Facebook, Inc. is changing its name to Meta. That was the news on Thursday after months of speculation about a potential change in name for the troubled tech group, and amid its efforts to fend off what has been called “one its worst crises yet,” and to “pivot to its ambitions” to the metaverse. A name change does not necessarily change much if the workings of the company formerly known as Facebook (and which may continue to be referred to as such by consumers in the same way as Google has found it difficult to get laymen to put its 2015 rebrand to Alphabet into practice) do not change along with it.  

After all, “A great name does not a great company make,” according to veteran linguist Anthony Shore, whose firm Operative Words has worked with brands like Adobe, Fitbit, Virgin, Neiman Marcus, and FedEx, among others. Nonetheless, Shore noted on Thursday that Facebook, Inc.’s name change – one that impacts the overarching parent company as distinct from the individual social media brand – “makes sense from a brand architecture standpoint” in the same that that Adobe should not be named Photoshop.”

Facebook is, of course, not the only one to change its name as of late, and in fact, companies commonly tweak their monikers for an array of reasons – from an attempt to reposition a beleaguered brand to a bid to reflect an expansion beyond a company’s initial offerings. And still yet, in some cases, as Venable LLP’s Andrew Price and Meaghan Kent noted, a rebranding exercise that is aimed at maximizing brand value, including in challenging times across industries, “may have to look beyond just changing [a company’s] own name or logo.” In such instances, “the rebrand will not only have to portray how the particular company has changed or grown but may also have to articulate how its profession or field, as a whole, has grown or matured. (Facebook’s name change is likely a bit of each of these.)

Facebook announcement

Fosun Fashion Group’s recent rebrand to Lanvin Group comes to mind. Fosun revealed this month that behind its decision to rebrand the fashion holding company is “a strong belief that the spirit and ethos of Jeanne Lanvin.” Realistically, Lanvin Group likely just sounds better, and is more widely known as having a reputation in the luxury segment, which is relevant as the group says that it is entering “the next phase of its global development.”

The Fosun name change comes almost three years after Michael Kors, the group, became Capri Holdings after scooping up Versace, and creating what CEO John Idol called “one of the leading global fashion luxury groups in the world.” And a year before that, Coach, Inc. rebranded as Tapestry following its acquisition of Stuart Weitzman and Kate Spade. In both cases, the moves were (at least partially) aimed at broadening the image of the two entities, which started as single brands, to multi-brand entities, and signifying a change in strategy. 

Just as will be the case of Facebook-turned-Meta, the rebrands by Coach and Kors required more than merely a swap in stock market ticker symbols, and both have come with broader change within the groups, including an enduring push upmarket. For Capri, that looks like a “considerable” raise in prices and a continued movement away from aggressive discounting. Diving the Tapestry move is its marquee Coach brand, which has been busy increasing marketing spend and enlisting mega-stars, such as J. Lo., to cement its more upscale positioning and reach younger consumers by convincing them that the new Coach is “not necessarily your mother’s Coach.” (My words, not Coach’s.) From a sales perspective, the revamp is working for Tapestry; for Q4 2021, Tapestry reported 60 percent year over year growth in Mainland China and triple-digit full-year global digital gains.

For Facebook – err Meta, it almost certainly will not be as simple as boosting ad spend and enlisting enticing brand ambassadors. However, at least some are optimistic that its evolution – both in name and in practice – could prove fruitful, assuming that it can convince consumers to join it in the metaverse. 

A final takeaway worth considering for companies that are engaging in – or toying with the idea of – a rebrand is what happens to pre-rebrand assets. Meta, for one, has significant reason to maintain its use of and rights in the Facebook name thanks to its individual social media brand. But what about other companies?

Price and Kent assert that in the wake of a rebrand, “it may be worth keeping old logos and other legacy marks visible on websites and other branding materials to help customers recognize the [new] brand and understand the purpose behind the rebrand.” Beyond aiding consumers amid a branding transition, they claim that “keeping these legacy marks alive also serves to protect them from misuse and helps to bridge the gap between the old brand and the new.” From a purely trademark perspective, if any of the formerly-used names, logos, etc. are still in use, it “can also be advisable to keep certain strategic registrations alive for legacy brands for a period in order to preserve ‘residual goodwill.’” 

