In a Prada earnings call in March, in between touting e-commerce sales growth of more than 200 percent for the 2020 fiscal year and citing “stronger retention, average order value, etc.,” as it has eagerly welcomed a younger generation of luxury-happy consumers, Patrizio Bertelli shared a bit of information that may ultimately prove to be the most telling of all. Addressing the enduring array of mergers and acquisitions that has been underway as the pandemic separates the mightiest from the lesser-so and enables cash-flush luxury giants to further bolster their holdings, Prada’s co-CEO said that the Milan-based group is “not planning to sell” Prada or its smaller brands.

The potentially more compelling revelation, however, was that Prada may consider acquiring other brands, a statement that now appears to be more than a mere possibility.  

Fast forward a few months and it seems that Prada is actively seeking out a deal that would enable it to build a bigger group under the watch of Mr. Bertelli, along with his wife and longtime Prada creative chief Miuccia, and their son Lorenzo Bertelli, 33. On the heels of stating in March that the family – which owns 80 percent of the Prada Group – was “open” to acquiring other brands, Bertelli is in talks with Mediobanca, Italy’s largest investment bank, about possible deals to take over an as-of-now unnamed brand, but likely one that Prada can acquire for cheap and relaunch under its ownership umbrella, according to a source for TFL.

A Second Try?

Should an acquisition come into fruition, it would not be the first time that Prada has tried to bolster its roster. In fact, in the late 1990s, Mr. Bertelli – who currently shares the CEO title with his wife, Miuccia – sought to take on the likes of LVMH and PPR, now known as Kering, by building Prada into a fully-fledged luxury group. In that vein, Bertelli set the fashion media ablaze when he amassed a 9.5 percent stake in fellow Italian fashion brand Gucci between 1997 and 1998, and then sold off all 5.6 million of his shares to LVMH chairman Bernard Arnault in January 1999. 

A few months later, in March 1999, Mr. Bertelli acquired 51 percent of the Helmut Lang brand, and would take over the remaining 49 percent stake several years later. In furtherance of Bertelli’s conglomerate-building quest, Prada revealed in August 1999 that it would secure a controlling stake in Jil Sander. Shortly after that, the group struck a deal to buy out Church & Co. after previously amassing a stake in the English footwear company, and in October 1999, jointly acquired Fendi in a €1 billion deal with LVMH. And still yet, Bertelli also brokered deals that saw the Prada Group amass controlling stakes in Azzedine Alaïa and Car Shoe. 

Ultimately, Bertelli, now 75, sold off almost everything, pushed “by [Prada’s] creditor banks” to rid itself of unprofitable brands, the Wall Street Journal reported in a 2006 article reflecting on the wind-down of the ambitious play that could have resulted in an Italian luxury goods powerhouse, one to rival the two French titans, LVMH and Kering.  

Swearing off further attempts to build out a bona fide luxury goods conglomerate, Bertelli said in the wake of the sell-offs that Prada would focus on achieving growth from within, namely by expanding into new markets, and in 2006, it sought €100 million ($126.5 million at the time) in funding from Banca Intesa in exchange for a 5 percent stake in the group, a deal that valued Prada at €2 billion.

Skip forward again, this time to June 2011, and Prada made good on its long-rumored plans to go public, listing 20 percent of the company on the Hong Kong Stock Exchange and raising $2.14 billion to “re-finance debt that was slated to mature and to finance its intended growth into Asia” and other market by way of upwards of 200 new store openings.

Strategy & Succession

More recently, things have been looking up for Prada, which has been actively aiming to boost margins and bolster its brand image by revamping its classic products and putting a stop to end-of-season markdowns, and looking to attract younger, digitally-connected consumers by way of a marketing overhaul and an emphasis on e-commerce following a few sluggish years beginning in 2013. And while Bertelli reaffirmed the company’s enduring focus on “internal growth” this spring, ongoing talks with bankers in Milan seem to suggest that he is undiscouraged by the group’s failed attempt to bolster its size by way of outside brands beginning in the late 90s, and in fact, may be looking to try his hand again. 

The potential for M&A activity for the Prada Group – in with Mr. Bertelli, personally, maintains 35 percent of the family’s 80 percent stake, and Mrs. Prada controls a larger 65 percent along with her family – comes as succession speculation looms. Bertelli has stated that he intends for the reigns to eventually pass to his son Lorenzo, who joined the Prada Group board this spring and has served as the company’s head of marketing and CSR since 2018. To date, a timeline for such a move has not been identified. However, sources suggest that Lorenzo, an ambitious new member of the family firm, who is said to have his mother’s backing in ascending to the CEO role in the not-too-distant future, could take over the business in as few as two to three years.

