“South Korea has very few natural resources,” Kayleen Schaefer wrote for The Cut back in 2015. “The country isn’t stocked with oil, much natural gas, or even many minerals.” And so, the nation’s government has invested in culture to boost its GDP – from its increasingly world-recognized K-pop boy bands to thriving cosmetics market, which as of 2018 was worth an estimated $13.1 billion, more than $1 billion of which was tied to beauty-specific exports from the thousands of K-beauty brands located in South Korea. 

The result of South Korea’s burgeoning beauty landscape can be seen in a large-scale rise in K-beauty brands and demand for the sheet masks, hydrating gels, cloudless creams, brightening serums, and nutrient-rich face masks – which are at the core of the segment’s offerings – not only in the country, itself, but in the west, particularly since the mid-2000s with national retailers like Sephora, Ulta, Target, Nordstrom, CVS, and Amazon all placing significantly emphasis on their K-beauty offerings. 

One such brand that has thrived in the K-beauty space is Amarte. What first started as a skin care initiative in a dermatology clinic in Korea in 1994, Amarte formally got its consumer-facing start in 2011. Within a few years, the company had morphed into an established private label supplier, and landed on the radar of Dr. Craig Kraffert, the board certified dermatologist, who started and was, at the time, still running Dermstore.com, the skin care and beauty e-commerce site that was acquired by Target in 2013 for $150 million. In furtherance of what Kraffert calls “a global partnership to further improve the formulations and customize them for the American luxury skin care market,” Amarte made its western debut. 

The brand is Kraffert’s response to what was missing from the market at the time. “The products have high-tech formulations and focus on multitasking, simultaneously refining, rejuvenating, and reducing the signs of aging in skin,” the Observer reported several years ago. “They also give an exceptional user experience.” 

At the center of those offerings is one particular product: the brand’s retinol-infused HydroLift Cream. With a proprietary blend of retinol, caviar extract, and acacia collagen, Amarte’s HydroLift Cream aims to nourishes skin while reducing fine lines. 

Potentially just as valuable as the formula, itself, is the name and branding associated with the brand’s staple HydroLift Cream, which Amarte claims in a new lawsuit that it “has extensively and continuously used and promoted in connection with its goods … for over a decade,” thereby resulting in “great success.” 

According to the trademark infringement complaint that it filed this week in a California federal court, Amarte alleges that unrelated skincare brand Lavié Labs has taken to using “an identical HYDROLIFT trademark” in connection with the sale of its own products. Not only is this problematic because Lavié Labs is “a direct competitor of Amarte,” and thus, is offering products using the allegedly infringing mark to “the same consumers and in overlapping channels of trade in the U.S,” and has been since 2018, “well after Amarte’s [first] use,” Lavié Labs use of the HydroLift mark is likely to confuse consumers, Amarte argues. 

Lavié Labs is “likely to cause confusion before, during, and after the time of purchase because consumers, prospective consumers, and others viewing [its] infringing goods at the point of sale or in use—due to [its] identical use of the HYDROLIFT trademark in connection with nearly identical skin care products.” More than that, Amarte claims that confusion is likely given that it “the purchasing public has come to associate the HYDROLIFT trademark with Amarte … and its skin care and cosmetic products” as a result of more than a decade of use and promotion of the trademark. 

With that in mind, Amarte claims that Lavié Labs is engaging in “a blatant attempt to trade on the goodwill and commercial success Amarte has built up in the HYDROLIFT Trademark and to free ride on Amarte’s success as a preeminent and well-known manufacturer and developer of skin care and cosmetic products.” 

Setting forth claims of federal and California state law trademark infringement and unfair competition, Amarte is seeking preliminary and permanent injunctive relief to bar Lavié Labs infringement of “any of Amarte’s intellectual property rights in the HYDROLIFT mark,” and monetary damages. 