UPDATED (Oct. 30, 2021): Facebook, Inc. filed an intent-to-use trademark application for registration for Meta on October 28 in classes 9, 28, 35, 38, 41, 42, and 45. This is a tiny excerpt of the very lengthy list of classes of goods/services, which consists of more than 16,500 words …

Facebook trademark

The Federal Trade Commission (“FTC”) put more than 700 companies on notice this week by way of letters in which it addressed “unlawful practices relating to the use of endorsements and testimonials.” In the newly mailed letters, a template of which was published on Wednesday, the FTC alerted companies ranging from luxury brands and well-known conglomerates to retail platforms, social media sites, and mass-market apparel entities, among others, that they could be subject to civil penalties of up to $43,792 per violation in connection with fake or misleading endorsements and/or reviews. 

According to the FTC’s template letter, “Companies use endorsements and testimonials in many forms to advertise and market their products and services, both in traditional and social media, as well as in the form of online reviews.” While endorsements and testimonials are not inherently problematic, the government agency – which is tasked with promoting consumer protection, and eliminating and preventing anticompetitive behavior in the market – asserted that “as reflected by [its] enforcement actions and other efforts, some companies use these advertising tools in a manner that deceives consumers.” 

Addressing the types of uses of endorsements and testimonials that are likely “deceptive or unfair and are unlawful under Section 5 of the Federal Trade Commission Act,” a federal law that broadly prohibits deceptive practices in advertising, the FTC pointed to the following: “Falsely claiming an endorsement by a third party; misrepresenting whether an endorser is an actual, current, or recent user; using an endorsement to make deceptive performance claims; and misrepresenting that the experience of endorsers represents consumers’ typical or ordinary experience.”

Also problematic, according to the FTC, failing to disclose an unexpected material connection with an endorser. After all, the agency requires that material connections between brands and publications – and brands and influencers, celebrities, etc. – must be “clearly and conspicuously” disclosed. Such disclosure may come in the form of hashtags, such as #Ad or #sponsored, as well as plain language that alerts consumers to the fact that an endorsement is the result of a connection between the endorser and the company at issue.

With the foregoing in mind, the FTC stated that the receipt of its letters puts the companies at issue on notice about the unlawful nature of – and the potential penalties that can come with – such misleading endorsement activities, and the government agency recommend that companies “carefully review the notice and take any steps necessary to ensure that [their] practices do not violate the law.” 

As for the companies that received letters, the FTC confirmed that they include sportswear brands like Nike, adidas, Converse, and Skechers; fashion and luxury groups Kering, LVMH, Richemont, Tapestry, and Supreme-owner VF Corp.; luxury brands, such as Rolex, Chanel, and Tiffany & Co.; retailers like Bloomingdales, Macy’s, Target, eBay, Amazon, and Walmart; and mass-market brands Gap, Banana Republic, Aeropostale, Patagonia, Victoria’s Secret, and Urban, among others. Also on the list of recipients: Apple, Facebook, Inc. and Google, online game platform Roblox, the newly-public Honest Company, and Kylie Jenner’s brand Kylie Cosmetics, LLC. (Jenner, for one, has come under fire in the past for failing to properly disclose sponsored posts on her personal Instagram account.)

The FTC was sure to note that its staff “is not singling out” companies by way of its letter or “suggesting that [recipients] have engaged in deceptive or unfair conduct.” Instead, the agency stated that it is “widely distributing letters and the notice to large companies, top advertisers, leading retailers, top consumer product companies, and major advertising agencies,” seemingly in anticipation of a potential push to crackdown on unlawful practices by major market players.

While deceptive reviews and endorsements have been a focus of the FTC as of late, with the agency sending out more than one round of warning letters to influencers and brands in 2017 and hinting at stronger action against big-name influencers, brands, and the platforms, the letters appear to be warning to companies that the Commission may be planning to come down harder in the not-too-distant future. More specifically, Hunton Andrews Kurth LLP attorney Phyllis H. Marcus states that by sending the 700-plus Notice of Penalty Offenses, the FTC “is hoping to create the requisite knowledge now to pin on recipients later, a strategy was presaged by FTC Commissioner Rohit Chopra and Consumer Protection Director Samuel Levine in an October 2020 article, ‘The Case for Resurrecting the FTC Act’s Penalty Offense Authority.’” 

“It is clear that, in the wake of the Supreme Court’s decision in April 2021, [in which it] rejected the FTC’s ability to use the FTC Act to obtain restitution and disgorgement from companies that engage in unfair or deceptive advertising practices, the agency is looking for new ways to, in the words of Chopra and Levine, ‘substantially increase deterrence and reduce litigation risk by noticing whole industries of Penalty Offenses, exposing violators to significant civil penalties, while helping to ensure fairness for honest firms.’” 

Going forward, Marcus encourages companies to educate themselves about FTC-approved endorsement and testimonial practices, and “to review their internal policies for using endorsements and testimonials in ads, and make sure they comply with the FTC’s requirements.” 

