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Lululemon Sues Costco Over Alleged Dupes or Knockoffs · Bloomberg Law

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  Speaker 1: This is Bloomberg Law with June Grosseo from Bloomberg Radio.
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  Speaker 2: We found the best activewear tight set dupe at Costco
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  Speaker 2: and it is nearly identical to Lululemon or Athleta. It's
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  Speaker 2: seriously made with the same material and has the same pockets.
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  Speaker 2: We love the waist and we love all of the
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  Speaker 2: fun colors.
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  Speaker 3: If you go to hashtag Lululemon dupes, you'll find social
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  Speaker 3: media influencers promoting knockoffs or dupes of their apparel, like hoodies, jackets,
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  Speaker 3: and pants at Costco that look authentic but sell for
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  Speaker 3: a fraction of the price. Well, Lululemon is making a
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  Speaker 3: federal case out of it, taking Costco to court for
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  Speaker 3: copying their designs. My guest is Susan Scaffiti, a professor
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  Speaker 3: at Fordham Law School and director of the Fashion Law Institute.
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  Speaker 3: Susan a very basic question to start off with. Are
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  Speaker 3: dupes what we used to call knockoff?
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  Speaker 1: We have definitely seen an evolution in nomenclature, right, So
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  Speaker 1: it used to be counterfeits and knockoffs, and then replicas
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  Speaker 1: and then reps and now dupes. And I think honestly
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  Speaker 1: part of the story of the public accepting them more
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  Speaker 1: is they sound cute and adorable? Now you know you
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  Speaker 1: could have a pet dupe, you cannot have a pet counterfeit.
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  Speaker 3: Well, also, social media right is blasting out where to
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  Speaker 3: find these precisely dupes are being sold all over. Is
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  Speaker 3: selling a dupe illegal?
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  Speaker 1: Well, it depends right. Dupe like knockoff before, it is
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  Speaker 1: a broad ambi us term when they are very exact.
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  Speaker 1: And in those cases in which the IP is protected,
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  Speaker 1: yes that is illegal. But if we're getting a little
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  Speaker 1: further away from the original, or if the original itself
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  Speaker 1: is not protected under US law, then no it is not.
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  Speaker 1: So we do indeed have a lot of gray area
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  Speaker 1: here and not a chic little chuckoal or dove, something
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  Speaker 1: a lot more sinister from the brand's perspectus.
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  Speaker 3: Lula Lemon, of course, pioneer your yogaware, tell us what
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  Speaker 3: it's accusing.
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  Speaker 1: Costco of salul Lemon is claiming that the things that
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  Speaker 1: have been copied and are being sold at Costco do
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  Speaker 1: in fact cross the line into illegal. And what's so
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  Speaker 1: interesting about this case, June is that they have gone
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  Speaker 1: through the entire list of potential IP claims and are
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  Speaker 1: basically throwing everything except copyright. At Costco, they're looking at patents,
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  Speaker 1: a specifically design patent, because they do have a design
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  Speaker 1: patent on their scuba design. For hoodies, they are looking
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  Speaker 1: at trade dress protection, that subset of trademark that focuses on,
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  Speaker 1: among other things, product design. Right, So when a product
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  Speaker 1: design itself is so iconic, like the red souls on
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  Speaker 1: Lobaton's or the ermes burkeens, the design is so iconic
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  Speaker 1: that it serves as its own source indicator that can
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  Speaker 1: be protected. So they're claiming that kind of protection in
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  Speaker 1: the case of their fine jackets. Then they're claiming unregistered
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  Speaker 1: protection for men's trousers, They're claiming wordmarks in the case
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  Speaker 1: of scuba, and a wordmark for the colored Tidewater teal
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  Speaker 1: that they say is proprietary to them, and then they're
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  Speaker 1: throwing in some state law unfair competition claims. So they
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  Speaker 1: are really going across the board looking at Costco in
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  Speaker 1: house brands like Kirkland, but also other brands being sold
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  Speaker 1: at Costco like dan Skin and Jockey in this case.
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  Speaker 1: So they are really taking a very broad brush approach
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  Speaker 1: to the items that Costco is selling that lu Lemon
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  Speaker 1: believes are protected intellectual property.
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  Speaker 3: Costco is known for that Kirkland brand, and people often
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  Speaker 3: say that their products are high quality but sold for
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  Speaker 3: much less than name brand products. What kind of a
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  Speaker 3: price differential are we talking about with Lululemon apparel.
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  Speaker 1: Well, in the case of the men's trousers, they were
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  Speaker 1: saying eight dollars versus one hundred and eighteen dollars, quite
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  Speaker 1: a bit less, which has actually been consistent with the
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  Speaker 1: prices of knockoffs over the years. We always say somewhere
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  Speaker 1: between five and twenty percent when we're looking at knockoffs
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  Speaker 1: across the board.
