In February 2019, Daniel Lee sent his first main season collection down the runway in Milan. Among leather shift dresses, quilted leather puffer jackets, moto leather trousers, and a mix of vibrant knitwear, a wavey-shaped handbag in a green hue was tucked under the arm of a catwalker. What was little more than a passing accessory at the time, the bag was – in hindsight – an indicator of what was to come, albeit not so much from a design perspective but a branding one. In many collections since then, Mr. Lee has included “it” accessories, as well as apparel, in the same color, revamped its packaging to include the green, and also put the specific shade at the center of many of its retail outposts and pop-up installations, prompting the fashion press and consumers, alike, to begin referring to it as “Bottega Veneta Green” or simply, “Bottega Green.”

The potential for “Bottega Green” to serve as an indication of source when used on apparel and/or accessories in something of the same way as the Bottega Veneta name, for instance, is worth pondering given the rate at which consumers have come to connect – name-check – the brand in connection with the color. And it would not be the first time that a brand has been able to show that consumers link a specific use of a specific color to a single source. 

Most commonly, this sees brands amassing (and enforcing) rights in the use of a specific color for their packaging. Hermès’ orange comes to mind, as does Tiffany & Co. blue, Glossier’s pink, and Cartier’s red. Seemingly less common (but certainly not unheard of) is the existence of trademark rights in a color for use on products, themselves. The most famous fashion industry example is, of course, Louboutin’s rights in “Chinese red” for use on the soles of contrasting color footwear. 

The ability of brands to rely on trademark protection – a form of intellectual property protection that applies to “any word, name, symbol, or device, or any combination thereof” that is used to “identify and distinguish” one’s goods or services from those of others – when it comes to colors is not a novel phenomenon. Colors are not included within the statutory definition of trademarks, but the U.S. Supreme Court put any doubts to rest about their protectability in 1995 when it decided Qualitex Co. v. Jacobson Products Co., a landmark case that centered on the green-gold color of Qualitex’s dry cleaning press pads. In its decision, the Supreme Court explicitly stated that a color can be registered as a trademark, assuming, of course, that it identifies a single source for the goods/services at issue. 

As Cooley’s John Crittenden and Bobby Ghajar asserted in a note last year, color marks have “a long and complex history under U.S. trademark law,” with certain brands being instantly associated with a specific color, such as Tiffany blue or pink fiberglass insulation.” However, just because colors can act – and be protected – as trademarks does not mean that all (or even many) uses of color by brands amount to trademark uses, as most companies “use colors as ornamentation [or decoration], rather than to signal the source of the product,” Crittenden and Ghajar assert. 

Aside from potentially being inherently decorative in nature (and not functioning as a trademark as a result), colors can take on a non-source identifying role if they are “functional or utilitarian, such as colors that are used to indicate the flavor of a product (red for cherry) or allow the product to blend in better with its surroundings (camouflage for hunting gear).” Purely ornamental or functional/utilitarian use stands in the way of a color serving as a trademark, as in order to function as a mark, the color needs to identify a product or service’s source in the minds of consumers, rather than serving some other purpose. 

And still yet, it is worth noting that should a brand seek to claim rights in (and amass registrations for) the use of a color mark, in addition to establishing that the mark is not being used in a purely decorative or a functional capacity, it would generally need to show that the mark signifies to consumers that a product comes from a single source. In other words, a company must “cultivate consumer recognition of the particular color as an identifier of source,” per Debevoise attorneys Megan Bannigan, Christopher Ford, and Kate Saba, which can be achieved by a brand “advertising and promoting the color as its trademark, and sold products and services bearing that color for a substantial period of time, such that the color acquired distinctiveness.”

What does all of this mean for Bottega Veneta, which has been utilizing Kelly green on its packaging and products and in its retail outposts with increasing frequency and consistency as of late? It may mean that the Kering-owned brand is well on its way to amassing exclusive – but limited – rights in the hue (one that is not earth-shatteringly novel but also not a terribly common shade for luxury brand packaging or for handbags, footwear, etc., either). 

“The fact that the Bottega green color is not a shade one encounters on these particular items every day, combined with how often that color-product-source cluster is repeated, tends to make me think more than a few people are already making [a] cognitive connection” between the color and the brand, which, trademark practitioner and former USPTO examining attorney Ed Timberlake says is at the very core of the secondary meaning/consumer recognition equation. 

