What Independent Retailers Need to Know About Intellectual Property and Licensing

by Michael Satterfield

Over the last few months, waves of anxiety have swept through the Independent Boutique community as letters marked “Cease & Desist” have arrived by certified mail or in-person delivered by a member of major brand’s legal teams. Since last year, Louis Vuitton has been targeting retailers who are selling products featuring the iconic brand’s intellectual property, for both counterfeit items and unauthorized uses of the trademarked logos. Since the trend of "upcycling" gained popularity a few years ago some in the industry, including me, have been warning manufacturers and retailers that trademark infringement is serious business and major brands will eventually act, but these warnings have often fallen on deaf ears, with one retailer even exclaiming “if I get caught” while others claim that these letters are hoaxes sent by their competitors.


Reading through copies of the letters I obtained from retailers, Louis Vuitton is demanding not only that all sales of infringing items be ceased, but one letter demanded that all sales records be turned over for auditing, that any product in stock be surrendered, and that all profits from sales of infringing products be forfeit, otherwise the boutique could face further legal action.  


Many retailers are under the impression that so long as they are not manufacturing infringing items that they would somehow be exempted from any legal ramifications for simply selling them. This is not the case as Texas-based intellectual property attorney Andrea Sager points out:


This is a big misconception, and it's very important for anyone conducting business to understand. States may have individual counterfeit laws. However, it's important to know that ANYONE selling counterfeit or unlicensed goods are subject to federal intellectual property laws and possibly federal prosecution. It doesn't matter if you purchased from a wholesaler that purchased from a manufacturer, which would leave you third down the chain. Each entity selling the goods is subject to legal ramifications.

 

One brand whom we will refer to as “Texas Bagmaker” created, or at least popularized, the upcycling trend when their founder customized her own Louis Vuitton bag and posted it Instagram in 2015, has become one of the best-known brands in the upcycling space. That business grew to include bags, bracelets, and accessories made from recycled materials, mainly the canvas made famous by Louis Vuitton. 


The style, quality of construction, and thoughtful designs made “Texas Bagmaker” bags a must-have for high-end boutiques and their customers, launching many imitators. Today the Texas bagmaker only upcycles authenticated pre-owned bags in addition to selling their own custom products. According to their site “We are in agreement with Louis Vuitton by only enhancing second-hand existing authentic Louis Vuitton bags.” I reached out to the company about the nature of the agreement they have with Louis Vuitton, however, they declined to make any statements outside of the disclaimer is published on the site.


Reaching out to the owner of another company who has built their business on the concept of “upcycling” I was met with resistance, only agreeing to speak to me only on the condition of anonymity. In her opinion, it is a non-story as brands are "more concerned with removing counterfeit products than going after customizers of pre-owned bags." She also floated the conspiracy theory that “these (cease and desist) letters are all part of a scare tactic from larger upcyclers hoping to dissuade others from getting into the business.” Now the concept that there is a conspiracy by both upcyclers and other retailers to craft fake cease and desist letters from law firms seemed like a stretch, but it wasn’t the first time I heard the idea. While I suppose anything is possible in the competitive world of fashion, it seems farfetched. 


So when does upcycling becomes trademark infringement? According to attorney Andrea Sager:


Upcycling is typically fair use. However, upcycling companies are on a VERY fine line. When companies, cut up a used designer handbag and add that material to a different product, even if it's a product from the same designer, that is crossing the line. Adding fringe and your own touch to a product is fair use. It's considered art and not illegal. However, if you want to add a protected logo to a different product, that is illegal because it's misrepresenting the product. I'm sure designers have a close eye on the upcycling companies to make sure they don't cross that line.

 

The issue of intellectual property goes far beyond major international luxury brands and upcycling. Walk into almost any independent boutique and you will find apparel, koozies, signs, coffee mugs, and other products all produced without licensing or permission from artists, brands, sports teams, schools, and celebrities. Most retailers simply shrug it off, feign ignorance, or simply don’t care… until they get a letter or a knock on their door. Suppliers from China are even knocking-off boutique brands, many times using the brand's own photos to market their bootlegged products via online wholesale websites and social media.


Most independent retailers simply think they are too small to be noticed, but this wasn’t the case when the Chicago Cubs and MLB decided that they had enough of retailers selling unauthorized apparel. In 2016 they filed a federal lawsuit against 30 independent retailers they claimed were selling unlicensed Cubs merchandise, gaining a federal injunction to putting many out of business altogether.


In 2018 Louisiana State University and the NCAA sent out a wave of cease and desist orders to retailers who were producing or reselling items with one or more of the school’s eighteen trademarked phrases or logos. But in the world of sports and spirit merchandise, it isn’t just major teams and universities that are fighting back against unlicensed apparel, high schools, middle schools, and private schools are also cracking down on infringing products. Several School Districts in Florida have filed federal lawsuits against sportswear manufactures and retailers for using their school names, logos, and mascots without permission. 


The music industry has been greatly impacted by unlicensed merchandise sales and while they have been lax in the past, many artists are stepping up enforcement. Musician Eric Church has filed more than one lawsuit to stop illegal knockoff merchandise filing against John and Jane Doe so that the injunction can be broadly applied to any retailer they find selling infringing products. While Country Star Kacey Musgrave used Instagram to publicly call out a major western retail chain for selling signs featuring not just her lyrics but her name. Her post said, “I currently have not authorized any of my lyrics to be put on anything for sale in ANY major retailers or boutiques of any kind. If you support me and my music please just go to my website and shop or come to a show. And please lemme know if you see anything out there. I'm down to fight it. This happens to SO many writers. Think before you buy. The product might be cute but stealing ain't.” 


So what kind of penalties can a retailer face for selling counterfeit or unlicensed products? According to the attorney I consulted, “The penalties will vary depending on whether it is a civil lawsuit or criminal charges. If it is a civil lawsuit, the brand owner will sue for trademark or copyright infringement, and possibly both. Additionally, customers of the seller may be able to come after the seller for fraud for intentionally misrepresenting the product. If there are criminal charges, the seller could be facing a large fine (in the thousands) and prison time.” 


Many times, retailers are simply acting in good faith the products they are buying from a wholesale vendor are legal to sell, but retailers should question their suppliers when buying products that feature known national brands, celebrity likeness or names, teams, schools, or other trademark or copyrighted elements. Asking for proof of licensing or verifying that the company is listed as an official licensee is a simple step that can save retailers thousands in seized products and legal fees. Lawyer Andrea Sager says, “If the wholesaler will not provide either, then what they are doing is most likely illegal and you certainly don't need to be doing business with them.”


Some retailers like to gamble, hoping they won’t get caught, but depending on how aggressive the brand wants to be, they could be gambling their entire business. 


Andrea Sager:

Andrea is a brand protection attorney specializing in copyrights and trademarks for modern-day entrepreneurs. From your brand name to your content, Andrea protects it all.

Law firm - Andrea Sager Law PLLC www.andreasager.com