In October 2019, Emily Ratajkowski was sued for copyright infringement after posting a photo of herself to her Instagram account, captioning the photo in which she is obscuring her face with a flower arrangement with “mood forever.” The model-slash-actress would later argue in response to the copyright infringement lawsuit filed against her and her corporate entity by Robert O’Neil, the paparazzi photographer who took the photo, that her use of the image was fair use, as it served as a commentary on the state of her paparazzi-plagued life. 

The basis of the lawsuit against Ratajkowski, which is still underway in a New York federal court, is hardly novel. In fact, since 2017 or so, which is when Khloe Kardashian was sued by Xposure Photos after sharing a photo of herself entering David Grutman’s restaurant Komodo in Miami on her heavily-followed Instagram without licensing it from the celebrity photo agency, a long list of nearly identical copyright cases have been filed against celebrities (and some fashion brands, as well) primarily in federal courts in New York and California for their unauthorized use of photos of themselves, the copyrights to which belong to third parties, namely, paparazzi photographers and/or the agencies that their assign their rights to. 

Few celebrities have actively fought back in the increasingly lengthy list of paparazzi cases, and instead, have opted to settle suit out of court by paying undisclosed sums to the paparazzi photographer and/or photo agency defendants instead of choosing the more expensive and time-consuming alternative of defending themselves against such claims. A case filed against Gigi Hadid has proven to be an exception, with the supermodel making fair use claims and arguing that she was a joint author of the image at issue in the “meritless” case, and ultimately, prevailing in light of the defendant’s lack of a copyright registration, which is a prerequisite to filing a copyright infringement claim. 

In addition to characterizing the suit as little more than a potential pay day for the paparazzi photo agency, Hadid’s counsel asserted that “it is an unfortunate reality of Ms. Hadid’s day-to-day life that paparazzi make a living by exploiting her image and selling it for profit,” emphasizing the ongoing argument about the dynamic of protection when it comes to photos under copyright law, namely, that protection can exist in a photo that was taken without a subject’s authorization, and that protection is granted to the “author” of a photo without considering the subject when it comes to awarding rights. 

More recently, Ratajkowski has opted to challenge the copyright infringement lawsuit waged against her, and filed a motion for summary judgment last fall, arguing that the court should side with her in lieu of a full trial. The court sided with Ratajkowski, in part, and plaintiff Robert O’Neil, in part, meaning that the case will largely move forward to trial to determine a number of questions of fact. 

As TFL reported recently, a lawsuit filed against singer Dua Lipa and a separate, newer suit filed against Ratajkowski, both of which in a California federal court in July, kick off the once-again-growing string of clashes between paparazzi and celebrities. The filings of these cases experienced a bit of a lull in 2020 in line with a more generalized drop in the initiation of new lawsuits were generally filed amid the pandemic. 

“Mood Forever”

Not interested in simply settling the lawsuit filed against her for using his photo with authorization, Ratajkowski has taken to challenging O’Neil’s case, submitting in a motion in September 2020 in which she moved for summary judgment on the grounds that: “(1) the photograph is not the subject of a valid copyright, (2) Ratajkowski’s reposting was fair use, (3) O’Neil has not suffered damages, and (4) O’Neil’s cannot show facts establishing Ratajkowski’s involvement.” 

In deciding on the motion in an order dated September 28, Judge Analisa Torres of the U.S. District Court for the Southern District of New York quickly agreed to let Ratajkowski’s corporate entity Emrata Holdings off the hook, agreeing that O’Neil has not demonstrated Emrata Holdings’ liability. While “it is undisputed that Ratajkowski posts on the Instagram account in her personal capacity,” the judge stated that O’Neil “has demonstrated no facts linking Emrata to the copying of the photograph.”

Also dealt with in a relatively straightforward manner: Ratajkowski’s claim that the photo at issue is not the subject of a valid copyright, because it is “insufficiently original,” a finding that would take the infringement claim off the table. Siding with O’Neil, Judge Torres held that courts have previously “found paparazzi photographs original based on their ‘myriad creative choices, including, for example, their lighting, angle, and focus,’” and that not devoid of creative decision making, O’Neil “selected his location, lighting, equipment, and settings [for the photo] based on the location and timing.” Just because other photographers took photographs of “the same subject matter at the same time does not make the photo less original,” the judge stated, denying Ratajkowski’s motion on this front. 