It also bodes well for Bottega that the realm of relevant subject matter when it comes to trademark law is “vast,” and tends to be “categorically non-categorical,” Timberlake says; the pool of potentially protectable subject matter consists of “symbols,” regardless of whether those symbols be words, logos, designs, colors, etc. And “because the requirement for functioning as a symbol – which is basically that a human being able to attach some meaning to something – is essentially as broad as simply being perceivable (since we seem to be capable of attaching meaning to almost anything we can perceive),” he says that not very many things are really ruled out. 

As for whether Bottega will have an easier time showing that consumers have come to associate “Bottega green” with its clothing and accessories or its packaging, Timberlake does not place much emphasis on this distinction, stating that “the kinds of things that might influence whether a connection is made between stimuli and a product has less to do with the categorical distinction – such as packaging vs. product, or color vs. text – and more to do with how unusual the stimulus is in that context.” Also telling is “how often the exposure is repeated.” 

For a “very mildly unusual color on a particular product,” such a Kelly green used on leather handbags, he says that “it might take 1000 repetitions before people start to make the connection, whereas with a very unusual color in a specific context it might only take a handful of repetitions.” 

As of now, Bottega Veneta has not sought to register its green in connection with any marks, but that does not mean, of course, that it is not accumulating rights anyway by virtue of its use of the color on certain goods/services ahead of potentially seeking registrations at a later date. It is also worth noting that the brand is no stranger to amassing registrations for slightly-more-difficult to claim marks, including for its weave design (i.e., “a configuration of slim, uniformly-sized strips of leather, ranging from 8 to 12 millimeters in width, interlaced to form a repeating plain or basket weave pattern placed at a 45-degree angle over all or substantially all of the goods”). 

Beginning in 2007. counsel for the brand sought to register the weave design for use on leather goods, including handbags, in the U.S., and ultimately, was able to overcome pushback from the U.S. Patent and Trademark Office (“USPTO”), including on aesthetic functionality and non-distinctiveness grounds, which ultimately registered the design in 2014 in a widely-reported development that was touted as shedding light on the scope of trademark rights in the U.S.  

Among other things, Bottega argued – and the USPTO’s Trademark Trial and Appeal Board agreed – that the weave design was not merely ornamental, but rather it functions as a trademark to indicate the source of the goods as a result of consistent use of the mark, upwards of $18 million in advertising spend between 2001 and 2007, and U.S. sales of more than $275 million sales during that same period, with more than 80 percent of those sales consisting of goods sold that included the weave pattern.

Chances are, Bottega could – and very likely will (at some point down the road) – make similar arguments about the function of its green hue. 

Gucci owner Kering reported that it generated sales of 4.19 billion euros ($4.88 billion) for the first nine months of the year were up 36.6 percent compared to the same period last year and a smaller 9 percent versus the same period in 2019. For the third quarter, alone, the three-month period ending in September, revenues for the French luxury goods group rose by 12.2 percent year-over-year and 10 percent compared to Q3 in pre-pandemic 2019, driven by “very strong momentum in North America,” but less than optimal results in Asia, where sales “were held back by rising COVID-19 case numbers during the summer,” and in Western Europe and Japan, “where markets are still being affected by the absence of tourists,” although sales in these regions “continued to improve.” 

Diving into the Q3 performances of its biggest revenue-driving brands, Kering revealed that its crown jewel Gucci’s sales of 2.18 billion euros ($2.54 billion) were up 3.8 percent on a comparable basis, but not enough to meet analyst expectations of a 9.1 percent gain in sales compared to Q3 2020. The results mean that Gucci “continues to lag behind mega-brand peers,” according to Bernstein analyst Luca Solca, who stated in a note on Tuesday that the fact that Gucci’s blockbuster Aria collection with Balenciaga will not fully arrive in stores until Q4 penalized the quarterly results this time around. 

Despite the dip in Gucci’s Q3 sales compared to Q2, during which Gucci sales rose by a whopping 86 percent, Kering pointed to the “successful launch of the Diana bag,” and “good sales momentum continued in North America and Western Europe, particularly with local customers” as wins for the quarter. Meanwhile, the group expects that the full launch of the Aria collection will set up Gucci “for an intense fourth quarter.”

