When Imitation Exceeds Flattery

Posted by on Jun 25, 2013

Imitation is the sincerest form of flattery.  Good artists borrow; great artists steal.  Nowhere are these old adages more apt than the hidden focus groups and team meetings of the fashion industry.  What’s trendy this season is often only good for the clearance rack in six months time – leading to enormous pressure to constantly produce products on the cutting edge.  Invariably, similar looking articles of clothing and other apparel are going to hit the shelves.  At what point does imitation cross the line?  The Trademark infringement case of Gucci America Inc v. Guess Inc examines this question in detail.

In 2012 the U.S. District Court for the Southern District of New York decided a case brought by Gucci America against Guess Inc alleging that Guess had infringed three of Gucci’s registered Trademarked designs and one combination of Trademark and unregistered “trade dress.”

Trademarks are not limited to words and phrases alone.  The Lanham Act, which governs Trademarks, also protects what is known as trade dress – the appearance of a product, its design, even a distinctive color or fragrance.  The overarching public policy goal of the Lanham Act is to protect businesses who invest money into their brand and to also prevent customer confusion.

Here, Gucci’s theory of the case went outside the harm caused by infringement of their Trademark alone.  The 120 million dollars they sought in damages were predicated on damage to their brand as well as lost sales that they may have otherwise made since Guess is in the same retail/fashion market and the two companies are competitors.  This is a common litigation tactic because the value of a major brand like Gucci is often substantially higher than the actual value of the merchandise sold in violation of the Lanham Act.

The judge, deciding this case without a jury, first examined Gucci’s allegations of Trademark and trade dress infringement.  The judge focused much of her analysis on a factor known as post-sale confusion.  Here the judge decided that buyers of fashionable apparel would not be unduly confused as to whether they were buying Gucci or Guess products.  However, she interestingly ruled that one of the reasons customers might buy these similar looking Guess items would be to fool others into thinking they were wearing or carrying the more expensive Gucci products rather than the less expensive Guess products – in other words to achieve a bit of social prestige.  Weighing all the factors, the judge ruled that Guess indeed infringed three of Gucci’s designs, but did not infringe a fourth (the “script Gucci.”)  The judge awarded Gucci $4.66 million for this infringement as well as a permanent injunction.

However, in considering Gucci’s other claims the judge was not impressed.  She felt that Gucci was aware of Guess’s infringing conduct for a period of at least several years, and possibly much longer for one of the marks.  She pointed out that Gucci’s delay in pursuing its infringement claim caused prejudice to Guess – evidence that could have helped Guess defend itself was lost, key witnesses died, etc.  In addition she ruled that the theories of harm to the brand and lost sales were ‘unduly speculative’ and that Gucci, as the plaintiff, had not met its burden of proof to show these damages existed.

The message of this case is quite clear.  Trademark holders must act diligently to protect their marks when they discover evidence of infringement.  As in other areas of the law, the injured party cannot just sit back and allow damages to pile up.  If the holder is really concerned about damage to the brand and lost sales, this decision suggests the best course of action is to immediately file for injunction.