At the same time, the court shot down Ratajkowski’s claim that O’Neil did not establish that he is entitled to statutory damages (he is no longer seeking actual damages) due to the fact that the photo was only posted as a “sample” thumbnail on Splash’s website, which is accessible only to Splash subscribers, and thus, “was not published within the meaning of s. 412.” (No statutory damages are awarded for unpublished works, where the infringement commenced before the effective date of the registration, per s. 412 of the Copyright Act.) Unpersuaded, the court held that publication to Splash’s site meets the publication standard of s. 412, noting that “although Splash’s viewership is limited to its subscribers, that membership is a far cry from the ‘few trusted customers’ deemed too small a viewership for publication.”

The court also stated that O’Neil was “in a position to immediately realize the benefits of the photograph, and in fact, earned income on the photograph between September 13 and 19, 2021.” As such, the court found that he is not barred from recovering statutory damages for the infringement, and denied Ratajkowski’s motion for summary judgment based on lack of damages. 

Ratajkowski Claims Fair Use

With those elements out of the way, Judge Torres spent the bulk of the order dissecting the merits of Ratajkowski’s claim that her posting of the photo amounts to fair use, and thus, she should be shielded from infringement liability. The court looked to the four non-exhaustive fair use factors, of course – (1) the purpose and character of the use; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used; and (4) the effect of the use upon the potential market for or value of the copyrighted work – in furtherance of its ultimate determination that it, well, could not decide, and thus, both parties’ motions for summary judgment on the issue of fair use should be denied. 

From the outset, the court was largely unwilling to decide on the various fair use factors. On the purpose/character of the work, which comes with a number of sub-factors (transformativeness, commerciality, and bad faith), the court stated that reasonable jurors could disagree about whether or to what extent Ratajkowski’s use of the photo is transformative, noting a reasonable observer could conclude that Ratajkowski’s Instagram post “merely showcases Ratajkowski’s clothes, location, and pose at that time – the same purpose, effectively, as the photograph.” On the other hand, the judge held that “it is possible a reasonable observer could also conclude that, given the flowers covering Ratajkowski’s face and body and the text ‘mood forever,’ the Instagram [post] instead conveyed that Ratajkowski’s ‘mood forever’ was her attempt to hide from the encroaching eyes of the paparazzi – a commentary on the photograph.” As such, there is a genuine issue of material fact that needs to be decided by a jury. 

As for the other sub-factors, the court found that Ratajkowski’s use was “slightly commercial,” but that this factor deserves “little weight” given the specific facts here. Among some of the noteworthy elements: the court held that Ratajkowski’s Instagram is, “at least in part, a for-profit enterprise,” as she “has a link to her for-profit store on the Instagram account main feed,” and she estimates that “she has made more than $100,000 from the Instagram stories section of the Instagram account within the last three years, although posting sponsored posts to Instagram Stories is less common than to her main feed.” The balance also tipped the other way to some extent in the commerciality assessment due to the fact that Ratajkowski was not paid to post the photo at issue, “nor was the infringed work displayed directly next to advertisements, or in a section almost exclusively meant for advertisements.” 

The court was not convinced by O’Neil’s claim that Ratajkowski’s use was in bad faith because of “her ‘omission of any credit,’ and her [failure to pay] a license fee despite knowing that celebrities occasionally license photographs from Splash.” Judge Torres stated that while “Ratajkowski rarely credits photographers, there is no evidence that she personally removed copyright attribution from the photograph.” Beyond that, the court stated that “there is no evidence that Ratajowski knew the photograph was copyrighted or who it was copyrighted by,” and held that her mention of “general ‘internet etiquette’ that ‘people will share [her] images and [she] share[s] their images,’ does not demonstrate specific knowledge about the photograph or Instagram stories.” 

Again, the judge held that “there is a genuine issue of material fact as to whether Ratajkowski’s use was transformative, and neither commerciality nor bad faith weigh heavily on the analysis— particularly if the use is deemed transformative.” 

In terms of the second factor, the nature of the copyrighted work, the court determined that this weighs in favor of O’Neil, “but only marginally so” because the photo is “essentially factual in nature” and O’Neil “captured [his] subject in public, as [she] naturally appeared, and [was] not tasked with directing the subject, altering the backdrops, or otherwise doing much to impose creative force on the [photograph] or infuse the [photograph] with [his] own artistic vision.” 

The court looked to the amount and substantiality of use of the photo next, and determined that Ratajkowski took “the vast majority, if not the entirety, of the photograph,” but also – interestingly – considered Ratajkowski’s argument that “by posting the photograph [via the temporary] Instagram Stories, rather than the main account, the use was less substantial.” The court sided with O’Neil on this factor, stating that “because Ratajkowski used a greater portion of the photograph than was necessary for her purpose, this factor weighs slightly in favor of the plaintiff.” However, “the fact that it was posted on Instagram Stories lessens that weight.” 

