Issue 9 – Spring 2013

LAW À LA MODE

Fashion, Retail and Design Group

Retailing landscape in Australia

Industry Insight with Arlene Tansey, Non-Executive

Director of Pacific Brands

One size does not fit all Options for restructuring your business

when expanding overseas

Management within management Employment issues arising out of

concession stores

The pitfalls of a parallel market

Growing up A review of UK Children’s retail

sizing standards

Creativity required Developing a legal strategy to protect

fashion in the United States

High Court reaffirms Importance of confidentiality

3D Printing A designer’s friend or foe?

Business round-up

Creating links in the fashion chain

Calendar

ContentsContentsRetaIlIng landScape 04 in Australia

InduStRy InSIght 06 with Arlene Tansey, Non-Executive Director of Pacific Brands

One SIze dOeS nOt fIt all 08 Options for restructuring your business when expanding overseas

ManageMent wIthIn ManageMent 10 Employment issues arising out of concession stores

the pItfallS Of a paRallel MaRket 12 We look at parallel: Imports in Australia

gROwIng up 13 A review of UK Children’s retail sizing standards

cReatIvIty RequIRed 14 Developing a legal strategy to protect fashion in the United States

hIgh cOuRt ReaffIRMS 16 Importance of confidentiality

3d pRIntIng 16 A designer’s friend or foe?

BuSIneSS ROund-up The news and the views 18

cReatIng lInkS In the faShIOn chaIn DLA Piper joins the IAF 19

calendaR Our round-up of what’s on where you are 20

02 | Law à la Mode

The Australian editorial team is delighted to bring you the ninth edition of Law à la Mode, the quarterly legal magazine produced by DLA Piper’s Fashion, Retail and Design group for distribution to clients and contacts of the firm worldwide.

The Australian retail market has seen dramatic change over recent years. On the fashion front, high street brands based overseas such as Zara and Topshop are flooding to our shores and establishing a competitive presence within a market traditionally occupied by Australian domestic retailers. The last few years have also seen a boom in luxury brand presence within Australia, much to consumers’ delight. In this edition, we examine what these changes mean for local Australian retailers, as well as considering the challenges faced by overseas players when entering the Australian retail marketplace (page 4).

We also share with you some fashion industry insights from one of Australia’s leading company directors, Arlene Tansey of Pacific Brands. Pacific Brands has operations throughout Asia Pacific and in the UK and is famous for marketing many iconic brands such as Berlei, Bonds and Sheridan. We’re sure you will enjoy our Q&A with Arlene, appearing on page 6.

Parallel importation is a hot topic around the world. In Australia, the Australian dollar is strong and online retail is booming when compared with sales in traditional bricks and mortar stores. This has a range of implications for both importers and brand owners, and may require them to adjust existing operational models to maintain a competitive stance and preserve the bottom line. We take an in-depth look at these issues on page 12.

We also discuss the phenomenon of 3D printing and the implications it has for mass manufacturers and retailers the world over, particularly from an intellectual property

perspective. It may sound like arcane science fiction, but 3D printing may actually become a household item fairly quickly, with the cost of 3D printers falling and the necessary software becoming more readily available. Read more on page 16.

Protection of intellectual property and business goodwill is a critical issue for brands and retailers alike. On this front, we examine avenues for protecting fashion designs in the United States (page 14), as well as a recent decision of the UK High Court relating to protection of confidential information by employers (page 16).

This issue also includes a look at the advantages and pitfalls of the most common business structures used for overseas expansion (page 8), employment and workplace issues that may arise when operating a concession store within a department store (page 10) and the results of the UK’s ShapeGB review of children’s retail sizing standards (page 13).

Finally, we conclude our ninth issue with the usual business round-up (page 18) and the calendar of upcoming fashion events (page 20), to ensure you remain fashion-forward no matter where you are.

We hope you enjoy this edition of Law à la Mode. If you have any comments, please get in touch with the Fashion, Retail and Design group via our email address: fashion@dlapiper.com.

Editorial

AusTRALIAn EDITORIAL TEAM

Melinda Upton

Stephanie Surm

Rohan Singh

Alex Chubb

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IN AUSTRALIABy Jane Baddeley (Melbourne)

RETAILING LANDSCAPE

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Another challenge – unique to Australia – is its regulatory framework for retail leases. Since the 1980s, attempts have been made by state governments to redress the perceived imbalance in bargaining power between landlords and small retail tenants. Each state and territory now has its own retail tenancy legislation, which is in the nature of consumer protection legislation, designed to ensure small business owners are informed and equipped to enter into formal leases which are equitable and conducive to the success of their proposed enterprise.

Unfortunately, the fact that the legislation differs across internal Australian states combined with anomalies of drafting, means that protection is distributed inconsistently. For example, a retailer that is either listed in Australia on a public exchange or is a subsidiary of a listed company will not be protected in Victoria, but will be subject to the legislation in NSW. The same quirks apply for an overseas retailer, with bodies corporate whose securities are listed on a World Federation of Exchanges stock exchange outside Australia, and their subsidiaries, being excluded in Victoria, but not in NSW. There have been recommendations for uniform national retail tenancy legislation around Australia. It would appear that achieving this is some way off, with state and territory governments continuing to turn their attention to other issues.

Where the legislation does apply, it prescribes landlord disclosure before the lease is entered into, minimum lease terms of five years, compensation to tenants for disturbance and redevelopments, rent review, operating expense and sinking fund limitations, use of tenant’s sales information, procedures for landlord consent to assignments of lease, relocation requirements and dispute resolution processes. It is important to realise that this regime is more than just a code of conduct and, for the most part, it is not possible to contract out.

