From lawsuits over the ESG and sustainability-centric marketing claims made by apparel companies, Nike’s quest to crackdown on customizers that are allegedly looking to build businesses off of its famous trademarks, and a battle between Warby Parker and 1-800 Contacts over website designs to “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” and of course, the enduring fights that Chanel has waged against players in the burgeoning resale market, there are an array of interesting lawsuits set to unfold further this year. Here is a (non-exhaustive) look at the lawsuits we have our eyes on in 2022 …
The Peloton v. Lululemon Spat
2021 saw the start of a headline-making legal scuffle between Peloton and Lululemon. In late November, Peloton – fresh out of a 5-year-long apparel deal with Lululemon – filed a declaratory judgment action in New York federal court, seeking an order that it is not infringing a number of Lululemon’s design patents and trade dress by way of its new apparel offerings. Lululemon followed up shortly thereafter with a suit of its own, which it in California federal court, arguing that the exercise bike-maker is on the hook for design patent and trade dress infringement in connection with its sale of “copycat” athleticwear.
The latest in the new case? According to a joint filing dated December 23, “Lululemon filed a letter in the New York Action … indicating its intention to file a Motion to Dismiss the New York Action as an improper anticipatory declaratory judgment action.” With the impending motion to dismiss in mind and in order “to avoid the potential waste of substantial party and judicial resources, the parties have agreed to stipulate to a temporary stay in the present litigation pending a decision on Lululemon’s Motion to Dismiss in the New York Action.”
As we noted when the cases were first filed, as much as the matter is about alleged infringement, it is also about competition, which has heated up in the activewear market both before – and during – the pandemic. With such ever-growing competition in mind, brands appear to be increasingly eager to clamp down on perceived copycat products in order to protect their R&D and also to maintain their positions within the market amid an influx of new players.
Nike is Taking on Customizers
On the heels of its short-lived legal battle against MSCHF over the company’s heavily-publicized Jesus and Satan sneakers, Nike is taking on the “growing threat” that is the customization market, which it says is “unfairly trading-off of [its] successes by leveraging the value of [its] brand to traffic in fake products.” This effort landed Drip Creationz on the opposite end of a suit from Nike in July, with the Swoosh claiming that in addition to offering up unabashedly counterfeit Air Force 1 sneakers, Drip Creationz is promoting and selling unauthorized footwear as handmade “customizations” of Nike’s most iconic products. The problem, per Nike, is that in creating the customized footwear, Drip Creationz “materially alter[s]” the initially authentic Nike shoes “in ways [it] has never approved or authorized.”
Counsel for Drip Creationz has since asserted that the company’s sale of modified sneakers that it purchased from Nike and/or authorized Nike retailers “amount[s] to a resale by the first purchaser of the original product and is, thus, protected under the first sale doctrine and does not constitute trademark infringement or unfair competition.” Coming on the heels of the Hamilton watch case and in the midst of Chanel v. Shiver and Duke, this is one of the latest cases to bring enduring issues of customization and modification to the fore.
1-800 Contacts, Warby Parker Clash Over TMs, Website Design
Warby Parker landed on the receiving end of a lawsuit from 1-800 Contacts this summer, with the contacts-maker claiming that Warby Parker has attempted to confuse consumers into believing that its products are affiliated with those offered up by 1-800 Contacts. In addition to buying 1-800 Contacts keywords, 1-800 Contacts has argued that Warby Parker went further by adopting a website that allegedly “mimics the look and feel of 1800contacts.com.” New York-based Warby Parker has since rebuffed 1-800 Contacts’ trademark-centric claims, including by arguing that despite its claims to the contrary, the design of 1-800 Contacts’ website has not acquired distinctiveness.
This case will potentially prove an interesting one, as companies continue to rely more heavily on e-commerce in our omnichannel retail world, and simultaneously, look to protect their websites in the same way as other brand-centric assets. The potential kicker here: Just as companies are placing more weight on e-commerce sales, websites are starting to look more alike, which could mean that 1-800 Contacts is in for an uphill battle.
