On December 9, 2019, a New York-based company called RSE Archives, LLC filed an offering statement with the Securities and Exchange Commission. With the help of Regulation A+, an exemption from traditional Securities Act registrations that allows privately-held companies to raise money from the public by way of offerings of up to $50 million, RSE was able to qualify to sell shares in an asset in furtherance of what could be likened to a mini IPO. Given the lessened reporting requirements and the lower fees that Reg. A+ entails, these types of transactions are becoming routine ones for the SEC, with dozens filed each year. RSE’s filing was a bit different. 

The operators of three-year old RSE – which does business as Rally Road – were not seeking qualification from the SEC, the government agency tasked with regulating the securities industry in the U.S., in order to offer shares to the general public (as opposed to just accredited investors) in the burgeoning young company, itself. No, they were looking to enable investors to buy shares in a tangible asset. The tangible asset up for offer? A purse … but not just any purse.

This specific purse at play was a rare Hermès Bordeaux Porosus Crocodile Birkin. With its glossy, blood-hued crocodile body, shiny golden hardware, and retail value of $52,000, this bag is virtually impossible for all but a relatively small selection of consumers to get their hands on. Rally wanted to change that.

The breakdown of Rally’s offering, which would ultimately go live on Valentine’s Day, went a little something like this: for $26.25 per share Rally Road members could buy into the bag in the same way that shareholders buy into a publicly-traded company. There is no required minimum amount of shares that a Rally member has to buy, nor are there any fees to invest. And invest is precisely what people did.

The 2,000 shares that Rally Road offered in the Bordeaux Porosus Crocodile Birkin in mid-February were acquired by a total of 270 investors in barely more than 5 minutes (7 to be exact). The median investment was $175.00, and the average investor bought 6.67 shares, with many existing Rally members using this offering as a chance to diversify their current Rally-specific holdings of stakes in cars and rare baseball cards by adding stakes in the bag to their portfolios. 

Not only is Rally the first company to look to Reg. A+ to sell shares in a Birkin bag; it is arguably the first company to provide an actual basis for testing the enduring speculation that the wildly coveted Birkin bag just might fare more favorably over time than some of the more traditional classes of assets. By offering shares in the bags, Rally – and its co-founders Chris Bruno, who came from the world of venture capital, and Rob Petrozzo, whose background is in product design – is setting the stage to see just how valuable an investment these bags really are from a securities perspective. 

The notion that Birkin bags are an investment that is just as attractive as – or possibly, even more attractive than – conventional financial vehicles is not exactly a novel one. In fact, the Rally offering comes four years after Baghunter, an online retailer for luxury handbags, garnered headlines when it made a striking proclamation: Hermès Birkin handbags are a better investment – on an annualized basis – than gold and the stocks in the S&P 500 index. 

Citing data collected between 1980 and 2015, Baghunter revealed that while the stock market and the value of gold can swing up and down, that is not the case with Birkins. Instead of falling victim of market fluctuations, it found that the pricey handbags increased in value over that 35-year period by an annual average of 14.2 percent for a total of a 500 percent increase. In other words, these $10,000-plus handbags do not have bad years, making them the “safest and least volatile investment asset of the three,” the handbag resale company declared. 

The Beverly Hills-based handbag reseller’s assertion spoke to a rare but interesting trend in the luxury goods market: one in which a product does not depreciate over time, thereby, putting Hermès in a small grouping of companies “whose goods are more expensive to buy used than new,” as the Wall Street Journal’s Carol Ryan put it recently. 

More than merely situating the Birkin bag – and its sister bag, the Kelly – among a handful of the market’s most highly coveted luxury goods, alongside the offerings of privately owned watchmakers Rolex and Patek Philippe, for instance, the appreciative-powers of these ultimate “it” bags puts them in a larger class of burgeoning alternative investments, a category of assets that are proving to be increasingly compelling to investors and entrepreneurs, alike. 

The notion of alternative investments is nothing new; any real estate buyer or Bitcoin enthusiast will tell you that. But with consistent, dramatic declines in the market, particularly as of late, whether it be the result of prolonged protests in Hong Kong, or more recently and significantly, the spread of the COVID-19 virus, the latter of which has seen the Dow Jones and S&P 500 post their sharpest daily declines since 2018, investor appetite for alternative investments is on the rise. 