(Note: Given that the key ingredients in and the marketing surrounding both Amarte and Lavié Labs’ “HydroLift” products do not make any mention of the significance of water in their formulas or in connection with the results, it does not appear as though descriptiveness of the mark will be an issue in connection with the validity of Amarte’s mark (and its skin-firming and potentially ‘lifting’ product) or a defense to infringement for Lavie Labs).

The lawsuit – which focuses exclusively on Lavié Labs’ alleged infringement of the HydroLift trademark and does not accuse it of copying the composition of the Amarte cream, itself – comes are many niche brands and buzzy startups face an influx of competition by way of copycats. 

That can, at times, see competitors ripping off others’ trademark-protected names and elements of their branding and/or product packaging (both of which are also protected by trademark and trade dress law). However, in most cases, the copying goes without legal action because it involves co-opting the type of product (and not all of the ingredients), thereby, enabling the copycat product to remain above-board from a legal perspective. 

In other words, for popular, often millennial-focused brands, including K-beauty ones, copycat products have saturated the market. Far from a novel phenomenon, beauty products meant to look and work like other established products, albeit at a less expensive price point – i.e., dupes – have long co-existed with high-end brands’ offerings. 

While dupes have long-existed in the market, they have become a particularly-popular mainstay of the $89.5 billion beauty and cosmetics industry in the United States, with the likes of K-beauty products and those coming from Kylie Cosmetics, Glossier, Drunk Elephant and other burgeoning up-starts, proving to be particularly attractive targets, as the market for dupes as a whole “becomes increasingly more popular,” according to the Independent, driven, in large part by “overzealous millennial beauty players who care more about getting hold of a similar product than waiting for” – or shelling out on – “the original.” 

With dupes showing no signs of subsiding and instead, only likely to garner more steam in an uncertain financial environment, brands are routinely being advised by their legal teams that when developing new products, they “should consider adopting intellectual property strategies that will improve their ability to establish exclusive rights, which will allow them to enforce their rights against the imitators,” according to Knobbe Martens’ Lesley Kim and Robert Roby. And this is precisely what is at the heart of Amarte’s suit: its “extremely valuable” product name and the goodwill associated with it, which enables the brand to take legal action even when its product has not been copied. 

*The case is Amarte USA Holdings, Inc., v. G.L.E.D Cosmetics US Ltd. d/b/a/ Lavié Labs, 3:20-cv-00768 (S.D. Cal.). 

The latest in budding beauty takeovers is seeing cosmetics giants like Unilever and Puig vying for the Charlotte Tilbury brand. L’Oreal, Estée Lauder Cos., and Japanese beauty company Shiseido have also made presumably sizable bids for Tilbury’s 7-year old company, months after the British-born makeup artist to the stars first reportedly received a $1 billion takeover offer from Estée Lauder Cos. this past summer. According to Bloomberg, the company could ultimately “fetch more than $1.2 billion” in the sale. 

Founded in 2013, Charlotte Tilbury – which is known for its skincare products and matte lipsticks – has found fans in celebrities, consumers, and investors, alike, first raising an undisclosed sum in a 2014 funding round led by the Samos Investments and Venrex Investment Management in 2014, according to the PitchBook platform, followed by a similarly-undisclosed investment from venture capital firm Sequoia Capital in 2017. 

The impending sale “comes at a time when big beauty companies have been on an acquisition spree, as they seek to court younger shoppers with upstart brands,” according to Bloomberg. It follows from Coty Inc.’s headline-making acquisition of a 51 percent stake in reality star-turned-makeup mogul Kylie Jenner’s Kylie Cosmetics for $600 in November, putting a cool $1.2 billion valuation on the 6-year old cosmetics startup. 

That same month, Estée Lauder Cos. boosted its one-third stake in Have & Be Co., the South Korean skincare company that owns Dr. Jart+ cosmetics to assume full ownership, putting Have & Be Co.’s “total enterprise” valuation at approximately $1.7 billion. Also in November, private equity firm Advent International agreed to acquire prestige and professional hair care brand Olaplex, although the financial details of the transaction were not disclosed.