A snapshot of Kering’s total sales growth by region

Elsewhere under the Kering ownership umbrella, Yves Saint Laurent stood out with “an excellent quarter,” in which it “maintained its strong growth trajectory” by way of sales of 652.9 million euros ($760.07 million), up 28.1 percent on a comparable basis. Geographically speaking, Saint Laurent experienced “outstanding momentum continued in all geographic regions,” according to Kering, most notably in North America and Western Europe, as the brand “continues to reinforce its appeal in Asia-Pacific.” As for its offerings, Kering highlighted the brand’s “iconic products” as enjoying “sustained appetite from locals across all markets,” while newer collections are also being “very well received.”  

In terms of Bottega Veneta, which reported revenue of 363.4 million euros ($423.03 million), up by 8.9 percent on a comparable basis, with its “balanced growth” driven by demand from “both existing and new customers.” Specifically, Kering asserted that Bottega’s “global brand strategy, [as well as its] focus on exclusivity, controlled distribution, and full-price sales” is paying off in the form of sales success “across regions and product categories” and close to double-digit growth. 

Kering does not break out individual figures for Balenciaga or Alexander McQueen but they were the driving forces behind its grouping of “Other Houses,” for which revenue totaled 843.7 million euros ($982.14 million), with growth of an ever 26 percent on a comparable basis. Specifically, Kering asserted that the revenue for its “Other Houses” not only increased compared to Q3 2020 but also rose “very sharply relative to 2019, due notably to the ongoing expansion of Balenciaga and Alexander McQueen, whose sales continued to grow rapidly across all distribution channels.” 

In other takeaways, Kering revealed that online sales for the quarter continued to grow at a “firm pace,” up 24.3 percent relative to the third quarter of 2020 and 147.9 percent relative to the same period in 2019. Shedding light on e-commerce penetration by region (i.e., e-commerce revenue as a percentage of total Q3 retail sales), Western Europe and North American were tied at 20 percent, followed by Asia Pacific at 9 percent and Japan at 5 percent. Also in terms of e-commerce capabilities, Kering noted that Q3 saw the “successful internalization of completed,” which has yielded “multiple benefits,” including reduced lead times as tied to the rollout of new omnichannel capabilities and services, and higher conversion rates. 

Rival LVMH reported its Q3 earnings last week, posting sales of 44.2 billion euros ($50.9 billion) for the first nine months of 2021, up 46 percent from the same period in 2020 and up 11 percent from the first nine months of pre-pandemic 2019. During most recent 3-month quarter, which ended on September 30, the Paris-based conglomerate, which owns upwards of 75 luxury goods brands, revealed that sales grew by 20 percent to 15.51 billion euros ($17.90 billion), which appears to be something of a stabilization of the whopping 84 percent growth that it saw in Q2 of this year amid further loosening of pandemic restrictions and growth of vaccination campaigns.

Diptyque is taking aim at Italic, accusing the swiftly-growing retail startup of running afoul of both federal and state law by way of a new advertising campaign that endeavors to compare the two parties’ candles, but that allegedly fails to do so in a way that is either necessary or truthful, and instead, which “comprises a series of false statements and depictions” all in furtherance of a quest by tech founder (and former Thiel Fellow) Jeremy Cai’s company to piggyback on the cult appeal of the 60-year-old Diptyque brand. 

According to the complaint that it filed in a California federal court on Monday, Diptyque asserts that Italic recently launched an ad campaign – both online and on billboards in New York and Los Angeles – that pictures its $16 unbranded candle alongside a $68 Diptyque Bais candle. In connection with the recently-released “compare to Diptyque” campaign, the Parisian fragrance company claims that Italic is attempting to “imply parity between Diptyque’s scented candles and Italic’s scented candles […] when in fact the two candles being compared are not commensurate in size, burn rate, content, fragrance concentration, potency, and other variables that make Diptyque candles superior and more desirable.” 

Italic also allegedly pushes viewers towards its own offerings by including the text, “A candle that doesn’t smell like burning money,” in bold alongside both parties’ offerings. 

Comparative Advertising

In order for comparative advertising to be permitted under both federal and state laws, Diptyque asserts that the advertisement must be “truthful and honest regarding the products compared and their respective benefits,” which it argues is not the case here. Specifically, Diptyque claims that the Bais candle portrayed in Italic’s ad is “not accurate, with regard to its size, burn rate, or its price, and the candle image has been altered in at least size and color.” At the same time, “The price of the comparative Italic candle is not accurate either, in that it represents Italic ‘member pricing,’ which includes a $60 annual fee.” 

