Brooks Brothers is looking to drop the “Brothers” from its name. That was the apparent takeaway to be garnered from the application for registration that the 201-year old apparel company, the oldest men’s clothing company in the U.S., filed with the U.S. Patent and Trademark Office (“USPTO”) late last year between the rush of the Christmas holiday and the festivities of the New Year. According to the application that counsel for Brooks Brothers quietly filed on December 30, the company is seeking registration for its impending use of the word “Brooks” on its own. 

In its trademark application, Brooks Brothers sets out eight different classes of goods/services for which it aims to use the simplified “Brooks” name – from jewelry and eyewear to handbags and travel bags. Absent from the list of goods and services for which New York-based Brooks Brothers is seeking a registration? Footwear. Its decision to veer away from shoes, even though it sells an array of boots, loafers, sandals, and sneakers, including “Sporty” ones, has not stopped a like-named rival from stepping in and filing a lawsuit.  

By way of a complaint filed on February 10, Brooks Sports has asked a federal court in Washington to step in “to stop Brooks Brothers from using Brooks’ famous BROOKS trademark on [its] stores and products, and [to] prevent public confusion and dilution of the BROOKS mark.” According to Brooks Sports’ suit, Brooks Brothers’ is in the midst of attempting to “re-brand” and “enter into the active lifestyle and athletic footwear, apparel and accessories market” by selling “new products that differ from its traditional offerings.”

The problem with that, according to Brooks: in doing so, Brooks Brothers is likely to damage its similarly-monikered rival by “confusing the public [about the source of its products], diluting the BROOKS marks, [and] ridding on Brooks’ coattails.” 

All the while, Seattle-based Brooks – which was founded in 1914 and later acquired by billionaire Warren Buffett’s multinational holding company Berkshire Hathaway – claims that Brooks Brothers has waged a campaign to prevent it from “obtaining registrations for its BROOKS trademark in the United States and other countries, despite decades of unopposed use.”  

Beyond the relatively straightforward trademark infringement and dilution asserts – and the trade dress infringement claim (which centers on Brooks’ Heritage sneaker and Brooks Brothers’ Sporty sneaker) – that Brooks makes in connection with Brooks Brothers’ impending attempts to rebrand is a more interesting assertion: one that centers on a behind-the-scenes deal that the two like-named brands entered into 40 years ago. 

On the heels of a “dispute” in November 1977 when Brooks Brothers sought to oppose the registration of Brooks Sports’ “BROOKS” trademark with the USPTO for use on athletic shoes, the two parties settled their differences and entered into a formal and legally-binding agreement “of indefinite duration.”

According to Brooks’ complaint, “On or about January 16, 1980, Brooks and Brooks Brothers executed an agreement resolving [Brooks Brothers’] opposition.” In that agreement, Brooks was “granted the right to use BROOKS-formative marks for all athletic and athletic-related clothing, with a narrow exception for golf related clothing, and granted Brooks Brothers the right to use BROOKS BROTHERS-formative marks on clothing other than athletic shoes and apparel, with an exception for golf polo shirts.” 

In particular, Brooks asserts, “Brooks Brothers agreed in Section (1) of the agreement not to ‘object to the use and registration by [Brooks] for the entire world of the [trademark] BROOKS or BROOKS SHOES in connection with any type of athletic shoe.’” 

As a result of that agreement and given their distinct offerings (“Brooks is known for athletic-inspired innovative footwear, apparel and accessories under its famous BROOKS mark, [while] Brooks Brothers is known for its traditional ready-to-wear fashion apparel and tailored business and formal wear under its BROOKS BROTHERS mark”), Brooks claims that they “have coexisted without a likelihood of confusion for over one-hundred years … selling their respective goods and services under their respective marks in different markets to different customers who have different objectives in purchasing the parties’ respective products.” 

That changed in 2018 when Brooks Brothers initiated a new opposition with the USPTO. 

In early October 2018, Brooks Brothers allegedly breached the parties’ agreement by filing an opposition with the USPTO that sought to prevent Brooks’ pending application for the mark BROOKS for use of “athletic footwear” and “athletic clothing” from being registered. The timing was hardly coincidental it seems, as Brooks alleges that beginning in 2018, “Brooks Brothers began to enter the athletic footwear market.”