Finally, on the effect on the market front, which requires a plaintiff to show that “even if the photograph is deemed transformative, a market exists which would be affected if this manner of using the photograph became widespread,” the court did not make a determination for either party, as “there is no information in the record regarding that market” for the court to “rule on this factor at this juncture.”  

With the foregoing in mind, the court granted both parties’ motions in part and denied them in part, letting Emrata Holdings off the hook (and granting its motion for attorney’s fees and costs), denied a handful of the defendants’ affirmative defenses, and ultimately, left the critical issue of fair use up to a jury. 

One Final Question

A question to ponder here: Ratajkowski has not made a right of publicity counterclaim in response to O’Neil suit. Why? It might be because her face is obscured in the photo. It is worth noting that something of a similar issue came up in another recent SDNY decision. In a September 22 order in the Champion v. Moda Operandi case, Judge Colleen McMahon stated that the use of images that show runway models’ bodies – but in which their faces were either “cropped out, shown from the back, or indiscernible because they are part of a crowd of models” make it so that the models “cannot recognized by a viewer of Moda Operandi’s website” – cannot give rise to false endorsement claims under the Lanham Act. In photos in which their faces do not appear, the models “are effectively anonymous,” which is important, as “the misappropriation of a completely anonymous face [cannot] form the basis for a false endorsement claim, because consumers would not infer that an unknown model was ‘endorsing’ a product.”

Moreover, Judge McMahon held that “the very fact that their faces are not identifiable renders the allegation that Moda Operandi intended to trade on the good will associated with their personas totally implausible,” and as a result, dismissed some of the models’ Lanham Act claims against Moda.

The case is O’Neil v. Ratajkowski et al, 1:19-cv-09769 (SDNY). 

The ugly legal battle that erupted between JLM Couture and designer Hayley Paige Gutman late last year over the Hayley Paige brand and its various social media accounts is only heating up, with a New York federal court recently finding 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 (“PI Order”) by promoting the impending launch of a new bridal brand on Instagram and in an Business Insider interview. 

The court’s finding follows from a motion that JLM filed in August, in which it argued that Hayley Paige Gutman violated part of the court’s March order, which explicitly prohibited her – and “any other persons who are in active concert or participation with her” – from “engag[ing] in the design, manufacture, marketing or sale of bridal apparel, accessories and related items, evening wear and related items; and/or any other category of goods designed, manufactured, marketed, licensed or sold by JLM.”  

According to JLM, which owns the Hayley Paige brand and corresponding trademarks, Ms. Gutman violated the terms of the PI Order by actively “engaging in the marketing” of a future bridal brand on Instagram, and should be held in civil contempt by the court and subject to sanctions. Specifically, JLM asserted that on June 7, 2021, “a few days after the court issued its order denying Ms. Gutman’s motions for dissolution and reconsideration of the preliminary injunction, Ms. Gutman posted a video on her Instagram @allthatglittersonthegram account captioned ‘SAVE THE DATE.’” In that video, Gutman asserted, “The judge clarified in her order that I will be allowed to reenter the bridal industry and start designing again under a different brand name in August of 2022 … I have 14 months to plan a gorgeous return to the work I love. And I hope you are as ready as I am.” 

On the heels of posting that video, Gutman published additional Instagram videos of herself “sketching designs of dresses on June 21, July 1, and July 15, 2021.” In doing so, JLM claimed that Gutman “not only violated [the PI Order’s] directive that she refrain from ‘engaging in the marketing’ of ‘goods designed, manufactured, marketed, licensed or sold by JLM,’ but also [the] prohibition on ‘engaging in . . . the design’ of competitive goods,” as JLM offers up sketches to brides as part of the Hayley Paige brand “as accessories for brides to use as part of a memory or scrapbook about a wedding.” 

And still yet, JLM argued that Gutman – who resigned from her role at her JLM-owned eponymous label in December 2020, almost 10 years after signing away her rights to the commercial use of her name to JLM as part of a previously-entered employment agreement – “continued to promote her future bridal collection when she gave an exclusive interview to Business Insider [in June] about her plans for ‘reentering the bridal space [she] was meant to be in,’” and then shared a link to the interview on her Instagram account.

