The parent company of the Hayley Paige bridal brand has prevailed in the latest round of an ugly legal battle that a New York federal court calls “a novel dispute between a leading bridal wear designer and the manufacturer from whose employ she recently resigned over the control and use of social media accounts.” In an order dated March 4, Judge Laura Taylor Swain of the U.S. District Court for the Southern District of New York sided with JLM Couture (“JLM”), granting the majority of its motion for a preliminary injunction, and thereby, extending the temporary restraining put in place in December that has prevented designer Hayley Paige Gutman from using the “Heyley Paige” name and corresponding social media accounts.
The case got its start in December when JLM filed suit against Gutman, accusing the “Say Yes to the Dress”-featured designer of federal and common law trademark dilution, unfair competition, breach of contract, conversion, and breach of fiduciary duty, among other claims, and asserting exclusive rights in the “Hayley Paige” name and variations, thereof, in connection with the manufacture and sale of bridal garments and accessories on the basis of the employment agreement the parties entered in 2011.
In its December 2020 complaint, JLM – which generated $220 million in retail sales between 2017 and 2020 – alleged that it enlisted Gutman to work as a designer for its bridal collections in July 2011. As a result, the designer signed off on an employment agreement, in which she granted JLM the exclusive right to use “her name ‘Hayley,’ ‘Paige,’ ‘Hayley Paige Gutman,’ ‘Hayley Gutman,’ ‘Hayley Paige,’ or any derivative thereof in connection with the design, manufacture, marketing and/or sale of bridal clothing, bridal accessories and related bridal and wedding items,” and to file – and own – any subsequently-earned federal trademark registrations for “any such name.”
Among the issues before the court now is whether those rights extend to the “Hayley Paige” social media pages, such as the @misshayleypaige Instagram account, which the court has asserted that Gutman “developed in connection with her employment,” and which JLM argues that she assisted in maintaining in connection with “the scope of her employment,” making the account and any creative contributions to it made by Gutman works for hire and thus, the property of JLM.
Partnership Gone Awry
Problems ultimately arose between the parties in 2020, JLM argues, when Gutman began posting “personal images in addition to bridal images” to the @misshayleypaige Instagram 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.” The bridal brand claims that this was followed by Gutman taking “steps to convert [the Instagram account] from a JLM company account” – and its one million-plus followers – “to her own business platform, as if she were an influencer.”
Given its exclusive rights in the “Hayley Paige” name for use in connection with the manufacturing, marketing, and sale of bridal goods, JLM filed suit against Gutman, pointing to her “confusingly similar use” of the various “Hayley Paige” trademarks and the @misshayleypaige Instagram account “since at least July 2020,” as well as her “efforts to pass off [her] endorsement of third parties’ goods and services, as being … authorized or approved by [JLM] when they are not.” Gutman’s “hijacking” of the Hayley Paige name and social media accounts for her own “personal use, and to promote non-JLM authorized goods and services” has “erod[ed] the distinctiveness of the [Hayley Paige] trademark and the @misshayleypaige trade name,” per JLM.
As a result, JLM claims that Gutman – who left the company on December 17, 2020 (just a couple of days after JLM filed suit) – is on the hook for a whole host of offenses, including breach of contract and trademark infringement. (Gutman’s contract with JLM runs through August 1, 2022, and does not permit her to “terminate it unilaterally.”) In filing suit, JLM has sought – and was granted – a temporary restraining order barring Gutman from using the social media accounts, and in the March 4 order, in which she granted the majority of JLM’s motion for a preliminary injunction, Judge Swain ordered that Gutman refrain from making any changes and/or additions to the various accounts for the duration of the litigation.
In her 57-page opinion and order, Judge Swain held on March 4 that “while a preliminary injunction cannot enforce the contract to the extent it requires [Gutman] to perform personal services” until the end of its duration in 2022 (as courts are rarely willing to interfere with an individual’s personal liberty by forcing a relationship between unwilling parties, including in cases of employment contracts), “A preliminary injunction can prohibit Ms. Gutman from engaging in conduct that would breach provisions” in her enduring contract with JLM, such as her use of the “Hayley Paige” name in a commercial capacity, and that would run afoul of JLM’s rights in the “Hayley Paige” trademarks.
Specifically addressing ownership and use of the Hayley Paige name and corresponding social media accounts, Judge Swain pointed to a provision in the parties’ employment agreement in which Gutman “unambiguously transfers to [JLM] the exclusive right to use the name Hayley Paige and any derivatives in connection with bridal goods that [Gutman] substantially participated in designing or creating during her employment until August 1, 2022, and for two years thereafter.” The court states that this “unambiguously encompasses ‘misshayleypaige’ and ‘@misshayleypaige,’” as these “are derivatives of ‘Hayley Paige.”
