Fashion Law: The IP and distribution issues facing the industry today

Agreements with Fashion Designers:

from the Design Services Agreements to the Trademark

and Design License Agreements

Mattia Dalla Costa

Avvocato/Rechtsanwalt

New York
15 February 2013
Summary

SUMMARY

1. Introduction and overview

2. Agreements with Fashion Designers (DESIGN SERVICES AND

CONSULTANCY AGREEMENT, TRADEMARK LICENSE AND
CONSULTANCY AGREEMENT, TRADEMARK AND DESIGN
LICENSE, EXCLUSIVE SUPPLY AGREEMENT to THE MAISON)

3. Common clauses in the fashion sector

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1. Introduction and overview

A TEXTILE COMPANY may find it beneficial to enter into

-a design services agreement where a designer or his consulting company

simply provides design services in return for compensation;

-a license agreement where a textile company manufactures and autonomously

sells a textile company’s products under license with a given trademark and/or
design in a certain territory;

-a supply agreement through which a textile company undertakes to act as

exclusive supplier of the famous fashion company (hereafter “THE MAISON”)
following the design directives of the latter;

- or some hybrid and combinations of the above.

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1. Introduction and overview

Fashion licensing agreements and agreements with designer

should contain, among other things,

-A clearly defined scope: what is the role of the DESIGNER?

-Ownership of the IPRs on design, trademark

-Quality control provisions and rights of inspection

-Advertising and possible promotion restrictions

-Non-competition

-Appropriate warranties against infringement of third party´s IP

rights

-Termination: sell-off period of the closeouts / inventory 4

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1. Seasonal collections

In the fashion industry designers produce clothing

prêt-à-porter (or “ready-to-wear”)

(which is the term for factory-made clothing, sold
in finished condition, in standardized sizes) as
distinct from

haute couture (or “bespoke”) Î

(i.e. a clothing item made to a buyer's specification
(personalized or tailored).

The time is not marked by months or years but ……

by the seasonal collections, at least 2

AUTUMN / WINTER SPRING / SUMMER

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2. Agreements with Fashion Designers

1) DESIGN SERVICES / CONSULTANCY AGREEMENT

the DESIGNER provides his consultancy services on an exclusive basis to

the TEXTILE COMPANY which becomes the exclusive owner of all
DESIGN IPRs against payment of a lumpsum / royalty / fixed amount

2) TRADEMARK LICENSE AND CONSULTANCY AGREEMENT

the DESIGNER HAS HIS OWN BRAND and grants to LICENSEE (the
TEXTILE COMPANY) the exclusive license to use the trademark only on
the clothing manufactured according to the designs provided by the
DESIGNER but transferred and sold to the TEXTILE COMPANY which is
entitled to sell, distribute and promote the goods (after choosing the
materials, doing the tailoring, cutting, assembly, inspection and packaging)

Îthe trademark (e.g. VIVIENNE WESTWOOD) is licensed but the IPRs

on the designs are transferred and sold by Ms. VIVIENNE WESTWOOD to
the TEXTILE COMPANY

Î Option: VIVIENNE WESTWOOD through her company acts

as commercial agent in the UK to advertise, promote and sell the cloths
manufactured in Italy by the TEXTILE COMPANY
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2. Agreements with Fashion Designers

3) TRADEMARK AND DESIGN LICENSE

the DESIGNER HAS HIS OWN BRAND and grants to

LICENSEE (the TEXTILE COMPANY) the exclusive license
to use the trademark only on the clothing designed by the
DESIGNER but manufactured, sold, distributed and promoted
by LICENSEE:

Î the trademark (e.g. POLO RALPH LAUREN) and the

designs belong to the DESIGNER (Mr. RALPH LAUREN) and
are ONLY licensed to the TEXTILE COMPANY

4) EXCLUSIVE SUPPLY AGREEMENT

the TEXTILE COMPANY acts as exclusive supplier of THE

MAISON for clothing to be manufactured under the trademark
and according to the design of THE MAISON: the TEXTILE
COMPANY does the tailoring, cutting, assembly,
manufacturing, inspection and packaging of the goods under the
control of THE MAISON which usually chooses the materials.
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2. Design services and consultancy agreements (OBJECT)

For each seasonal collection the DESIGNER shall

a) provide written descriptions of design themes and concepts

b) prepare designs, drawings and sketches

c) manufacture paper sample patterns (= paper or cardboard

templates from which the parts of a garment are traced onto fabric
before cutting out and assembling), and prototypes of each mock-up
(= an original garment from which other garments of a similar style are
copied in order to test color, finish and design details which cannot be
visualized from the initial drawings and sketches) as well as samples of
trim and fabrics in the desired qualities and colors.

d) provide color and textile swatches related to each mock-up;

e) provide consultancy services for the manufacture and testing of the
prototypes of each mock-up to be manufactured by the TEXTILE
COMPANY as well as for the final production of the clothing of the
seasonal collections (A/W and S/S);
f) take part in the fashion shows and relevant advertising activities as
well as to the photo shootings.
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2. Design services and consultancy agreements

ASSIGNEMENT OF THE IPRs

(a) DESIGNER hereby agrees that all materials, ideas,

artwork, designs, patterns, sketches, whether or not
copyrightable, created or adapted by him, whether alone or in
conjunction with any other person, firm or corporation arising
out of or created in connection with Services provided for the
TEXTILE COMPANY hereunder (the "Work Product") are
hereby assigned to and shall be the sole property of the
TEXTILE COMPANY.

