Briefing: February 24, 2023
A year after Russia’s deadly invasion of Ukraine began, the White House has announced additional actions “to support Ukraine and hold Russia accountable,” and among them is ban that specifically cites luxury goods. In addition to taking “several export control actions,” such as “listing nearly 90 Russian & third country companies, including in China among other countries, on the Entity List for engaging in sanction evasion and backfill activities in support of Russia’s defense sector,” the Department of Commerce “will also take action alongside G7 partners and allies to align measures on industrial machinery, luxury goods, and other items.”
The impact on luxury goods brands as a result of war has been relatively minimal from a bottom line POV. Bloomberg Intelligence reported this month that the war has had “a limited direct effect” on the luxury-goods market, with “light asset-impairment write downs & little lost revenue.” The limited damage is due in large part to the fact that major luxury goods makers’ share of revenue from the Russian market was limited to 1-3% prior to the war, with global purchases by Russians averaging 5%. Moreover, luxury brands’ real estate holdings & employee head-counts are also minor compared to other markets due to an overarching reliance on wholesale activities outside of flagship stores in Moscow.
From a trademark perspective, the state of things is not quite as contained. A few key developments include …
Grey Market Goods – Expectations of an influx of parallel imports appears to have come into fruition. Russia’s Industry and Trade Ministry opened the floodgates for grey market goods last year when it released a 25-page list of allowable brands/products, thereby, making way for parallel imports of luxury cars, consumer electronics, cosmetics, and fashion & leather goods in furtherance of what Russian authorities have called an attempt to “defend the interests of domestic consumers for products of those foreign companies that left the Russian market under the sanctions regime imposed by ‘unfriendly’ countries.”
“While Coca-Cola stopped producing & selling drinks in Russia last year, others have been importing them, with labels on cans and bottles showing they have arrived from Europe, Kazakhstan, Uzbekistan and China,” Reuters reported recently. Not limited to beverages, the same pattern is playing out across industries; fashion, included.
The Rise of Daigou – A system that seems to resemble the Chinese daigou trade appears to have emerged, with individuals living outside of Russia (including in Turkey and Dubai) acquiring fashion/luxury goods and shipping them to individuals in Moscow.
Counterfeits – The market for counterfeit goods in Russia has continued in the wake of the war, with a number of physical markets in Moscow being cited in the Notorious Markets list released by the USTR on Jan. 31. “The vast majority of the goods sold at [Dubrovka] market appear to be counterfeit footwear, apparel, and luxury watches,” the trade rep’s report revealed. It also stated that “some right holders reported that a de-prioritization of IP enforcement by Russia has led to a significant increase in the sale of counterfeit & pirated goods through well-known outlets.”
Bad-Faith Trademark Filings – From the outset, the Russian Trademark Office has seen rising levels of applications for TMs that mirror those of well-known Western companies. Over the past few months, alone, Maserati, Lamborghini, YSL, Zara, H&M, and Calvin Klein have been among those targeted. Companies are encouraged to monitor their TMs in Russia (to the extent possible) even in light of an uncertain future in that market.
Ultimately: One of the most glaring takeaways here with regards to authentic goods being offered up in Russia w/o the trademark holders’ authorization is the extent of the difficulty that brand owners have when it comes to controlling the distribution of TM-bearing goods.
In litigation news …
– Patagonia v. Gap: In addition to setting out laches & acquiescence, waiver, and estoppel defenses on the basis that it has offered up fleece jackets bearing a similar patch design since the early 1990s, Gap seeks a declaration that Patagonia’s Snap T Design “does not constitute protectable trade dress under common law because the design is functional and lacks secondary meaning.”
– Friel v. Dapper Labs: An SDNY judge refused to dismiss a case accusing Dapper Labs of selling unregistered securities by way of its “NBA Top Shot Moments” NFTs. According to the court, “Plaintiffs’ allegations render each consideration under Howey facially plausible and survive Defendants’ Motion to Dismiss the alleged violation of sections 5 & 12 of the Securities Act.”
Here’s what this development does not mean …
– Anthrop LLC v. Anthropic PBC: TM infringement suits are coming to the AI realm, with ChatGPT competitor Anthropic A.I. – which received $300M in funding from Google this month – filing suit against Anthropic, Inc., an A.I. research & development co.
– Yuga Labs v. Ryder Ripps: Counsel for Ripps has filed a motion to stay the NFT-centric TM case until the 9th Cir. has heard their appeal of the lower’s denial of their anti-SLAPP motion.
– Jack Daniel’s v. VIP Products: ICYMI, the dog toy-maker filed its SCOTUS brief in the TM case on Feb. 16, arguing that the Bad Spaniels toy is “a parody of both Jack Daniel’s cultivated self-image & the fun pet owners have with their dogs.” And in addition to MSCHF (see below), Harvard Law’s Rebecca Tushnet also filed a brief in favor of VIP.
– Alexandre Gaudin v. Frankie Shop: We’ve got another streetstyle photographer v. brand © infringement lawsuit on our list.
And in a bit of deal-making (and potential deal-making) news this week …
Unikbase has raised €2M in a seed funding round. The Paris-based startup creates digital twins to “identify, authenticate & unlock the power of ownership for the world’s most valuable objects.”
OWND has raised $750K in pre-seed funding to launch & grow its platform that enables consumers to invest in digital collectibles, including fashion-focused NFTs.
Fabacus has raised £4.5M in funding to accelerate the growth of its data intelligence platform, Xelacore, which connects retail industry license holders, licensees & end users.
DTC luggage brand Away is reportedly exploring a potential sale of the company, which is valued at $1.45 billion.