The regulatory overlay can make negotiating retail leases somewhat complex in Australia because of the need to understand how the statutes interact with and affect the common law rights and obligations, both in contract and tort, which govern commercial leases generally. It also can be more expensive for both landlords and tenants because of the need for state specific lease documentation and lease advice. On top of that and quite apart from the retail leases legislation, each state and territory in Australia has differing land title regimes, meaning sometimes leases are registered and sometimes they are not.

OvERvIEW OF THE CHAnGInG AusTRALIAn RETAIL LAnDsCAPE

Until relatively recently, the Australian retail market was occupied in the main by domestic retailers. Many such retailers are long standing and are considered national icons, but gone now are the days when those local retailers were the sole drawcard to our major shopping centres. Now customers are flocking to the new players – overseas brands like Zara and Topshop, who have recognised that the time has come to tap into the Australian market.

THE WInDs OF CHAnGE

In the last few years we have observed two main changes to the Australian retail landscape. First, we are seeing an explosion of luxury brand presence: no longer just the domain of flagship CBD or casino sites, luxury brands are setting up shop in dedicated high end precincts in our suburban shopping centres. Second, we are seeing the arrival of numerous overseas high street brands, particularly in the fast fashion and general apparel sectors.

Australians have long been familiar with both of these sets of brands, having been introduced to them in the course of overseas travel and more recently as a result of online shopping sites extending delivery services to this part of the world. But now these international retailers are more formally entering our market, with their own bricks and mortar stores, and bringing their experience and competitive pricing achieved through economies of scale.

We cannot yet know the longer term effect on our local retailers. Are these overseas retailers taking the consumer dollar at the expense of home-grown traders or are they injecting much needed renewal and confidence into a market that is at the mercy of economic fluctuations?

Vacancy rates in major Australian shopping centres are at the lowest levels in years and owners continue to have a healthy appetite for renewal and redevelopment of those centres. Development of brand-new centres has slowed in recent years due to the economic climate, but we are seeing a revival of CBD retailing with Westfield Sydney and the soon to be completed Melbourne Emporium.

CHALLEnGEs FACED WHEn EnTERInG THE AusTRALIAn RETAIL MARkETPLACE

Australia is an obvious market for US, UK and European brands. There are few of the language or cultural barriers that are faced in entering other markets. But supply chain and reverse season issues are challenging, and several companies have faced difficulties with local distribution and licensing relationships.

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arlene, can you please tell us a little about your role at pacific Brands and your career highlights so far?

At Pacific Brands, I am one of five non-executive directors and a member of the Remuneration Committee. I met the former Chair and Managing Director of the company through business when I was still working full time as a banker. The highlight of my Pacific Brands career was to be invited to join the board after working through some challenging times with the company.

what do you see as the main challenges for the fashion industry in the next five years?

The fashion industry has changed dramatically and it is the rate of change and the required speed of the response that I believe will continue to be the greatest challenge for the industry.

Customers still love quality brands that reflect their lives and aspirations like Bonds and Sheridan.

Before pacific Brands, your experience was more in the banking and financial services sector. what has been the most important thing that you learnt from the fashion industry?

I come from institutional banking and the fashion industry has a more personal connection with the community. Like retail banking, it is more about how we live with our product. We run in our Berlei bra, we relax in our Bonds hoodie, we feel luxurious in our Sheridan sheets. It’s all personal.

In your experience, what is the most significant change the fashion industry has experienced?

The most significant change the fashion industry has experienced in Australia is the ability to compare the best with the rest on a global basis and the access to purchase globally.

where do you see the retail sector going, and how will this impact on the fashion industry?

I think there are some positive signs coming through in the economic cycle that will flow through to increased discretionary spending. Having said that, I think consumers have become more value conscious and that change is here to stay. This is great news for Pacific Brands because we deliver design, innovation and quality – the key ingredients our customers want.

INDUSTRY

INSIGHTwith arlene tansey, non-executive director of pacific Brands

for this edition, we caught up with one of australia’s leading company directors, arlene tansey. from growing up in new york as the daughter of two doctors (one of whom became an entrepreneur whose business manufactured aircraft parts), to her current role as a director of one of australia’s iconic brand manufacturers, pacific Brands, arlene’s journey is a fascinating one.

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how is australia performing compared to the rest of the world in terms of the fashion industry?

Australia is a leader in innovation and design. For example, Pacific Brands, particularly in some of our fabrics for workwear and technology in bras, have delivered year on year improvements. Serena Williams – who could certainly wear any sports bra in the world, chooses our Berlei bra.

the under-representation of women in senior board roles is well documented. do you think that quotas might be a good way of redressing the balance?

Quotas are a charged issue in Australia today. I think they are not well understood. Sheryl Sandberg in her new book quotes a US statistic

of women moving from 14 percent to 17 percent of board directors in ten years. I believe the statistics in Australia are similar. I also believe quotas can be an effective means to correct persistent under-participation. The key is in the implementation. The main objection is that unqualified women will be appointed to fill quotas – if properly implemented, I don’t believe that would be the case.

On growing up in new york: New York is a city of boundless energy and optimism. I love living in Sydney but always love being in New York.

On your first trips overseas: I spent a lot of time in Paris growing up and I have family there. Another great city, particularly for fashion. I love the French sense of style.

On having children: I have two teenage daughters and they give me lots of tips on how to be a better parent! Actually, as they grow up they’re becoming great friends and fashion co-conspirators. They’re great fun to shop with.

first impression of australia: I came to Australia in 1994. I was an investment banker at the time. My first impressions were how beautiful Sydney was, how much lower the density was and how few female executives I met when I went to work.

favourite pacific Brand: Very hard. It’s Bonds…no, Sheridan…no, Berlei…. I’m afraid I can’t choose!

pacific Brands has come a long way from manufacturing dunlop bicycle tyres in 1893. today, pacific Brands is famous for marketing iconic everyday brands its consumers love including Berlei, Bonds, clarks, dunlop, everlast, grosby, hard yakka, holeproof, hush puppies, king gee, Mooks, Mossimo, Razzamatazz, Sheridan, Slazenger, tontine, and volley.