Italic “attempts to reconcile some of these issues in mouse-print disclaimers, which would not be legible to consumers on any billboard,” but Diptyque argues that even those disclaimers are “inaccurate as to the burn rate and size of the Diptyque candle portrayed in the advertisement.” 

Things run further afoul of the law, as “comparative advertising also requires that the advertiser not disparage or tarnish the allegedly competing product,” which counsel for Diptyque argues is precisely what Italic is doing here. “Italic’s billboard tagline ‘A candle that doesn’t smell like burning money’ jabs at the primary feature of Diptyque’s candles – their fragrance – to baselessly convey to consumers that Diptyque’s high-end candles are, at best, a rip-off, and at worst, a fraud.” 

And finally, even if Italic ads did not include erroneous information, the almost 4-year-old company would still be in the wrong, according to Diptyque, as “it was unnecessary for [it] to use Diptyque’s instantly recognizable oval design logo, and to manipulate the appearance of Diptyque’s candle and otherwise disparage the Diptyque brand” in the ad campaign. This is problematic, as “in the context of trademark and other intellectual property rights, comparative advertising requires [… ] that the advertiser use only so much of the mark or marks as is reasonably necessary to identify the product or service.” 

Instead of limiting its use of Diptyque’s “logo trademarks and copyrights,” Italic allegedly opted to use them in full “as a means to trade on Diptyque’s substantial goodwill, and use the well-known trademarks and copyright of a market leader to capture consumers’ attention for its own product – and in large-scale billboard form,” the famed candle company claims. As for what those trademarks and copyright consist of, Diptyque points to its incontestable federal registrations in the DIPTYQUE word mark, and a word and design mark that consists of “34 BOULEVARD SAINT GERMAIN DIPTYQUE PARIS5E, [and which] depicts the words inside an oval shape.” Diptyque also makes mention of its consistent use of “jumbled and stacked letters that appear inside its Oval Mark,” which is both “striking and very much associated with Diptyque.”

The company asserts that it has a copyright registration for the specific depiction of the jumbled BAIES design inside of the oval (although it is not entirely clear to me how an infringement claim is particularly relevant here), and maintains common law trademark rights for it, as well.  

Italic’s use of “identical copies and colorable imitations of” Diptyque’s trademarks in advertisements that “promote its inferior goods” is likely to cause confusion, or to cause mistake, or to deceive consumers as to association of Italic with Diptyque when no such affiliation exists, the candle-maker contends. Moreover,  Diptyque argues that Italic’s conduct “literally and impliedly false or materially misleading statements to consumers, constituting unfair competition and false advertisement in violation of the Lanham Act, in that Italic has published false or necessarily implied false and misleading statements that are likely to deceive consumers and direct them away from purchasing or otherwise using Diptyque’s products and instead purchase products from Italic.” 

With this in mind, Diptyque sets out claims of false advertising, unfair competition, trademark infringement, and copyright infringement, and is seeking an unspecific sum of damages, as well as injunctive relief to permanently bar Italic from further infringing its rights and making false statements in connection with Diptyque’s brand or products, among other things. 

The Big Issue

What ultimately appears to be at issue in the case is Italic’s alleged attempt to trade on the appeal of another brand in order to sell its own goods. As Diptyque argues in its complaint, Italic’s ad comes in furtherance of its larger business and marketing strategy, in furtherance of which it “claims to have ‘eliminated traditional brand and retail markups’ which allows its customers to ‘pay 50-80% less for the exact same quality.’” In other words, the budding young company’s model depends (or at least has depended in the past), in large part, on the appeal of high-end brands’ offerings. 

Interestingly enough, the lawsuit comes after Italic has undergone what appears to be a shift in how it presents its products, moving away from a more aggressive attempt to align itself with certain high fashion and luxury brands. As TFL noted back in 2018, Italic has long argued that “by removing brands and labels from the equation,” it enables “manufacturers to earn significantly higher profits while passing ‘brand markup’ savings onto customers.” Yet, it was simultaneously making prominent mentions of other brands in connection with its own offerings: “Cream made from the same ingredients as La Mer,” read one prompt on its website. A bag was advertised elsewhere on its site as being made by suppliers in a factory that “previously produced luxury handbags for Celine.” 