If his father has anything to do with it, that business will be at least one brand mightier, putting Prada in a stronger position to achieve greater future growth and assuming this time is different than the last, maybe even enabling it to take a spot within the ranks of the industry’s most well-known groups. 

UPDATED (November 18, 2021): Mr. Bertelli confirmed this week that he plans to put his son Lorenzo in charge of the Italian fashion company within the next three years, and also reiterated that Prada is not looking to sell. “I’ve always been interested in buying, never selling,” he stated, noting that the group could grow further by acquiring small Italian textile and manufacturing companies.

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Hermès has fared relatively well in the midst of a pandemic-ravaged market. Analysts celebrated the Paris-based brand when FY20 results were posted early this year, as the Birkin-bag maker’s revenues amounted to 6.39 billion euros ($7.7 billion) – down by just 6 percent, which is quite a bit less than rivals LVMH and Kering, which saw their 2020 sales fall by 16 percent and 18 percent, respectively. “To record only a 6 percent drop in sales after the most horrible year for the luxury industry ever was an outstanding result,” Bernstein analyst Luca Solca stated in a note in February, pinpointing a “better performance” in Europe, “a significantly stronger rebound” in Asia, and “high demand” for its products across the board as some of the “differences” between Hermès and its “weaker peers.” 

In a separate note, Citi analyst Thomas Chauvet highlighted Hermès’ 20 percent revenue growth in Q4 and its record 37 percent increase in gross margins for the second half of the year, saying that the 184-year-old brand “appears to be in a different league” than similarly situated fashion brands. The same takeaway applied again this month when Hermès’ beat analyst expectations and its rivals in terms of revenue growth the first 3 months of the year (up 44 percent compared to the same time last year), which was “particularly noteworthy” given its decision not to raise prices in as aggressive a way as many other luxury players.

Elsewhere in the upper echelon of the luxury market, other entities have also performed well, all things considered. Like Hermès, which notoriously proves its worth in times of economic downturn and/or uncertainty, certain luxury automakers have stood out. Lamborghini, for instance, “had its most profitable year ever in 2020 and its second-best sales year in the brand’s history,” CNN reported this month, despite a sales drop of 11 percent on a year-over-year basis for 2020. The company’s results were boosted by what Bloomberg’s Hannah Elliott called “the right mix of six-figure SUVs,” which have proven a draw among Chinese car buyers, “and multimillion-dollar supercars.” 

Meanwhile, fellow Italian automaker Ferrari’s sales were down by less – 10 percent compared to 2019, but thanks to a “record” Q4 results, the company’s results “exceeded full year guidance on all metrics.” And in case that is not enough, Ferrari revealed in February that orders for future cars were similarly at “record” levels. 

The Latest Luxury Brand?

In the midst of the COVID pandemic, there appears to be another – albeit less traditional – standout player in the “luxury” sphere: Pfizer. The name of the New York-headquartered pharma giant has been likened to a coveted brand in its own right in a growing number of instances over the past several months, as the various vaccines have been brand-ified amid the increasing roll-outs and information campaigns. This is evidenced by the inundation of (unauthorized) “Pfizer” and “Moderna”-bearing merch on sites like Etsy, the comparison of the Pfizer-BioNTech vaccine to the likes of Hermès (even if light-heartedly), and of course, the enduring inquiry that you have inevitably heard (or posed): “Which vaccine did you get?”

It is not entirely clear whether the “what did you get” question is purely the most relevant of the small-talk comments and inquiries that usually center work or weekend plans, or whether it reflects some inherent preference as a result of the widely-publicized efficacy of the Pfizer shots, something that “has been in the news for endless of hours,” Manuel Hermosilla, assistant professor of marketing at the Johns Hopkins Carey Business School, told Quartz late last month. Either way, the question – which writer/cultural commentator Chris Black recently called “the newest obnoxious question sweeping modern social situations” – has, nonetheless, permeated conversations and placed an emphasis on brand in a way that is more traditionally used when talking about things like a handbag, watch or car. 

All the while, memes that depict vaccine vials covered in Chanel and Hermès branding have circulated social media, a play, certainly, on the element of branding that has been attributed to the vaccines. 