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OnE sIzE DOEs nOT FIT ALLOptions for structuring your business when expanding overseas

the retail press has in recent times been full of articles about uk-based businesses expanding overseas. expansion overseas can offer businesses a chance to compensate for the current difficult conditions experienced on British high streets. It can also provide access to untapped markets, such as the rapidly growing asian, BRIc and Middle eastern markets, and exposure to a more favourable business climate or simply an opportunity to increase brand exposure and test new business propositions.

Implementing the right operating model can be critical when expanding into new overseas markets. This article sets out, in high-level terms, the principal structures underpinning the most common operating models and highlights some potential advantages, as well as pitfalls.

COnCEssIOn AnD DIsTRIBuTIOn ARRAnGEMEnTs

Using a local distributor is one of the simplest ways to expand into new markets. Distribution can take the form of a concession arrangement (typically, a business operated under a contract or licence within someone else’s premises) or a wholesale model.

Distribution is a relatively cheap and low risk way of testing a new market and raising a retailer’s profile in a new location. Flagship department stores overseas may be seeking brands new to their market and may be attracted by product ranges not previously seen by shoppers in their country or location.

FRAnCHIsInG

Franchising has been used as part of an international growth strategy by numerous companies including Marks & Spencer, Burberry and Zara. A franchise involves the grant of a right to use a product, trademark or logo held by the franchisor in return for the payment by the franchisee to the franchisor of a fee.

The franchise model is fairly common; it represents a relatively easy and low-cost means of launching in a new market. Sometimes it is employed out of necessity since in some markets (such as the Middle East) other structures are not available to foreign-owned businesses.

As with concessions, lack of control can be a disincentive to some franchisees. Progress is also heavily influenced by the identity and behaviour of the franchisor, for whom preserving brand reputation can be paramount.

By polly Owen (london and hong kong) and James hickling (london)

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JOInT vEnTuRE

A joint venture – or JV – involves each partner bringing certain assets and/or expertise to the venture. As with franchising, the JV model is often used in countries where foreign entities are not allowed to own businesses outright.

A JV offers a higher level of control than franchising, involves a relationship with a single local partner and provides access to the JV partner’s knowledge of their country and the ability to share cost and risk.

Practical disadvantages for a brand owner may include relinquishing some control and flexibility (both financially and operationally) to the JV partner, tensions arising from the legal JV agreement governing the relationship between the venturers – for example around consent or control rights – and a clash of corporate and national culture.

ORGAnIC GROWTH

Building an own-store retail portfolio afresh may be an option for some retailers. Launching a new brand and acquiring or building a real estate portfolio is, however, an expensive and high risk way to enter a new market.

While organic growth is an option which offers tight operational, brand and financial control for a retailer, the cost may prove prohibitive when weighed up against the benefits.

MERGERs AnD ACquIsITIOns

Building a retail operation overseas organically may present too many obstacles for some. Establishing a presence by merging with – or acquiring – a local retail chain may therefore be an attractive option. An example is the acquisition by Louis Vuitton Moet Hennessy of Sacks, Brazil’s leading beauty retailer.

Advantages include the retailer having full control of the undertaking from the outset, as well as giving immediate presence, market share and impact in the new territory. The acquisition process itself can, however, be an expensive and time-consuming way to move into a new market and subsequent ownership can be high risk and can continue to be costly.

OnLInE ExPAnsIOn

This is a relatively low cost way of accessing a new market and testing local appetite for a brand. Retailers will need to invest time and money in ensuring that they are compliant with all local laws and regulations for the territory into which they are selling, that their website is translated into the local language, that the currency options open to customers are flexible and that their distribution infrastructure can support sales made.

OTHER COnsIDERATIOns

Numerous other matters need to be considered on a case-by-case basis, including local employment and real estate laws, brand protection, insurance and tax. The range of different operating models mean an appropriate solution should be available for all those retailers wishing to take the next step in the evolution of their business by expanding overseas.

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eMplOyMent ISSueS aRISIng Out Of cOnceSSIOnS StOReSBy katie Sweatman (Melbourne)

MAnAGEMEnT

MAnAGInG THE EMPLOyMEnT RELATIOnsHIP

In most cases, the concession holder will hire its own staff to operate the concession store, whether this is an internal business decision or a requirement imposed by the department store under the concession agreement.

notwithstanding that staff are direct employees of the retailer, there remains a strong element of control and influence exercised by a department store over the presence of employees of the retailer, which will affect the ability of the retailer to effectively manage employment relations. this may go so far as a department store requiring that final approval be provided by it to any person being employed within its premises.

this control over who is employed by the retailer, including where the department store requires staff of a particular look can create issues around direct or indirect discrimination. In australia, protected attributes around which an employee or prospective employee may not be discriminated include (but are by no means limited to) gender, age, race, pregnancy and, in a number of states, physical appearance.

while a directive that a prospective or current employee does not fit a desired look may come from a department store, any final decision not to employ a particular employee

will rest with the retailer employer, and any proven allegation of discrimination will render the retailer employer liable in respect of that discrimination.

In the day-to-day management of staff employed in a concession store, the department store will generally require that concessions store staff comply with policies and procedures of the department store. It is important that the retailers’ own policies and procedures with which staff are expected to comply are not inconsistent with the policies and procedures of the department store.

where inconsistent requirements operate under competing policy and procedure documents, the retailer risks a situation whereby a particular policy or procedure may not be able to be relied upon in circumstances where non-compliance raises disciplinary matters.

