Kering generated 9.9 billion euros ($10.11 billion) in revenue during the first six months of the year, up 16 percent compared to the first half of 2021, and touted 4.97 billion euros ($5.03 billion) in sales during the second quarter, alone, up by 12 percent compared to the same three months last year, topping analyst expectations of 4.44 billion euros for the quarter that ended on June 30. Helping to drive what the luxury goods group called “sharply higher sales in the first half” was Saint Laurent, which boasted sales of 1.48 billion euros ($1.51 billion), up 34 percent on a comparable basis. Saint Laurent beat out Gucci in terms of H1 growth, with Kering’s biggest brand delivering an increase of just 8 percent for total sales of 5.17 billion euros ($5.28 billion). 

Gucci

Diving into the results of its individual brands, Kering revealed that Gucci – the single largest revenue-generator for the group – suffered from a “China drag” during Q2 with sales growth of just 4 percent, which offset the strength of sales in other regions, namely, Western Europe, Japan, and North America. Nonetheless, Kering reported that its “brand elevation” strategy for Gucci is ongoing, and its “reorganization of the brand’s distribution over the last two years is now almost complete.” The “very substantial reduction” in the proportion of revenue coming from the wholesale business means that sales from directly operated stores made up 91 percent of Gucci’s total sales in the first half of 2022. (Gucci is the first Kering name to embark on this drastic wholesale “streamlining.”)

At the same time, Kering states that “efforts to enhance Gucci’s offering and pricing structure went hand-in-hand with the almost-completed streamlining of its distribution and subtle changes in the brand’s creative and aesthetic proposition,” with the aim being to “elevate the brand and make it more exclusive.” And additionally, Gucci “continued to allocate greater resources to communications and marketing efforts in the first half of 2022,” following from efforts made in the second half of 2021, “when its communications expenditure moved broadly into line with normative industry levels.” 

Kering Revenue

As for individual product categories, Gucci’s leather goods sales – which counted for 52 percent of its revenue for H1 – were “buoyed by successful product launches and investments in improving the range of luggage and travel bags,” per Kering. “The deterioration in the Chinese market in the second quarter partly depressed handbag sales, [but] they remained solid in other regions.” The brand’s other product categories – including shoes (21 percent of H1 revenue) and ready-to-wear (15 percent of h1 revenue) – saw “very robust sales growth compared to 2021.” 

In the first half of 2022, Gucci’s recurring operating income totaled 1.89 billion euros, with recurring operating margin coming in at a “solid” 36.5 percent.  

Saint Laurent

Rising star Saint Laurent “hit new highs,” according to Kering, with growth being “particularly strong in the directly operated retail network (revenue up 35 percent on a comparable basis in Q2) due to the success of all product categories,” including leather goods (which drove 72 percent of H1 sales) and ready-to-wear (11 percent of H1 sales), which rose “very sharply, continuing trends seen throughout 2021.” (Sales in all product categories were up by “over 30 percent” in Q2.) 

While the brand’s growth “slowed slightly” from 37 percent in the first quarter to 31 percent in the second, “the slowdown resulted from lower business levels in China, although the brand is less exposed to that market than the Group’s other brands.” In the first half of the year, the brand “achieved year-on-year revenue growth across all major regions, although performance in Asia-Pacific was held back by China’s anti-COVID-19 measures.” Elsewhere, sales in Western Europe “more than doubled” in Q2. There was “further growth” in North America. And while sales growth in the APAC region was “nearly flat,” sales in Q2 were “excellent” in Japan. 

Kering Revenue

Still yet, Keirng reported that Saint Laurent’s recurring operating income was 438 million euros in the first half of 2022, and its recurring operating margin was 29.6 percent, “a first-half record level,” up 3.3 points compared to the year-earlier period.

Bottega Veneta

Kering also breaks out figures for Bottega Veneta, which generated 834 million euros for the first half, up 13 percent on a comparable basis, and 438 million euros in Q2, up 10 percent on a comparable basis. (75 percent of H1 revenue came from the brand’s leather goods offerings, followed by shoes (14 percent) and ready-to-wear (9 percent.) “Sales from the directly operated retail network were up 19 percent year-on-year,” according to Kering, while wholesale revenue was down 4 percent, “in line with Bottega Veneta’s strategy to streamline its wholesale distribution.” The brand’s recurring operating income for the first half of 2022 totaled 168 million euros, and its recurring operating margin “rose markedly” to return to the 20 percent level.