Hayley Paige’s Arguments

Granting the bulk of JLM’s motion, Judge Swain found that Gutman did, in fact, violate the terms of the PI Order by way of her social media posts, including her post that linked to the Business Insider interview. In siding with JLM, the court shot down Gutman’s various arguments to the contrary. Primarily, Judge Swain stated that Gutman’s claim that she did not violate the court order because “[t]here are no ‘competitive goods’ that have been designed or manufactured at this point” was “unavailing,” as such a reading of the PI Order “completely ignores [its] prohibition against the ‘marketing’ of such goods, whether or not they have yet to be manufactured.” 

“Even if Ms. Gutman has not begun the process of creating the dresses that will be a part of her forthcoming collection, she has advertised her future bridal brand in violation of … the PI Order,” per Judge Swain. 

“Ms. Gutman has created and posted videos of sketches of gowns, and dress sketches are competitive goods manufactured and sold by JLM to brides as accessories or memorabilia of their weddings,” Judge Swain stated. She further declared that “Gutman’s assertion that the creation of her drawings does not violate [the order] because her ‘drawings are not for sale,’ nor are they ‘aimed at creating a product line,’ again takes an impermissibly narrow view of [the PI Order], which prohibits engaging in the ‘design, manufacturing, marketing or sale of’ ‘goods designed, manufactured, marketed, licensed or sold by JLM.’” 

Beyond that, the court held that Gutman’s argument that she should not be found in contempt because she “has only made preparations for her future brand, and has not taken sufficient steps to engage in competition with JLM,” is similarly unpersuasive. Although Judge Swain stated that Gutman is correct in arguing that “under applicable New York law, a former employee may prepare to compete during the term of a non-competition provision,” the judge held that such acts “cease to be preparatory where they detrimentally impact the former employer’s economic interests during the term of a non-competition clause.” 

Gutman actions “go far past mere preparatory actions, to the detriment of JLM’s economic interests,” according to the court, particularly since Gutman “publicly announced and promoted her future bridal brand on her Instagram account, a powerful advertising medium on which she has accumulated approximately 197,000 followers, and also through her interview with Business Insider.” 

Finally, and in addition to other arguments unsuccessfully waged by Gutman, the court pushed back against her assertion that the limitations imposed by the PI Order violate her First Amendment rights. “Ms. Gutman has already argued that the court should reconsider the PI Order because it constitutes an improper restraint on her speech in violation of the First Amendment,” Judge Swain stated, noting that the Court already rejected that contention. 

Even if that argument had not been previously dismissed by the court, Judge Swain held that “the court has already found that the ‘relevant provisions of the negotiated contract’ constitute ‘clear and compelling evidence’ that ‘Ms. Gutman voluntarily, knowingly, and intelligently, in exchange for consideration’ waived her rights to use the [Hayley Paige] name for commercial purposes without JLM’s permission,” thereby, doing away with any First Amendment concerns. 

Siding with JLM

Ultimately, the court determined that JLM proven by clear and convincing evidence, on the undisputed facts of record, that Gutman was in civil contempt of the court’s PI Order and that her contempt of the order was willful. As for remedies, Judge Swain stated that the court’s “finding of contempt and order granting equitable relief, coercive sanctions, and an award of JLM’s attorneys’ fees and costs incurred with the prosecution of this motion are sufficient to address Ms. Gutman’s violations of the PI Order and the dual coercive and compensatory purposes of civil contempt.” 

Not a total win for JLM, the judge found that JLM’s request for monetary compensation “based on actual harm to JLM’s business and reputation,” including at least $66,000 in lost sales based on the average price of a JLM Hayley Paige bridal dress multiplied by the 15 comments on Instagram “showing refusal to buy from JLM/waiting for August 2022” was “too speculative in nature” in order to warrant a monetary damages award. 

In terms of the Instagram posts at issue, the court directed Gutman to remove them within five days of the date of the September 8 order, while also reiterating that “Ms. Gutman is also enjoined, effective immediately, from announcing a new brand name in the context of any present or future commercial venture involving any category of goods listed in the PI Order” as long as the order remains in effect. 

In a statement issued on the heels of the court order, a spokesman for Gutman said, “We are disappointed by the court’s ruling. Many elements of the matter are on appeal to the [U.S. Court of Appeals for the] Second Circuit, and we look forward to their consideration this fall.”

The court’s latest decision comes nine months after JLM filed suit against Gutman – who found widespread fame thanks to her recurring role on TLC’s reality show Say Yes to the Dress – in December 2020, accusing Gutman of federal and common law trademark dilution and unfair competition, breach of contract, conversion, and breach of fiduciary duty, among other claims, after she began posting “personal images in addition to bridal images” to the @misshayleypaige 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.” Not only did Gutman “hijack the [@misshayleypaige] account,” JLM has argued that she took “steps to convert it from a JLM company account” – and its 1.1 million followers – “to her own business platform, as if she were an influencer.” 