MAInTAInInG A sAFE WORkInG EnvIROnMEnT

as the employer of staff engaged in a concession store, the retailer has responsibility under workplace health and safety legislation to eliminate risks to the health and safety of concessions store staff, so far as is reasonably practicable, or if it is not reasonably practicable to eliminate risks to health and safety, to minimise those risks so far as is reasonably practicable.

the operation of a concessions store within a department store can often be an attractive alternative to opening a stand-alone retail store for market entrants or retailers seeking to promote their brand in an established retail location.

however, operating what is effectively a “store within a store” can create some interesting challenges around the management of staff, where the retailer as concession holder does not maintain full control over the environment in which staff work and the way in which staff perform their work.

WITHIn MAnAGEMEnT

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In a small working area within a broader department store, it is important to ensure that concessions staff have proper access to first aid facilities and other safety devices.

the concessions store retailer is not, however, alone in this responsibility. the department store itself will retain also a particular obligation to eliminate any risks to the health and safety of all workers within its store, including the staff of concessions holders that are not their own employees.

department stores will generally have established policies and procedures around the safe performance of work as well as procedures around consultation to ensure the ongoing identification and management of health and safety risks and hazards.

australian workplace health and safety legislation varies from state to state, but is gradually becoming harmonised under uniform adopted legislation. Small, but important differences between each state do make it important for advice to be obtained in the particular state in which a concessions store is to be established to ensure full compliance with risk management and consultation obligations.

WHEn THInGs GO AWRy

under its concession agreements, a department store will generally reserve the right to assert that a particular person is not welcome to work in its premises.

under australia’s primary workplace relations legislation, the Fair Work Act 2009 , many employees are eligible to apply to the fair work commission for a remedy if a dismissal is unfair, that is, a dismissal that is harsh, unjust or unreasonable. employees will be eligible to make an unfair dismissal claim after completing a minimum employment period of six months (12 months for a business with less than 15 employees), if they earn up to a prescribed salary threshold (currently au$123,300, indexed annually) or if they are covered by a workplace agreement or tribunal made order setting minimum conditions (known as an award).

these considerations become particularly relevant in a case in which an employee is excluded or otherwise banned from a particular department store following allegations of misconduct. while a department store will generally be empowered to exclude an employee at its discretion, the retailer employer must undertake its own investigations, provide the employee with a full opportunity to respond and consider whether termination of employment is appropriate before proceeding to do so on the basis of allegations presented by the department store alone.

MAInTAInInG A GREAT RELATIOnsHIP

the operation of a concessions store is a great opportunity for a retailer and the department store granting the concession to leverage off each other for the mutual benefit of each business.

Maintaining a strong working relationship with the department store and working closely for the seamless integration of concessions store staff with the staff and environs of the department store provides the best opportunity for a smooth and long standing working relationship.

In determining whether a dismissal is harsh, unjust or unreasonable, the fair work commission will have regard to factors including, but not limited to:

■ whether the employer can evidence that there was a valid reason for the dismissal related to the employee’s capacity or conduct

■ whether the person was given an opportunity to respond to the reason for dismissal and

■ the size of the employer, that is, whether the employer should have sufficient human resource capabilities to follow a thorough process based around procedural fairness.

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THE PITFALLs OF A PARALLEL MARkETBy Melinda upton and Jessie Buchan (Sydney)

importance of ensuring that well-considered intellectual property protection and licensing strategies are in place so as to maintain the status quo and preserve existing supply channels.

kEEP yOuR EyEs OPEn

One of the most frequently cited arguments against parallel imports is that they raise serious concerns about quality assurance and product safety. In addition, customs compliance, uncertainty in supply, defect and warranty issues and consumer protection concerns have all been raised as potential risks of parallel importing from a consumer quality perspective.

questions for importers to keep in mind include:

■ where have the product’s materials been sourced from?

■ under what conditions have the products been stored?

■ have the products been tested and if so, under what conditions?

■ have the products been manufactured for your country?

■ do the products contain ingredients which breach laws in your country?

■ how will the consumers obtain spare products/replacements of the products?

■ do the products come with guaranteed warranties and if so, who is responsible for honouring them?

the risks raised by the answers to these questions are even more heightened for the genuine brand owners themselves. for companies who have invested a significant amount of expertise and money in research and development of their products and brands, and take their commitment to deliver the highest quality products very seriously, parallel imports can have a profound effect on brand integrity and corporate reputation.

IT PAys TO CHECk yOuR TARGET

a recent and on-going case in australia between one of the world’s most iconic cosmetic brands, estée lauder, and one of australia’s largest retailers, target australia, serves as a timely reminder of the importance of having good professional relationships with suppliers and manufacturers, and proves that businesses should tread carefully when it comes to parallel importing. while alternative supply channels may be more cost effective in the short term, importers should be wary of the complex compliance issues associated with parallel importing and the potential risks involved.

the practice of parallel importing is a hot topic in australia at the moment, particularly given the tough economic environment for traditional bricks and mortar retailers and the strong australian dollar. price is an important factor for many australians, and the effect of the strong australian dollar is two-fold: consumers are enjoying access to cheaper prices for a wider range of goods online, prompting a downturn in traditional sales; and the strong dollar has made purchasing from overseas markets more attractive prompting many retailers to source supplies from outside of the official distribution channels.

although the parallel importation and sale of goods in australia is a legal practice (mostly), it gives rise to a whole host of issues for both importers and brand owners to consider. for brand owners, this has required an adjustment to their overall commercial policies in order for them to maintain a competitive stance in the marketplace and to preserve their existing supply chain arrangements. for importers, the high australian dollar, local distribution and retailing overheads has created more price pressure and less incentive to maintain the existing status quo. this tension prompts consideration from both brand owners and importers alike.

knOW yOuR LIMITs AnD REMEMBER – COnsEnT Is kEy

parallel importation of goods into australia is not a practice which should concern australian brand owners alone. for international companies who enter into exclusive distribution agreements with australian companies, or establish subsidiary companies in australia, parallel importation is a live issue which has real potential to affect the bottom line, particularly in the form of licensing revenue.

