clippings of Gucci fabrics to Claser, its Italian fabric agent, in April 2006), should be avoided, where possible. In-house attorneys, too, should keep in mind that their conduct might be deemed signicant in trademark litigation. In this case, for example, the court closely examined the Guess legal departments response to its licensees infringement.16 In-house counsel can and will be called as witnesses in trademark infringement and dilution cases.17 Note also that most federal judges will not have had rst-hand experience with trademark registration, and will have to be educated about the signicance of key events during the prosecution process.18 This case shows that parties and litigators must consider whether to demand a jury trial in a trademark infringement suit: judges will more closely scrutinise experts while juries will likely be less critical of expert methodology, if only because they need not provide a thorough explanation of their reasoning. On the other hand, the evidence that persuaded Judge Scheindlin of the Gucci marks fame might well have failed to persuade a jury. Even during bench trials, however, litigants must be sure to tell the story of their brands even, and maybe especially, defendants. In nding that Guesss non-brown/beige

colorways [were] substantially different from [those of] Gucci, for example, Judge Scheindlin noted that [t]hese products frequently feature bright and/or neon colors, garish or bling-y hardware, and [thus] generally succeed in communicating the Guess Girl image that defendants have been careful to cultivate over the years.19 Finally, even when it seems relatively clear to litigants and their counsel that an aesthetic functionality argument will not prevail in a particular case and/or before a particular judge, it may nevertheless be advisable for trademark infringement defendants to remind judges of the policy concerns on which the aesthetic functionality doctrine is based.

Judge Scheindlin awarded the plaintiff an underwhelming $4,613,478 US (roughly half from Guess and the rest from its licensees), just a fraction of the $100-200 million it had sought.
Although the Guess defendants aesthetic functionality argument failed in this case20 and, in fact, received only cursory attention from the court, which may well have applied a more stringent legal standard than warranted under controlling case law21 Judge Scheindlin nevertheless recited classic aesthetic functionality language in reaching her rather reserved conclusions.22 As for whether those conclusions are sufciently reserved to keep this dispute alive, only time will tell.
Footnotes 1. The latter company recently told Womens Wear Daily that it would henceforth do business under the name Saint Laurent Paris instead of Yves Saint Laurent; nevertheless, I refer to it here as YSL. 2. Gucci America, Inc, v Guess?, Inc, 09 Civ 4373 (SAS), 2012 US Dist LEXIS 84232, at *117 (SDNY Jun 18, 2012). 3. id at *21. 4. id at *23. 5. id at *35. 6. Barton Beebe, An Empirical Study of the Multifactor Tests for Trademark Infringement, 95 CAL. L. REV. 1581, 1582 (2006) (the data show that a nding of bad faith intent is in fact dispositive, as much in the district courts of the Second Circuit as in those of any other). 7. See eg, Gucci America, 2012 US Dist LEXIS 84232 at *75, *106.

8. See eg, id at *94 (Gucci has submitted evidence that MFF knowingly and in bad faith copied Guccis GRG Stripe [conduct] so egregious that a full Polaroid analysis is not necessary to conclude that there is a likelihood of confusion with Guccis GRG Stripe); *103 (basing GRG Stripe dilution ruling largely on clear evidence of intentional copying). 9. id at *118-*119. 10. id at *112-*113. 11. id at *45, *114. 12. id at *49-*63. 13. As the court explained: This type of confusion occurs when a potential purchaser, knowing that the public is likely to be confused or deceived by the allegedly infringing product, will choose to purchase that product instead of a genuine one in order to gain the same prestige at a lower price. id at *67 (internal citations omitted). 14. id at *67-*68. 15. id at *114. 16. id at *21 (Guess also did nothing to follow up on its demand that MFF put an effective intellectual property clearance procedure into place); *26 (Guesss recall of products bearing the GRG Stripe design, imperfect as it may have been, when they came to the attention of its legal department is indicative of its good faith). 17. id at *29. 18. See id at *30 (nding trademark examiners reversal of position after a phone call with applicant suspect). 19. See id at *93-*94. 20. id at *87. 21. id at *66, *87. 22. See, eg, *95-*96 Stripe patterns are basics that every brand must be able to use freely in order to compete, excepting, of course, those instances where a particular conguration has come to be identied with a particular brand.

Author

Charles E Colman is the founder of Charles Colman Law, PLLC, where he handles intellectual property licensing and other legal matters arising in fashion and other creative elds.

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