Founder and CEO Jeremy Cai noted at the time that his company was, in fact, being “a little controversial in that we say, ‘Here is a handbag made in the same factory as Prada.’” (Worth pondering: Could this possibly be part of a larger effort to garner publicity for the brand in the same way as MSCHF, for instance, has been taunting companies like Hermès, Disney, Nike, etc. to file suit against it? Comments on TFL’s Instagram are interesting in this regard.)

TFL previously questioned whether Italic was really removing brands from the equation when it was making such overt mentions of other brands and seemingly looking to directly associate its wares to those of some of fashion’s most well-known brands. Such prominent mentions were significant (in my mind), as it was not impossible to image any of those protective luxury brands arguing that Italic was making use of their trademark-protected names in an effort to entice consumers to buy its own products. 

Chances are, Italic – which has attracted investors like Comcast Ventures, Global Founders Capital, Index Ventures, Ludlow Ventures, and Kindred Ventures, among others, and raised at least $13 million over four rounds – may have been able to shield itself by way of fair use arguments if faced with litigation from any of those brands. (I have not seen any such cases being filed.) Yet, the company appears to be playing it a bit safer now, at least on some fronts. It still informs consumers that its bags, for example, are made in factories that boast “past clients” like Miu Miu and Prada; that its eyewear comes from factories that used to manufacture glasses for Chanel; and that its outerwear is made by suppliers that counted have Armani and Max Mara as clients. However, these facts are presented in a way that is far less centrally located and less bold than in the past. 

Nonetheless, while it may have toned down its references to other brands on its site, Italic has ruffled Diptyque’s feathers on the advertising front just as the company – which has largely operated using a membership model to date – has announced that consumers can shop its markup-free offerings without paying for a membership. 

A rep for Italic did not immediately respond to a request for comment. 

The case is Diptyque SAS, et al v. Italic, Inc., 2:21-cv-08227 (C.D.Cal.)

Edie Parker – the brand whose colorful and often customized acrylic box bags have garnered a very long list of famous fans and graced red carpets from the Oscars to the Met Gala – has prevailed in a legal battle that it has been fighting over its name. The case got its start last year when Timothy Moran, a personal representative of the estate of Frankie Edith Kerouac Parker, the writer and first wife of Jack Kerouac, filed suit against Edie Parker, arguing that the now-11-year-old brand’s name is not actually its name but that of the late Ms. Parker, and that the brand had been making use of – and benefitting from – the “Edie Parker” name without ever seeking or getting authorization from the late Ms. Parker’s estate. 

According to the complaint that he filed in a Michigan state court in September 2020, Mr. Moran alleged that in or around 2012, New York-based Edie Parker LLC and its founder Brett Heyman (the “defendants”) “began selling high end handbags and accessories patterned after vintage styles favored by Ms. Parker.” Hardly an unknown figure, Moran argued that Ms. Parker, who was “known to fans and friends alike as Edie Parker, was the first wife of acclaimed writer Jack Kerouac and a celebrity in her own right during the ‘Beat Generation’ of the 1950s and 1960s.” 

Given the fame that she enjoyed during her life, Moran argued that “Ms. Parker’s identity continues to carry significant good will and value even now, 27 years after her death.” Because the Edie Parker brand name “is identical to that of Ms. Parker’s, and because its [offerings] mimic Ms. Parker’s style, consumers associate the company with Ms. Parker herself,” the plaintiff alleged, contending that such an association has been bolstered further, including by the fact that Ms. Heyman “has given interviews in which she characterized the name of her company as a nod to Ms. Parker and other ‘stylish Edies’ from the mid-20th century.”

Against that background, by using the late Ms. Parker’s name without authorization from her estate, Moran claimed that the defendants “have and continue to infringe on the rights to Ms. Parker’s identity, including her privacy and publicity rights” under Michigan state law, which provides legal protection for “an individual’s pecuniary interest in the commercial exploitation of his or her identity.” (And the plaintiff was sure to note that “as with most states, this right survives an individual’s death and may be enforced posthumously by the individual’s estate or heirs.”)

In connection with a single claim of unauthorized use/infringement of publicity rights and/or invasion of privacy, Moran sought monetary damages, including a disgorgement of any profits and income that the defendants “derived from [their] unlawful infringement of [Parker’s] intellectual property rights,” while also arguing in favor of injunctive relief to permanently bar Edie Parker LLC and Heyman from “any further infringement of such rights belonging to Ms. Parker’s estate.” 