Meanwhile, a month prior, in October 2019, Japanese beauty conglomerate Shiseido acquired Drunk Elephant for $845 million, adding the “clean” skincare brand to its arsenal of brands, which includes Nars, Laura Mercier, and Bare Minerals, among others, in furtherance of its quest to expand its global presence.

Still yet, that summer, consumer goods giant Unilever – which owns Kate Sommerville, Murad, and Dermalogica – acquired California-based, Japan-developed skincare company Tatcha for a reported $500 million, and General Atlantic announced a “partnership and strategic growth investment” in Morphe Holdings. The latter saw the New York-based private equity firm acquire a majority stake in Morphe “alongside existing investor Summit Partners and co-founders Chris and Linda Tawil,” giving the influencer-driven beauty brand a valuation of more than $2.2 billion valuation.

Bloomberg notes that “a successful sale [of the Charlotte Tilbury brand] would show that large consumer companies still have an appetite to acquire independent brands despite the coronavirus pandemic, which has ended a decades-long boom in deals” following a particularly busy year for beauty M&A in 2019. Much of that activity was driven by “strategic acquisitions by larger players aiming to expand their scale and enhance capabilities to meet changing consumer preferences,” according to Ernst & Young, particularly as the industry “has been disrupted by the growth of direct-to-consumer channels such as e-commerce platforms and the use of social media to engage directly with consumers.”

In its January 2020 Personal Care M&A Overview Canada and US Market Insights report, EY further pointed to the “shift in consumer preferences” that the personal care market is experiencing, in much the same way as other consumer product segments. “Innovative start-ups are selling on trend natural, organic, clean and cruelty-free products, predominantly to millennial consumers, who are more informed and seek transparency in ingredients, packaging, sustainability and ethical sourcing,” leaving a lot of room for M&A activity by established names looking to bolster their roster of brands.

However, at least some of that deal-making has been put on hold, according to Reuters, with “German conglomerate Henkel and U.S. buyout fund KKR are holding off bidding for a portfolio of beauty brands that Coty is trying to sell as they fret over the fallout of the coronavirus pandemic.” The sale of the Coty-owned brands, which was expected to fetch about $7 billion earlier this year, has reportedly “hit a snag as hair salons and nail bars remain shut in most countries around the world.”

A new group of diamonds stands out as being more perfect than almost all others in the $14 billion global diamond market. They are “chemically, physically and optically identical to a mined diamond,” according to the BBC. Decades in the making, as the first-ever man-made diamonds were created in a lab in Upstate New York by General Electric in December 1954, the market for lab grown diamonds is increasingly finding favor among a growing number of companies and consumers, the latter of which are warming up to the idea of buying diamonds that have not been extracted from the mountainous expanse of the Republic of Sakha in Russia or from mines in Botswana, many of which are operated by De Beers, and instead, are coming out of labs in Silicon Valley or in Portland, Oregon.

Unsurprisingly, millennials are said to be driving this growing interest, tempted by the marked affordability of these alternatives, and the lack of potential human rights abuses tied to the “cultured” stones, which are “visually identical” to “the real thing.”

It is against this background that the lab-grown diamond industry is expected to growth significantly within the next several years. According to Morgan Stanley, by the end of 2020, the market for lab-grown diamonds could account for 15 percent of the gem-quality diamond market, up from less than 1 percent in 2016. At the same time, Bain & Co. asserted in its 2018 “Global Diamond Industry Report” that “lab-grown diamonds are clearly here to stay,” particularly in light of “generational shifts in consumer preferences.”

From De Beers to the FTC

With such a potential for growth in connection with the popularity of synthetic diamonds at play, even traditional jewelers, such as De Beers – the stalwart diamond purveyor that coined the phrase “A Diamond is Forever” in 1947 – which have been largely been reluctant to be too praiseworthy of this new category of diamonds for obvious reasons, are paying attention.