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  Speaker 3: That is quite a big price difference. Susan, What would
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  Speaker 3: Lulu Lemon have to prove if this case went to trial?
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  Speaker 1: In these cases, the first step is going to have
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  Speaker 1: to be convincing of the jury that the claims that
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  Speaker 1: Lula Lemon is making are actually valid with regard to
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  Speaker 1: what Lulu Lemon owns. Now they've done their homework, they
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  Speaker 1: have warmed up, stretched and prepared for this particular case
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  Speaker 1: by registering some of those marks, trademarks and design patents.
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  Speaker 1: So in the case of a registration, there's already an assumption,
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  Speaker 1: but it's an assumption that can be overturned. So Lululemon
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  Speaker 1: is going to have to be able to prove that
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  Speaker 1: these particular marks are indeed sourced indicators, or in the
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  Speaker 1: case of design patents, that they are indeed new these designs.
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  Speaker 1: With regard to the things that are not registered, they
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  Speaker 1: have a somewhat higher far to pass in order to
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  Speaker 1: convince the jury that they deserve protection. But if they
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  Speaker 1: can do that, then they actually have to be able
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  Speaker 1: to show that the Costco items are close enough the
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  Speaker 1: Lululemon items that they actually infringe. In other words, it's
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  Speaker 1: a two step process. Is the IP valid and if so,
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  Speaker 1: are the Costco items infringing? And they do need to
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  Speaker 1: persuade a jury. This is a jury claim.
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  Speaker 3: What about the fact that, you know, there's that hashtag
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  Speaker 3: Lululemon dupes and apparently some dupes are being sold on Amazon, Walmart,
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  Speaker 3: Target and elsewhere. So why is Lululemon focusing on suing Costco?
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  Speaker 3: And you know, will Costco be able to say, but look,
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  Speaker 3: they're selling these elsewhere?
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  Speaker 1: Well, Costco will be able to do that. But of course,
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  Speaker 1: when you're engaged in brand protection, you need to make choices.
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  Speaker 1: No company, not even the very largest, wealthiest ones have
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  Speaker 1: unlimited legal budgets, much to the sadness of their lawyers,
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  Speaker 1: do they make choices, And I think choosing Costco is
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  Speaker 1: smart in some ways. It's one stop shopping. They're suing
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  Speaker 1: that only Costco or its house brand, but they're suing
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  Speaker 1: over some of the other brands that Costco carries, and
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  Speaker 1: they are suing an entity that is highly recognizable and
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  Speaker 1: trusted by the American public. So it's going to get
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  Speaker 1: attention when they go after Costco, much the way it
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  Speaker 1: got attention when Arimez said, yes, we know there are
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  Speaker 1: lots of counterfeit Burken's out there, but we're going after
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  Speaker 1: the work in the Walmart Burgen. So if that kind
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  Speaker 1: of press release aspect to a complaint is relevant here,
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  Speaker 1: they want the attention on this case. They may not
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  Speaker 1: win the hearts and minds of consumers. They may not
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  Speaker 1: change this social tide toward the acceptance of dupes as
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  Speaker 1: something to be celebrated rather than hidden, but they will
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  Speaker 1: be able to convince some people that these dupes are
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  Speaker 1: not a good thing. And they will also be able
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  Speaker 1: to send a warning to vendors across the board that
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  Speaker 1: Lululemon is not to be messed with, and of course
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  Speaker 1: Lula Lemon has a history of bringing other lawsuits in
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  Speaker 1: the past, so this has been a long term strategy
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  Speaker 1: for them to try to become a harder target, if
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  Speaker 1: you will.
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  Speaker 3: And what happened with the copy of the Birken.
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  Speaker 1: Bag, Well, they're no longer available for sale at Walmart.
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  Speaker 1: So let's assume that one has settled, which is I
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  Speaker 1: think the likelihood here is that we will get a settlement.
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  Speaker 1: It would be from a legal respective, wonderful to see
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  Speaker 1: what a jury thinks and then what the pellate court
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  Speaker 1: thinks about how close is too close in these cases,
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  Speaker 1: But more than likely we will get a settlement. If
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  Speaker 1: this in Europe, of course, this would be a very
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  Speaker 1: short complaint. We would simply have that other category of
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  Speaker 1: design protection, so we wouldn't be looking separately at trademarks
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  Speaker 1: and patents and asking whether the law applies in these cases.
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  Speaker 1: We would go straight to design protection and be done
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  Speaker 1: with it.