According to research from alternative investment data provider Preqin, the alternative investment industry is expected to grow by 59 percent by 2023, reaching $14 trillion in assets, with institutional investors, as well as high-net-worth individuals and ultra-high-net-worth individuals, looking to “safe-haven alternatives where they can be almost certain that a financial or equity market correction will not dent their returns,” per Seeking Alpha

A catch-all term for assets that do not fall under the umbrella of typical classes of financial assets, such as stocks, bonds and cash, alternative investments come in the form of cryptocurrencies like Bitcoin, peer-to-peer lending, real estate, and equity crowding, just to name a few. And as investors look to hedge their bets in increasingly diversified ways, a new category of investments has been finding momentum – and this is where Birkin bags and certain luxury watches, for example, come in. 

“In the event of an economic downturn, fine watches may turn out to represent a safe-haven asset, like metals or gems, for investors looking to diversify their portfolios,” the New York Times’ Alex Williams wrote in March 2019, noting that “prices for sought-after classics from brands like Rolex, Omega and Patek Philippe are shooting up, [and] in some cases, they have doubled in just a couple of years.”

Rally’s Bordeaux Porosus Crocodile Birkin

Meanwhile, Birkin bags may not come with the million dollar resale price tags that some watches do, but their prices are, nonetheless, on the rise (at least for now; there is, after all, a chance that the robust secondary market for Birkin and Kelly bags will catch up to Hermès and the carefully calculated equation of supply and demand that has enabled these bags to command eye-popping prices for decades). According to Ryan, “For most luxury labels, a used handbag sells at a 35 percent discount to store prices,” citing UBS research. “Not so for Hermès: shoppers can expect to pay a 50 percent to 100 percent premium to store prices for unusual colors.”

BagHunter maintains that Hermès Birkin and Kelly bags  “in good to very good condition can fetch up to or more than 80 percent of what the previous owner invested, a bag in excellent condition up to or more than 100 percent of what the previous owner invested, and a bag in pristine condition up to or more than 120 percent of the previous owner invested.” And at the very least, Rebag founder and CEO, Charles Gorra says Hermès’ two most iconic styles retain between 80 and 90 percent of their retail price, making it clear why these bags are touted as an investment in the same vein as coveted Rolex models.

It is against this background that the idea of banking on luxury goods as an alternative to – or maybe more likely, a fun supplement to –  more traditional investments is evolving. A slew of young companies are putting a new spin on the notion, and offering up a chance for investors to buy into otherwise largely inaccessible goods – and benefit from their ability to increase in value – without having to shell out for the whole thing or to engage in the efforts necessary to ensure that the asset’s value does grow. For a piece of art or a Birkin, that may mean insuring the painting or the bag, properly storing it, etc.

New York-based Masterworks, which was founded by entrepreneur Scott Lynn in 2017, prides itself for enabling “anyone to purchase and trade shares in iconic artworks, by artists like Monet, Warhol, and Picasso.” The first-mover in the fine art space, Masterworks buys multimillion dollar “blue-chip” paintings, “files them with the SEC,” and enables consumers to purchase shares in each individual piece of artwork “for as little as $20 a share,” making some of the world’s most sought-after art “accessible to investors and to a wider range of art lovers [than before],” according to Yahoo Finance.

Rally is another one of these new market entrants. In furtherance of its own quest to “democratize” alternative investments, the company – which raised $7 million in a series A round led by Upfront Venture in 2018 – acquires high-value, tangible assets that have “a history of strong returns.” It registers the assets with the SEC, and then splits them into shares, ultimately enabling individuals to acquire equity in the individual goods, and trade them on Rally’s peer-to-peer marketplace. 

In the meantime, while Rally says that it “intends to hold on to its assets for the long term,” they are made available for sale, and subject to shareholder approval, can be sold off, at which point the existing shareholders get their payday “similar to a company acquisition.” To date, Rally’s VP of Operations Fitz Tepper says the company has sold three of its assets – a 2000 Ford Mustang Cobra R, a  2006 Ferrari F430 (6-Speed), and Mohammad Ali’s 1971 “Fight of the Century” signed contract – all for quite a bit more than it acquired them. 