De Beers – the 133-year old mining-and-trading company that maintained a monopoly over the supply of the world’s mined diamonds until the late 1990s – has made moves in the diamond growing space, making headlines in late 2018 when it announced that it would invest nearly $100 million over four years to build a factory in Georgia that will churn out 500,000 carats of lab-grown gems per year to be sold under its Lightbox brand.

Although, even as De Beers diversifies, it is not changing its primary tune. In fact, CEO Bruce Cleaver expressed some skepticism of the movement as a whole last year, asserting that unlike the prices of its mined diamonds, which remain relatively steady over time, “wholesale prices for lab-grown diamonds have fallen by up to 60 percent since the company began selling synthetic stones for jewelry in September 2019.” He added that “margins for the sector would continue to fall as improved technology increases the quality and volume of lab-grown diamonds,” according to Reuters

The Federal Trade Commission (“FTC”) has been paying attention. In July 2018, the government agency – which is tasked with promoting consumer protection – issued updated Guides for the Jewelry, Precious Metals, and Pewter Industries that aim to prevent the use of deceptive representations by jewelry companies about their offerings, including lab-created diamonds.

In particular, the FTC “cautions marketers against using any gemstone name (e.g., diamond) to describe any man-made product unless an equally conspicuous ‘laboratory-grown,’ ‘laboratory-created,’ ‘[manufacturer name]-created,’ ‘synthetic,’ ‘imitation,’ or ‘simulated’ disclosure immediately precedes the name.” More than that, the FTC notes that marketers should use this terminology “only for products with essentially the same optical, physical, and chemical properties as the named stone.”

Last spring, the FTC confirmed that it had sent letters eight unnamed jewelry marketers “warning them that some of their online advertisements of jewelry made with simulated or laboratory-created diamonds may deceive consumers, in violation of the FTC Act.” The FTC noted in a statement that its letters specifically took issue with “examples where the advertising might imply that a simulated diamond is a lab-created or mined diamond, or that a lab-created diamond is a mined diamond, or where required disclosures about the source of the diamonds are not proximate to the individual product descriptions.”

In taking a stance on the terminology, the FTC is – in some way, at least – seemingly speaking to the potential staying power of the lab grown diamond market.

A Question of Value

As for what the rise of these alternative diamonds means for the likes of De Beers and other traditional purveyors of mined diamonds, not everyone is convinced that the rise of lab grown sparklers will be a deal breaker any time soon. While Bain & Co. notes the acceleration in the burgeoning field, it also asserts that “if the natural diamond industry can differentiate its stones from lab-grown diamonds (perhaps positioning lab-grown diamonds as fashion jewelry rather than luxury items), the effect on natural diamond demand by 2030 will be limited up to 5 percent to 10 percent in value terms.”

“Ultimately,” Bain asserts that “marketing and consumer perception” will be the determining factors when it comes to the effect that lab-grown diamonds have on the natural diamond market,” pointing to three scenarios: one in which “consumers perceive lab-grown and natural diamonds as interchangeable,” another in which they see them “as two different products,” or a third in which they fall “somewhere in between.” The consultancy states that “marketing could uphold the value of natural diamonds, especially if the prices of lab-grown diamonds continue to drop; and it’s probable that consumers will view lab-grown diamonds as fashion jewelry but not luxury goods, limiting the effect on natural diamond demand.”

Meanwhile, as Robert H. Frank, a professor of management at economics at Cornell’s Johnson Graduate School of Management, wrote for the New York Times, “Not even perfect replicas will extinguish strong preferences for mined diamonds.” In the short term, Mr. Frank suspects that nothing will change, including prices.

But beyond that, the lack of rarity in large, perfectly cut and colored diamonds might have an impact. “Longer term,” he says, the price premiums associated with real diamonds “may prove fragile.” Why? Because “wearing large diamonds, for example, will no longer be likely to signal significant wealth or attract admiring glances,” he says. “Tumbling prices will transform many longstanding social customs. An engagement diamond, for instance, will lose its power as a token of commitment once flawless two-carat stones can be had for only $25.”