While the two companies attempted to make peace, Brooks claims that such efforts were “unsuccessful.” Matters were made worse, the footwear company claims, as “just days after the discussions between the parties regarding the opposition failed, Brothers filed [its December 2019] federal trademark application for BROOKS” for use  “in connection with … all-purpose sport bags and retail store services and online retail store services featuring clothing and sporting goods,” among other goods and services.

Taken together, Brooks claims that Brooks Brothers’ opposition and pending trademark applications, and its “bona fide intent to expand its presence in the athletic and active lifestyle [market]” by way of products that are “identical, similar, overlapping or related to Brooks’ athletic and active lifestyle footwear, apparel and accessories,” are part of a larger scheme to “trade on the goodwill of Brooks’ BROOKS Marks, cause confusion and deception in the marketplace, and divert potential sales of Brooks’ athletic and active lifestyle footwear, apparel and accessories to [itself].”  

With this in mind, Brooks sets forth claims of trademark infringement and dilution, trade dress infringement, unfair competition, and breach of contract, and asserts that “Brooks Brothers’ acts are threatening to cause and causing, and unless restrained, will cause and continue to cause damage and immediate irreparable harm to Brooks and to its valuable reputation and goodwill with the consuming public.”  

The Brooks-centric suit is not the first to come about in connection with an agreement between two like-named brands to make the peace. In July, Valentino S.p.A. filed suit against Mario Valentino, arguing that the similarly named brand was running afoul of the co-existence agreement they entered into in 1979 due to the fact that they have “similar names and overlapping goods” and “experienced issues of consumer confusion” as a result. 

According to that agreement, which the similarly-named fashion brands agreed to forge due to their respective “desire to avoid public confusion and conflict, present or future, in any part of the world,” Mario Valentino is permitted to “use and register the full name Mario Valentino or M. Valentino or Valentino or the letters MV or V exclusively on the outside, together with Mario Valentino on the inside and on the packaging [of] all goods made of leather or imitation leather or other material.” 

That agreement served its peace-making purpose for nearly 4 decades, but as of this past summer, the Valentino Garavani-founded Valentino S.p.A. accused Mario Valentino and its American licensee of  “actively engaging in a campaign to trade off Valentino’s goodwill in the United States handbag market,” and breaching their agreement in the process. That case is still underway.

*The case is Brooks Sports Inc v. Brooks Brothers Group Inc, 2:20-cv-00207 (W.D. Wash.).

Rihanna’s boundary-pushing Savage X Fenty collection is at the center of a budding new legal battle centering on what is being characterized as “deceptive advertising and illegal operations.” In light of a growing number of “customer complaints about Savage X Fenty’s Xtra VIP Membership,” non-profit, advertising watchdog TINA.org initiated an investigation into the marketing of the 31-year old Grammy winner-slash-burgeoning retail phenom’s Savage X Fenty’s membership program and says that it “found that the company is violating [U.S. federal] law.” 

According to formal complaint letters filed with the Federal Trade Commission (“FTC”) and Santa Cruz County District Attorney’s Office, respectively, Connecticut-based TINA.org claims that TechStyle, Inc., the company behind the $150 million-plus Savage X Fenty joint venture, is running afoul of the 2014 settlement it entered into after being sued by the state of California for allegedly misleading customers about automatic monthly payments charged to their credit cards in connection with its JustFab.com, Fabkids.com, Shoedazzle.com and Fabletics.com businesses.

In furtherance of that settlement, TechStyle agreed to pay $1.8 million and refrain from “making untrue or misleading statements about products or services; deceptively marketing product prices and discounts that are only available to consumers who are bound by the company’s VIP membership without clearly and conspicuously disclosing this fact; and failing to provide a timely cancelation mechanism,” among other things.

Fast forward 5 years, and TINA.org claims that it is precisely these off-limits tactics that TechStyle is using to bolster its wildly successfully Savage X Fenty venture. 