Starting with cars and expanding its assets to include rare books, watches, and sports memorabilia, Rally recently set its sights on Birkin bags, assets that are not all that different, per Tepper, than the ones that the company first started with. “Rarity, collectible desirability, cultural relevance over a long period of time with a strong attachment to popular culture, etc., these traits generally span across all assets on the platform, and Birkin bags meet all of these criteria.” 

Importantly, Birkin bags “have a strong history of appreciation,” he says, noting that these top-of-the-totem-pole bags are “an asset class that our users had been asking for. So, [adding them] was a no-brainer.” 

Jeffrey Berk, co-founder of Prive Porter, the Hermés reseller that is supplying the bags to Rally, confirms that “the collectable handbag category has, in fact, been appreciating in value, and growing like crazy,” making these bags a reasonable inclusion in the category of alternative investments, alongside the likes of certain cars or watches, whose prices have proven relatively unimpaired even in times of market volatility.

In terms of the market for five and six-figure timepieces, Williams previously stated that even with decades of steady gains in mind, it is unclear how well the established demand would “hold up” “if [there is a] credit implosion in China,” for instance, or “a splintering of the eurozone that produces a sequel to the 2008 financial crisis.” These concerns would similarly prove relevant for rare bags. While Birkins boast a level of “desirability and rarity [that has enabled them] to historically stand the test of time in terms of appreciation and value retention,” according to Tepper, there is no telling what could happen to demand even for the world’s most enduring “it” bag in the worst of times. 

It is still early days, but if the current state of the COVID-19 outbreak – which is seeing mass luxury groups like Louis Vuitton’s parent LVMH Moët Hennessy Louis Vuitton and Gucci’s owner scramble to address large-scale shifts in consumption patterns that favor essential goods to the detriment of high fashion ones – is any indication, some camps of consumers are still shopping, and appeal of certain coveted products remains.

According to Berk, Birkin sales for the digitally-native Prive Porter are not faltering amidst the global health pandemic. In fact, the number of new customers that Prive Porter has seen in March, alone, is up. “Our customers are super-affluent and are largely immune to the financial impact of this Black Swan moment, for right now anyway,” he says. Nonetheless, “They are emotionally impacted and admit they are looking for ways to continue to park money, while also indulging their handbag-collecting hobby.”

Buying Birkin bags outright is one way of doing that. Buying into Birkin bags is another. 

As for Rally, the company appears to only be getting started when it comes to handbags. While its Soho, New York showroom is closed for the time being, its digital marketplace is up and running, and the the company is in the process of readying its next bag for investment – and it is a big one: a Himalaya Birkin with an eye-watering $140,000 valuation. 2,000 shares in the 30cm Niloticus Crocodile bag with Palladium hardware will be priced at $70 each, and will be available in the coming weeks, a timely offering that will certainly test the viability of this budding new investment economy.

As we adjust to life with the new coronavirus around us, our behaviors and habits are quickly changing. What will be the impact of these changes on the organizations and industries around us? Here is a look at how three business categories will fare as COVID-19 continues to spread, from the sectors that will likely benefit the most (the so-called “winners”) from increased consumer demand and market volatility to the sectors that will suffer the most (the “losers”) from disrupted supply chains and plummeting tourism numbers, and the sectors where results could go either way depending on how they respond (the “inbetweeners”).

The Winners

These sectors have found themselves serendipitously on the right side of history. By applying a basic level of competence, they should thrive. The natural strategy for these companies is to aggressively invest in opportunities and growth.

Ecommerce marketplaces

People are moving online to do their shopping. Already, Amazon is adding 100,000 new jobs to manage the extra demand. Some other marketplaces are struggling to add capacity. For example, online grocer Ocado has suspended new orders until it can clear its backlog of deliveries. Some marketplaces are turning to technology for help. Chinese ecommerce giant JD.com, for example, is using unmanned vehicles to deliver food and medical supplies in Wuhan.


Pharmaceutical companies are inevitably playing a large role in the crisis. Gilead, which owns the rights to treatment drug Remdesivir; Moderna, actively working on a vaccine; Roche, a major supplier of testing kits; and Fujifilm, with existing treatment drug Avigan, are all poised to benefit.