While “technology won’t eliminate [the] need for suitable gifts and tokens of commitment, of course, and such things will still need to be both intrinsically pleasing and genuinely scary,” what it will change is “where those qualities reside.”

Angela Ma was one of the individuals eagerly crowded outside of the Balenciaga store in Soho, New York in September 2019, hoping to catch a glimpse of Kendall Jenner, who was shopping inside. When Jenner emerged from the Paris-based brand’s Mercer Street outpost, she smiled, gave a quick wave to the group, and strutted several yards down the sidewalk to a waiting car with her garment bag-toting bodyguard. Ma caught the whole glamorous scene on video, and posted it to her Instagram account. 

New York-based Ma was not the only one who posted the video online, though. Two days later, Jenner, herself, posted the very same video to her heavily-followed Instagram account, along with the caption, “bye nyc 🚀”. The problem? According to the lawsuit that Ma filed this week in a federal court in Los Angeles, Jenner “did not have [her] permission or consent to publish the video,” thereby, giving rise to an action for copyright infringement. 

Pointing to the federally registered copyright that she now maintains, for which she filed an application on September 15, 2019 (three days after Jenner posted the video to her Instagram account), Ma alleges in her complaint that the 24-year old reality star-slash-supermodel “did not license the video from [her]” or get her authorization to use the video before posting it online. And now, Ma is seeking legal recourse, arguing that Jenner’s “acts of infringement … were willful, intentional, and purposeful, in disregard of and indifference to [her] rights”  as the copyright holder, including her exclusive right to reproduce and to display the video (regardless of the fact that Jenner is the primary subject of the video because copyright law does not grant rights based on whether an individual appears in a work).

By posting the video to her Instagram, Ma asserts that Jenner is the “direct and proximate cause of the infringement,” and thus, should be forced to pay either the sum of Ma’s “actual damages and [Jenner’s] profits, gains or advantages of any kind attributable to [her] infringement of [Ma’s] video” or … alternatively, statutory damages up to $150,000. 

The fact that Ma filed to register her video with the Copyright Office after the alleged infringement took place should not have an impact on the damages available to her. “For a work that is previously unpublished, a copyright owner can get statutory damages and attorney’s fees so long as she registers the work within 3 months following first publication, even if infringement commences prior to that date,” according to NYU School of Law copyright professor Christopher Sprigman.

With that in mind, if Ma can prove that she suffered economic harm as a result of Jenner posting the video, such as as lost sales, lost licensing revenue, or any other provable financial loss directly attributable to the infringement, she can recoup that; the same holds true if Jenner earned any money as a result of the alleged infringement. Both would likely be difficult to prove here, as chances are, Jenner did not earn anything tangible as a result of the post, and it is unclear what damages Ma, who does not appear to be a professional photographer in the market of licensing photos, could have experienced as a result of the model posting the video.

As such, statutory damages – which are explicitly set out in title 17 of the United States Code as a remedy for copyright infringement, and permit a court to award damages from $750 up to $30,000, per work and increase the amount of damages up to $150,000 if willful infringement is found – are an attractive alternative.

However, should Ma be entitled to statutory damages of $150,000 potentially without being able to prove that she was actually damages by Jenner’s posting of the video? That is “the real problem here,” Sprigman says, reflecting on the availability of such sizable statutory damages awards. “Why on earth should Kendall Jenner owe this woman $150,000? That’s just an attempted shake-down,” or to put it another way, it is “bad behavior by the plaintiff which the statutory damages rule is encouraging.”  

Hardly the only case in which a copyright holder has sought an eye-watering sum in connection with the unauthorized use of his/her imagery by a famous figure (or fashion brand) on social media, this is merely the latest in a lengthy string of very similar lawsuits centering on the use of others’ copyright-protected works.