In addition to allegedly “promoting prices and sales that are only available to consumers who are bound to the company’s Xtra VIP Membership” without clearly disclosing that fact, and misleading consumers about how/when they can use their “unused store credits,” TINA.org claims that one of the most striking behaviors of TechStyle comes in the form of its alleged “enrolling of consumers into … the Xtra VIP Membership without clearly and conspicuously disclosing all the material terms and conditions.” It allegedly does this by “automatically adds (without a consumer’s affirmative consent) a ‘Savage X Monthly Membership’ to the Shopping Bag without showing any price associated with that membership and displays a discount price for the item(s) in the bag.” 

Because TechStyle only provides consumers with a “summary of the Xtra VIP Membership terms at the end of the order process (with different terminology than that used in the Shopping Bag throughout the check-out process),” no small number of consumers have been misled, per TINA.org, and thus, claim that they “never authorized SavagexFenty to sign me up for [the $49.95/month membership],” a sum that is automatically collected from their bank accounts each month until they actively cancel their memberships. 

The situation is made worse, TINA.org, as once an individual is a Savage X Fenty member, TechStyle “employs dissuasion and diversion tactics so that consumers encounter unnecessary difficulty when trying to cancel their memberships.” According to the complaints, “Countless consumers report experiencing great difficulty when trying to cancel their Savage X Fenty Xtra VIP Memberships, which can only be done by calling the company despite the fact that joining the subscription service only takes the click of a button online.” 

Finally, TINA.org argues that among other “illegal acts,” TechStyle is preying upon consumers by “using social media influencer advertisements that fail to adequately disclose the influencers’ material connections to the company.” Specifically, TINA.org asserts that it “has identified a sampling of 70 social media posts by 21 different influencers that deceptively advertise Savage X Fenty products,” none of which “have adequate disclosures of the influencers’ material connections to the company either by failing to include any disclosure at all, using inadequate and unclear language to disclose the relationship, or placing the disclosure in a place that will easily be overlooked by consumers.”  

With the foregoing in mind, TINA.org claims that TechStyle is not only violating its 2014 settlement (which is legally binding), it is running afoul of the FTC Act and the Restore Online Shoppers Confidence Act, a federal law that prohibits sellers from “charging any financial account in an Internet transaction unless it has disclosed clearly all material terms of the transaction and obtained the consumer’s express informed consent to the charge.”

As such, the ad watchdog has asked the FTC “to commence an investigation of the claims being made by Savage X Fenty, as well as the illegal business practices being employed by [TechStyle], and take appropriate enforcement action,” and is also urging the Santa Cruz County District Attorney’s Office, which investigated TechStyle in 2014 (thereby, resulting in the lawsuit and settlement), to “re-open its investigation” and take any necessary enforcement action. 

Rihanna, herself, is not listed as a recipient of either of TINA.org’s letters.

As the coronavirus continues to spread around the world, and luxury brands, in particular – with their extensive dependence on high-spending Chinese consumers, who account for 35 percent of total global luxury goods sales, making it the second-largest personal luxury goods market after the U.S., per McKinsey – continue to cut their earnings projections, economists are increasingly concerned about the impact on the U.S. economy. 

In addition to brands like Burberry, which generates 40 percent of its sales from China’s shoppers at home and abroad, according to Bloomberg, warning investors that the deadly virus is wiping out “as much as 80 percent of sales at stores that remain open in China” (the British brand has closed one-third of its Chinese outposts), and American groups like Coach’s parent Tapestry and Versace and Michael Kors’ owner Capri announcing expectations of reduced revenue, the Federal Reserve warned of the disruptions from the coronavirus in a recent report to Congress. Meanwhile, Wall Street lender Goldman Sachs estimates that the virus will cut as much as half a point off of U.S. economic output in the first quarter of 2020. 

With such mounting concerns in mind, and given how dependent upscale U.S. companies have become not only on Chinese consumers but companies across the board have come to rely on manufacturers and suppliers in China, here are three ways the outbreak could impact the U.S. economy, and one potential that could mitigate that impact.  