Another interesting takeaway when it comes to Bottega Veneta, which Kering says is in the midst of “building long-term value, (and Gucci) Kering opened its conference call presentation document with an image of a Bottega store front, which appears to be the latest in a string of subtle efforts by the group to position its growing, non-Gucci brands in the minds of analysts as growth for its biggest brand eases. The group did the same thing in its full year 2021 presentation.

Other Houses

As for Kering’s “Other Houses,” namely, Balenciaga and Alexander McQueen, they “continued to achieve very strong growth,” with revenue close to 2 billion euros in the first half of 2022, up 29 percent on a comparable basis. The Other Houses “contributed significantly to the increase in the Group’s recurring operating income,” per Kering, generating “record recurring operating income of 337 million euros in the first half of 2022, an increase of 71 percent.” Recurring operating margin was strong at 17.3 percent, an increase of 4.0 points.

Kering name-checked Balenciaga, in particular, as “achieving higher penetration in Leather Goods” for the first half of the year, McQueen as “delivering double digit growth across channels and categories,” and Brioni confirming a “sharp rebound.” 

Just over two years after announcing the impending launch of Yeezy Gap, a 10-year deal between the American mall brand and musician-slash-fashion figure, the Gap x Kanye West collaboration is starting to take shape. The heavily-hyped pairing has gotten off to something of a slow start, as “in its first 18 months,” Yeezy Gap “yielded just two products” – a puffy coat and a hoodie – “both sold only online,” the New York Times reported this week. Fast forward to May 2022, and French fashion brand Balenciaga entered into the equation and “a full Yeezy Gap collection was finally released,” a portion of which hit stores across the U.S. – and the web via the Yeezy Gap and Balenciaga sites, as well as via third party retail platforms like Farfetch and MyTheresa – this past weekend, “with more promised later in the year.”  

Since the first announcement of Yeezy Gap back in June 2020, the venture has undergone “product development, testing and learning” from an apparel and textile perspective; seen changes in high-level management for the project (Gap installed former Vampire’s Wife CEO Leonardo Lawson to a strategy role in 2021; he was promoted to head of Yeezy Gap in March), as well as design (original design director Mowalola Ogunlesi left after the end of her one-year contract, and the endeavor now boasts a 20-person “innovation studio”); and welcomed the involvement of Balenciaga creative director Demna Gvasalia, who says that he stepped in to help “give [Kanye] the starting point” for the project. (Gvasalia told the Times that the Balenciaga element of the partnership “is now over.”)

All the while, behind the scenes of the protracted timeline of the Yeezy Gap’s largest launch to date, the collaborative endeavor has also been building out its branding – and not without a setback or two along the way. 

Yeezy Gap brand

The mashup of Gap’s signature navy blue hue with Yeezy’s “YZY” mark was first teased in 2020 when the Yeezy Gap was announced, and formalized a year later when West’s Mascotte Holdings, Inc. and GAP (Apparel) LLC filed three joint applications for registration with the U.S. Patent and Trademark Office (“USPTO”) for the blue-hued logo for use on clothing; “handbags, backpacks, all purposes carrying bags, [and] luggage,” among other similar goods; and “retail and online store services in the field of clothing, footwear, headwear, accessories, bags.” Two months later, they filed an application for the same mark – for use in connection with “retail and online store services” – with the European Union Intellectual Property Office (“EUIPO”). 

The parties’ logo – which can be found on the individual garments in the latest launch (and the puffer and hoodie that dropped last year) and on the Yeezy Gap website – was registered by the EUIPO on July 13. However, potential registrations for the mark with the USPTO have been a bit less straightforward, and in fact, the applications were suspended by the U.S. trademark body in June due to a conflict with another party’s previously-filed application for registration for a stylized Y.Z.Y. logo for use on “fragrances and hair care preparations.”

As TFL previously reported, Mascotte and Gap’s jointly filed the U.S. applications for registration for “the letters YZY in white inside of a blue square with rounded edges” were met with pushback for the USPTO, which pointed to the application that Miami-based perfume and beauty supply wholesaler Y.Z.Y., Inc. filed in June 2018. “If the mark in [Y.Z.Y., Inc.’s] application registers, the USPTO may refuse registration of [Mascotte and Gap’s] mark … because of a likelihood of confusion with the registered mark,” USPTO examining attorney Rebecca Caysido stated in Office actions in December 2021 in response to Mascotte and Gap’s applications. 