In recent years, intellectual property holders in australia have sought to rely on either trademark or copyright infringement as a method of preventing the importation of parallel goods, with a majority of cases being decided in favour of the importer. however, a recent string of cases in the federal court of australia have created uncertainty for importers over whether or not products can be parallel imported risk free.

for importers, these recent decisions place the onus squarely on them to ensure that they make the necessary inquiries about the conditions of supply and consent prior to importation. for brand owners, these decisions reinforce the merits in having strong contractual terms regarding manufacturer and licence agreements, and highlight the

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GROWInG uP A review of UK children’s retail sizing standards

On 28 February 2013, Shape GB published the results of the first comprehensive measurement survey carried out on children, which aims to update the publicly available British Standards Institution (BSI) standard based on 1978 data, and the 1990 children’s retail sizing (private) standards of Marks & Spencer.

Who – Shape GB is a collaborative project between six major UK retailers – Tesco, Marks & Spencer, Next, Monsoon, Shop Direct and George at Asda, jointly accounting for 48 percent of the UK children’s wear market – five UK universities, and specialists in retail sizing surveys and 3D scanning (Alvanon and Select Research).

Ed Gribbin, president of fit solutions specialist Alvanon, expressed the advantages of the Shape GB study as follows: “Everyone will benefit. Manufacturers will have a single common standard for gauging fit, improving speed and accuracy in the quality control process and ultimately saving money. Retailers will have fewer returns due to fit, while consumers will find that children’s sizing is more accurate and consistent regardless of where they shop.”

The Shape GB report (phase 1), as released on 28 February 2013, is available to any interested brand, retailer or manufacturer and can be downloaded – upon payment –from www.shapegb.org.

What – A two phase process: First the measurement of 2,500 boys and girls aged 4-17 throughout the UK over two years using 3D body imaging scanners. Second, analyzing the measurements of the target group of new-borns to four year olds – results of which are expected to be published by Shape GB in Autumn 2013.

Where – Because the Shape GB study focused on UK children only and was initiated by UK retailers and universities, it remains to be seen whether this excellent initiative will result in similar (harmonized) measurement projects within continental Europe.

Why – As the last standards for children’s wear measurements were based on data from 1978 and 1990, the participating UK retailers agreed there was a pressing need to update the existing standards, and to ensure that these new common standards accurately reflect body shapes of children nowadays.

One of the findings of the study carried out by Shape GB is that while children have only slightly grown in height since the study carried out by Marks & Spencer in 1990, they have grown significantly larger in girth. The average 11-year-old boy, for instance, now has a chest measurement of 78.5 cm (10 cm wider than captured by the 1990 study), with a waist of 70 cm (8.5 cm wider) and hip measurements of 80.2 cm (7 cm wider); the average height of an 11 year old boy has gone up by just 3.6 cm since 1990. Similar evolutions in measurement were found for 11-year-old girls during the study.

Another interesting finding is that there is less variation within sizes when children are grouped by height rather than by age: it is more likely that a 104 cm tall child will have a waist of X cm, rather than a 10 year old being 104 cm.

By Julie Brunn and Jean-louis kerrels (Brussels)

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develOpIng a legal StRategy tO pROtect faShIOn In the unIted StateS

CREATIvITy REquIREDBy: ann k. ford (washington, dc), paul a. taufer (philadelphia), Michael Burns Iv (philadelphia) and James Stewart (washington, dc)

PATEnTs

Patents, an often overlooked area of protection for fashion, grant US designers the limited right to exclude others in the marketplace from making, using, offering for sale, or selling the invention or design. By specifically employing utility patents and design patents, designers can create new revenue streams through licensing, sale or enforcement of the patent.

Utility patents, the most common type of patent in the United States, offer the strongest form of protection for functional features of clothing or manufacturing processes. Designers holding utility patents are able to prevent competitors from replicating their patented product and entering the market. For example, Levi Strauss uses its utility patented rivets to secure pocket openings on Levi Strauss clothing. Competitors could not use this method for a period of time to create pocket opening on clothes unless their competitor licensed the technology

fashion designers in the united States have struggled to develop legal strategies that adequately protect their work while still recognizing that fashion is an evolutionary art that draws on what has come before it. as such, fashion does not fall squarely under the complete protection of any of the three statutory uS intellectual property schemes: patents, trademarks, and copyrights. consequently legal strategies for protection must balance creative combinations of these laws, with business goals, and, of course, budgets.

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from Levi Strauss. While utility patents are a powerful tool, the expense and three year period of time to obtain them can be prohibitive. In light of the market’s demand for seasonal changes, securing a timely utility patent is a challenging form of protection because few designers enjoy the market success to justify the investment in a utility patent.

Design patents – a less costly and quicker alternative to utility patents – provide protection for novel, ornamental product designs. The key here is that the design is in fact, novel. While design patents usually issue in about one year, they offer more narrow protection. Designers are limited to the drawing of the product or feature as it appears in the patent application. A familiar example of a design patent for footwear is the shoes produced by Crocs, Inc. Although a design patent offers more limited protection than a utility patent, designers find the more economical costs associated with securing it very appealing. And design patents can be a potent method for retaining rights in unique designs.

TRADEMARks

Designers create their commercial identities through trademarks. Trademarks allow designers to distinguish their goods in the marketplace and communicate unique and distinctive value to the consumer. Therefore, the fashion designer’s most valuable asset is the trademark, name, or logo which imbues designs with the power of their brand. Nevertheless, trademarks offer limited protection. A trademark application must be tied to specific goods or services. Consequently, if a designer procures a US trademark registration for shirts, the trademark protection does not automatically extend to other goods (unless of course the registration also covers other goods or one makes the argument that the mark carries over to

all apparel). Therefore, it is key to work with a legal advisor when planning a trademark strategy.

