The legal and commercial forces shaping retail – analyzed every Friday
Today’s read: 5 minutes
March 27: Some key pressure points across retail, tech, and digital commerce were on display this week. Courts focused on the outer limits of trade dress law, where design stops being protectable and starts doing something functional. In beauty, the Estée Lauder–Puig talks highlight that competition is assessed at the level of closely competing brands, not scale alone. In AI, the absence of clear copyright rules for training and output is leaving core questions to the courts.
Marketing claims are also coming under closer scrutiny, with Washington adopting a marketer-friendly amendment to its Commercial Electronic Mail Act. And on the platform liability front, a jury endorsed a theory that targets how platforms are designed, not just the content they host.
> Trade dress does not cover product design that serves a practical purpose, even if competitors copy the overall look.
> Removing logos does not remove trademark liability where the look and feel of the product itself is an indicator of source.
> Competition is assessed at the level of substitutable products, not just corporate scale.
> AI copyright policy remains unsettled, with courts set to define the boundaries.
> Tariff refunds are triggering follow-on litigation over who ultimately bears the benefit.
Two decisions this week draw a sharp line between what trade dress can – and cannot – protect.
In New York, a federal court held that Sol de Janeiro’s Bum Bum Cream packaging is functional, pointing to features that improve usability and communicate product attributes. However distinctive the jar may appear, those elements fall outside the bounds of trademark law when they serve a practical purpose, as trade dress does not extend to features that make a product work better or easier to use.
Also this week, a California jury found that Nike’s Dunk trade dress was infringed even without the use of logos. The case turned on the overall design of the sneaker as a source identifier, reinforcing that branding is not limited to names and symbols.
But Nike’s win against sneaker influencer Nicholas Tuinenburg turned on more than the sale of infringing goods under his DTY brand. At trial, Nike focused on the system Tuinenburg used to promote and facilitate sales – pointing to affiliate links, Discord channels, and shipping intermediaries as part of a coordinated effort to move counterfeit goods. That framing resonated with the jury, which awarded $8 million in statutory damages for direct and contributory counterfeiting, along with $1 million in punitive damages.
The verdict reflects a shift in how these cases are being framed. Liability is not limited to the act of selling infringing goods; it can extend to the systems used to promote and distribute them. >> More to come on the latter aspect of this case soon.
>> In practice: Functional design cannot be protected, even if it defines a product’s look. Removing logos does not avoid liability where the product remains recognizable.
Estée Lauder’s headline-making merger talks with Puig put the focus on how closely brands actually compete – and how regulators measure that.
While a combined company would bring together a wide portfolio of brands (but one that is still significantly smaller that L’Oreal), merger analysis does not stop at scale. Regulators look at how competition plays out within specific categories, where brands function as substitutes in the eyes of consumers.
In the beauty market, those competitive boundaries can be narrow. Products are often positioned within defined price bands and compete on brand identity and perceived quality. A consumer choosing between two prestige fragrance labels may view them as direct alternatives, regardless of who owns them. Bringing an array of beauty/fragrance brands – from Tom Ford Beauty, Byredo, and Le Labo to Charlotte Tilbury and Dr. Barbara Sturm – under the same corporate structure can reduce head-to-head competition within that segment.
The result is a shift in focus: from overall market share to the proximity between brands that compete for the same consumer, reflecting the 2023 Merger Guidelines’ emphasis on head-to-head competition and substitutability.
>> In practice: In brand-driven markets, competition is measured at the level of substitutable products.
Across several areas, the question is not whether liability exists, but how it is being defined …
> In AI, that question remains unsettled. In the UK, the government has stepped back from its proposed opt-out model for AI training. In the U.S., the White House has taken a more definitive (but still evolving) position: it does not believe that training LLMs on copyrighted material is infringement, but acknowledged that arguments to the contrary exist and left the issue of fair use to the courts.
> In a case against Meta and YouTube, a jury in Los Angeles endorsed a theory that treats recommendation systems and engagement-driven features as product design choices that can give rise to liability, rather than focusing solely on third-party content.
> And in retail marketing, Washington amended its Commercial Electronic Mail Act this week, reducing statutory damages and adding a critical knowledge requirement but reinforcing a broader point: claims around timing and availability are being treated as factual representations that can give rise to liability.
>> The takeaway: Liability is being shaped less by bright-line rules and more by how courts and lawmakers treat real-world conduct.
The wave of litigation following the Supreme Court’s tariff ruling shows how legal wins can create a second layer of risk. Companies are moving to recover duties paid under the invalidated regime, with more than 3,000 lawsuits filed to date and billions of dollars at stake. At the same time, consumer class actions are emerging with a different theory: that companies that passed tariff costs on to consumers should not retain the benefit of those refunds.
This creates dual exposure. On one side, companies are seeking recovery from the government. On the other, they face claims tied to how those costs were handled at the consumer level.
The outcome will turn less on the tariffs themselves and more on whether companies can show how those costs were absorbed, passed through, or on track to be returned.
>> The takeaway: Legal recovery can shift exposure rather than resolve it.
Across these cases, the outcome is turning on how products are designed, how closely brands compete, and how companies structure the systems used to reach consumers. Trade dress claims are failing where design serves a function, even if the look is arguably distinctive. At the same time, recognizable design and coordinated sales channels are still enough to support liability. In competition, the focus is not only on scale, but on how closely brands compete within the same segment. That is where these disputes are now being decided.