Chanel v. The RealReal
On the heels of engaging in mediation with the aim of resolving their rival trademark and anticompetition 3-year-old fight, Chanel and The RealReal alerted a New York federal court in November that they were unable to settle their differences. With a temporary stay on the proceedings lifted, the parties are now at odds over how the case should proceed on the discovery front, namely given TRR’s lodging of anticompetition counterclaims against Chanel last year.
After slamming the trademark claims waged against it by Chanel, and characterizing the lawsuit as “nothing more than a thinly-veiled effort to stop consumers from reselling their authentic used goods, and to prevent customers from buying those goods at discounted prices,” TRR filed an the amended answer in February 2021. This included a handful of counterclaims, in which TRR alleges that Chanel has engaged in violations of engaging in an “aggressive campaign” of “exclusionary and anticompetitive conduct” aimed at “monopoliz[ing] the market” – and thus, the supply and price of its goods, both new and pre-owned – to the detriment of its competitors and consumers, alike.
The enduring squabble is one worth keeping an eye on, as it sheds light on how at least one luxury brand is coping with the meteoric rise of the resale market, which boasts a value of more than $30 billion and which is expected to grow at an annual rate of 10 to 15 percent over the next decade, with the rise of digitally native resale businesses – like TRR – playing a large role in helping to prompt such growth.
All the while, Chanel is also in the midst of a similar lawsuit that it waged against reseller What Goes Around Comes Around in a New York federal court in March 2018.
The Bridal Battle
The ugly legal battle that erupted between JLM Couture and designer Hayley Paige Gutman in late 2020 over the Hayley Paige brand and its various social media accounts has only heated up since, with a New York federal court recently finding in September, for instance, that Gutman violated a preliminary injunction that bars her from making, marketing, and selling various bridal products until August 1, 2022. According to a September 8 opinion and order, Judge Laura Taylor Swain of the U.S. District Court for the Southern District of New York determined that Gutman had acted in contempt of the court’s March 2021 preliminary injunction order by promoting the impending launch of a new bridal brand on Instagram and in an Business Insider interview.
Fast forward to October 2021, and the parties were before the U.S. Court of Appeals for the Second Circuit, where Gutman argued, among other things, that the lower court was wrong to require that she forfeit her @misshayleypaige Instagram account to her former employer and the owner of her eponymous label. Gutman also claimed that the non-compete in her contract with JLM was extinguished when the company failed to pay her royalties, thereby, breaching the parties’ agreement.
The case, which got its start in December 2020, has been referred to by the district court as “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.”
The Sustainability, ESG Marketing Lawsuits
In 2021, Allbirds and Canada Goose were slapped with false advertising lawsuits over sustainability-centric marketing claims that they have made to boost their businesses as investors and at least some consumers prioritize ESG. Newly-public “Allbirds has claimed that its wool harvesting practices are sustainable [and] humane,” plaintiff Patricia Dwyer asserts in the proposed class action complaint that she filed this summer. Meanwhile, George Lee asserted in the suit that he filed against Canada Goose that the down jacket-maker is misleading consumers by marketing that is dedicated to “the ethical, responsible, and sustainable sourcing and use of real fur.”
Both suits come as a closely-watched case over statements made by Goldman Sachs – including, “We have extensive procedures and controls that are designed to identify and address conflicts of interest;” “Our clients’ interests always come first;” and “Integrity and honesty are at the heart of our business” – continues to unfold. (These statements fall under the “G” of ESG.) The plaintiffs, the Arkansas Teacher Retirement System, filed suit against the investment bank on the basis that its statements are at odds with the significant undisclosed conflicts of interest maintained by Goldman, and thus, misled shareholders – and artificially propped up and maintained its share price.
Following a win before the Supreme Court in 2021, including a determination that while defendant corporations bear the burden of establishing that their statements did not impact their stock price, the generic nature of the statements should be included in a court’s assessment of that impact, the case has landed back before the U.S. District Court for the Southern District of New York. In December, Judge Crotty rejected Goldman’s claim that the statements at issue are too generic to mislead investors and impact its stock price, a determination that could have an impact in light of widespread marketing by brands that may have previously been viewed as aspirational in nature or potentially too vague to be actionable.