The court has since characterized the case 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 case is JLM Couture, Inc. v. Gutman, 1:20-cv-10575 (SDNY).

Forget traditional e-commerce shopping for a moment. Social commerce – which sees consumers purchase products and services online through social media platforms like Facebook, WeChat, TikTok, Zalo, and Line – is consistently proving to be the model of the moment and seemingly, of the future, as well, as consumers consistently adopt new ways of shopping, largely led by advances coming from Chinese tech titans. While some super-apps integrate payment and logistics into a single app, others serve as a platform for connecting users and their offerings to buyers by way of third-party services that handle the payment and logistics. Simultaneously, other “s-commerce” platforms have sprung up, further shifting the status quo in the e-commerce space, and focusing on combining social media networks with e-commerce functionality, where Key Opinion Leaders and influencers can promote products. 

No small shift, according to Econsultancy, Magento and Hootsuite’s 2019 “State of Social Commerce in Southeast Asia” report, consumers routinely find social media to be highly influential in their buying decisions. 44 percent of social shoppers said that they had made three or more online purchases in the past month after seeing social media posts or ads. A subsequent study conducted by PWC found that there has been increasingly higher usage of social media platforms among consumers who are looking to make purchases. And due to the pandemic and the resulting social isolation that has come with often-lengthy lockdowns, the adoption of social media for communication and shopping has accelerated even further. 58 percent of consumers increased their social media consumption, per PWC, with 86 percent of those consumers likely to maintain such increased levels of use even after COVID isolation measures have worn off. 

The enduring rise of social media usage and shifting shopping habits has brands clamoring to meet consumers where they are. In Indonesia, for instance, Paypal reported that 80 percent of online merchants sell through social e-commerce. In a report of its own, McKinsey revealed that the social commerce market is at least a $3 billion market in Indonesia, with users increasingly buying products via BlackBerry Messenger, Facebook, Instagram, Line, and WhatsApp. Meanwhile, in the U.S. social commerce sales surged by 38.9 percent in 2020, according to EMarketer, “thanks mainly to the pandemic-driven boom in e-commerce and increased social media consumption.”

Percentage of internet users aged 16-64 that has used each platform in the past month

On a global basis, Grandview Research put the value of the global social commerce market size at $474.76 billion in 2020, with the research firm stating that it expects the market to expand at a compound annual growth rate of 28.4 percent from 2021 to 2028.

More than Media-Sharing

Although many of the aforementioned platforms started as communications or media sharing platforms, most have evolved towards super-apps where users can also buy, sell, and transact within one app. TikTok, for instance, recently launched its marketplace in Indonesia, while Facebook, Instagram, Zalo, and Line have also integrated in-app shopping and transactions. YouTube plans to eventually incorporate e-commerce elements, as global platforms look to copy China’s success in the video marketing and livestream selling space, with leaders including KuaiShou, Taobao Live, Douyin (i.e., TikTok) and others.  

A crucial factor for the staggering success of social media platforms in e-commerce in China – where social commerce sales totaled approximately $186 billion in 2019, nearly ten times the number of sales in the U.S., which reached $19.42 billion – is that they are more multifunctional and have a broader purpose for their users.

Take Pinduoduo as an example. The Shanghai-based platform reached $251.76 billion in e-commerce revenues in 2020 thanks to its harnessing of popular social commerce elements, including social shopping, in furtherance of which users can shop in tandem with – and seek real-time feedback and recommendations from – their friends and family. They also tap into discounts on products by way of the group-buying model. Pinduoduo’s meteoric rise has been helped along by WeChat – the most popular social media platform in China, with upwards of 1.2 billion monthly active users, as it enables users to proactively encourage friends to join their group-shopping team. 

Now consider WeChat. The most popular social media app in China, WeChat has developed an array of new functions in the past ten years, including – but not limited to – WeChat Pay, Mini-programs, Moments Ads, and Short video accounts. The mini-programs can function as standalone e-commerce stores that do not require installation to use. Meanwhile, Moments and Short videos can be used to promote products to WeChat “friends” and the public that follow these accounts. And still yet, payments can be made seamlessly through the WeChat Payment function – and Chinese consumers trust and use WeChat pay for payments on a daily basis, meaning that there are no barriers from payment trust issues like can occur while giving payment information to third parties. Under this ever-evolving WeChat’s ecosystem, the whole social commerce journey is much easier for customers to make orders and interact directly with brands.