The brand-specific vaccine question also seems to indicate some underlying preference for one version versus others, even if the difference in effectiveness between Pfizer and Modern, for example, is largely negligible. The notion of preference – or that one “brand” of vaccine might be more desirable than another – has also been reflected among at least some vaccine-seekers. In the United Kingdom, the Washington Post reported that Pfizer has come to be called the “posh” vaccine, while in the U.S., it is not entirely uncommon for people to state a preference for the Pfizer doses, per Quartz, which noted in March that “according to marketing experts, Pfizer has emerged as the victor of the vaccine branding wars so far.” 

While the notion of brand in the context of a vaccine for a globally-spanning and potentially deadly virus seems preposterous, as a culture that largely revolves around, relies upon, and identifies with brands – and as a result, prioritizes some over others – on a daily basis, the fact that this way of thinking would not be turned-off when it comes to things like vaccines is maybe not so surprising. 

What Was the Impact?

Given the reported preference among many individuals for Pfizer-BioNTech doses and the company’s nabbing of the title of the first to secure U.S. emergency use authorization for a coronavirus vaccine, Pfizer appears, in some way, to be the luxury brand of 2021. The consideration of quarterly earnings or stock price as an indication of the strength of the “brand” at play, however, is not quite a simple for Pfizer as it is for say, Ferrari or Hermès. This is due, at least in part, to the fact that Pfizer’s business is simply much larger (Pfizer generated $41.9 billion in revenue in 2020, up 2 percent on a year-over-year basis), and its offerings are far more expansive, and require a far greater level of research and development than those in most market segments. Currently, Pfizer’s arsenal consists of name-brand drugs like Advil, Viagra, Zoloft, Lipitor, and Xanax; vaccines for things like pneumonia; gene therapy products; a slew of generic medications; and “new medicines and vaccines” currently in various stages of development, all of which stand to have a bearing on its bottom line and stock price.

As Keith Speights wrote for Motley Fool early this year, while 2020 should have been Pfizer’s year, the company’s shares actually slipped, making it a “surprising” stock market loser. “You can mainly blame disappointing clinical results for Ibrance,” which is a treatment for HR-positive and HER2-negative breast cancer, he says. Forbes also weighed in, stating that Pfizer – which holds the title of the world’s largest pharmaceutical company – has not been immune to changes in consumer behavior amid often-strict lockdowns. Part of the fall in the New York-headquartered pharma giant sales last year can “largely be attributed to the impact of Covid-19, which reduced doctors’ visits and delayed individuals from seeking care.” 

According to most analysts, things will be looking up for Pfizer this year from a stock market and sales standpoint. Nasdaq revealed this week that “Pfizer and BioNTech are at the threshold of signing the biggest vaccine supply deal ever,” one that will see them supply “up to 1.8 billion doses” of their vaccine to the European Union. “If the full 1.8 billion doses of the vaccine are purchased, Pfizer and BioNTech stand to make more than 35 billion euros over the next couple of years, or around $42 billion at current exchange rates,” per Nasdaq, which is “great news for shareholders that Pfizer and BioNTech are likely to secure a significant revenue stream for the next two years.” 

The Inevitable Role of Branding (and Rebranding?)

But what about the impact of the vaccine on Pfizer from a more intangible, branding perspective? “The commercial and branding implications of the company’s new-found prominence in the world of Covid treatment could be an enormous opportunity to … build brand,” among other things, Mark Ritson wrote for Marketing Week in February, noting that “the development and mass-manufacture of a Covid vaccine will likely become Pfizer’s finest hour, its biggest commercial opportunity and an enormous global boost to the company’s corporate brand equity.” 

From a purely branding asset perspective, Pfizer recently launched “its first major rebrand in decades with a new logo, an effort to highlight the company’s shift from a diversified health care giant to one more focused on creating prescription drugs and vaccines that prevent and cure disease,” according to the Wall Street Journal. The Journal’s Alexandra Bruell notes that Pfizer’s introduction of a “new identity” comes as “consumers have garnered more positive feelings toward the pharmaceutical industry [throughout the pandemic], and shown an interest in how drugs and vaccines come to market, prompting historically reticent pharma giants to promote their corporate brands and communicate more openly about their internal processes.”

Pfizer is, of course, located smack-dab at the center of this.