1. Sales to China

China is one of the largest markets for U.S. products, especially electronics and fashion. For example, about 47 percent of Qualcomm’s annual revenue and 28% of Intel’s income comes from China, making it the most important region for both chipmakers. China is also the second-largest market for iPhone-maker Apple, and the outbreak has the potential to severely depress its sales. Apple extended the closureof its corporate offices and all of its stores in China until at least February 14.

Many cities and provinces have told businesses to stay closed, and residents throughout China have been staying off the streets. That has resulted in deserted shopping centers with closed stores, including those run by American fast food companies and fashion and apparel retailers – from Starbucks and McDonald’s to Nike and Coach, just to name a few. 

As Jide Zeitlin, the Chairman and CEO of Tapestry, the New York-based group that owns Coach, Kate Spade, and Stuart Weitzman, said in an earnings call on February 6, “The escalating coronavirus outbreak in China is now impacting our business, resulting in both significant traffic declines and the closure of the majority of our stores on the mainland.”

2. Constrained and disrupted supply chains

The Chinese economy has effectively shut down, which is taking a toll on U.S. manufacturers through their supply chains. Manufacturers that use components in their products that are mostly sourced from infected areas in China such as Wuhan, where more than 500 car parts manufacturers operate, have two options: find alternative sources outside of China or shut down production. Automakers including Tesla, Ford and Volkswagen have shut down plants in China. Hyundai has gone a step further and temporarily closed production lines in South Korea because of a shortage of parts, a hint of more trouble for other manufacturers. 

U.S. companies, such as Apple, that have outsourced most of their manufacturing facilities to China have been affected by widespread closures. And even when components or products remain generally available, the disruption to established supply chains is limiting access for some companies, something that fashion brands, among others, fear will linger even when factories reopen. 

Anne Harper, founder of OMG Accessories, a lifestyle brand which produces out of Guangzhou, “expects production to be delayed from two to four months,” according to Vogue Business. Womenswear designer Xuzhi Chen, who employs 10 people in Shanghai, told the BBC that “even when the factories reopen, not all of the workers will return immediately, so we’re not sure they’ll be working at full capacity.” The BBC notes that he “expects a two to three week delay to deliveries, throwing off product launches that were due to take place in March and April.”  

3. U.S. tourism will take a hit

Chinese tourism has in recent years become an important driver of U.S. GDP, and an important avenue for consumption, as the majority of their spending on fashion and luxury goods has taken place outside of mainland China to date, in an attempt to avoid the steep import tariffs and value added taxes passed onto them if they buy Western luxury goods at home.  

Then the trade war arrived, and that caused a large drop in Chinese visits. Now, the coronavirus is expected to deal another blow to the industry. Many airlines have have canceled all flightsin and out of China, and the Trump administration has imposed travel restrictions that bar any foreign national who has recently traveled to China from entering the U.S. 

The number of visitors coming to the United States from China could drop by as much as 28% in 2020, which could translate into $5.8 billion in less spending this year and $10.3 billion less through 2024. 

Trade war’s silver lining

One consequence of the U.S.-China trade war is that many U.S. companies have moved all or most of their manufacturing facilities out of China to other countries in the region, such as Vietnam, Taiwan, Bangladesh and South Korea. In a May 2019 survey, about 40% of American Chamber of Commerce member companies said they have relocated manufacturing facilities outside China or were considering doing so. This could mitigate some of the impact as a result of disruptions in mainland, but the outbreak is spreading to other countries in Asia – though not as fast as in China – so their new manufacturing facilities could still be affected.

Robert Aboolian is a Professor of Operations and Supply Chain Management, California State University San Marcos. Edits courtesy of TFL. 

France is home to the fashion industry’s most esteemed names and as of late last month, it is also on the brink of enacting one of the strongest laws when it comes to the handling of unsold garments and accessories. On the heels of revealing that it was working to draft legislation to ban companies from destroying certain unsold products, the French government has made good on its vow to “put in place in the [fashion and textile industries] the major principles of the fight against food waste in order to ensure that unsold materials are not thrown away or destroyed.” 