As people around the world are blocked from leaving their homes, products and services will need to be delivered. Cainiao, Alibaba Group’s logistics arm, launched the Green Channel initiative on January 25 in response to the increased demand for protective clothing and medical supplies, especially for front-line medical staff in Hubei province. In just nine days, Cainiao received more than 7,000 calls and shipped over 5 million medical products to Wuhan and neighbouring cities. 

Meanwhile, UK food delivery app Deliveroo has launched a “no-contact drop-off service”. This provides restaurants with additional packaging and seals for orders to be left on customers’ doorsteps.

Video conferencing

Videoconferencing start-up Zoom has benefited massively. The company’s sales and share price are already up over 50 percent in 2020. Webex from Cisco and Skype and Teams from Microsoft are also seeing major upticks in sales. Most are offering special deals for their conferencing services during the outbreak.

Entertainment streaming and gaming

Platforms like NetflixAmazon Prime video, and Disney+ all report increased viewership. Online gaming platforms are also experiencing record volumes.

The Losers

For the losers, their managements will need a Herculean effort to pull them through the crisis. Even if they succeed, many will be seriously damaged. The natural strategy in these sectors will be to cut costs, de-risk operations and be ready to return when conditions improve.

Traditional retail

With people confined to their homes, there isn’t much point keeping traditional retail stores open. The largest U.S. mall owner, Simon Property Group, announced on March 18 that it would close all its malls across the country. Similar decisions have been made across Europe and Asia. Apart from grocers and pharmacies, it will take a long time for traditional retail to recover.

Airlines, trains and cruise ships

The global airline industry has said it will need up to $200 billion  in emergency support, and Boeing has called for $60 billion in assistance for aerospace manufacturers as the international travel industry bleeds cash. Norwegian has already cut 85 percent of its routes and laid off 90 percent of its staff. Virgin Atlantic intends to park up to 85 percent of its fleet during the month of April and is asking staff to take up to eight weeks unpaid leave over the next three months to avert job losses.

IAG, parent company of British Airways, Iberia, Aer Lingus, Level and Vueling, will cut capacity by 75 percentin April and May, while the Air France-KLM group is set to cut capacity by between 80 percentand 90percent. Most cruise ship operators have ceased operations, and bankruptcy is likely for some. 


The US Travel Association is projecting that close to 5 million travel-related American jobs will be lost. This is more than 25 percent of the 15.8 million Americans who work in the sector. The situation is equally dire elsewhere. For example, all ski resorts in Italy, France, Austria and Switzerland are effectively closed for the season. 

Oil and gas

On January 1, a barrel of crude oil sold for $67.05 on New York’s NASDAQ exchange. At the time of writing, it was trading at around $26 per barrel. So companies’ oil reserves are worth less than half that of the start of the year. The value of giants like BP reflects this – on March 19, it was worth 51 percent of what it was at the start of January. According to the International Energy Agency, global oil demand is set for its first annual drop since 2009. Contrast this with the agency’s February prediction, when it expected annual growth of 825,000 barrels per day.

Investment banking

Hundreds of London and New York investment bankers are set to lose their jobs amid a slump in deal-making. Shares of leading US banks JPMorgan ChaseBank of America and Citigroup are all down more than 30 percent from January highs. Financial News spoke to senior London investment bankers who predicted a drop in fees of up to 50 percent in the first six months of 2020. That would mean around $10.7 billion in lost revenues across equity deals – the worst first half of a year since 2009. 

Professional sports and entertainment

Italy, Europe’s worst-hit country, cancelled all sporting events until at least April 3. FranceSpainGermany and the UK quickly followed suit. This year’s Copa America and Euro 2020 football tournaments have been postponed until 2021. North America’s Major League Soccer, the National Basketball Association and National Hockey League have suspended their seasons, and restricted locker room access to players and “essential staff” only. The African Nations Championship 2020 soccer tournament scheduled for April in Cameroon has been postponed indefinitely. Long cancellations mean major losses for sports channels and the traditional cable TV ecosystem, as live sports has kept millions of viewers from cutting the cord on cable.


Analysts predict that the global film industry is facing a $5 billion loss from diminished box office revenues and production restrictions. That could grow if more countries force people to remain at home or order public space to close.