Reflecting on the topic of brand value and equity, Brand Finance analyst Hugo Hensley says that Pfizer’s brand value – a metric that gauges “the value of the “names, terms, signs, symbols, logos, and designs” that a company uses to identify and distinguish its “goods, services or entities” from those of others – increased in 2021, presumably as a result of the vaccine. In terms of “Brand Strength,” a separate calculation that the London-based brand valuation consultancy uses to value brands, Hensley told TFL that “consumers only really started benefiting from the Pfizer vaccine in the new year,” which means that the Brand Strength Index score attributed to Pfizer “did not see the full impact of being the first effective vaccine.”

Nonetheless, Hensley says that it is “safe to say that Pfizer’s “Brand Strength” – which takes into account a company’s “marketing investment, customer familiarity, staff satisfaction, and corporate reputation” – will “improve, as a result of the fact that the vaccine has been shown to be safe, effective, and reliably delivered.” 

In short, the value of the Pfizer-BioNTech “brand” and its impact on the larger Pfizer entity may not be easily quantifiable at this point, but is it difficult to deny that value, just as is it difficult to overlook the deeply-ingrained role that branding plays in the minds of consumers no matter the context. Professor Hermosilla told Quartz that “in the interest of getting through the pandemic, it is crucial to subvert our consumerist instincts for comparison shopping” – and exerting preference for one brand over another – “and heed the advice of health experts,” such as Dr. Anthony Fauci, who says that “the most important thing to do is to get vaccinated and not to try and figure out which one may be or may not be better than the other.”

At the same time, Hermosilla told Quartz that while he would have taken any vaccine that available, “he ‘was glad’ to receive the favored brand.”  

UPDATED (May 4, 2021): Pfizer revealed on Tuesday that the vaccine, alone, generated $3.5 billion in revenue in the first three months of 2021, with the New York Times reporting that while “the company did not disclose the profits it derived from the vaccine, it reiterated its previous prediction that its profit margins on the vaccine would be in the high 20 percent range.” That translates “roughly [to] $900 million in pretax vaccine profits in the first quarter.” Meanwhile, Ferrari’s NYSE-traded shares fell 7 percent on Tuesday “after the company said it would hit its 2022 financial targets a year late due to Covid-19,” according to the Wall Street Journal, a slip that “highlights just how high the stakes are when a stock fetches more than 40 times prospective earnings.”

Amid enduring chatter that Richemont may ultimately merge with Gucci-owner Kering or maybe LVMH Moët Hennessy Louis Vuitton, making the Swiss luxury goods conglomerate’s chairman Johann Rupert “the most powerful man in luxury” at the moment, as Bloomberg’s Andrea Felsted put it last week, another headline-making M&A transaction may also be in the cards. 86-year old Giorgio Armani recently revealed that he is entertaining the idea of trading in his celebrated brand’s long-standing status as an independently-held entity and partnering with an established group, a move that would fall neatly in line with a larger trend of mergers and acquisitions that is running through the fashion and luxury sphere. 

A lengthy profile published by Vogue on March 31 provides a noteworthy bit of information on this front. In between talk of the forces shaping the modern fashion industry (“fast fashion, sustainability, diversity, e-commerce, resale,” etc.”) and the enduring impact of the COVID pandemic, Vogue contends that Mr. Armani – who founded his Milan-based eponymous label in 1975 –  “allows that the idea of Armani continuing as an independent company is ‘not so strictly necessary.’” More specifically, the legendary fashion figure says that “one could think of a liaison with an important Italian company.” The revelation is striking, given that, as Vogue states, “Mr. Armani has insisted” – for years – “on his company’s independence, even as Gucci and Fendi and Pucci and other Italian luxury giants sold to the French conglomerates Kering and LVMH.” 

Without naming names (and in lieu of any guesswork from Vogue), Mr. Armani provides a couple of potentially significant clues in the interview about what such a deal could look like. For one thing, he seemingly doubles down on the Italian heritage of a prospective acquirer, saying that “a French buyer is not in the cards,” thereby, ruling out obvious picks like LVMH and Kering. He also – quite tellingly – notes that the buyer would “not necessarily [be] a fashion company.”  With the latter point in mind, a quick game of connect-the-dots suggests one very likely name: Exor N.V. 