Thanks to sweeping new legislation, called “Projet de loi relatif à la lutte contre le gaspillage et à l’économie circulaire” – or Bill on the fight against waste and the circular economy – French companies are slated to be subject to more than 100 new sustainability-centric provisions, such as those that require the systematic phasing out of automatic paper receipts and single use plastic in fast food restaurants, for instance; followed by the outright ban on all single-use plastics by 2040. 

Of particular interest for the fashion industry is, of course, the prohibition on the destruction of an array of different types of unsold goods, including fashion items. To be exact, the law – which was formally approved by the French Sénat on January 30, and currently awaiting promulgation – aims to require “producers, importers and distributors, including e-commerce platforms, such as Amazon, to donate unsold non-food goods, save for those that pose a health or safety risk,” the Guardian reports.  

The same law will implement a “polluter pays” clause, which requires companies to finance the destruction of waste that they create. This will require tobacco manufacturers, for example, to pay for the disposal of cigarette butts beginning next year, but is also expected to affect an array of other industries, as well.  

Speaking of the new law, Paris-based attorney Céline Bondard says that it is aimed at reducing waste across sectors of the market, with some of the “more stringent measures emerging through a ban on the destruction of unsold products and the mandatory incorporation of a minimum level of recycled material into new products.” According to Bondard, in accordance with the law, companies can be penalized for destroying unsold products without sufficiently attempting to recycle or reuse the materials, and fines for failure to comply can reach up to €15,000 ($16,350). 

The fashion industry is a particular target of the new legislation, as “apparel retailers, in particular, as they renew their products more frequently [than other industries] and often have surplus unsold stock,” according to French legislators. As a result of its longstanding practice of destroying unsold merchandise to avoid selling it at a discount and/or paying to store it, the industry, itself, is one of the biggest culprits in terms of the more than €650 million (nearly $710 million) worth of new consumer products that are destroyed or disposed of on an annual basis in France, and the $900 million more worth of unsold items going to landfills, according to Prime minister Édouard Philippe’s office.  

Destruction of otherwise marketable products by brands has been a particularly popular topic of discussion in the wake of a number of brands coming under fire for such practices. In July 2018, Burberry revealed in its 2017/18 annual report that the “cost of finished goods physically destroyed in the year was $37.8 million,” that is up from the $35.6 million figure the brand cited for 2017. Swedish fast fashion giant, H&M, had previously made headlines for allegedly burning at least 60 tons of unworn apparel, while Richemont, the parent company to watchmakers Cartier, Piaget, Baume & Mercier, and Vacheron Constantin, among others, made headlines for “allegedly destroying its expensive, unsold watches.”  

Still yet, Paris-based Louis Vuitton has – for years – been plagued with reports that it destroys unsold leather goods as part of a large-scale scheme to maintain its brand image, at least in part from the tarnishment that comes from the grey market and thus, the sale of its wares at unapproved prices by unaffiliated retailers.  

Beyond efforts to save face, though, brands that import goods into the U.S. often resort to destroying unused products as a way to benefit from the “drawback” or the return of certain duties, internal and revenue taxes and certain fees collected upon the importation of products into the U.S., for instance, from France. In accordance with U.S. Customs and Border Protection program (and 19 USC § 1313, the section of U.S. Code, which centers on “drawback and refunds”), “If imported merchandise is unused and exported or destroyed under Customs supervision, 99 percent of the duties, taxes or fees paid on the merchandise by reason of importation may be recovered as drawback.”

The new legislation is awaiting promulgation. 

On January 22, 2020, Josephine Palumbo, the Deputy Commissioner of the Deceptive Marketing Practices Directorate at the Canadian Competition Bureau (the “Bureau”), spoke at the Canadian Institute’s 26th Annual Advertising and Marketing Law Conference. During her remarks, Ms. Palumbo identified the Bureau’s current enforcement priorities as they relate to advertising and marketing in the digital economy. Among other things, these include a growing focus on the burgeoning influencer marketing economy, one that saw companies spend $1.9 billion in the U.S. and Canada, according to Instascreener.