As these cases continue to fill the dockets of federal courts, primarily in New York and California, prompting celebrities and some courts, alike, to call foul, Sprigman says “the easiest way out of this would be to rule for the plaintiff, and then award as little as possible — minimum statutory damages ($750) if the plaintiff ultimately elects statutory damages, or actual damages, which are bound to be near zero, if the plaintiff elects that.” 

And more than that, the court would need to “refuse to award attorney’s fees, as [it] has discretion to do.” That would “stop these suits in their tracks,” he says, “because they cost a lot to litigate and the plaintiff would be in the red at the end.” 

UPDATED (October 7, 2020): In a new filing, counsel for Kendall Jenner alerted the court that the parties have settled the matter out of court. While the terms of the parties’ agreement is confidential, it likely includes payment in the form of a retroactive license fee paid by Jenner to Ma for her use of the video, which remains on Jenner’s Instagram.

*The case is Angela Ma v. Kendall Jenner, Inc. and Kendall Jenner, 2:20-cv-03011 (C.D.Cal.).

The copyright in F. Scott Fitzgerald’s famed story The Great Gatsby is inching towards extinction. As the Associated Press reported recently, the exclusive rights that protect the 95-year old novel, which prevent the unauthorized reproduction, distribution, display, and creation of derivative works of the original work, are set to expire at the end of 2020. This means that as of January 1, 2021, the work will enter into the public domain and the exclusive rights currently held by the Fitzgerald’s literary estate will be opened up to the general public. 

In short, as the AP puts it, “Anyone will be allowed to publish you the book, adapt it to a movie, make it into an opera or stage a Broadway musical. No longer will need to permission to write a sequel, a prequel, a Jay Gatsby detective novel or a Gatsby narrative populated with Zombies,” noting that “publishers specializing in older works already are preparing their own editions,” while “a graphic novel, featuring an introduction from Blake Hazard” – the late author’s great-granddaughter and a trustee of his literary estate – planned for a release in June 2021. 

First published in 1925 and proving an enduring read for decades, as “Jay Gatsby, Daisy Buchanan and other characters from [the novel] have been as real to millions of readers as people in their own lives, exemplars and victims of the American pursuit of wealth and status,” the AP writes, after initially receiving mixed reviews and selling poorly, the novel ultimately became a literary staple, selling nearly 30 million copies worldwide, and more than 500,000 copies each year in the U.S., alone. 

As for how the rights in book, itself, have remained exclusively within the control of Fitzgerald and then his estate (following his death in 1940), that is a testament the exclusive bundle of rights that copyright law provides for the creators of “original works of authorship fixed in a tangible medium of expression” – whether that be novels and song lyrics or photographs and sculptures. 

While Fitzgerald died 80 years ago, The Great Gatsby is still restricted by copyright for a few more months, as “even though the book was published nearly 90 years ago and is a long-established part of our shared cultural heritage, it has not yet entered the public domain,” the Electronic Frontier Foundation states, due to the statutory framework for the duration of copyright-protected works. (One of the statutes is the 1998 Sonny Bono Copyright Term Extension Act).   

To date, the Fitzgerald estate has been relatively “selective about which Gatsby adaptations to allow,” according to LitHub, while still giving the green-light to  “ballets, radio plays, operas, television movies, stage plays and, of course, big-screen adaptations, from Herbert Brenon’s 1926 silent film to Baz Luhrmann’s 2013 film,” which grossed more than $350 million at the box office. The copyright in the film – and the screenplay written by Luhrmann with his long-time collaborator Craig Pearce – will remain in force for decades to come. 

“As with such current public domain titles as Pride and Prejudice, The Scarlet Letter, and Great Expectations, cheap paperback editions and free e-book editions are likely to proliferate,” the AP asserts. This means that sales – for Gatsby publisher Scribner –“are likely to fall,” but Scribner editor-in-chief Nan Graham says the publisher is “working to hold on to as much of the market as it can, drawing in part on its long ties to Fitzgerald’s heirs.” 

“We’re now looking to a new period and trying to view it with enthusiasm, knowing some exciting things may come.”