While it has made headlines in recent months due to its fashion-centric deals (it announced in December that it would invest “around €80 million [$96.9 million] in Shang Xia, the China-centric fashion brand formerly owned by Hermès, and in early March revealed a new 24 percent stake in luxury footwear brand Louboutin), Exor is certainly not a fashion conglomerate in the same way as Louis Vuitton’s parent or Gucci’s owner. In fact, the Netherlands-incorporated investment group run by Italy’s Agnelli family – whose late scion Giovanni Agnelli was one of the original founders of Fiat motor company – is best known for its holdings outside the confines of the fashion industry. These include sizable stakes in reinsurance company PartnerRe Ltd., Italian football club Juventus F.C., Italian media group GEDI Gruppo Editoriale, luxury automaker Ferrari, publisher Economist Group, capital goods entity CNH Industrial N.V., and Stellantis, which is the result of the recent merger between Fiat Chrysler Automobiles group and French automotive group PSA. 

Exor’s historically non-fashion focus appears to be changing, though, and Armani may help further that shift. After all, the group’s acquisitions of Shang Xia and Louboutin have prompted speculation among analysts that it may be looking to build a luxury conglomerate around Ferrari – one of the world’s most esteemed luxury entities – under the watch of Exor Chairman and CEO John Elkann, who is regarded as one of the most talented capital-allocators of his generation. (The grandson of Giovanni Agnelli, 45-year old Elkann is credited with helping to save the “nearly-bankrupt” Fiat beginning almost two decades ago, and more recently, for pioneering the merger between Fiat Chrysler Automobiles NV and PSA Group, and creating the world’s third-largest car maker by auto-sales in the process.)

A push by the company into luxury makes sense in light of the sheer depth of Exor and the Agnelli family’s understanding of – and connections in – that sphere. As we previously noted, the expertise that the group has built as a result of its majority ownership of Ferrari – which operates more in the luxury space than the traditional auto market – is integral to Exor’s quest to build time-tested, valuable companies, and could easily be applied to building more fashion-oriented luxury brands. Elkann appeared to echo this – and maybe allude to addition industry acquisitions – in his annual letter to Exor shareholders, which was released this month, stating, “Over the years, we have developed considerable knowledge about the luxury sector and our ownership of Ferrari has allowed us to understand better the art of building luxury brands.” 

When it comes to Exor’s connections in the upper echelon of the fashion industry, the board of Ferrari is quite illustrative – with Louis Vuitton Executive Vice President Delphine Arnault, Yves Saint Laurent president and CEO Francesca Belletini, and Chanel Inc. President and COO John Galantic all maintaining non-executive director positions. Meanwhile, Mr. Elkann’s sister Ginevra Elkann has been an independent director on Kering’s board since 2018. 

Exor has been clear that it “invests in single companies, not in sectors,” such as fashion or luxury, and yet, there is still room to speculate that it may have its sights on other, similarly-situated companies. As for what fashion entities might make sense beyond Armani, there are two conceivable Italian names: Valentino – which Qatari fund Mayhoola for Investments acquired from British private equity firm Permira in 2012 for $856 million – has been the subject of M&A speculation for several years. (A bid to sell could help explain Valentino’s enduring litigation centering on its rights in the Valentino name). And there is also Prada, whose CEO Patrizio Bertelli is said to be actively talking with bankers about a potential merger for the group’s marquee brand. (It is unclear whether Exor would be interested in Prada, which falls under the umbrella of the SEHK-traded Prada Group, given its penchant for privately-held companies). 

One thing that is clear about Exor, however, as the company revealed in a statement in connection with the Louboutin deal (and as the Shang Xia acquisition makes perfectly clear), whatever brands its does end up acquiring (if any), its focus is firmly on China. “There is significant scope to develop the Christian Louboutin brand’s presence, notably via further geographic expansion, particularly in China,” company stated in a release in March. Since then, Elkann emphasized this in his shareholder letter, stating, “Chinese consumers account for one third of luxury spending today, and that proportion is forecast to grow to almost half the total, with China becoming a ~€95 billion market by 2025.” 

As for existing ties between Exor and Armani, the parties do have a history. They recently announced a multi-year tie-up in furtherance of which Reuters reported in March, Armani will manufacture “branded clothing for all [the Scuderia Ferrari] racing team’s off-track duties.” In a statement last month, Mr. Armani revealed that “more than ever,” the companies “need to pull together as a system to promote Italian excellence, creating a synergic dialogue among different disciplines.” And not a one-off deal, the recently revealed F1 sponsorship follows from an existing partnership between the two, which was announced in 2019, and will see Ferrari roll out its own luxury-level apparel and accessories collections with the help of Armani, as it continues to cut down on its formerly expansive licensing program in favor of fewer – more upscale – initiatives.