The defendants pushed back against Mr. Moran’s suit, filing a motion to dismiss early this year on the basis that the common law right of publicity claim is preempted by the Lanham Act, a federal trademark statute, because Edie Parker LLC maintains eight federal trademarks for the “Edie Parker” name. And in a Memorandum Opinion & Order dated September 27, Judge Nancy Edmunds of the U.S. District Court for the Eastern District of Michigan agreed. (The case was removed to federal court in October 2020.)

In her opinion late last month, Judge Edmunds granted the defendants’ motion to dismiss, holding that the defendants “have registered the trademark EDIE PARKER as their own, [and] thus, federal law is necessarily implicated by [Moran’s] state-law claim.” 

Reviewing the facts of the case, Judge Edmunds stated that as Moran “sees it, in the minds of consumers, the defendants’ chic products absorb and reflect Ms. Parker’s style and allude to her celebrity, [and] thus, on the back of Ms. Parker’s fame, [they] have turned a profit amounting to tens of millions of dollars without regard to the rights of Ms. Parker’s heirs.” 

The court also set the stage by noting that while Michigan courts have not yet spoken to “whether the right of publicity survives the death of an individual, the Sixth Circuit Court of Appeals has predicted the state would continue to recognize the right post-mortem as it ‘is more properly analyzed as a property right and, therefore, is descendible.’” At the same time, the judge noted that “neither the Sixth Circuit nor any other court has considered how long such a post-mortem right of publicity survives under Michigan law.” 

Ultimately, Judge Edmunds did not delve into that issue because the defendants maintain registrations for the EDIE PARKER trademark, making it so that Moran’s right-of-publicity claim is “impliedly preempted by the Lanham Act.” The court did note that “if [Moran] were given the opportunity to prove [his] allegations, perhaps Ms. Parker’s estate could have collected a portion of the defendants’ business profits, or perhaps could have prevented the defendants from doing any business at all.” But again, “that is not the case here,” according to the court, due to the federal trademark element. 

“Requiring the defendants to abandon [their] trademarks in the face of a common-law tort claim would utterly frustrate the goals of the Lanham Act,” Judge Edmunds ultimately determined, and held that applying “the state law [would be] an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” And with that in mind, the court granted the defendants’ motion to dismiss and tossed out Moran’s complaint. 

As for the Edie Parker brand, quite a bit more than the branding of its hot-selling handbags was at stake in the case. Heyman has since spawned something of a little universe out of the brand, developing her formerly limited collection of acrylic handbags into array of acrylic homewares, while also launching a sister brand – Flower by Edie Parker – which caters to fashion-forward pot-smokers by way of handmade acrylic, ceramic, and glass blown smoking products (think: glass pipes and acrylic rolling trays) and merch to go along with it. 

A rep for the estate of Ms. Parker was not immediately available for comment. 

The case is Moran, Personal Representative of the Estate of Frankie Edith Kerouac Parker v. Edie Parker, LLC, et al., 2:20-cv-12717 (E.D. Mich.).

Consumers and investors are increasingly taking into account companies’ efforts on the Environmental, Social and Governance – “ESG” – front, with investors, in particular, scrutinizing companies’ sustainability credentials with more frequency and robustness than in the past. Against this background, glossy public-facing ESG and Corporate Social Responsibility reports are being published by companies in an attempt to draw attention to their efforts, while brands are readily engaging in marketing campaigns to tout the sustainability-centric elements of their businesses. And still yet, in a nod to the growing importance of ESG themes in connection with investments, the three most prominent rating agencies, Standard & Poor’s, Moody’s and Fitch Ratings, have each incorporated them into their credit rating methodologies. 

In addition to rising mentions of ESG themes in public filings in recent years, with some of Allbirds’ pre-IPO filings being a clear demonstration of this, the number of companies seeking B Corporation status is also rising. The first generation of B Corps – or “for-profit companies certified as meeting rigorous standards of social and environmental performance, accountability and transparency” – was certified in 2007, and the number of firms earning certification has grown significantly since, with more than 4,000 companies across 77 countries and 153 industries counting themselves as B Corps, B Lab reported this summer. 