Yeezy Gap Brand
Mascotte’s “YZY” mark (left) & Y.Z.Y., Inc.’s stylized mark (right)

Caysido reiterated this point in a second round of letters to Mascotte and Gap on June 30, in which she suspended the applications until Y.Z.Y., Inc.’s mark is either registered or the company abandons its application. 

Caysido also pointed to the potential for a likelihood of confusion among consumers between the Yeezy Gap logo and an existing registration for a YZY word mark held by Mascotte. This refusal could be overcome, she stated in the letter, by way of “a written statement explaining the nature of the legal relationship between” Mascotte and Gap, along with “a detailed written explanation and documentary evidence showing the parties’ ‘unity of control’ over the nature and quality of the goods and/or services in connection with which the trademarks … are used” given that “neither party owns all or substantially all of the other party.” (This answers a question I posed last year about whether companies like Yeezy and Gap, which do not share a parent company, will face additional issues when it comes to their co-branded assets given that they are two different entities, and thus, two separate sources even if the collaborative wears arguably come from a new, single source.)

The story over Y.Z.Y., Inc.’s application – and in turn, Mascotte and Gap’s own YZY filings – does not end there, though, as there is a separate battle underway between Y.Z.Y., Inc. and Mascotte. As it turns out, on the heels of Y.Z.Y., Inc. landing in the receiving end of Office actions of its own, in which the USPTO asserted that its stylized Y.Z.Y. mark is confusingly similar to a “YZY” word mark that was registered to Mascotte in 2017 for use on footwear (no. 5227726). Faced with such pushback, Y.Z.Y., Inc. initiated a cancellation proceeding before the USPTO’s Trademark Trial and Appeal Board in August 2019 in an attempt to have Mascotte’s YZY registration invalidation on the basis that its use of Y.Z.Y. dates back to “at least as early as August 2011,” and thus, predates Kanye’s use of the mark. 

That back-and-forth before the Trademark Trial and Appeal Board has been on hold since 2020 in light of “pending settlement negotiations” between the parties. 

With the foregoing in mind, the outcome of Gap and Mascotte’s trademark applications23 may now hinge, to some extent at least, on the registrability of Y.Z.Y., Inc.’s mark. Any outcome on this front is, of course, distinct from the rights that Mascotte and Gap have already amassed in the YZY logo and “Yeezy Gap” word mark in the U.S. simply by using – and widely advertising – those marks (and the Yeezy Gap brand more broadly) in connection with garments and retail services. And with Gap’s ambitions of turning the Yeezy Gap brand into a $1 billion-plus venture (and a much-needed one, as the company is in the midst of financial woes), it seems unlikely that it will allow a relatively minor trademark scuffle to stand in the way.

LVMH Moët Hennessy Louis Vuitton reported revenue of 36.7 billion euros ($37.15 billion) in the first half of the year, up 28 percent compared to the first six months of 2021, with the French luxury goods group touting “double-digit organic revenue growth” for all of its business groups during the first half and strong growth coming from Europe, Japan and the U.S. In addition to “exceptional momentum” in champagne and cognac and “rapid growth” in fragrances and skincare, LVMH revealed that Fashion & Leather Goods had a “remarkable performance,” as consumers continue to double-down on luxury goods purchases in the wake of the pandemic.

Focusing specifically on its biggest division, LVMH revealed that Fashion & Leather Goods generated revenue of 18.1 billion euros ($18.32 billion) during the first half of the year, up 24 percent (on an organic basis) for H1, and up by 19 percent (to 9.1 billion euros) for the second quarter, which ended on June 30. In addition to revenue growth, Fashion & Leather Goods reached new “record highs” for profitability, per LVMH, with profit from recurring operations growing by 33 percent to 7.51 billion euros for H1, and its operating margin as a percentage of revenue growing by 0.6 points to 41.4 percent. (A nod to the success of enduring price hikes from Louis Vuitton, Dior, and co., which increased prices from 3 to 7 percent in H1, with “no push back from customers,” per LVMH management.)

In a note following the LVMH earnings call, Bernstein analyst Luca Solca stated that the 40 percent-plus margins for Fashion & Leather Goods” are the new normal particularly due to the performance of Dior,” which contributes “significantly” both in terms of revenues and margins, and on top of that, “Loewe, Fendi and Celine are also improving margins significantly – most brands within the divisions are reaching a profitability level which is satisfactory and commensurate to their size, which was not the case in the past.”