UPDATED (April 27, 2021): Kering has announced that Ginevra Elkann has stepped down from its board. “As a result of her changing roles within Exor, [where] she is also a board member, and in order to avoid any potential conflicts of interest, Ginevra Elkann has resigned from her position as a member of Kering’s board of directors,” Kering said in a statement on Tuesday, as reported by WWD.

On the tree-lined Avenue George V in Paris’ 8th Arrondissement, mere steps from the Seine and just across the street from where Cristóbal Balenciaga opened his own maison in 1937, Yves Saint Laurent’s team was in the midst of working on the brand’s Resort collection in early April 2011 when a package arrived. The stack of documents was hand-delivered to the fashion house in Paris, as well as to its American headquarters on the heavily foot-trafficked 57th Street, nestled between Louis Vuitton and Chanel’s midtown outposts, and addressed to Yves Saint Laurent America, Inc. and its Paris-based entity, Yves Saint Laurent SAS. 

Fifteen years prior, in 1996, Christian Louboutin was on the receiving end of a delivery of its own. A carefully packaged prototype of a high heel shoe arrived from Italy to the workshop of the budding Parisian brand. The concept shoe, with its stacked heel and floral applique, was missing something. As the story goes, the designer, Mr. Christian Louboutin, who was 33-years-old at the time, reached for a bottle of red nail polish – “Thank God, there was this girl painting her nails,” he told the New Yorker – and with that, the shoe’s sole went from a dull black to a striking red. “Then it popped,” he said, and the foundation of a footwear revolution was born. 

Fast forward less than two decades and by 2010, Louboutin was selling more than 600,000 pairs of shoes per year – all of which bore Pantone 18-1663 TPX “Chinese red”-hued soles. There was nary a red carpet that was not smattered with actresses in the brand’s shoes, or a magazine that was without an editorial in which Louboutin shoes appeared. Online, some 48 percent of luxury footwear searches in 2011 were for Louboutins.

Back on Avenue George V, which is where Yves Saint Laurent’s ateliers and corporate head office were located in 2011, Yves Saint Laurent was turning out noteworthy footwear, as well. In fact, the garments of Yves Saint Laurent’s soon-to-be-ousted creative director Stefano Pilati were being outshined, according to critics, by the famed brand’s footwear. One need not look further than Tim Blanks’ take on the Spring/Summer 2012 YSL collection for proof. The first two sentences –  “The shoes! The shoes!” – told you everything you needed to know.  

Given that a significant portion of high fashion brands’ revenue routinely comes from the sale of accessories, including handbags and footwear, the praise for YSL’s footwear offerings was no small matter. It was significant for the brand’s bottom line, as touted by its parent company, the corporate conglomerate now known as Kering, and it was not being overlooked by rival Christian Louboutin. After all, inside that package addressed to Yves Saint Laurent was not a shoe; it was a complaint. Christian Louboutin was suing the company for more than $1 million.

The Most Closely Watched Case in Fashion

Within a matter of days, the media was abuzz. Christian Louboutin’s legal team had filed a trademark infringement lawsuit in a New York federal court, giving rise to what would swiftly become one of the most famous footwear lawsuits in fashion history. After all, on the receiving end of that complaint was not a fast fashion retailer like Zara or a frequently-sued footwear company like Steve Madden; it was a fellow luxury goods brand, and at the heart of the closely-watched lawsuit was Louboutin’s trademark-protected red sole and its allegations that by selling $800-plus red high heeled shoes that also bore a red sole, YSL was infringing the federal trademark registration that Louboutin had maintained since January 2008. 

After attempting to handle the matter out of court and avoid litigation entirely, Louboutin filed suit; the complaint was signed by Harley Lewin, the renowned intellectual property attorney, who heads up the intellectual property group at McCarter & English, one of the oldest and largest law firms in the U.S. Mr. Lewin had been working alongside Louboutin arduously for over a month, first in an attempt to amicably come to a resolution with Yves Saint Laurent over the parties’ lookalike shoe soles, and then to determine the most appropriate place in the world to file a lawsuit when it became clear that YSL would not, under any certain circumstances, pull its own red-soled shoes from the shelves of its boutiques and those of some of the world’s most upscale stores. 