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2. Exclusive Supply Agreement with THE MAISON

ASSIGNEMENT OF THE IPRs (in case of supply)

The designs, mock-ups, prototypes, tests and patterns furnished

by THE MAISON or created by the SUPPLIER for the performance
of THE MAISON orders shall remain the sole property of THE
MAISON and shall be used exclusively for the manufacture of the
Products to be supplied to THE MAISON. As a consequence, they
cannot be communicated to or used by third parties without the
written consent of THE MAISON. The SUPPLIER must affix, in an
indelible manner, on the mock-ups and sheet plans, removable or
other labels indicating that they are the property of THE
MAISON.

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2. Design services and consultancy agreements (REPS and WARRANTIES)

ORIGINALITY – NO IPRs INFRINGEMENT

(c) DESIGNER represents and warrants that the Work

Product provided by him hereunder will be original works
created by him or a third party and not previously
published in any form and that the use by the TEXTILE
COMPANY of the Work Product will not violate or
infringe any copyright or other proprietary or privacy
right of any other third party and that the TEXTILE
COMPANY will have the right to use the Work Product in
perpetuity. In the event of any breach of this representation
and warranty, DESIGNER agrees to indemnify the
TEXTILE COMPANY and hold it harmless from and
against any and all claims, costs, liabilities and expenses
incurred by it as a result of such breach.

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2. Design services and consultancy agreements (REPS and WARRANTIES)

NO PREVIOUS ASSIGNEMENT

(b) DESIGNER hereby assigns exclusively to the TEXTILE COMPANY in

perpetuity all right, title and interest of any kind whatsoever, in and to the Work
Product, including any and all copyrights thereto (and the exclusive right to register
copyrights), and represents and warrants that he has not previously assigned
such rights or any portion thereof to any other third party. Accordingly, all rights
in and to the Work Product, including any materials derived therefrom or based
thereon, shall from its creation be owned exclusively by TEXTILE COMPANY
and DESIGNER will not have or claim to have any rights of any kind whatsoever in
such Work Product.

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2. Design services and consultancy agreements

INDEPENDENT CONTRACTOR

In performing Services under this

Agreement, DESIGNER will be acting as
an independent contractor and not as an
employee of the TEXTILE COMPANY
for any purpose whatsoever, including but
not limited to workers compensation, health
insurance and other benefits offered by the
TEXTILE COMPANY to its employees.
Further, DESIGNER will not have any
authority or ability to bind, contract on
behalf of or otherwise obligate the
TEXTILE COMPANY in any manner.

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3. Common Clauses

DURATION

This Agreement will be effective as of the launch of the Spring/Summer

Collection 2013 for a test period of two seasons during which either Party
can withdraw from the Contract by giving the other Party at least ___ days´
prior written notice. It is further understood that any notice of withdrawal
must take into account the time frames which are characteristic for this
line of business in order to avoid any harm to the realization and/or
marketing of the Collection.

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3. Common Clauses

TERMINATION

¾GOODS:

Æ Sell-off period of the closeouts (= discontinued and end of season

products) sold to TEXTILE COMPANY approved closeout retailers

Æ Right to purchase by TEXTILE COMPANY

ÆDestruction of the clothing

INVENTORY OF REMAINING PRODUCTS

LICENSEE shall furnish to LICENSOR a certificate listing its inventory of

Products on hand (which shall include, without limitation, all used
components and packaging) and work in progress (including without
limitation, raw materials, textile and accessories) together with the location
thereof.
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3. Common Clauses

NON-COMPETITION AGREEMENTS

™If you assist a more established designer

Î avoid non-competition clauses precluding from

continuing work on existing core business (or for so-called
“fast-fashion” collections like Zara or H&M)

™If you assist a TEXTILE COMPANY as opposed to an

established designer with other projects

Î include restrictions on the time the designer must

devote to the TEXTILE COMPANY

Î right of termination if the designer works too closely

with a competitor.

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3. Common Clauses

MATERIALS AND OTHER SUPPLIES PROVIDED BY THE

MAISON

The Supplier will be liable for any deterioration, loss, theft and/or
misuse of supplies and materials procured, either directly or
indirectly, by THE MAISON for the cutting and/or assembly and/or
manufacture of the Products. The Supplier must inform THE
MAISON of the quantities of scraps arising from the work with
which it has been entrusted on a six-monthly basis, with a view to its
destruction or use for other purposes determined by THE MAISON.

