Fashion Law and Lawyers: What???

Fashion Law has become trendy.  Both within and outside the legal profession there has been a growing movement to create, segregate or calibrate a discrete discipline based upon the fashion industry even to the extent of creating academic degrees in the discipline.  When identifying the discipline known as “fashion law” it is humbling to recall that fashion law is indeed nothing more than the ordinary and usual practice of law as and when applied to the fashion industry.  As such to say one is a “fashion lawyer” practicing “fashion law” is to say that the segregated disciplines of the practice of  law, inclusive of securities, trademarks, copyrights, rights of publicity design patents, employment issues,  and of course bankruptcy are at the fingertips of a singular lawyer. I genuflect before the greatness and renaissance breadth of such a being.

In the launch of a fashion company, a lawyer should first and foremost have a sense of history. Knowledge of the great stories of designers losing the right to use their own name through poor planning or judgment; Thierry Mugler,  John Galliano, Halston, Simon Spurr and Joseph Abboud.  Thus the fashion lawyer has to have a core competency in intellectual property law, a knowledge of intellectual property rights and licensing.  A clear vision of the value of a brand and the need to segregate it from the other components of the fashion company is a paramount consideration in the launch and exploitation of a fashion company.

As the fashion company matures, recruitment of designers, consultants, agents, public relations staff and other key personnel creates issues as to recruitment, compensation and incentives as well as future competition.  So the “fashion lawyer” will have to apprise the client of employment issues, incentive plans, stock options, warrants, employment agreements, covenants against competition and so on, the failure to do so competently could lead to immeasurable harm to the on going business of the company.

As the fashion company arises to its apogee or nadir, separate competencies arise in dealing with capital raises, exit vehicles and at the other end of the spectrum,  possible bankruptcies.  American Apparel exemplifies the strength of debt. James Carville, Bill Clinton’s political strategist, once said “I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.” In other words it can be good to be a creditor.  As a creditor and holder of bonds, debentures, convertible securities and the like, you can accrue equity like benefit when the going is good and exercise control when the business goes south. Just as the American Apparel bondholders could wipe out the equity holders, the founders and investors in a fashion company should be sensitized from inception, and not at the end,  that there is more than one way to exploit the profit from a business venture.

While a “fashion lawyer” should be one knowledgeable of the industry, the required competencies are beyond the scope of a single individual. Knowledge and sensitivity of the key issues, experience and access to the required resources and proficiencies are essential for the practice.

 

 

The Evergreen Co-Tenancy

One of the main concerns of the fashion brand opening up a store or shop within a mall is whether the brand itself will be enhanced or diminished by association with the co-tenants in the mall. Too often people associate quality with based on a general perception of whether or not the mall is identified as a luxury or upscale mall.  However, in truth that is only a function of the nature of the tenants in the mall. The tenants bring the value and reputation in the mall markets the same.   The problem faced in deciding whether or not to enter into a lease with the mall is beyond the fit for the fashion brand today, but what will it be tomorrow especially if there is a communication and the quality of the tenancies.   These changes can arise for  a variety of reasons including but not limited to issues beyond the control of the mall owner such as the vicissitudes and changes in the marketplace affect the flow of traffic and demography being attracted to a particular mall.

This is further exacerbated when dealing with a new project. It is axiomatic that when negotiating for space in a mall that is under construction that the proposed tenant received assurances as to the tenants that will be open and operating their businesses upon the “Grand Opening Date.” There are variants on this and sometimes landlords will not guarantee that the aforesaid businesses will actually be open for business, merely that the lease will have been executed. That in itself raises questions as to the nature of the signed ease. If an anchor tenant has the ability to terminate the lease if certain metrics are not met that could vitiate any comfort the new proposed tenant may have in that particular anchor tenant.

But that is old hat. No matter how many times we negotiate those particular revisions it is an accepted norm. What about the fashion tenant that may be launching in the United States or may be in an expansion mode looking at different in various malls throughout the United States/ We have seen in recent history the vagaries of the economic marketplace and the havoc that can be wought when certain sectors of the economy are adversely affected. We’ve also seen the effect of e-commerce and web marketing on traditional brick and mortar. Witness the trend towards spectacle being combined with the traditional mall shopping experience.  All of these are having an negative trending effect on the stability of the complexion mall.

How does one protect the fashion brand in a 5 to 10 year lease from dimunition in the quality of the co tenancies? The most direct way is with an evergreen co-tenancy, meaning that assurances must be given as to a certain number of brands having leases in effect throughout the term of the new brand’s tenancy interest in the mall. As an example one might schedule a list of 20 brands that are deemed breakpoints in connection with continued tenancy. Of those 20 brands you might provide that no less than 10  must  at all times  be in operation in the mall. An alternative is to have a provision for comparable replacements  should any of the key tenancies be terminated. Having such a provision ensures that the new fashion client is not the last man standing in a failing proposition.

Needless to say based upon the value of the brand and its leverage negotiating such provision is not a given. But it is something that is a very valuable insurance commodity in this market and should be pursued aggressively . Moreover, a mall owner and operator should intellectually be comfortable giving an evergreen cotenancy because it is marketing its small at a particular tranche in the marketplace and but for such positioning the fashion client would not be entering into the lease. Simply put the landlord has the duty and obligation not really present a vanilla box to the proposed tenant but also to maintain the quality and status of the mall is represented by the tenancies.

Leonard N  Budow, 2 June 2016

Fox Rothschild LLP, Chairman Fashion Group

 

Knocking Copy

While not overly common in today’s age of social media and influencers fashion companies are likely to engage directly or indirectly in fashion comparisons which may result in comparative and pejorative claims against competitors, commonly known as Knocking Copy. So what are the limits of such claims before one crosses the line and in fact what are those lines?
The Federal Trade Commission has a statement of policy that goes back to 1979 but the law is truly driven by the facts, meaning general guidelines only go so far and each copy must be interpreted based upon the actual language of the advertisement. In concept the FTC wishes to ensure that our advertising is not deceptive as to the consumer and not unfair as to the competitors mentioned.
Knocking copy is governed mainly by the Federal Trade Commission and the Lanham Act, Federal trademark Law. In concept the government actually encourages knocking copy since it serves to support competition and inform the consumer. This is limited, however, by the clarity and accuracy of the message. Specifically the applicable standard is that the advertisement must be structured so that the comparisons are clearly identified, truthful and non-deceptive; finally the advertisement must be fair, or in the negative as stated by the FTC “not unfair.”
Deceiving the consumer is the main concern. In summary, and very simple summary, the advertisement will be deemed deceptive if it will most likely, not necessarily, cause the consumer to be misinformed and important in the consumer’s decision making process.
Fundamentally one should have evidence backing up and supporting comparative claims, so it should be more than just our opinion or mere letters of accolade from customers. A true survey would be good.
In addition to the above a company can bring a private right of action especially under the Lanham Act meaning a claim for trademark infringement.
Finally the National Advertising Division of the Council of Better Business Bureaus, Inc. is a self-regulatory body that commands the respect of national advertisers, advertising attorneys, federal and state regulators, and the judiciary. Parties may appeal NAD decisions to the National Advertising Review Board.