A Trend for Retailers to Avoid – Copyright Infringement Lawsuits Over Clothing

Written By Trent Horne, Jeilah Chan and Jesse Goldman

Textile Copyright Infringement Claims on the Rise

Katy Perry received a lot of attention for the dress she wore to the Met Ball this year, and not all of it was welcome. A Brooklyn artist thought that the dress was an imitation of graffiti that he painted in Detroit, and filed a copyright infringement action to enforce his rights.

A number of copyright claims relating to clothing, prints and patterns have been filed recently, and are not limited to designer outfits worn by celebrities. Lilly Pulitzer filed a claim against Old Navy alleging that her fabric prints had been copied. Last week, H&M sued Forever 21 over the design on a tote bag.

For any retailer, being named as a defendant in a copyright lawsuit is an unwelcome and costly distraction. There are a number of steps that can be taken to minimize both the risk of litigation and financial exposure.

What Retailers Should Do

Allocate Risk to Your Supplier

At the outset, it is difficult to overstate the importance of a well-drafted supply agreement. Any supply agreement should include a broad representation and warranty from the supplier that its products do not and will not infringe intellectual property rights owned by a third party. More importantly, the supply agreement should also include a broad indemnity requiring the supplier to pay both the legal fees associated with the defence of any lawsuit and any damages that the parties agree to or a court orders. Control of the defence of the lawsuit should also be clearly set out in the agreement. Such obligations will precipitate diligence, give suppliers an incentive to carefully consider the possibility of an infringement claim before shipping the goods, and will mitigate the retailer's financial exposure.

Confirm Canadian Rights to Minimize Importation Risks

When dealing with suppliers, great care should be taken to ensure that their licenses and related agreements include Canadian intellectual property rights. This particularly applies to "grey goods" – genuine products that are authorized or licensed for sale in one country but are then imported into Canada for commercial sale. Under Canada's Copyright Act, the importation of goods without the consent of the Canadian copyright owner is illegal. The test is broad and does not require actual knowledge of infringement. Even a party that "should have known" that it imported infringing goods into Canada for the purpose of distribution or sale is subject to enforcement, whether at the Canadian border or afterwards. There may also be territorial restriction clauses that either preclude sale to Canada or require specific permission to do so.

Educate Buyers

Retailers should not rely on a supplier's promises alone. Proactive retailers educate their buyers to identify copyright litigation risks. A basic understanding of intellectual property rights will assist buyers in assessing not only how well a product will be received by consumers, but also whether there is a risk of an infringement lawsuit from a competitor or the owner of a textile print.

Get Legal Advice

Copyright law is complex. Other than in cases of counterfeiting, the line between what constitutes an infringing and non-infringing article can be difficult to draw. If there is doubt as to whether incoming products may infringe someone else's intellectual property rights or whether you are sufficiently protected by a supply agreement, get an opinion from experienced outside counsel. Taking these proactive steps can avert resource consuming litigation.

Bennett Jones is a full service domestic and international business law firm with a long track record of successfully representing clients in the retailing and hospitality industries. We look forward to working with you.