The Inbetweeners

These sectors will probably struggle if they continue as is. Many companies will fail, though a few will adapt their business models to take advantage of new and emerging opportunities. In some cases, this will build a solid foundation for continued success.


Many manufacturers will struggle as the goods they produce are no longer in demand, but more agile operators will shift to making different products. For example, Chinese car manufacturer BYD has opened up production lines for surgical masks and hand sanitizers. It was one of 2,500 Chinese companies to respond to a call from President Xi Jinping for a “people’s war” against the virus.

GM, Ford and Tesla are talking about producing ventilators. LVMH Moët Hennessy Louis Vuitton, the French luxury goods company behind Louis Vuitton, Christian Dior and Givenchy, is also shifting to produce hand sanitizers, and aims to make 12 tones within the first week of production. LVMH is giving the product to French authorities to distribute at hospitals at no charge.


Most banks will lose money as individuals and businesses struggle to pay back loans. If the world economy enters a recession, which seems very likely, the market for financial products will also fall. Banks can, however, generate goodwill with businesses that need assistance, and create relationships with new customers. Several UK incumbents, including Barclays, Santander and RBS, are already offering emergency loans and overdrafts to at-risk business customers. Many consumers will need temporary solutions, which could yield a spike in demand for small and medium-sized loans. 


Some players in this sector emerge with new ideas that could improve healthcare. Others will be pushed past breaking point and will never return. Chinese digital firm Baidu, for instance, is among those that has been quick to innovative. It launched a Fight Pneumonia app to help the public get accurate and useful information about the epidemic in real time. It is also offering its online medical advice platform free to users seeking COVID-19 consultations. This has seen over 100,000 doctors across China responding to tens of millions of inquiries. 

Baidu has also released an intelligent healthcare unit that responds to common questions through a conversational chatbot. This so-called “call bot” makes automated phone calls to ask people about their recent travels, health condition and contacts.


Most schools, universities and private education providers have closed their doors, but not necessarily their operations. As more and more people are confined to their homes, there is a golden opportunity for education institutions to expand the scale and scope of their operations online. In China, Kuaishou, a social video platform valued at $28 billion, has promoted online education offeringsto compensate for school and university closures. The company and other video platforms have partnered with the ministry of education to open a national online cloud classroom to serve students.

Zhejiang University, one of China’s leading universities, officially started online teaching on February 24 in line with the term calendar. This covers all ZJU students, although many courses are open to learners worldwide. Two weeks in, the university was offering more than 5,000 courses. 2,500 graduate students are expected to present their theses in the spring, and will also be able to do an online oral exam to graduate as planned.

Michael Wade is a Professor of Innovation and Strategy and the Cisco Chair in Digital Business Transformation at the International Institute for Management Development. 

Fashion’s richest man was up more than $11 billion on Tuesday, as the stock market rebounded in response to the White House and U.S. Senate reaching a $2 trillion stimulus deal amid the continued spread of the coronavirus. On the heels of “losing more financially than anyone else in the world,” per Bloomberg, LVMH Moët Hennessy Louis Vuitton chairman Bernard Arnault’s net worth rose as share prices for the publicly-traded LVMH and Christian Dior got a boost during Tuesday’s “historic” stock market surge. 

According to Bloomberg, “The swings in Arnault’s fortune” – which are directly tied to the fluctuating prices of his luxury goods companies’ stock – “underscore the dramatic volatility of global markets, driven by virus panic and alternating hope and pessimism for government intervention.” The coronavirus-related hits to LVMH and thus, Arnault, individually, that have abounded in recent weeks follow from the French business titan’s landing in the number 2 spot on Bloomberg’s and Forbes’ respective “Billionaires” lists in 2019 thanks to sizable gains in the luxury goods sphere. 

As of July 2019, Arnault had added nearly $40 billion to his fortune, “the biggest individual gain by far among the 500 people on Bloomberg’s [Billionaires] ranking,” the publication noted, largely thanks to gains in LVMH’s shares. While Arnault was up on Tuesday compared to his starting position for the day, he is still down a whopping $35.2 billion in 2020 as a result of the COVID-19.