Designers are increasingly adopting as trademarks non-traditional elements repeated throughout their collections. Consumers recognize and associate these repeated elements with a particular designer. Through consistent use as a source identifier and consumer recognition of the same, designers may be able to protect this element as a trademark through federal registration. For example, women’s high heel shoes with red soles bring to mind the designer Christian Louboutin. A designer may adopt a colour as a trademark so long as the designer can show that the colour is recognized by the public as a source identifier for the designer’s goods. A designer will not be given an exclusive right to a colour or element if it has a functional aspect (such as, the slimming function of black). For example, a trademark owned by a single designer in the colour black for use in connection with dresses would unfairly prevent other designers from making use of the colour black and its “slimming” function.

Another challenge for designers seeking federal registration of a non-traditional trademark is that it may be deemed ineligible because the proposed mark is merely ornamental or decorative. Designers, who attempt to feature a large or atypically placed design, logo, or other element on a product, often find their applications rejected on the ornamental, decorative basis. The difficulty for designers arises because a bright line between trademark and ornamental does not really exist. In determining whether the element can function as a trademark, much weight will be given to the size, location and dominance of the proposed trademark as it appears on the goods. Consequently, smaller traditionally placed trademarks (e.g., a small logo on the left breast of a collared shirt) have more readily been granted registration as consumers have come to expect and recognizes trademarks in those places.

Nevertheless, recent case suggests that larger logos can be protected when placed in a non-traditional location so long as the public identifies that logo as emanating from the designer.

COPyRIGHT

Designers’ inspirations for their creative works (designs) derive from a myriad of sources including daily life observations and the work of other designers from the past and present. Designers seeking copyright protection must therefore avoid infringing on another party’s rights in a similar design.

US copyright law allows designers to seek copyright protection for jewellery, fabric designs or patterns. Much litigation swirls around the protection of fabric designs and patterns, this is a potent area of protection in the fashion industry. Copyright protection does not extend to “useful articles”1 such as clothing. If the purportedly useful article design incorporates graphic or sculptural features that can exist independently of the utilitarian aspects of the article (clothing), then the designer may be able to obtain copyright protection.

DEvELOPInG An EFFECTIvE LEGAL sTRATEGy

Developing an effective legal strategy to protect a fashion line in the US (and, indeed, anywhere in the world) requires an investment of time, money and creativity. Patent, trademark and copyright provide varying degrees of protection that each has its own costs and limitations. Nevertheless, developing and implementing a successful strategy can generate new revenue streams for designers and keep the designer’s vision unique and distinctive in the marketplace. Working with an experienced fashion lawyer allows a designer to develop a comprehensive strategy that properly balances the protection offered by each of these legal tools with the market reality.

1 Defined in the Copyright Act 1976 (United States) as “an article having an intrinsic utilitarian function that is not merely to portray the appearance of the article or to convey information.”

www.dlapiper.com | 15

A DEsIGnER’s FRIEnD OR FOE?

3D PRInTInG

By Rebecca kay (london), Rohan Singh (Sydney) and dominic Mckean (liverpool)

In March 2013, burlesque star Dita Von Teese grabbed the headlines yet again, but this time for modelling the world’s first fully articulated dress produced with a 3D printer. While the concept might sound like the stuff of fantasy, the 3D printing age is closer than one might think and has profound implications for retailers.

WHAT Is 3D PRInTInG?3D printing (also known as additive technology) is the manufacture of three-dimensional objects from a computer file (CAD) using a specialised printer. Watching footage of the process brings to mind the gadgetry of science fiction (YouTube has many examples), hence most people are surprised to learn that the invention has in fact been around since the 1970s. The main reason for its apparent obscurity is that, until recently, the costs of 3D printers and the underlying software far transcended the reach of most of businesses, let alone the average consumer. However, now prices are dropping rapidly, the number of brands investigating the potential of 3D printing is on the increase.

EnGLIsH HIGH COuRT REAFFIRMs

IMPORTAnCE OF COnFIDEnTIALITy premier Model Management v. Bruce [2012] ewhc 3509(qB)

By vinita arora and Stacey holloway (london)

In our last article “using a haute couture approach to protecting business secrets,” we explored methods that companies use to protect their confidential information. the issue has recently come to a head in the case of Premier Model Management Ltd v Bruce [2012] ewhc 3509(qB).

In this case, Mr Bruce was a senior model booker for premier. during the course of his employment, he was prevented from competing with premier and from poaching staff and models. he was also subject to 12-month non-poaching covenants post-termination. lastly, Mr Bruce was bound by the common law duty of confidentiality which applies to all employees both during employment and indefinitely post-termination.

after handing in his notice, Mr Bruce took sick leave for the majority of his notice period. In that time, he set up a rival agency with his partner and began sending confidential information to his personal email address, including details of models, work opportunities and terms of business. as a result, premier summarily dismissed Mr Bruce and sued him in the high court for breach of contract. they also sued his partner and their new company for inducing the breaches.

the high court held that by sending confidential business information to his partner, Mr Bruce was clearly in breach of his duty of confidentiality. they also held that he was in breach of his obligation not to compete with premier during employment, as his rival agency was incorporated some six months before his employment ended. the court held that Mr Bruce’s partner and company were both liable in tort for inducing these breaches.

this case demonstrates a robust approach and a willingness by the courts to safeguard these critical business issues. however, on a practical point, premier was lucky that Mr Bruce had been careless, as it had a wealth of evidence to support its claim. the penalties imposed by the court on this occasion are draconian, so in the absence of significant evidence, judges tend to be cautious about finding that an employee has engaged in unlawful behaviour. generally, employees who choose this path tend to be more careful and covert about their activities. as such, finding evidence to support a claim for breach of covenants is notoriously difficult and can be expensive if forensic It experts have to be brought in.

premier’s claim was also bolstered by the fact that Mr Bruce had been competing while still employed by premier. as such, his obligations towards his employer were beyond dispute. the court did find that the 12-month non-poach covenants were valid and enforceable in this case (because that duration reflects the usual length of contracts in the industry), however covenants must always be carefully tailored for each business to ensure enforceability. undoubtedly, competitive behaviour post-termination will be harder to police and claims for breach will be more difficult.