LVMH Revenue

Reflecting on the “strong progress” of Fashion & Leather Goods group, LVMH primarily name-checked Louis Vuitton, Christian Dior, Fendi, Celine, Loro Piana and Loewe – leaving out the likes of Givenchy. In an apparent effort to keep up with demand for Louis Vuitton, LVMH revealed the inauguration of two new workshops for its most robust brand in France, including one for precious leathers. As for its other Fashion & Leather Goods leader, Dior, LVMH pointed to “outstanding growth in all product categories,” including “continued success of [its] Lady Dior bag.”

Meanwhile, LVMH mentioned the “success of iconic bags Peekaboo and Baguette” for Fendi; the planned opening of two new workshops in Italy in H2; and the Fendace capsule collaboration with Versace, which “generated major media coverage and commercial success, with its best-selling products selling out in the space of a few days.” It also cited “strong progress of ready-to-wear” for Celine, as well as the success of new high-end leather offerings; and in terms of Marc Jacobs, the brand boasted “fresh momentum” during H1, per LVMH, with “an impressive surge in online sales and new stores that opened in the U.S. and Europe.” 

Elsewhere under its umbrella, the group revealed that the Perfumes & Cosmetics division – which recorded organic revenue growth of 13 percent for H1, reaching 3.6 billion euros – saw “excellent momentum in Perfumes” and a rebound in makeup.” LVMH also cited the impact of health restrictions in China on the division, in particular, along with its “intensification of selectivity in distribution” and its practice of “limiting promotions.” 

LVMH Revenue

The Watches & Jewelry division – which posted revenues of 4.9 billion euros for H1, an organic increase of 16 percent – was led by the success of Tiffany & Co., which “enjoyed an excellent half-year, still driven by strong momentum in the U.S.,” as well as sales at Bulgari and watch-maker Tag Heuer. And still yet, LVMH noted a “strong rebound from Sephora” and a “recovery in hotel activities,” with luggage-maker Rimowa similarly benefitting from an uptick in travel, “stepp[ing] up its performance considerably as borders reopened around the world.” Similarly, Wine & Spirits – which saw revenues grow to 3.3 billion euros for H1 (up 14 percent on an organic basis) – felt a lift from travel resuming, as strong demand in the U.S. and Europe was “led by restaurants reopening and tourism recovery.” 

Regionally speaking, LVMH saw revenue grow by 24 percent in the U.S. market for the first half of the year. Sales grew by 47 percent in Europe, 33 percent in Japan, and 1 percent in Asia (excluding Japan). As for the revenue by region breakdown, the group generated 32 percent of total H1 revenue in the Asian market (vs. 38 percent in H1 2021), followed by 27 percent of sales in the U.S. (vs. 25 percent in H1 2021), 15 percent from Europe – excluding France (vs. 14 percent in Q1 2021), 7 percent in France (vs. 5 percent in H1 2021), 7 percent in Japan (the same result as H1 2021), and 12 percent from “Other Markets” (vs. 11 percent in H1 2021). 

As for the “painful” impact of the Chinese market on the group’s results, LVMH chief financial officer Jean Jacques Guiony said on an earnings call on Tuesday that sales in China, which is facing strict lockdown measures in the face of the latest wave of COVID-19, were down by “heavy double digits.” While the group saw “some improvement” towards the end of Q2, it was “not significant.” Nonetheless, management is confident that the Chinese market “will bounce-back” once the health restrictions are lifted thanks to strong, underlying demand.

A New York federal court has agreed to modify the preliminary injunction it entered in March 2021 in the lawsuit that pits bridal designer Hayley Paige Gutman against her former employer – and owner of her eponymous label – JLM Couture over her ability to compete with JLM and use social media accounts bearing her name. In a 57-page opinion and order on Monday, Judge Laura Taylor Swain of the U.S. District Court for the Southern District of New York determined that JLM has demonstrated “a clear likelihood of success on the merits” of its property and contract claims, thereby, extending the timeline for barring the designer from doing things like making changes to – or attempting to gain control over – the @misshayleypaige social media accounts.