LVMH – which generated $59.12 billion in sales in 2019 in connection with Louis Vuitton, Christian Dior, Celine, Givenchy, Loewe, and Fendi, as well as the 70 or so other luxury brands under its ownership umbrella – has not yet released any preliminary guidance on how its sales and growth will be impacted by the global health crisis that is COVID-19. However, one of its closest rivals, Kering’s recently-issued preliminary financial estimates likely provide some hints as to what is to come. 

In a statement released last week, Kering, which owns Gucci, Saint Laurent, Balenciaga, and Bottega Veneta, among other brands, estimates that when “taking into account the progression of COVID-19 in all of its key markets and the impact on the activity of its Houses,” consolidated revenue for the first quarter of 2020, ending March 31, will be down by between 13 percent and 14 percent in reported terms (approximately 15 percent in comparable terms) compared to the first quarter of 2019. 

More than that, the Paris-based group said that it expects “sharp” impacts for the second quarter, as well, as consumer opt out of luxury spending amidst the global health crisis.  

As of Wednesday morning, shares in LVMH were still “climbing amid broader European gains, rising as much as 4.9 percent by 10:07 a.m. in Paris.”

It is almost impossible to discuss the style of pop mega-star Billie Eilish without the word “bootleg” coming up. There was the headline-making Louis Vuitton-esque toile monogram-printed denim look that she wore on stage at the Coachella Music Festival last spring, and the rainbow-bright “LV” printed outfit she chose for the Los Angeles launch party for her Grammy Award-winning album, “When We All Fall Asleep, Where Do We Go?,” before that. Remember the chocolatey-brown interlocking “G” logoed hoodie-and-shorts combo she wore to perform on Jimmy Fallon in 2018? Or how about the roomy cargo shirt-and-shorts emblazoned with Chanel’s double “C” logo that she appeared in for her Camp Flog Gnaw performance that same year?

In each of those instances, the legally-protected logos (i.e., trademarks) of Louis Vuitton, Gucci, and/or Chanel were emblazoned upon the materials used to make the garments. Yet, none of those outfits were the products of the brands, themselves. The same goes for the marigold-hued shorts-and-jacket set that 18-year old Eilish wore at an event promoting her album this spring. While the textiles for that look were authentic (and crafted from authentic Louis Vuitton towels), the look, itself, was – again – not a creation of the Paris-based luxury goods brand. This same set of facts also holds true for the magenta string bikini that fellow musician Lizzo wears in a recent Rolling Stone spread. The bathing suit was made from real Louis Vuitton materials, but the modified version was not created – or authorized – by the brand. 

These instances – which very well might give rise to trademark infringement, dilution, and/or counterfeiting claims for the brands – are hardly isolated ones. They are part of a larger movement being heralded by “bootleg” creators, such as Imran Moosvi, Chanel Copy, Vandy the Pink, and Etai Drori, who have found fans in some of the biggest names in music and pop culture years after Harlem-based tailor Dapper Dan famously put this phenomenon in motion in the 1970s when he first began offering up designer bootlegs from his atelier at 43 East 125th Street in New York City.

There is something more striking at play than the rise of this new breed of “knockoff artists,” as they are often called, and their logo-laden wares: the fact that they have been able to thrive. In other words, as of now, court dockets in the U.S. are not being saturated by lawsuits filed by the brands whose logos have been co-opted – without their authorization – for these popular wares. 

Interestingly, the fact that brands have not (yet) called foul by way of litigation is not necessarily because they lack the basis to do so. In fact, potential legal grounds abound. For example, when the textiles at issue are outright fake, such as the ones used by Moosvi, counterfeiting claims are available to the trademark rights holders, which Dapper Dan learned when he found himself on the wrong side of the now-LVMH Moët Hennessy Louis Vuitton-owned Fendi and the law in the 80s. (At the time, Fendi did not fall under LVMH’s ownership umbrella).

As for the garments created from authentic materials and reconstructed into different products, brands still might have claims. Trademark infringement could be one viable cause of action, given the risk of confusion that comes with this specific breed of high-end bootlegs.

The risk that consumers might be confused as to the source of the bootleg products, themselves (in a post-sale capacity), and/or the brands’ involvement in the making of those products – which is the central element in a trademark infringement inquiry – is particularly relevant in light of the adoption of these wares by celebrities. Such a potential for confusion is heightened due to high fashion’s obsession with streetwear and its penchant for streetwear/skatewear-centric collaborations – from Louis Vuitton and Supreme’s highly-anticipated tie-up in 2017 to Stussy and Dior Homme’s more recent partnership for Pre-Fall 2020. And after years of being on the wrong side of trademark law, Dapper Dan is now actively collaborating with Gucci.

