The turnover of the Finnish textile and clothing industry was EUR 3.95 billion in 2020, and the industry employed 18,000 people in a total of 3,180 companies. The export of textiles and fashion goods out of Finland totalled EUR 648 million.
Finland has a strong track record of technical innovations, and Finnish textile innovators are ambitiously seeking to solve global climate challenges. One example of the Finnish textile industry’s carbon handprint (a measure of beneficial greenhouse gas impacts) is the production of recycled and cellulose-based textile fibres in Finland and the export of the related expertise.
Finns are known for favouring domestic brands, and consumer interest in sustainable business is clearly on the rise. Beloved consumer brands range from classics, such as Marimekko and Andiata, to newer arrivals, such as Makia.
1 . What are the main intellectual property legal tools available to protect fashion products?
Finland has good and comprehensive tools to protect intellectual property rights. Intellectual property rights are considered to be an important part of business, and businesses invest in innovations and the protection of intellectual property rights. In addition to national exclusive rights, such as trademarks, patents, design rights and copyrights, Finland has naturally also adopted the EU's trademark and design right systems, and Finland is a signatory to all of the most important international conventions concerning intellectual property rights.
All intellectual property disputes in Finland are tried in the Market Court. The Market Court has jurisdiction over all application matters and disputes concerning intellectual property rights, as well as precautionary measures related to them. However, the Market Court does not have jurisdiction over criminal cases.
1.1. Trademarks and non-traditional trademarks
A trademark, which can be a figurative mark, a word mark, a unique product package or even a slogan, can be registered for a period of 10 years in the Trademark Register kept by the Patent and Registration Office. The registration is renewable without limitations.
If a trademark has not been used for five years, the registration can, on application, be declared null and void in an administrative revocation procedure operated by the Finnish Patent and Registration Office. The claimant can choose whether to file the revocation or invalidation action to the Office or the Market Court. The protection of a trademark being used or to be used in Finland can also be obtained by international registration in accordance with the Madrid Protocol or as a European Union Trademark.
Colour marks. Some colour marks have been registered in Finland, as a few well-known Finnish brands have registered their iconic brand colours.
Black and white marks. New black and white trademarks filed after 1 May 2019 cover only the black and white versions of the mark. Existing trademark registrations or applications filed before continue to cover all colour variations of the mark in question.
Shape marks, unique product package. At least to date, shape marks have not been applied for in Finland in significant numbers. For example, perfume packages and product packages have been applied for as trademarks. Protecting the shape of a product as a trademark could be challenging, as it is difficult to indicate commercial origin based solely on the shape of a product. Trademark protection is, thus, possible, but a design right could often be a more functional form of protection. For example, the shape of cuts used in diamonds would not be accepted as a trademark but could be protected as a design right.
Unregistered marks. Exclusive rights to a trademark can also be obtained in Finland through establishment. A trademark is deemed to be established if it is generally known in Finland, i.e. the mark has been used in Finland and is generally known among its target group and said target group considers the trademark to be a distinctive mark of the holder. Thus, it is not enough that the mark is known to exist, but it must be known as a distinctive mark of a specific company. Protecting an established trademark is as strong as that of a registered one, but invoking an established trademark is often problematic and requires that the use of the mark has been carefully documented and also often requires market research.
Patterns. It is possible to protect patterns, but a design right could often be a more functional form of protection.
Slogans. It is possible to register a slogan as a trademark if the mark in question is distinctive as regards the goods and services the mark is being applied for. With respect to the distinctiveness of slogans, the Market Court has stated, for example, that with the exception of the evident promotion purpose, it is possible that a slogan would lack components based on which the relevant target audience could easily and immediately remember it as a distinctive trademark for its services.
1.2. Design as an alternative or addition to TM registration
Design rights provide extensive opportunities to protect the details of fashion products in particular, but design rights need to be taken into account as a strategic choice at an early stage in order to avoid losing the novelty of the design right.
The design of a product can be registered in the Design Register provided by the Finnish Patent and Registration Office. Registration of a design is valid for a period of five years from the date upon which the application is filed, and it may be renewed for four further periods of five years. Thus, the maximum period of protection in Finland is 25 years. The Community designs are also valid in Finland.
Whereas a trademark is a commercial symbol and functions best to protect the main brand itself or highly logo-centric products, design rights are an excellent and important form of protection, particularly in the fashion industry. Design rights are a functional form of protection for new and distinctive garments and accessories and can, for example, protect a pattern or more distinctive outward appearance of a product. A design element that is repeated in different fashion products can also be protected by a design right as a detail component.
Generally speaking, one conceivable approach would be that designs that are considered a brand’s classic garments should be registered, but that the protection provided by an unregistered design would be enough for changing lines and collections. Within the EU, the protection provided by an unregistered design, which is particularly well-suited for the needs of the fashion industry, extensively covers known designs and patterns for three years.