Beyond that, the court asserts that Gutman’s “contractual transfer to [JLM] of the right to use and control the use of” the Hayley Paige in certain contexts “is made still clearer” by the fact that the parties’ contract “grants [JLM] the exclusive right to register and use trade and service marks in the [Hayley Paige] name and derivatives thereof,” and that such trademarks “shall in perpetuity be the exclusive property of [JLM].”
Not exactly a one-sided deal, Judge Swain notes that in exchange for “the assignment to [JLM] of the [Hayley Paige] name and the trademarks, JLM agreed to pay Ms. Gutman as consideration, in addition to her base pay and additional sales volume-related compensation, and for ten years following the termination of her employment with the company, a further percentage of ‘net revenues derived from the sale of goods under the [Hayley Paige] name and trademarks based on the [Hayley Paige] name.”
Siding with JLM, Judge Swain held that “the restrictions on Ms. Gutman’s ability to use the [Hayley Paige] name, including derivatives, continue to apply notwithstanding her resignation” from the company, and that JLM “has demonstrated a strong likelihood of success on its claim that any unauthorized use or control of the [@misshayleypaige Instagram] account or similarly-named social media accounts going forward to promote [Gutman] as a celebrity influencer and/or endorse third-party products and services for commercial purposes would constitute a breach of the contract” given that Gutman “contracted away any right to monetize the trademarks and the [Hayley Paige] without JLM’s permission.”
With that in mind, Gutman has “no right to the use of” the Hayley Paige trademark or the @misshayleypaige social media accounts “in trade or commerce during the [contract] term or any time thereafter” without JLM’s consent, Judge Swain stated, also holding that JLM sufficiently “demonstrated that it is likely to succeed on its claims that social and other media appearances by Ms. Gutman in connection with commercial ventures marketing competing bridal-related goods breach [her] contract,” and as a result, she should be barred from engaging in such endeavors under the “Hayley Paige” name.
In terms of JLM’s trademark infringement and unfair competition allegations, the court stated that “consumer confusion is likely to result from Ms. Gutman’s use of the [Hayley Paige] name, [JLM’s] registered trademarks, or similar variations in commerce to promote other products or to promote herself as an influencer able to promote other vendors’ products.” As for her previous use of the “misshayleypaige” name and Instagram account to promote non-JLM-branded goods, the court found that such “use of an identical mark on an account where consumers had previously seen [JLM’s] goods and also began to see promotion of third-party goods, increases the likelihood of confusion as to affiliation should Ms. Gutman be able to continue to use the handle and the [Hayley Paige] name in commercial activities on social media.”
Ultimately, Judge Swain held that JLM demonstrated “a clear showing of its likely success on the merits of the contract and trademark claims,” as required for injunctive relief. Moreover, the bridal company established that “enjoining Ms. Gutman’s control of the [Hayley Paige] social media accounts” and the Hayley Paige name “in commerce during the pendency of this litigation serves the public interest,” and “will protect [its] trademark rights, prevent consumer confusion, and enforce the contract against Ms. Gutman’s ongoing and imminent willful violations.”
As such, the court held that Gutman may be – and is – legally prohibited from using and/or making any changes to the Hayley Paige social media accounts; using the Hayley Paige “name, trademarks and any derivatives or anything confusingly similar in trade or commerce;” and “engaging in or associating with any person or entity engaged in design, manufacture marketing or sale of goods in categories competing with JLM” for the duration of the case.
Modern Brand Assets
In response to the court’s order, JLM took to Instagram this week to state that “intellectual property is the cornerstone of every modern business especially in the fashion industry,” and asserted that it takes these rights very serious, which is why Ms. Gutman’s employment agreement clearly and unambiguously set out [her] obligations, what rights were being acquired, and what restrictions would be imposed … all of which she freely and knowingly agreed to.” JLM further alleged that Gutman is “trying to mislead the public about the facts of this case and her own motivations,” including that she “secretly licensed the Hayley Paige name to her fiancé to [sublicense] to third parties and asked to funnel payments through him, [which] was a clear attempt to avoid the explicit terms of her contract.”
In a similarly-timed Instagram post of her own, Gutman revealed – from her @allthatglittersonthegram account – said that she will not remain “nameless and jobless” as a result of the court’s decision, and revealed that she is changing her “professional name” in furtherance of a quest to build a new brand.
As for the case, itself, it is still underway in New York federal court, and clearly highlights that the key assets for almost any modern brand come not only by way of the arsenal of intellectual property protections at play, but also critically extend to the social media accounts and the audiences of those accounts that are tied to those brands.
“Of particular interest in the business world is how to use social media tools to gain market share and to attract and engage consumers,” Stout managing director David Haas has asserted. However, he also noted that as social media has become a widely-used tool by brands across the board, questions arise about the value – and ownership – of the resulting rights and content created in connection with brands’ various social media endeavors given that social media account handles and the corresponding follower base, as well as things like hashtags, “are examples of protectable assets that companies can create by investing in social media.”
*The case is JLM Couture, Inc. v. Gutman, 1:20-cv-10575 (SDNY).