Against this background, it is not outlandish that someone might think that the aforementioned “bootleg” wares are the result of a collaboration with the luxury brand at issue.

It also bodes well for the brands’ hypothetical cases that their potential infringement claims likely would not be overcome by sale doctrine arguments on the part of the bootlegger. A trademark (and copyright) tenant, the first sale doctrine is a defense to infringement that holds that once a trademark owner, such as Chanel, releases its goods into the market, it cannot prevent the subsequent re-sale of those goods by their purchasers. This rule assumes, of course, that the physical condition of the goods in question has not been altered or impaired. That latter bit is the kicker for bootleggers, as the subsequent use (i.e., the Etai Drori-designed garments, for example) is “materially different” from the initial one (i.e., the Louis Vuitton towels or blankets that Drori purchased and crafted into clothing), a distinction that would likely stomp out any first sale protections.

With the foregoing in mind, the fact that brands have not taken public-facing legal action (as of now) likely does not mean they are without the ability to do so. It also does not mean that they are not potentially dealing with these issues in an out-of-court capacity.

There are suggestions that this very well may be the route that brands are taking. For example, the Instagram account of Tsuwoop, one of Eilish’s go-to creators, used to be filled with Louis Vuitton logo-covered wares – from Toile Monogram-printed hoodies and sweatsuits to multicolore-covered board shorts and bucket hats. Those posts have all disappeared, which might suggest that the brand objected, albeit without filing suit. Meanwhile, Drori alleged in an Instagram post in September 2019 that Louis Vuitton “banned” him from making purchases, presumably to cut down on his pattern of churning out logo-emblazoned wares of his own. 

The potential for quiet efforts falls neatly in line with the sentiment that Louis Vuitton CEO Michael Burke shared with the Wall Street Journal back in May 2019. Speaking of the “bootleg” creations that have found their way onto some of the buzziest names in music, Burke revealed that he does not think that lawsuits “are a good solution.”  

To some extant, Burke’s approach stands in stark contrast to many major luxury brands’ traditional practice of aggressively policing unauthorized uses of their trademarks in order to avoid consumer confusion, genericization of their marks, and/or dilution, and to ensure that their wildly valuable marks remained in-tact both from a legal perspective and also from a consumer perception one; brand valuation can be impaired by a market saturated with counterfeits or otherwise infringing products. 

At the same time, though, he also told the publication that he “doesn’t rule out legal action against” bootleg creators, which very well might mean that if the perfect case comes along, the brand’s mighty legal department could pounce. 

After all, that is precisely what Louis Vuitton did when it filed suit against Junkmania, accusing the popular Japan-based online seller of customized footwear and accessories of running afoul of the law by way its “customized” products that incorporate textiles covered in Louis Vuitton’s trademarks. In that case, Louis Vuitton called these wares little more than glaring examples of unfair competition, and the Japan Intellectual Property High Court agreed, siding with the Paris-based brand and its argument that Junkmania was violating the Japan Unfair Competition Prevention Act, which outlaws the use of “another’s famous indication of goods or business … for a purpose of acquiring an illicit gain.”

It will be interesting to see if luxury brands take similar action in the U.S., as while Eilish may have moved on the real thing as indicated by her wardrobe on recent red carpets, some of her favorite bootleggers are still up to their old tricks leaving room for brands to take action if/when the right case comes along.

Forget all of the urban legends and the “alternative facts” that you have heard about fashion over the years, including the frequently espoused – and since firmly debunked – proclamation that it is the “second most polluting industry in the world.” (It is further down on the list than that). Forget those and consider another widely-cited piece of fashion folklore: if you take an existing design, whether it be a copyright-protected Yeezy sneaker or the design patent-covered ornamental elements of a bag, for instance, and change a certain percentage of it – some say 3 percent is sufficient, others put the figure closer to 20 percent – you have created a new design in the eyes of the law. 