In its lawsuit, Louboutin asserted that the red-soled YSL shoes were being sold in many of the exact same stores and websites as its own shoes, thereby enabling YSL to confuse consumers and “take unfair advantage of the enormous goodwill and brand recognition in the red sole trademark that [Louboutin] has developed over the past two decades.” The sale of “identical and/or highly similar” shoes by YSL was actively impairing Louboutin’s “ability to control its reputation, and the quality and careful distribution of Louboutin footwear.”  

Louboutin alleged that it “repeatedly sought to have [YSL] remove the infringing footwear from the marketplace,” only to have YSL “advise Louboutin that it was going to continue to sell the infringing footwear.”  After attempting to handle the matter out of court, and thereby avoid litigation, Louboutin filed suit in a New York federal court. 

Faced with the newly-filed suit, the ball was in YSL’s court. Even then, instead of agreeing to quietly settle the case amongst themselves outside of court and away from the prying eyes of the media, which was eager to air the rivals’ dirty legal laundry, YSL took action of its own. Setting its sights on the red sole trademark registration that Louboutin was granted by the U.S. Patent and Trademark Office (“USPTO”) for the mark back in early January 2008, YSL wanted to ensure that such protection came to an abrupt halt. 

Red sole trademark
A Christian Louboutin shoe (left) & an Yves Saint Laurent shoe (right)

That battle, which played out in federal court in New York – and on the pages of media outlets across the globe – inched towards a close two years later. On the heels of proceedings before the U.S. District Court for the Southern District of New York, which denied Louboutin’s request for a preliminary injunction – a binding court order would have prevented YSL from selling its own red-soled pumps for the duration of the case – on the basis that “single-color marks are inherently ‘functional’ and that any such registered trademark [including Louboutin’s red sole trademark] would likely be held invalid,” Louboutin appealed. It argued that the court had failed to properly apply existing Supreme Court precedent from a 1995 case, Qualitex Co. v. Jacobson Products Co. That case may have centered on dry cleaning “press pads,” but it, nonetheless, was particularly relevant to the case at hand, as in Qualitex, the Supreme Court held that a color is, in fact, capable of meeting the legal requirements for trademark registration, assuming that it has acquired secondary meaning (i.e., the trademark holder can show that consumers can identify a trademark with a single source). 

While the media was on high alert, closely watching the developments in the case, trademark practitioners, academics, and fellow consumer goods brands were paying attention, as well. In between the district court issuing its decision and the case’s day before the U.S. Court of Appeals Second Circuit, a group of eleven law professors from an array of different schools in the U.S. came together to draft and file an amicus brief in support of YSL. They argued that in order to preserve innovation and competition in the market, the protection of single colors in fashion should be rejected. Meanwhile, counsel for Tiffany & Co. filed a brief of their own the court, siding with Louboutin and its ability to claim rights in its specific use of the color red. Tiffany & Co., after all, had a dog in this fight, as it maintains an arsenal of trademarks registrations for its robin’s egg blue. 

In a highly-anticipated decision in September 2012, the Second Circuit overturned the lower court’s findings. It stated that Louboutin’s red sole had, in fact, “acquired [the necessary] secondary meaning as a distinctive symbol that identifies the Louboutin brand.” Elaborating, the court held, “We see no reason why a single-color mark in the specific context of the fashion industry could not acquire secondary meaning―and therefore serve as a brand or source identifier―if it is used so consistently and prominently by a particular designer that it becomes a symbol, ‘the primary significance’ of which is ‘to identify the source of the product rather than the product itself.’”  

Louboutin’s counsel celebrated the brand’s win: thanks to the court’s decision Louboutin “will be able to protect a life’s work as the same is embodied in the red sole found on his women’s luxury shoes,” Lewin asserted. However, YSL did not leave court that day without a win of its own, as the appeals court’s three-judge panel held that Louboutin’s rights were limited to shoes where the sole contrasts in color with the rest of the shoe. In other words: Louboutin’s trademark does not extend to shoes that have a red body and a red sole. 

The Case Was Not Over

Let off the hook, so to speak, because its shoes – namely, its Tribute, Tribute, Tribtoo, Palais, and Woodstock styles – consisted of an all-over red body complete with a red sole, YSL’s counsel, prominent New York-based litigator David Bernstein of Debevoise & Plimpton, claimed victory, as well, telling the press, “The Court has conclusively ruled that YSL’s monochromatic red shoes do not infringe any trademark rights of Louboutin, which guarantees that YSL can continue to make monochromatic shoes in a wide variety of colors, including red.”   