PURCHASING OF THE MAISON PRODUCTS

Any supplier or sub-contractor wishing to wear a THE MAISON

ready-to-wear item or offer one as a gift, whether or not it is
manufactured in the premises that they manage or work, must
purchase such article in a THE MAISON store under the customary
sales terms of the latter or in accordance with the applicable specific
conditions specified for such case. Furthermore, the Products
manufactured in such premises are registered designs and may not
be worn by anyone without THE MAISON trade mark.
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3. Common Clauses

LABELLING OF THE PRODUCT AND

TRACEABILITY OF THE BATCHES

The Supplier undertakes to put in place the

necessary resources with respect to the
traceability of the Product (date of
manufacture, no. of the batch, component
code, identification of the Supplier, etc.) so
that THE MAISON is in a position to locate
the various items of the Product belonging to
a single batch, at any time during the course of
the manufacturing process until it is made
available at THE MAISON logistics center.

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3. Common Clauses

GOODWILL - NO INDEMNITY

TEXTILE COMPANY hereby waives any claim which it has or which it may have in
the future against THE MAISON arising from any alleged goodwill created by
TEXTILE COMPANY for the benefit of THE MAISON or from the alleged creation or
increase of a market for Licensed Products.

The Trademarks represent the substantial goodwill created by THE MAISON

through its use and sale of high quality products and by THE MAISON's policy of
distributing its products only through retail outlets that conform to THE MAISON's
strict standards for appearance, image, clientele, customer service and overall high
quality. LICENSEE declares that it is experienced in the manufacture and distribution of
certain high quality products.
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3. Common Clauses

QUALITY CONTROL AND APPROVALS

• QUALITY CONTROL
LICENSEE acknowledges that the Trademarks represent the prestige and goodwill that LICENSOR has earned
for itself and are well recognized in the minds of the public, and that it is of great importance to each party that,
in the manufacture and sale of Products, the high standards, reputation and image established by LICENSOR be
maintained at all times. Accordingly, Products manufactured or caused to be manufactured by LICENSOR shall
be of high quality workmanship and materials with strict adherence to all details and characteristics approved by
LICENSOR or embodied in items furnished by LICENSOR. Products manufactured by and for LICENSEE and
sold by LICENSEE shall strictly adhere to the materials, formulas, scents, ingredients, color, workmanship,
designs, dimensions, styling, detail, packaging and quality previously approved by LICENSOR.

• STOCK-KEEPING UNIT (SKU) NUMBERS / AFFIXATION OF

TRADEMARKS ON THE FINISHED PRODUCTS / PRIOR
APPROVAL
If LICENSEE purchases labels, stickers or other materials bearing the Trademarks from third parties, or
produces any such materials itself or through an affiliate, LICENSEE shall provide to LICENSOR copies of
invoices for all such materials purchased and/or equivalent information if any such materials are produced by
LICENSEE or an affiliate so to identify the manufacturer and the volume of the produced material.

• RIGHT TO INSPECT FACILITIES

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3. Common Clauses

• ADVERTISING: PRIOR APPROVAL

Before the use of advertising items such as posters, packaging and sales materials
(which shall include, without limitation, billboards, catalogues, gifts-with-purchase,
direct mail, remittance envelopes, blow-ins, billing inserts, product samples,
pamphlets, free products, counter displays (including testers, dummies, counter cards
and other visual merchandising) and temporary in-store demonstrators) or the
publication of any media advertising, public relations or promotion of any kind (which
shall include, without limitation, press releases, editorials, photograph submissions,
newspapers, magazines, television and radio), LICENSEE shall submit such
advertising to LICENSOR for approval. The right of approval shall also encompass
media placement (including the positioning of the advertisement within the media)
and creative execution.

• MINIMUM ADVERTISING EXPENDITURE

• UNAUTHORIZED ADVERTISING AND PENALTY

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 DISCLAIMER

THE AUTHOR IS NOT RESPONSIBLE FOR ANY LOSS OR DAMAGE

ARISING OUT OF THE USE OF THE INFORMATION SET OUT
HEREIN: SUCH INFORMATION IS ONLY INTENDED TO BE USED AS
A GENERAL REFERENCE FOR THE PURPOSE OF DISCUSSION
DURING EXPOSURE

SUCH INFORMATION IS NOT A SUBSTITUTE FOR SPECIFIC LEGAL

ADVICE UPDATED ON WHAT YOU SHOULD CONSULT

THESE SLIDES AND RELEVANT CLAUSES MAY NOT BE COPIED,

REPRODUCED, PUBLISHED OR USED WITHOUT THE PRIOR
WRITTEN CONSENT OF THE AUTHOR

THE PHOTOGRAPHS AND TRADEMARKS CONTAINED IN THIS PPP

ARE FOR NON-COMMERCIAL USE AND REPRODUCED ONLY FOR
ILLUSTRATIVE PURPOSES IN A SCIENTIFIC SEMINAR

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 Mattia Dalla Costa, Avvocato – Rechtsanwalt

mattia.dallacosta@cbalex.com
www.cbalex.com

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