A similar riff on that same rule asserts that if you were to make a specified number of changes – as few as five, according to at least one iteration of the popularly-referenced rule – to an existing design, you would create a “novel” work, and thus, would be able to avoid liability for infringement should you decide to ultimately manufacture and sell that design with your own brand’s name on it. 

The “x percent” rule or “x number of changes” benchmark is a nifty rule-of-thumb, and an inherently useful one given fashion’s well-established penchant for taking “inspiration” from others. It is also handy in light of the increasingly rapid pace at which fashion finds itself operating. Churning out four or more collections per year, often paired with frequent collaborations and other, special “drops,” leaves little time for extensive periods of research/inspiration-building, after all.

Against this background, these little rules essentially establish a bright-line that enables designers to look to existing creations and know exactly how much they can take-and-change in order to avoid being slapped with an infringement lawsuit if they choose to closely replicate those already-existing designs. (Infringement assumes, of course, that the existing design is protectable, something that can be somewhat rare in fashion). 

The clarity that comes with such rules has made them a go-to for no small number of industry participants. Heavily-followed Instagram watchdogs reference it in their quest to call foul on instances of “copying.” And just this month, it came up in a widely-read New York Times profile of Off-White founder and Louis Vuitton menswear director Virgil Abloh due to his penchant for referencing “the three percent approach,’” which the Times’ Vanessa Friedman deciphers as Abloh’s “theory that changing a design by that percentage is enough to make it qualify as new.” 

However, despite the attractiveness of such a rule or “cheat code,” as Abloh has repeatedly called it in furtherance of his role as an “intellectual grazer” – a position in which he is “constantly snacking on inspiration, offbeat ideas, iconic creative gestures from historic brands” – as the Washington Post’s Robin Givhan puts it, and despite the frequency with which it is cited, there is a glaring issue: no such rule actually exists. 

Raf Simons sweatshirt (left) & Off-White sweatshirt (right)

In other words, there is no basis in law for these often-referenced quasi-legal “rules,” which means that they will not shield you from legal liability.

While these “rules” are without merit from a legal standpoint, they are not entirely without roots in terms of the assessment of infringement generally. For instance, “the amount and substantiality” of the portion of an existing work that is used to create a subsequent work is a relevant factor that is considered in a determination of fair use (a defense to copyright and trademark infringement). However, unlike these “rules” seem to proclaim, there is no bright-line, number-specific rule that courts look to when making such a consideration. 

Put simply? Courts are not looking for a set percentage or specific number of changes in an infringement determination; there is no such magic number. The reality is, of course, more complicated than that, and involves standards like substantial similarity or likely to cause confusion. 

In a fair use inquiry, the Copyright Alliance asserts that the relevant part of the test goes a little something like this: “Where the amount [of an existing work] used is very small in relation to the copyrighted work [as a whole], this factor will favor a finding of fair use, but where the amount used is not insignificant, this factor will favor the copyright owner.” It continues, “This factor also considers the qualitative amount of the copyrighted work used. If the portion used was the ‘heart’ of the work, this factor will likely weigh against a finding of fair use even if that portion was otherwise a very small amount.” Again, not as simple as a number of percentage of changes. 

As for what can be established with certainty, it is that “there is no magic formula that can help someone avoid a claim of copyright infringement,” as Gottlieb, Rackman & Reisman P.C.’s Marc Misthal has asserted in the past. Or, as the U.S. Copyright Office puts it, “Only the owner of [the] copyright in a work has the right to prepare, or to authorize someone else to create, a new version of that work. Accordingly, you cannot claim copyright to another’s work, no matter how much you change it, unless you have the owner’s consent.”

The same is true, patent attorney Vic Lin says, when it comes to claims of design patent infringement and what he calls “the growing myth that you can avoid infringing someone else’s patent by changing your product by, say, 10 percent to 30 percent.” And still yet, in a trademark context (where novelty is not actually a relevant consideration), the metric for protectability – and for avoiding infringement – is whether there is a “likelihood” that consumers will be “confused” as to the source of one party’s goods/services if they bear a trademark that is similar to another party’s already-existing mark; no number to be found there.

Ultimately, while the appeal of these rules is apparent, their ability to provide sound guidance for those that want to rely on them is far less of a sure-thing. So, it is probably best for us – and Virgil – to put this one to bed.