Among the primary issues at the heart of the recently-issued opinion and order are JLM’s likelihood of success on the merits for its conversion and trespass to chattels claims in the lawsuit, which, according to the court, “turn[s] on the novel question of ownership of social media accounts,” and JLM’s likelihood of success in establishing that Hayley Paige Gutman’s conduct – including teasing the impending launch of a new bridal collection in “August of 2022” – constitutes a breach of the terms of employment contract that she entered into with the company, including an enduring non-compete provision.

In order to determine JLM’s likelihood of success on its property-based claims (namely, conversion and trespass to chattels), a discussion about “ownership of social media accounts” – a Pinterest account and an Instagram account, both of which bear the handle @misshayleypaige – “is necessary and appropriate,” Judge Swain states. (Ownership of the accounts is relevant, as JLM was looking to get the court to extend the duration of certain provisions past the term of Gutman’s employment contract (August 1, 2022) until the merits of the claims are resolved in the litigation. The provisions prevent Gutman from “making any changes” to the Hayley Paige social media accounts that are “inconsistent with her duties under the contract, without the ‘express written permission of’” JLM CEO Joseph Murphy; and prohibit Gutman from taking “any action, other than a properly noticed application to the Court, to gain exclusive control” over the accounts.)

Evaluating Ownership

Evaluating JLM’s likelihood of success on the merits for its conversion and trespass to chattels claims, Judge Swain asserts that “neither party disputes that ‘intangible property such as websites and account information can be the object of conversion under New York law,’” and that claims of trespass to intangible property, such as social media accounts, “have been treated as claims for trespass to chattels by courts applying New York law.” The issue of ownership of a social media account, however, is novel, according to the court, as “few courts have examined the question.” 

Nonetheless, JLM cites two decisions that provide “helpful guidance for resolving the instant motion,” per Judge Swain, pointing to In re CTLI, LLC and Int’l Bhd. Teamsters Loc. 651 v. Philbeck. In those cases, the U.S. Bankruptcy Court for the Southern District of Texas and the U.S. District Court for the Eastern District of Kentucky, respectively, “focused on common factors pertinent to the determination of whether a business or organization-related social media account belongs to the entity or to the individual who created it.” Those factors include “whether the account handle reflects the business name; how the account describes itself; [where/how] the account was promoted; whether the account includes links to other internet platforms of the entity; the purpose for which the account was used; and whether employees … had access to the account and participated in its management.” 

Looking at the individual factors, Judge Swain asserts that the evidence in the lawsuit at hand “strongly supports” a finding that the @misshayleypaige accounts were “held out as business accounts” for the Hayley Paige brand, as the accounts were “utilized to promote JLM’s business.” For instance, the accounts “regularly feature[ed] JLM products,” including the wedding dresses designed by Gutman for the Hayley Paige brand. In addition to “JLM utiliz[ing] the accounts to identify its products,” it incorporated the accounts’ handle @misshayleypaige “on hang tags of its physical garments in the Hayley Paige lines, in print advertisements, and on its website.” The court also found that the descriptions displayed on the Instagram and Pinterest accounts “regularly included a link to JLM’s website www.hayleypaige.com,” and “frequently featured the email address of JLM’s Public Relations Department,” which leans towards the accounts being “held out as business accounts marketing JLM’s Hayley Paige brand.” 

Beyond that, the court noted that Gutman and other JLM employees “frequently collaborated on strategies in which the accounts could be effectively leveraged to advertise trunk shows, promote stores selling HP brands, and inform followers about promotional codes or sales events,” efforts that “were directly tied to the corporate goals of promoting brand visibility and increasing sales and revenues.” In addition to collaborating with Gutman, JLM’s employees “directly participated in the management of the accounts in support of JLM’s business interests,” with the accounts playing “a critical role as a communication platform for JLM’s actual and potential customers, for both sales-related inquiries and customer service,” among other things. 

And still yet, the court noted that Gutman created the accounts “shortly after she signed [her] contract (which transferred to JLM the exclusive right to use such a variation of her name for commercial purposes) and a trademark registration acknowledgement form assigning the rights in her name to JLM,” which “weighs heavily in favor of finding that the accounts are business assets owned by JLM.”

The court was largely unpersuaded by Gutman’s arguments to the contrary, including her claim that she has superior rights to the accounts because she created them “with her subjective intention that they be utilized for personal reasons.” Additionally, Gutman claimed that no shortage of her posts were not business oriented, and instead, were aimed at “reflecting her personality.” Not convinced, the court held that “when the content of the accounts is examined holistically, the content of a more personal character does not outweigh the content geared toward Ms. Gutman’s marketing of JLM’s products, nor the type of subtle marketing in which she associated the girly, whimsical aspects of her personality with JLM’s Hayley Paige brand.” 