The case was not over, though. Still up for debate as of January 2013 was the actual language of the trademark registration for Louboutin’s red sole, as in limiting of the breadth of Louboutin’s trademark rights from the sweeping “lacquered red sole on footwear” to a red sole on a contrasting colored shoe, the Second Circuit ordered that the USPTO modify the language of Louboutin’s trademark registration. Ultimately, the language would be determined to read as follows: “a red lacquered outsole on footwear that contrasts with the color of the adjoining (‘upper’) portion of the shoe.”

Seemingly emboldened by its victory, Louboutin used that momentum of its win to look beyond the confines of the U.S. and its trademark system to engage in a tour de force aimed at formally amassing and/or enforcing rights in other jurisdictions, including Switzerland, France, Belgium, China, India, and beyond. What has come of that has been nothing short of a time-consuming and resource-intensive fight, and at times, the results have been mixed.

On one hand, the validity of the famed footwear brand’s trademark has been upheld by a series of important decisions, including ones from the Paris Court of Appeal, the Court of Justice for the European Union, the Hanseatic Court of Appeals in Germany, the Beijing High Court, and the European Union Intellectual Property Office, among others.

At the same time, though, there have been set backs. In 2012, for instance, Louboutin was handed a loss in a case it filed against Zara in France, with the court holding that “there was no risk of consumer confusion between a red peep-toe platform heel with red soles sold by [the] Spanish fashion retailer and Louboutin’s own ‘Yo Yo’ design, a nude peep-toe platform heel with his signature red soles.” As Hogan Lovells’ Camille Pecnard wrote at the time, “The French Supreme Court [ultimately] concluded that Louboutin’s trademark had to be declared invalid and dismissed Louboutin’s claims.”

Louboutin has since re-filed its French trademark to include a highly specific shade of red—Pantone 18-1663TP.

All the while, the nearly 30-year old Louboutin brand continued its efforts to dominate international markets with its red sole, upping its the number of pairs of $700-plus red-soles heels, sneakers, and flats it sells in a year from 600,000 to more than 1 million pairs as of 2017 (the number may have grown further since then), and in the process. And from a legal perspective, it has foreshadowed, right along with fellow color rights holders like Tiffany & Co., the increased efforts by brands to build out such trademarks of their own, and to a large extent, it laid the groundwork for what an aggressive global quest for color rights looks like.

But even beyond that, Louboutin’s global trademark fights – some of which are still ongoing – are about more than just a red sole; they tell a story about branding and brand building in the upper echelon of the fashion industry, where the products are expensive and the fights are high-stakes. And maybe most importantly of all, they speak to a brand’s goodwill and of awareness among consumers, which is precisely what is at the very heart of trademark rights.

Not Just About a Red Sole

Reflecting on the case years later, Lewin describes it as “one of the most interesting cases in my career because it crossed over from the law and business side to the consumer side. Not only did lawyers follow it, or business leaders and CEOs, but it caught the eye of the consumers. It was all over digital media, as well as the print media and television and radio around the world, whether it was because it was a dispute between two French designers, whether it was because it was a legal dispute, or because it involved high fashion with some salacious content like people calling each other names.”

“The press was relentless on this case and they followed it closely. Most of the talking heads on television routinely got it wrong,” he recalls. “So, we had to manage the message from the point of the client because either side could easily have won the legal fight but lost the public opinion fight, and, in doing so, especially from Louboutin’s point of view, it would have dramatically affected the business. So, we took extraordinary pains to both manage the message as well fight the case in court.”

And the element of consumer attention was significant. It meant that the case was about more than just a red shoe sole. It was about consumer perception.

“As it happens, and it has happened before, in my career in other cases,” Lewin says, “the cases morph and they become bigger than the trial itself both as a matter of law, because the issues ripple around the world, and also, because it’s a matter of the public, and in this case, one of the most ticklish things, and the realization that we had with the client, was that we were really trying the case in two forms: we were trying the case in courts, but we were also trying the case in the court of public opinion, which does not ordinarily happen.”

With the high-stakes nature of rights at play, and given that the world was watching closely “for almost two years,” according to Lewin, “we – and the case, itself – became a game changer.”