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  Speaker 3: Just suppose it does get to trial. Is it an
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  Speaker 3: uphill battle for Lululemon to convince a jury.
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  Speaker 1: I think it's going to vary amongst the different styles claimed.
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  Speaker 1: I think for the registered trade dress and registered design patents.
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  Speaker 1: That's going to be an easier sell for the claims
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  Speaker 1: of unregistered for ti deetion like for the men's ABC
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  Speaker 1: trousers and the Tidewater teals color. It's going to be
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  Speaker 1: a little more difficult, but not impossible.
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  Speaker 3: And does Lula Lemon have to prove that consumers are
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  Speaker 3: confused by the dupes.
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  Speaker 1: With regard to the trademark related claims, so the trade
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  Speaker 1: dressed claim, they do have to prove likelihood of consumer confusion,
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  Speaker 1: which is why something like hashtag Lululemon dupe is maybe
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  Speaker 1: not helpful to Lululemon. It certainly fuels the fire to
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  Speaker 1: go after these dupes, but it's also saying that consumers
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  Speaker 1: may not be confused, at least at point of sale.
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  Speaker 1: Now there's always post steal confusion. There's the concern that
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  Speaker 1: consumers will see others wearing the dupes and think that
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  Speaker 1: they're Lululemon. So there's that form of consumer confusion that
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  Speaker 1: might be easier to prove in the era of hashtag
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  Speaker 1: Lululemon dupes, but it's problematic if consumers are not actually confused.
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  Speaker 1: You know, It's interesting in that regard June is that
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  Speaker 1: Lululemon it actually has is a trademark application pending for
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  Speaker 1: the phrase Lululemon dupe in the context of retail stores.
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  Speaker 1: They haven't said exactly how they'll use it, and they
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  Speaker 1: don't have to do that yet, and the trademark has
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  Speaker 1: not yet issued. They filed the application back in December,
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  Speaker 1: but they're obviously thinking about playing in this field in
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  Speaker 1: another way as well.
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  Speaker 3: You say, most of these cases are settled, but is
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  Speaker 3: a lot of money spent just reaching the point of settlement?
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  Speaker 3: What are legal fees like?
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  Speaker 2: Oh?
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  Speaker 1: Of course, just developing this complaint with a dozen different
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  Speaker 1: claims has taken a lot of time, and surely there
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  Speaker 1: has been some conversation between the companies in advance of this.
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  Speaker 1: So it has already been an expensive process. It may
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  Speaker 1: be worthwhile because again it is a legal process and
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  Speaker 1: a public relations process. You know, if it's some one
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  Speaker 1: thing that a company that makes yoga pants is familiar with,
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  Speaker 1: it's inversions, and I think they would really like to
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  Speaker 1: be able to invert the public's perception of dupe. That's
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  Speaker 1: really the goal here from a public perspective, much the
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  Speaker 1: way that just as you know, a few years ago,
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  Speaker 1: Lululemon set up a dupe swap in a mall in
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  Speaker 1: Los Angeles and said, look, bring us your dupes, any brand.
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  Speaker 1: We will give you genuine, aligned Lululemon trousers. They are
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  Speaker 1: so great that you'll be able to tell the difference
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  Speaker 1: immediately and you will become Lululemon fans. So they are
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  Speaker 1: playing both a legal game and an extra legal game
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  Speaker 1: as part of their brand protection strategy. And it's something
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  Speaker 1: that they've done for years. So if they can start
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  Speaker 1: to again invert the perception of dupes, maybe restore them
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  Speaker 1: to their former sub rosa underground, splitely shameful status, or
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  Speaker 1: at the very least convinced people that Lulemon products are
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  Speaker 1: of higher quality so that they can recapture some of
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  Speaker 1: the folks who would have instead gone to Costco or elsewhere.
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  Speaker 1: That's going to be a win without ever getting as
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  Speaker 1: far as a jury.
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  Speaker 3: I remember when if you had a knock off, well
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  Speaker 3: you hid the fact that it was a knockoff. You
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  Speaker 3: tried to pass it off as the real thing.
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  Speaker 1: Nowadays they don't care exactly. There has been a huge
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  Speaker 1: shift in perception over fifteen years. It used to be
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  Speaker 1: that brands didn't want to talk about counterfeits, or knockoffs.