Taken together, the court determined that JLM established its “clear likelihood of success in demonstrating that it owns the Instagram and Pinterest account[s] or (to the extent Ms. Gutman or the relevant platforms may hold title to the accounts) has a right to use and control the accounts vastly superior to any such right of Ms. Gutman.”

In addition to showing a likelihood of success when it comes to proving ownership, Judge Swain found that JLM also successfully established that it will suffer “irreparable injury in the absence of injunctive relief maintaining its control of the accounts,” that the “balance of hardships tipping in its favor, and that the public interest would not be disserved by the issuance of preliminary injunctive relief prohibiting Ms. Gutman from making any changes to the Instagram or Pinterest accounts or taking steps to assume exclusive access over those accounts.” On this front, the court pointed to its previous finding that amid a deterioration in the parties’ employment relationship, “Ms. Gutman changed the access credentials for the Instagram and Pinterest account[s], refused to share the new log-in information with JLM, and informed JLM that she would ‘not [be] posting any JLM related business to the account,’ thereby blocking JLM’s access to its critical marketing platforms for the HP brands.” 

And still yet, Judge Swain stated that “JLM’s ability to control the content of the accounts is critical to maintaining the strong Internet presence of the HP brands, JLM’s reputation, and the goodwill JLM has created among potential and actual customers who follow the accounts,” which weighs in favor of extended injunctive relief. 

Because JLM’s likely success on its conversion claim supports the relief granted as to the Instagram and Pinterest accounts, namely, a block against Gutman making changes to (or trying to gain control of) the accounts,  Judge Swain states that “the Court need not conduct a separate analysis of the related trespass to chattels claims at this juncture.” 

Competition & Confidential Information

The court also determined that JLM established a clear likelihood of success on the merits of its claim that that Gutman’s “intended launch of a competitive brand would breach the restriction imposed” by her employment contract,” with the court finding that Gutman’s “plans to return to the industry and publicly identify herself as the designer of a competitive brand demonstrate that she intends to engage in conduct that is likely to constitute a breach” of the term in her contract that prohibits her from “‘identif[ying] [herself] to the trade or consuming public as the designer’ of ‘any goods in competition with goods manufactured and sold by’ JLM for a period of five years follow the conclusion of the Contractual employment term on August 1, 2022.” As such, the court agreed to — new injunctive relief 

This round was not all wins for JLM. The court refused to impose preliminary injunctive relief with regards to a contract term that requires Gutman to refrain from disclosing confidential JLM information, including “customer lists,” as JLM made “no showing” that Ms. Gutman is likely to disclose confidential information apart from her use of the [Hayley Paige] social media accounts. Since the court granted “exclusive control” of the accounts to JLM, it found that such concerns are not warranted. The court also declined to impose an additional sanction for Gutman’s past “misconduct,” including her announcement of a competing collection, as “the Court will enforce with injunctive relief, [which] provides substantial protection to JLM against competitive design activity in the bridal space.” 

The court’s order comes less than two years after JLM filed its lawsuit against Hayley Paige Gutman – who found widespread fame thanks to her recurring role on TLC’s reality show Say Yes to the Dress – in December 2020, accusing Gutman of federal and common law trademark dilution and unfair competition, breach of contract, conversion, and breach of fiduciary duty, among other claims, after she began posting “personal images in addition to bridal images” to the @misshayleypaige account, as well as uploading posts “promoting the goods of third parties, such as olive oil, beer, and nutritional supplements, none of which were approved by JLM, and none of which relate to the bridal industry.” Not only did Gutman “hijack” the Hayley Paige account, JLM has argued in its lawsuit that she took “steps to convert it from a JLM company account” – and its 1 million-plus followers – “to her own business platform, as if she were an influencer.” 

The court has routinely characterized the lawsuit as “a novel dispute” between Hayley Paige Gutman, “a leading bridal wear designer and the manufacturer from whose employ she recently resigned over the control and use of social media accounts.” 

The case is JLM Couture, Inc. v. Gutman, 1:20-cv-10575 (SDNY).