A form of social media marketing, influencer marketing sees “influencers” provide testimonials, endorsements and/or product placements on Instagram, Twitter, YouTube, Facebook and other social media platforms to sizable pools of eager followers in exchange for some form of compensation. While the term “influencer” most famously includes the likes of individuals who boast millions of social media followers and command hundreds of thousands of dollars in exchange for social media posts (Kylie Jenner, Selena Gomez and Cristiano Ronaldo each reportedly make at least $750,000 per sponsored post on Instagram), the size of their followings is not actually the dispositive factor.

Instead, Ad Standards – the Canadian advertising industry’s non-profit self-regulating body – defines an “influencer” as someone who possesses the potential to influence others, regardless of the number of followers or viewers they may have.

As for why influencer marketing is on the Bureau’s radar alongside issues of fake online reviews, data privacy, and dishonest price claims, that is because it is a sizable and growing business. In fact, many companies now dedicate significant resources to influencer marketing due to the effectiveness of the marketing practice in raising awareness about a brand and its products among consumers, and getting consumers to actually buy the products being promoted. For example, a recent Ad Standards study revealed that at least 35 percent of Canadians aged 18-35 have made a purchasing decision based on the recommendation of an influencer. Given the impact that influencers have on consumers’ purchasing decisions, influencer marketing has become a priority for the Bureau. 

With the ever-rising reliance on influencer marketing in mind, issues regarding the use of false or misleading information by influencers or/or their failure to disclose material information is particularly relevant.

In terms of the latter, the use of false or misleading information in connection with influencer endorsements can take the form of a promise of specific, scientific benefits that come from a wellness or beauty product if those benefits cannot be proven by the manufacturer, or the promotion of a product by an influencer who has not actually used the product (which is what was suspected of Kendall Jenner’s promotion of Proactive, for instance). 

Meanwhile, the issue of disclosure is one of the longest-standing ones when it comes to influencer marketing, and it has been the subject of guidance issued by regulators around the world, including in Canada and the United States.

Much like the law in the U.S., the Bureau requires the disclosure of any “material connection” between an influencer and the business, product or service. In the Bureau’s view, a connection may be “material” if it has the potential to affect how consumers evaluate an influencer’s independence from a brand, including where the influencer: (i) received payment in money or commissions, (ii) received free products or services, (iii) received discounts, (iv) received free trips or tickets to events, or (v) has a family or social connection. 

The Bureau has outlined best practices for disclosing a “material connection,” including requiring that the disclosure is prominent and visible on all devices (and not below Instagram’s “More” button), and includes plain and clear language and avoid the use of ambiguous terms and abbreviations. Ad Standards has been more specific, suggesting particular hashtags that are widely accepted as clear: #ad, #sponsored, #XYZ_Ambassador, #XYZ_Partner (where ‘XYZ’ is the brand name).

Canada’s Competition Act provides for a wide range of civil and criminal deceptive marketing practices provisions that apply to anyone who is promoting a product, service or business interest – including influencers. These include provisions relating to false or misleading representationsperformance claimsordinary selling price and testimonials, among other things, and a brand and/or influencer’s failure to comply with these provisions can have serious consequences, including administrative monetary penalties, restitution and reputational harm – and in some cases criminal fines and jail time. For example, administrative monetary penalties for making false or misleading representations contrary to the civil provisions of the Act have ranged from $10,000 to $10 million.

But far from merely issuing general guidance on these issues, the Bureau is taking action. Following a recent review of influencer marketing practices across various industries, including health and beauty, fashion, technology and travel, the Bureau sent letters to almost 100 brands and advertising agencies in December 2019 advising them to review their marketing practices to ensure compliance with the law, not unlike what the Federal Trade Commission did in 2017.  

In addition to setting forth the rules regarding disclosure, the Bureau also made clear that influencer reviews and testimonials must be based on the actual experience of the influencer in order to avoid false advertising action. 

The letters – paired with Palumbo’s specific mention of the growing focus on influencer marketing – send a very strong signal that the Bureau is, in fact, paying attention to influencers, and may begin holding these brands and advertising agencies responsible for representations made by influencers in the not too distant future. 

Chris Margison, Jenna Ward, Justine Reisler and Robin Spillette are Antitrust/ Competition lawyers at FaskenEdits courtesy of TFL.