16 | Law à la Mode

A DEsIGnER’s FRIEnD OR FOE?

3D PRInTInG

By Rebecca kay (london), Rohan Singh (Sydney) and dominic Mckean (liverpool)

FRIEnD OR FOE?Creative genius or space-age nightmare, 3D printing is an innovation which is unlikely to disappear soon. Retailers are therefore advised to add 3D printing to the ever-increasing watch list of IP exposures, to ensure they stay ahead of the infringers’ game. At the same time, the concept offers a brave new world for creative business who capitalize on the opportunity to produce highly complex and customized designs.

EMBRACInG CHAnGEThe Von Teese dress was the creation of designer Michael Schmidt, architect Francis Bitonti and printing firm Shapeways. While this particular design was customised to the model and made for purely promotional purposes (not least because it was embellished with over 13,000 Swarovski crystals), retailers have already started using 3D printing for more commercial projects. At Paris Fashion Week this January, Dutch designer Barend van Herpen’s eleven-piece collection featured two 3D printed ensembles, including a form-fitting dress. Meanwhile, in February 2013 Nike Inc unveiled its Nike Vapor Laser Talon, a shoe incorporating a 3D printed plate enabling it to be contoured to the particular player and increase efficiency. Even young designers are getting on the bandwagon, with 3D printers being installed at fashion schools such as the London College of Fashion.

THE RIsksWith the price of 3D printers now falling (one brand of domestic 3D printer in Australia currently retails for around AU$1,800), an obvious commercial risk for mass manufacturers is that they are cut out of the supply chain. While consumers do need appropriate CAD files in order to print, websites such as www.thingiverse.com are making this an increasingly easy hurdle

to overcome, providing free 3D files for a vast array of objects, including fashion accessories, jewellery, spectacle frames, juicers and even a model Predator unmanned military aircraft.

In addition, 3D printing presents challenges for retailers in the context of their intellectual property rights. If illegal film or music downloading was a problem for copyright owners, imagine the consequences of teenagers being able to “print” Nike trainers in their bedrooms. The Pirate Bay, a notorious file-sharing site in a music and film context, has already created a new category for files that allow 3D printers to create physical objects. Moreover, in many cases, IP regimes will offer defences to copiers, whether on the grounds of domestic use or exclusions for “must fit” designs or industrially exploited copyright works.

www.dlapiper.com | 17

the newS and the vIewS

BusInEss ROunD-uP

unHAPPy nEWs FOR TRADE MARks TRAvELLInG THROuGH GERMAnyby Dr. stefan Dittmer and Dr. Annemarie Bloss (hamburg)

the german federal Supreme court (Bgh) determined in its “clinique happy” decision (Bgh I zR 235/10), that imported counterfeit articles traveling through germany intended for sale in a foreign market (so-called “unbroken transit of custom sealed goods” – zollverschlossene, ungebrochene Durchfuhr von Waren) are not subject to the protection of german trade mark law, even if the mark in question is registered in germany or the eu. Such marks are not being used as trade marks pursuant to the german trademark act during the mere transport of the articles through germany to a foreign destination market. furthermore, the principle of territoriality foreign trademark law in connection with german tort law does not grant protection to marks merely travelling through germany.

the Bgh made it clear that counterfeit goods, protected by german trade marks and merely travelling uninterrupted through germany do not violate german trade mark law as it does not constitute a required “use in commerce”. furthermore, the court also denied protection against this transit under german tort law. as a result, to claim for preliminary injunctive relief, trade mark owners must now

demonstrate that an infringement of their trade mark rights also threatens in the country of destination of the goods and that the import of those goods may be prohibited under the laws of the country of destination.

OnEL/OMEL: “GEnuInE usE” OF Eu TRADE MARks by Claire Bailey and John Wilks (london)

the court of Justice of the eu has ruled that, where a european community trade Mark (“ctM”) is only used in a single eu country, the trade mark owner may still be able to establish “genuine use” of that ctM in the eu. ctMs which have not, within five years of registration, been put to “genuine use” in the eu in connection with the goods or services in respect of which they are registered may be subject to revocation.

hagelkruis Beheer applied for a Benelux registration for the word mark OMel. leno Merken, owner of a community word mark Onel for two of the same classes, opposed the registration. In response, hagelkruis requested that leno provide proof of use of the Onel mark. leno had proved use of the earlier mark Onel in the netherlands, but not in the rest of the eu.

the court rejected an arbitrary rule on territorial scope of genuine use, stating territorial borders should be disregarded.

the court concluded that an assessment of genuine use should take account of “all relevant facts and circumstances”. these include the characteristics of the market

concerned, the nature of the goods or services protected by the mark, and the territorial extent, scale and frequency of use.

Brand owners who have taken the trouble to register a ctM must ensure they have a strategy in place to maintain it, through genuine eu use on a sufficient scale.