A New York federal court has sided with model Hailey Bieber, refusing to issue a preliminary injunction that would have required her newly-launched skincare brand to stop using the name “Rhode” for the duration of a trademark lawsuit lodged against it by a fashion brand of the same name. The plaintiff argued that in addition to barring the defendants from using the Rhode “trade name or domain name” and thereby, “swamping [Rhode’s] market presence” and confusing consumers, the injunction was necessary in light of the fact that Bieber was planning to release a documentary about her brand titled, “The Making of Rhode,” which would further exacerbate the risk of reverse confusion. The court disagreed with Rhode, with Judge Lorna G. Schofield of the U.S. District for the Southern District of New York stating in a brief order on Friday that following the parties’ conference on July 22 and after viewing the documentary, “Plaintiff’s motion for a preliminary injunction is denied without prejudice.” 

The order follows from a hearing and oral ruling on July 21, during which Judge Schofield stated that Rhode failed to demonstrate a likelihood of success on the merits on its trademark claim. While the “similarity of the marks” factor weighed in favor of Rhode (but barely, as the plaintiff’s mark “is weak without much evidence that [the] mark has acquired distinctiveness through secondary meaning”), the judge held that the “proximity of the marks and their competitiveness with each other” weighed more towards Bieber’s brand. (Turns out, the court does not view clothing and skincare as closely as one might think in a market of fully-fledged lifestyle brands.)

Rhode first filed its lawsuit against Bieber and her companies RHODEDEODATO CORP. and HRBEAUTY, LLC d/b/a RHODE for trademark infringement and unfair competition under federal and New York state law in June, accusing the defendants of co-opting the Rhode name, which Rhode says that it first adopted eight years ago and has been using consistently ever since. In its complaint, Rhode alleges that it began selling luxury garments under the Rhode name back in 2014 and since then, co-founders Purna Khatau and Phoebe Vickers and their brand have garnered media attention from the likes of Vogue; had their wares carried by retailers like Net-a-Porter, Neiman Marcus, Shopbop, and Saks Fifth Avenue, among others; and garnered fans, such as Beyoncé, Tracee Ellis Ross, and Lupita Nyong’o, while building a business that is on track to generate “sales of approximately $14.5 million for the year 2022 and $20 million in 2023.” 

All the while, New York-based Rhode declared in the complaint that it has amassed trademark rights in – and registrations for – its name for use on apparel and accessories, among other things, with plans to expand into additional categories of goods/services in furtherance of its founders’ aim to build out a fully-fledged lifestyle brand. 

Against that background, Rhode argued that on June 15, model-slash-budding beauty entrepreneur Hailey Bieber launched a skincare brand of the same name. While Rhode contends that it maintains superior rights in the brand name and “has achieved great success in the competitive and challenging fashion industry and has established a strong brand identity, there is no question that Ms. Bieber’s worldwide fame affords her a more substantial platform from which to [promote and] sell products.” More specifically, Rhode asserts that “Bieber’s new, trademark-infringing brand will quickly swamp [its] market presence, confuse the marketplace, and ultimately, destroy the goodwill and reputation of the RHODE brand.”

In addition to potentially confusing consumers as to the source of Rhode-branded goods, the potential for harm that comes from Bieber’s new brand is significant, according to the lawsuit lodged by Rhode, which argues that such reverse confusion is “likely to cause Rhode to lose control over its goodwill and reputation, which it has spent nearly a decade building,” and “more than $1 million on brand advertisement” in 2021, alone. 

A spokesman for Rhode told TFL, “Friday’s court ruling is simply a decision by the judge not to prohibit Hailey Bieber’s skin care line from using our brand name while litigation proceeds, deferring the ruling until we have the opportunity to gather more evidence. It is exceedingly rare for a judge to issue the preliminary order we sought, and so we expected this outcome. We remain confident that we will win at trial. ‘Rhode’ is our name and brand, we built it, and federal and state laws protect it. We ask Hailey to achieve her goals without using the brand name we have spent the last nine years building. Our team remains focused on continuing to grow our brand and thank you again to everyone for your support.”

Reverse Confusion in Second Circuit District Courts

Not the only reverse confusion-centric case to be filed in a New York federal court as of late, the Rhode v. Rhode case was closely followed by the filing of a trademark suit against Kim Kardashian, her corporate entity Kimsaprincess Inc., and Coty, Inc. In a complaint dated June 28, Brooklyn, New York-based Beauty Concepts, which does business as SKKN+, claims the mega-star and her cosmetics manufacturing collaborator are on the hook for trademark infringement and unfair competition, as well as civil conspiracy under New York common law, for launching the “confusingly similar” SKKN by Kim brand and using the mark on goods and services that are “identical to, or highly related to, services offered by Beauty Concepts under [its own] SKKN+ trademark.” 