Risks & Rewards

As consumers continue to flock to social media for networking, entertainment, and increasingly, shopping, the opportunity for social media as a sales channel cannot be ignored. At the same time, neither can the risk of infringement and counterfeiting, which have saturated social media sites. Like traditional marketing, counterfeiters funnel sales by creating accounts across multiple platforms and attempting to direct consumers to external sites; it is common to see such accounts linking a social media reference landing page to other ecommerce or third-party payment sites. 

Given the sweeping reach of social media, monitoring for such illicit activities on social platforms is a big challenge. Most social media platforms in Southeast Asia do not require identity verifications, and counterfeiters hide behind a cloak of anonymity to create fake accounts. In a recent disclosure before the U.S. House Committee on Energy and Commerce, Facebook, Inc. revealed that it took down 1.3 billion fake accounts over a three-month period this year. 

Counterfeit sellers also aim to avoid detection, and thus, make the fight against them more difficult, by creating private networks of sales and distribution through closed groups, such as those on Facebook. Groups give these counterfeit-selling networks some form of control as they can set it up so that new members are required to answer a series of questions before being accepted. Administrators can also set the group’s visibility to “hidden,” thereby, completely hiding a group from searches by the general public, and instead, recruiting members through targeted messages.  

On a global level, developments in data protection regulation and privacy law have made it more difficult for law enforcement and investigators to collect data on online users. On the other hand, China does require Real Name Identification – although individual identities behind accounts are not made public and the usage of others’ identities is common to get around blocks and bans. 

China-Specific Enforcement Efforts

As China continues to be a leading manufacturer and supplier to overseas markets, including but not limited to Southeast Asia, with its B2C and B2B platforms acting as crucial elements in the distribution chain, an enforcement strategy that does not specifically consider China would be woefully deficient. Against that background, here are four points to keep in mind … 

1. Verified official account

Having an official verified account on the platform lets you fill any void left by successfully enforcing counterfeit sellers immediately. It could also open doors for more brand protection co-operation activities between brand owners and the platform.

2. Mapping and monitoring 

Mapping and monitoring a platform enables rights holders to track and focus their resources on critical infringers while keeping a tab on the general health of the platform. The simplest way to do this is by periodically searching sets of popular keywords and capturing the data manually. Ideally, brands want to capture information relating to the stores such as reviews, sales volumes, discounts rate and related networks. 

To scale up the process, brands can use scrapping tools that crawl the web automatically for data. It is important to note that data scraping can be a gray area, depending on its usage. For instance, however convenient, data scrapers have limitations. Many platforms now have anti-scraping mechanisms – social apps, such as Facebook and Instagram prohibit data mining activities and have anti-bot systems in place. Alibaba is continuously updating its defenses as hundreds of thousands of bots are crawling it every day to obtain valuable data which can be used for marketing insights or infringement detection.  

It is also relatively complex to monitor media streaming platforms such as live auctions on Facebook or a video stream on Tik Tok.  By the time rights holders become aware of such livestream flash sales on such platforms, the damage can already have been done – and evidence that it occurred for the purposes of enforcement can be challenging to obtain.

3. Online enforcement

With a monitoring system in place, brands can then consider enforcement. Most platforms have processes in place for the brand owner to report and enforce on IP infringements. FacebookInstagram, and Twitter have publicly accessible channels where rights holders can report infringing content. WeChat, Line, and Zalo allow users to report infringements through the app. WeChat also has a dedicated Brand Protection Platform where brand owners can register and file complaints (and receive “clues” from users who report others), while Line users are able to report through an online form.

4.  Beyond online enforcement

For platforms without a robust seller verification process in place, infringers can repeatedly create new accounts following any enforcement action. One of the biggest challenges of online enforcement is ensuring that infringers hiding behind the veil of anonymity are taken down permanently. One way to do this is to convert key online targets into offline targets for further investigations and take legal actions. Looking beyond investigations and enforcement, brand owners should also try to engage social media platforms and build up proactive brand protection measures and take joint enforcement actions against counterfeiters. The lawsuit that Facebook and Gucci jointly filed has demonstrated that social media platforms and brand owners are willing to take coordinated actions against counterfeiters.

Ultimately, social media has evolved from being a simple media sharing and communications platform to producing super-apps that rival and/or have overtaken e-commerce sites in some instances. In China, a new draft regulation argues that such social media platforms with e-commerce functions should be held to the same regulations as e-commerce platforms since they provide merchants with order generations and transactional services. In reality, social media platforms functioning as e-commerce often face less scrutiny than traditional e-commerce platforms. Therefore, it is crucial for brand owners to take precautionary and preventive actions.

James Godefroy is a senior consultant at Rouse. Benjamin Li is an IP consultant at Rouse.