In Finnish court practice, the protection granted by designs has not been interpreted to be very strong. Nevertheless, no conclusions on the functionality of this form of protection can be drawn from Finnish court practice, because there is relatively little case law on design rights, as most cases are settled and exceedingly rarely reach the Market Court. Design rights can be very effective at protecting, for example, get ups and the appearance of business premises, but this form of protection is sadly completely underutilised in Finland, and Finnish companies make very little use of it, due to the heightened significance of, for example, copyrights and trademarks.
1.3. Copyright as an alternative or addition to TM registration
The Finnish Copyright Act (404/1961) provides protection for material created and exceeding the copyright threshold of originality for 70 years from the death of the creator. Shorter protection is provided for neighbouring rights. No registration is available for copyrights.
Different examples of copyright protectable works are listed non-exhaustively in the Copyright Act. Therefore, the starting point of local copyright legislation is that any creation which is original and independent enough enjoys copyright protection. Consequently, whether the work is a piece of jewellery or a piece of clothing, copyright protection is triggered if the threshold of originality is exceeded. Naturally, this threshold of originality varies depending on the type of work in question.
Traditionally, the required threshold of originality has been set relatively high for everyday art and fashion pieces technically precluding copyright protection of everyday clothes such as regular shirts or T-shirts. From an enforcement point of view, a good way to keep copycats away is to per se use the copyright protected art content on the products and fabrics or, for example, on a regular T-shirt. Copyright is especially suitable for haute couture and other clothing, the primary purpose of which is not its usability but instead its aesthetic nature.
The design right is undoubtedly a more traditional form of protection for design and fashion products. The possible design protection, or lack thereof, does not, however, preclude copyright protection. Article 17 of the European Designs Directive 98/71/EC provides that any design protected by a registered design is also eligible for copyright protection from the date the design was created or fixed in any form, following that there may be a cumulative effect between design right and copyright.
It is also worth noting that intervening in violations through design rights or trademarks is always easier than invoking copyright, as the existence of a copyright is always ultimately determined by the Market Court once the dispute is already pending.
1.4. Any other pertinent IP rights?
1.5. Summary of additional IPRs
IPR in Finland
Time and modalities for granting
Pros and cons in the fashion sector
20 years from the date of application.
The average processing time of patent application is 2.5 to 3 years.
Patentable invention must be:
Usable and strong exclusive right particularly for new inventive compositions such as fabric solutions used e.g. in sports clothing.
Patenting takes time and financial resources. Not particularly suited for the fashion industry, where technical inventions are not in the core business.
10 years from the date of application.
The average processing time of application is 2 to 3 months.
Faster and cheaper than patents. Used for inventions that do not fulfil the requirements for actual patents.
Any person may request that the registration of the utility model is declared invalid in whole or in part.
Trade secrets provide exclusive protection as long as the information does not become public.
On the other hand, the scope of trade secrets does not extend to a third party independently coming up with the same idea.
As per agreement with the registrar.
Domain names are registered on a first come, first served basis, but the applicant must ensure that the domain name does not include a third party’s registered trademark.
A domain name registrar registers the domain name. The duration of the process varies typically from 1 to 6 days.
Registration is easy and cost-effective.
New domain names may take time to hit any high search results.
2 . Beyond intellectual property: what contractual arrangements are useful in manufacturing, distributing and advertising fashion products?
2.1. Manufacturing fashion products
License agreements and Non-Disclosure Agreements (NDAs). Finland is a civil law country, and as a general rule, Finnish law does not often require formalities, or that statutory provisions be incorporated into agreements, especially in the case of business-to-business agreements, such as license agreements.
Balanced agreements and the effective management of intellectual property rights create a solid foundation for successful licensing partnerships. Finnish fashion and home textile companies known for elements such as their beloved characters, high-quality products and bold colourful prints have successfully expanded their business outside of Europe through licensing deals with carefully chosen partners, particularly in Asia.
Since idea and concept cannot be protected by any intellectual property rights as such under Finnish law, the best way to secure one’s idea, concept or, for example, the specifications of an individual product would be a solid non-disclosure agreement with parties to whom the information is disclosed.
Subcontract agreements / in-house manufacturing. Agreements with subcontractors should include clear rules on how subcontractors can use the main brand and how they can bring up the cooperation. It is also of primary importance to agree on confidentiality, as subcontractors often gain access to business secrets.
2.2. Distributing fashion products
Agency agreement. Agency agreements are governed by the Finnish Act on Commercial Representatives and Salesmen (417/1992), which is mandatory law to parties. Therefore, parties cannot agree otherwise on some provisions of the act to the detriment of the commercial representative. One of such mandatory provisions that cannot be deviated from against the agent is the notice period.