And still yet, on the heels of facing complaints from more than one company following its name change last year, Meta Platforms, Inc. landed on the receiving end of a newly-filed lawsuit in New York’s Southern District, with a small virtual reality-focused company accusing the social media behemoth formerly known as Facebook, Inc. of “brazenly violat[ing] fundamental intellectual property rights enshrined in U.S. law to obliterate” a business that has been using the Meta name for more than ten years. In the lawsuit that it filed in a New York federal court on July 19, experiential and immersive technologies company Meta claims that in opting to rebrand to “Meta” last fall, Facebook, Inc. “astoundingly … ignored [its] federal registrations for the META mark,” and the company has since “saturate[d] the marketplace with its infringing META mark,” leaving Meta with little chance to survive. 

Given that Facebook, Inc.’s AR, VR, and XR-centric offerings, its consumers, and its channels of trade are “identical to those of Meta – albeit at a much larger scale,” Meta contends that Facebook, Inc.’s adoption of the Meta trademark makes for “a textbook reverse confusion case.” 

As distinct from traditional “forward” confusion, which is the most common case infringement scenario and one in which the junior user is a small entity that wrongfully makes use of the established brand of a larger entity (the senior user) by misrepresenting their trademark, reverse confusion results from a situation where consumers are likely to be confused in believing that both the junior and senior users’ goods/services are manufactured by or associated with the junior user. (In a reverse confusion scenario, the junior user is the larger, more established entity.) Because of its established position in the market and robust marketing efforts, the junior user is able to saturate the market with its goods/services, thereby, overshadowing the existence of the senior user.

To date, most reverse confusion cases have been litigated in district courts that fall within the jurisdiction of the U.S. Court of Appeals for the Ninth Circuit, and thanks to an array of opinions from the Ninth Circuit, plaintiffs have a relatively clear framework for pleading and establishing a trademark infringement claim under a “reverse confusion” theory in this Circuit. In connection with its decision in July 2017 in Marketquest Group v. BIC, for instance, the Ninth Circuit “relieved plaintiffs from having to specifically plead reverse confusion if it is compatible with the theory of infringement alleged in the complaint and supported a more malleable standard for proving intent in reverse confusion cases,” Fenwick partner Eric Ball wrote at the time. More recently, in its 2021 decision in Ironhawk Technologies, Inc. v. Dropbox, Inc., the court – after applying the Sleekcraft factors – refused to grant summary judgment for the defendant, a move that Weintraub Tobin’s James Kachmar says is a reminder that the Sleekcraft factors “can play an importantly equal role in cases where a senior mark holder brings a reverse confusion case against a more popular and commercially successful junior holder.”

And most recently, the Second Circuit issued its decision in RiseandShine Corporation v. PepsiCo, Inc. this month., in which it reversed a preliminary injunction entered by the U.S. District Court for the Southern District of New York that would bar PepsiCo from marketing its “Mtn DEW Rise Energy” energy drink, taking issue with the merits of Rise Brewing’s reverse confusion theory. Among other things, the Second Circuit disagreed with the lower court in terms of the strength of Rise Brewing’s mark, finding that links between the word “Rise” and coffee make it a suggestive mark entitled to a narrow scope of protection. Beyond that, the appeals court agreed with PepsiCo, which argued that “where a plaintiff claims it will be the victim of reverse confusion – in that consumers will believe that its product comes from the junior user – a plaintiff’s showing of acquired strength of its mark does not support its claim.”

The budding number of reverse confusion-focused cases being filed in federal district courts in New York, the Rhode lawsuit included, stand to bring some guidance for both plaintiffs and defendants should they seek to lodge – or be forced to defend – similar cases. And as Meta’s lead counsel Dyan Finguerra-DuCharme stated in connection with that case, “The facts provide the 2nd Circuit courts with the opportunity, for the first time this decade, to ensure that liability standards, injunctive relief, and damages awards in reverse confusion cases are commensurate with the fundamental purpose of the doctrine to protect the IP rights of small businesses in a contemporary era of corporate consolidation and dominance.”  

The case is Rhode-NYC, LLC v. Rhodedeodato Corp. et al1:22-cv-05185 (SDNY).