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  Speaker 1: Then they finally acknowledged the problem. But consumers I have
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  Speaker 1: also gone from hiding the fact that their items were
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  Speaker 1: knockoffs or trying to pass them off as the real thing,
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  Speaker 1: to bragging about them on social media, and that is
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  Speaker 1: actually of almost greater concern. The law hasn't changed a lot,
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  Speaker 1: but consumer perception has changed. So the law still is
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  Speaker 1: not great in the US with regard to protecting fashion,
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  Speaker 1: but there are these bits and pieces of law that
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  Speaker 1: can protect fashion a little bit. But the perception, the
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  Speaker 1: social norms have changed dramatically. You know, in my classes,
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  Speaker 1: I tell my students that when we're dealing with law,
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  Speaker 1: we're dealing with it at several levels. We think about
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  Speaker 1: black letter law when we go to law school that
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  Speaker 1: come out of legislatures and courts. But then there's also
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  Speaker 1: rules things like in the fashion context, office dress codes
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  Speaker 1: or school dress codes. But at the most basic, simple,
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  Speaker 1: diffuse level, there are social norms. Sometimes those social norms
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  Speaker 1: are subsequently written into law what's decent or indecent, for example.
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  Speaker 1: But social norms are really powerful in terms of controlling
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  Speaker 1: how we dressed, how we perceive what we dress, how
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  Speaker 1: we perceive what other people dress, and we've seen a
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  Speaker 1: shift in social norms here. We haven't seen a shift
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  Speaker 1: into law. We've seen a shift in the norms so
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  Speaker 1: that it went from being knockoffs their bad and shameful
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  Speaker 1: and cheap and to be hidden, to knock offs their
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  Speaker 1: to be celebrated. And that's part of what Little Lemon
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  Speaker 1: is addressing in this case.
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  Speaker 3: In December, Benefit lost a lawsuit to ELF over their
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  Speaker 3: last and role mascara, which is six dollars compared to
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  Speaker 3: Benefits twenty nine dollars misscara. Does that have any relevance
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  Speaker 3: to this case.
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  Speaker 1: It's another time trade dress lawsuit. Because the actual word
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  Speaker 1: elf was right on there, there was an undermining of
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  Speaker 1: the question of likelihood of consumer confusion. So here well
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  Speaker 1: to back up, when we're dealing with counterfeits, when we're
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  Speaker 1: dealing with substantially identical copies of trademarks that we can identify.
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  Speaker 1: So if we were dealing with copies of the wordmark Lululemon,
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  Speaker 1: or if we were dealing with copies of its little
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  Speaker 1: symbol that looks a little bit like an omega, right,
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  Speaker 1: that would be easy. There's no question of whether or
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  Speaker 1: not consumers are confused. We just assume that if we're
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  Speaker 1: dealing with those substantially identical copies, when we move into
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  Speaker 1: the realm of trade dress, and we are talking about
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  Speaker 1: infringement rather than counterfeitings, so we're dealing with things that
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  Speaker 1: are not necessarily quite as identical but merely confuse the consumer,
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  Speaker 1: then yes, that likelihood of consumer confusion does have to
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  Speaker 1: be proven by Lululemon in this case, in other words,
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  Speaker 1: by the plaintiff. And that's a little bit tougher. It's
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  Speaker 1: a little bit of extra work that has to be done.
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  Speaker 1: It's why this case is interesting. It's why Little Lemon
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  Speaker 1: is going for full on four waste stretch in this regard.
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  Speaker 1: They're not going for easy things. They're not going for
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  Speaker 1: counterfeits that would not probably be sold at costco the
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  Speaker 1: copies of the signs, the symbols that we all recognize
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  Speaker 1: easily as trademarks. They're going for product configuration trade dress. Right,
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  Speaker 1: So there are two kinds of trade dress. There's product packaging,
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  Speaker 1: so the shape of a coke bottle or the shape
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  Speaker 1: of some shampoo bottles. And then there's the product design.
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  Speaker 1: And that's where fashion has to live because we get
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  Speaker 1: so little protections on the three dimensional aspects of a
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  Speaker 1: garment generally. So if we are going to claim trademark
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  Speaker 1: beyond the label, beyond the logo, we're looking at product configuration,
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  Speaker 1: trade dress. We are going to have to show that,
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  Speaker 1: first of all, consumers recognize that trade dress as a
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  Speaker 1: source indicator. It's not just a great looking warm up jacket.
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  Speaker 1: It's one that looks like Lululemon, one that we recognize
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  Speaker 1: as Lululemon, just on the basis of curved themes, right,
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  Speaker 1: So we have to be able to prove that consumers
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  Speaker 1: see what Lulemon says consumers see, and then we have
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  Speaker 1: to show that those consumers are confused when they see
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  Speaker 1: a knockoff. And it's not easy, it's not impossible, but
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  Speaker 1: it is definitely going to be a.
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  Speaker 3: Battle, or, as you say, perhaps a settlement. Always great
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  Speaker 3: to have you on, Susan, thanks so much. That's Professor
• 15:32
  Speaker 3: Susan Scaffiti of Fordham Law School, and that's it for
• 15:36
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