PuCCI v. TuCCI: LATEsT DEvELOPMEnTs In A PROTRACTED LEGAL sAGA by stefania Baldazzi and Giulia zappaterra (Milan)

at the end of 2012, the eu court of Justice rendered three decisions on the legal fight between el corte Inglés S.a and the Italian fashion designer emilio pucci, involving word trademark “pucci” and figurative trademarks “emilio pucci” and “emidio tucci”.

the passionate legal saga started in 1977, when el corte Inglés elected to operate in Spain, with an imaginary Italian name emidio tucci. emidio tucci was a trademark intended to be more attractive to consumers in conveying an image of Italian elegance.

despite the opposition of emilio pucci, the trademark was finally granted as a Spanish trademark to el corte Inglés, on the ground of lack of similarity between the names.

the fight re-ignited when both companies sought to register their trademarks at the community level.

18 | Law à la Mode

CREATInG LInks In THE FAsHIOn CHAIn

dla piper’s fashion, Retail and design group covers an interesting and broad group of clients worldwide who focus on optimising their playing field and on combining their forces in the apparel industry. this approach matches the objective of the International apparel federation (“Iaf”). the Iaf is a federation founded in 1972 in williamsburg, virginia, in the united States, whose current headquarters are in zeist, near amsterdam, the netherlands.

dla piper recently joined the Iaf as an associate member. we spoke with the Iaf’s secretary general, han Bekke, to find out what this new cooperation can offer our clients.

■ the Iaf’s mission is to develop business contacts to foster dialogue and knowledge exchange between individuals active in the world apparel value chain, and in international practice by promoting common business interests. for instance, the Iaf encourages best practice and the support of apparel manufacturers and marketers worldwide. Members of the Iaf can share information on recent developments regarding the advancement of technology and the promotion of its use, the encouragement of innovation and new ways of thinking and the growth of apparel trade worldwide. further, the Iaf provides market information to its members. a relevant topic that has been covered by the Iaf is

the improvement of social, health and safety, and environmental conditions relating to the apparel chain worldwide.

■ the Iaf aims to be the premier worldwide knowledge network dealing with a variety of apparel industry issues including design, manufacturing, distribution, sourcing, trade, technology and education. the development of business contacts worldwide remains a main target of the Iaf. the Iaf also offers trade missions worldwide which members can join.

■ as an associate member of the Iaf, dla piper provides legal services to the apparel supply chain. In addition to this, and to the various national trade associations which represent apparel manufacturers in their respective countries which are Iaf members, there is an option to become an individual member. this is useful when your core business involves the design, marketing and/or manufacturing of apparel products.

■ Once a year, a large convention is held for all members. the next convention will be in Shanghai from 23 to 27 September 2013. dla piper will attend that convention and will give a presentation on legal issues. More detailed information on this convention can be found in the next Law à la Mode edition.

for more information see www.iafnet.com

In the first round, the eu general court (sentences t-357/09 and t-373/09) refused the registration of figurative trademark “emidio tucci” in classes 3 and 21 due to its detrimental impact on the exclusivity of the reputed trademark

which was well known in Italy and used to cover high-quality and luxury goods.

In the second round, the eu general court (sentence t-39/10) confirmed the registration of the word community trademark “puccI” for original classes 3, 9, 14, 18 25 and 28, notwithstanding the opposition of el corte Inglés. the court stated that the likelihood of confusion between trademark “puccI” and figurative trademark

has to be evaluated through consideration of the overall impression given by the signs to the public and suggested that the two trademarks are visually and phonetically different.

how will the saga unfold? could there be more to come? follow us in future editions.

DLA Piper has joined the IAF, the International Apparel Federation, generating exciting opportunities for DLA Piper’s clients and IAF membersBy Marchien Hoogenrad (Amsterdam)

www.dlapiper.com | 19

Calendar

dla piper is a global law firm operating through various separate and distinct legal entities.Further details of these entities can be found at www.dlapiper.com

Copyright © 2013 DLA Piper. All rights reserved. | APR13 | 2536788

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www.dlapiper.com fashion@dlapiper.com

APRIL

Mercedes-Benz Fashion Week Australia – sydney, Australia April 8 – 12 (http://australia.mbfashionweek.com/home)

Mercedes-Benz Fashion Week Mexico – Mexico City, Mexico April 15 – 18 (http://www.mercedes-benzfashionweek.mx/mbfwm/)

Aurora Fasion Week, st Petesberg, Russia April 15 – 21 (http://afwrussia.com/en/)

MAy

InTA’s 135th Annual Meeting – Texas May 4 – 8 (http://www.inta.org/2013AM/Pages/Overview.aspx)

Audi Fashion Festival singapore – singapore May 15 – 19 (http://audifashionfestival.com/calendar/)

Milan seminar: Global expansion of retail brands

On 20 May 2013, dla piper’s fashion, Retail and design team is hosting a seminar at the Four Seasons Hotel (Milan), which will give an insight into the legal issues surrounding the global expansion of retail brands. dla piper experts from europe, Middle east, americas and asia will be joined by a distinguished panel from leading International fashion brands. If you would like to attend this event, please email fashion@dlapiper.com.

Modaprima – Florence, Italy May 24 – 26 (www.pittimmagine.com)

Rio de Janeiro Fashion Week – Brazil, Rio de Janerio May 30 – June 4 (http://www.fashiontv.com/fashionweek/rio-fashion-week-spring-2013)

Our round-up of what’s on where you are…

Compiled by Tessa Kelman(Sydney)

stall Wars!

the london office of dla piper recently held a corporate Social Responsibility event to raise money for Barnado’s charity. entitled “Stall wars”, the event saw different teams within the office setting up “stalls” in the auditorium and competing to see which could raise the most money in a two hours, lawyers and support staff took on the task with gusto, with creative stall concepts including a “dvd lucky dip”, a mini fairground and a classic British “white elephant” stall. the event raised over £2000 – thanks to all who participated.

The Retail Brunch at MIPIM 2013

On 13 March 2013, dla piper hosted The Retail Brunch at MIpIM, the world’s leading real estate conference. the event was very well attended and provided an excellent opportunity to network with international investors and developers and to reinforce our commitment to the retail sector.

MARCH