The Rise of the Fashion B Corp

Of those 4,000-plus companies, almost 200 come from the apparel, accessories, jewelry, and footwear space, one where growth seems to be noteworthy as of late, with Richemont-owned brand Chloé, for instance, becoming the first European luxury brand to receive the certification, and hoping to lead a charge among similarly-situated entities. In an interview, Chloé CEO Riccardo Bellini said that the French fashion house “upgraded our operations, governance and policies in a way that allows us to operate in a more environmentally and socially responsible manner.” In addition to being “proud of [the new certification] as a company,” he also said Chloe “aims to inspire many others to join” what he calls “a real community of leaders who share a mind-set, and the belief that business can be a force of good.” 

Not the only new entrant into the B Corp space, reseller Vestiaire Collection announced in September that “following a rigorous certification process,” it is now a certified B Corp, a move that it says “reflects our firm commitment to the highest social and environmental standards.” And still yet, Chloé and Vestiaire join the likes of Patagonia and Bombas, footwear brands TOMS, Veja and Allbirds, Gap Inc.-owned Athleta and $1 billion Carlyle Group-based BeautyCounter, among others, all of which boast B Corp. certifications. 

A “Signal” to the Market

It is clear that a growing number of companies, including in the fashion and luxury space, are angling to add B Corp to their credentials. What is often less obvious is what being a B Corp actually entails – and maybe, more importantly, what is does not.

According to B Corp-designating non-profit B Lab, B Corps have to meet “the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.” At the same time, “on the face of it,” Bournemouth University professor Michael O’Regan says that B Corp certification “should indicate a company’s environmental performance, employee relationships, diversity, involvement in the local community, and the impact a company’s product or service has on those it serves, which can” – among other things – “help investors find companies that balance profit and purpose.” 

The reality can be more complicated, though, according to O’Regan, given that “B Corp standards are not legally enforceable, and neither a company’s board nor the company, itself, is liable for damages if it fails to meet them.” In this same vein, Brian JM Quinn, a professor at Boston College Law School, who focuses on corporate law, M&A, and transaction structuring, told TFL that while a company’s B Corp certification status does make the trade-offs that managers of publicly-traded companies generally have to consider “a bit more explicit,” it does not change the legal obligations of the company or its directors. 

As such, Quinn states that “if we expect businesses going forward to sacrifice profits for the environment or for social causes simply because they are B Corporations, then we are misunderstanding what a Benefit Corporation is, [as] they are not required to do that.” And in fact, Allbirds states in the S-1 that it filed ahead of its impending IPO that its board is required by law to consider the interests of stakeholders and also financial returns regardless of the company’s status as a B Corp. 

This falls in line with the sentiments that former Paul Weiss partner Mark Underberg put forth in his 2012 article, Benefit Corporations vs. “Regular” Corporations: A Harmful Dichotomy, in which he stated that while “the B Corp seems a welcome addition to the corporate governance landscape, one that promises to advance the cause of socially responsible business,” in a practical sense, the situation is not necessarily so rosy. Specifically, he contended that “the reality that corporate decision-making is largely a function of corporate choice rather than corporate law is no less true for the new benefit corporation,” thereby, asserting that the B Corp legal regime “no more guarantees that companies will make ‘socially responsible’ decisions than existing law prevents directors from doing so.”

This not to say that “providing the option for companies to organize as B Corps is a bad idea,” Underberg claimed, as “it seems likely that the laws’ mandatory mission statements and accountability provisions will help attract patient capital and thus, provide a B Corp with a shareholder base less likely to apply pressure for short-term results.” However, all in all, a B Corp certification is more of a “signal to the market that this is the kind of company they want to be” than it is any sort of sustainability fix-all or “legal constraint on the business,” Quinn aptly notes.

In Allbirds’ case, for instance, the more significant element at play than the footwear brand’s B Corp status is the high value stock that its founders Tim Brown and Joey Zwillinger‎ are being granted in the IPO. This dual-class structure, which is common for most founder-led IPOs, ensures that Mr. Brown and Mr. Zwillinger‎ will control all of the major decisions of the corporation, including who is on the board of directors, for as long as they want to remain in control. This means that the real safeguard to protect Allbirds’ ESG-centric purpose – which is presumably at the heart of its B Corp mission – in light of potential opposition down the road (as was the case for former B Corp Etsy), per Quinn, is “what the founders want, and not whether the company is a B Corp. or anything else.”

The same is true for other brands, as well, which should give a bit more insight into what the buzzy B Corp status really means, something that consumers, investors, and brands, alike, should certainly weigh in connection with their considerations of this larger industry trend going forward.