The state of the United Kingdom’s exhaustion regime is being revisited, with a government spokesperson saying late last week that it is “considering all options for the future exhaustion of IP rights following the UK’s departure from the EU and will announce a decision in due course.” The statement followed from reports that Secretary of State for Business & Trade Kemi Badenoch is “considering whether to push for reforms” to the UK’s existing approach to trademark exhaustion (or the limitation of a TM holder’s ability to exercise control over a product once it releases – or authorizes the release of – that product into the market.)
The move has “sparked fears” among industries where such a rule-change could result in “a glut of cheap, copycat products undercutting prices in the UK,” according to the FT.
The Background: Since leaving the EU in 2020, the UK has continued to operate in accordance with pre-Brexit exhaustion rules. The EEA-regional exhaustion regime provides for exhaustion with respect to TM-bearing goods placed on the market in the EEA (or the UK) by the TM owner (or authorized retailer) – in other words, TM holders who put their goods on the market in the EU cannot prevent them from subsequently being imported into the UK & sold there. It does not entail exhaustion for goods placed on the market outside the EEA by the TM owner – or to put it another way, TM-bearing products cannot be imported into the EU from the UK without the consent of the rights holder.
An International Regime? While the UK government has not give any recent indication as to what route they may take if/when they adopt new rules on the exhaustion front, an “international regime” – which would mean that TM rights in the UK would be exhausted once goods were been put on the market anywhere in the EEA and/or the rest of the world by (or with the consent of) the rights holder – has been cited as a likely option. Reflecting on the possible adoption of an international exhaustion approach, HGF attorney Lee Curtis said this week that this “was always a very attractive option for a government trying to show some benefits of Brexit by potential lower prices” – and greater selection/choice – “for branded products in particular.” Although, this option would “not be so good” for brand & IP rights holders looking to carefully control the distribution (and prices) of their wares beyond a certain point.
What an international regime would look like in a nutshell, courtesy of Bristows LLP’s Sean-Paul Brankin & Toby Headdon …
No small matter, the UK government asserted in the wake of Brexit that the issue of exhaustion is “vitally” important as it “underpins parallel trade” – or the trade of gray market goods (i.e., authentic branded goods obtained from one market (i.e., a country or economic area) that are subsequently imported into another & sold). This is especially true for fashion brands & luxury goods groups, for which the gray market – which Bernstein analyst Luca Solca estimated to be worth up to 8% of the $257B personal luxury goods market in 2020 – continues to be an issue that is top of mind.
“Traditionally, plenty of luxury brands either turned a blind eye to or even indulged in sales from the gray market as it meant quick cash & a chance to beautify their reported numbers from wholesale retail partners, especially on non-moving or excess stock,” Solca previously told the New York Times. “But in recent years that attitude has had to change as the market morphs into something that has become more & more difficult to control” thanks to a confluence of factors like the rise of large-scale daigou collectives, the robust secondary market & enduring price increases.
Next Steps: In terms of timing, it may take a while for the UK to decide on & implement a new regime. “Such a significant change to the UK IP Rights Regime would take time,” Curtis said, noting that it would need to “go out to consultation, responses processed & legislation drafted and voted through Parliament for Royal assent.”
Tapestry will acquire Capri Holdings in a deal valued at $8.5B. In furtherance of the M&A, Tapestry – which owns Coach, Kate Spade & Stuart Weitzman – will pay Capri shareholders $57 per share in cash, or $6.69B, to acquire the rival U.S. group, whose holdings consists of Versace, Jimmy Choo & Michael Kors. “Once the deal closes, it will create an American fashion giant that – while still not quite as large as its European competitors – will be better positioned to compete in the luxury market,” CNBC stated this week.
The deal is noteworthy from a continued-consolidation POV, and in light of apparent synergies between the two groups, with the WSJ reporting that “Tapestry has a strong expertise in leather goods, as well as in operating its own stores & digital business. It also has a large presence in Asia, [while] Capri has expertise in shoes & clothing and is bigger in Europe.”
Also interesting: The role that data is currently playing at Tapestry and seemingly will continue to play for the combined companies. Distinguishing the impending new group from the likes of LVMH, Kering, and co., Tapestry CEO Joanne Crevoiserat said the group is not angling to be the American LVMH, and instead, it is more focused on doing something else, namely, “applying data & analytics to iconic brands to develop them, a strategy that has worked well at Tapestry.” Tapestry “uses data to manage its inventory, develop products, and market to consumers,” Crevoiserat told the WSJ, saying that “those skills have helped it transform its business over the past three years & can be used to enhance the brands it is buying.”
– Alani Nutrition, LLC v. Ryse Up Sports Nutrition: Sports drink-maker Alani Nutrition is suing rival Ryse Up & influencer Paige Hathaway for © infringement, false advertising, unfair competition, etc. as a result of their alleged “misappropriation of [its] valuable © images & unlawful copying of [a Kim K-fronted] promo campaign.”
– Vans v. Walmart: ACI, the co-designer, manufacturer & importer “for most, if not all, of Walmart’s [allegedly] infringing in-house shoes,” has lodged a motion for summary judgment in the TM case filed by Vans, arguing that, among other things, “Vans fails to meet its burden to prove a distinctive trade dress.”
– Amarte USA Holdings v. Peter Thomas Roth & Amarte USA Holdings v. The Honest Company: Amarte has filed 2 new infringement lawsuits (complaint & complaint) over its EYECONIC trademark. These cases join those previously waged against a number of beauty product-selling brands, including LVMH’s Kendo Holdings.
– Flora v. Prisma Labs: An N.D. Cal. judge sided with Prisma Labs & compelled arbitration in a proposed class action accusing it of violating the Biometric Information & Privacy Act via its generative AI app, Lensa. The court rejected Ps’ arguments that the arbitration provision at issue is unconscionable & that “because some provisions arguably fall below JAMS’ Consumer Arbitration Minimum Standards, the arbitration provision is illusory.”
– Adonis Real et al v. Yuga Labs: An amended complaint has been filed in the suit being waged against Yuga Labs, Guy Oseary & a number of big-name brand/celebrities for allegedly duping consumers via “manufactured celebrity endorsements & misleading promotions” that helped to “artificially increase the interest in & the price of the Bored Ape NFTs.”
– Resale company Trove has raised $30M in a Series E round to fuel its expansion with new brands and verticals.
– Outfindo has raised €900K in a Seed round to further build out its AI-driven “Guided Selling” SaaS.
– London-based supply chain startup Kavida.ai has raised £900K in a Seed round to “strengthen and develop [its] supply chain ChatGPT.”
– Spatial apps creation & collaboration platform startup ShapesXR has raised $8.6M in a Seed round.
– VIP3, which touts itself as “the first all-in-one web3 benefits and membership platform,” has raised $2M in a Seed round.
– Legal recruitment software provider Flo Recruit has raised $4.2M in a Seed round to accelerate the expansion of its Flo Recruit Applicant Tracking product.