The minimum notice period for an agency agreement valid until further notice is one month in the first year, two months in the following year, three months in the following year, and so on, but it is increased to a maximum of six months. Notice periods shorter than these may not be agreed in the agency agreement, and if agreed, they are invalid.
According to the act, an agent is also entitled to compensation after the termination of the agency agreement in certain situations. Upon termination of the agency agreement, the agent shall be entitled to compensation from the principal if and to the extent that the agent has acquired new customers for the principal, or significantly expanded the business with previous customers, and this confers a significant advantage on the principal upon or after the termination of the agency agreement, and the compensation may be considered reasonable in the light of the commissions lost by the agent under the contracts and all other relevant factors.
Selective distribution online in high-end fashion and trademark protection. E-commerce has truly revived the discussion around selective distribution also in Finland. The Commission has also recently had an increased focus on vertical restrictions and currently has an ongoing evaluation process for the new VBER, as the current one expires in May 2022.
As a general rule, all distributors may sell their products via online sales, as well. The supplier may require, however, that the distributor has one or more brick and mortar shops or showrooms where customers can see the products as indicated. However, as the Coty case (C-230/16) provides, the manufacturer or supplier may, under certain conditions, prohibit a distributor in its selective distributor system from using third-party market platforms in an externally identifiable manner, when seeking to ensure a luxurious product image for the products.
The updated VBER and related guidelines are welcomed also in Finland, as companies would benefit from more up-to-date and agile guidance.
Co-branding and co-marketing. According to the most common definition, co-branding refers to the combination of two or more brands into a single unique product or service. Co-branding has become more common in Finland, and Finnish fashion brands have undertaken interesting co-branding projects with international partners over the past few years.
The foundation for successful co-branding is careful planning: what are the reasons and goals of the cooperation, are the brands compatible and what is the target group of the end product? A written agreement is vital, and a co-branding agreement should include at least clear rules for the distribution of royalties as well as a brand manual for how to use the marks together. Furthermore, the agreement must have a functioning mechanism for ending the cooperation quickly in case one of the partners acts in a way that causes serious brand harm to the other.
2.3. Advertising fashion products
Employing fashion models. The fashion industry is by far the largest employer of fashion models, and agreements are often entered into through modelling agencies. It is important for companies to remember to sufficiently agree on the use of the photos of the model, as established national court practice holds that the use of an identifiable person in marketing and for commercial purposes requires the express consent of the person in question, as a photo of an identifiable person is always assumed to be personal data.
In Finland, the challenges of the modelling industry have not been addressed through legislation, and the focus has been on industry self-regulation.
Social media, influencers and brand ambassadors/celebrities. Social media marketing is a very powerful tool in customer engagement and reaching the desired target group. Influencer marketing is subject to the provisions of the Finnish Consumer Protection Act (38/1978) concerning good marketing practices and improper marketing (from the perspective of the Consumer Protection Act, all activities that seek to influence consumers commercially are essentially considered marketing).
It is vital for companies to remember that they ultimately bear the legal liability and brand risk for marketing through influencers. Any defects in the influencer’s post, such as the failure to disclose the commercial relationship, is directly attributable to the trader. A company can free itself from liability if it can prove that it gave the influencer sufficient instructions on how to carry out the marketing. This means that it is particularly important to draft an agreement on influencer cooperation that makes the obligations concerning the identification of advertising sufficiently clear. It is also advisable to include some clear examples on, for example, how to mark a post as an advertisement and which hashtags to use to make sure the influencer is instructed sufficiently.
From a brand protection point of view, one of the biggest problems in influencer marketing is the possible brand damage, as the influencer marketing may also become a viral platform for harmful opinions if things go wrong. To avoid that, it is recommendable to have sufficient remedies incorporated in the influencer agreement.
Guidelines on transparency in marketing vary a lot by region. This is problematic since social media platforms are global, influencers’ posts may reach audiences from many different countries and even continents. In Finland, the Finnish Consumer Ombudsman has published Guidelines for Influencer Marketing in Social Media (2019) widely referred to in local discussion and practice.
Advertising standards, relevant authorities and advertising practice. There are no specific rules applicable particularly in the fashion industry. General Finnish consumer protection law and the guidelines and praxis of the local Consumer Ombudsman are generally complied with.
3 . What regulations govern online marketing and how are the rules enforced?
General Finnish consumer law regulations govern online marketing.
The EU’s Regulation on cooperation between national authorities responsible for the enforcement of consumer protection laws (EU 2017/2394) has been implemented in Finland through new national provisions. Among other things, the new provisions expand the Finnish Consumer Ombudsman’s toolkit for intervening in various violations of consumer protection legislation (e.g. hidden or false advertising).
The most relevant change is a new administrative sanction, a penalty payment that can be imposed by the Market Court based on a proposal of the Consumer Ombudsman. In addition to penalty payments, the Consumer Ombudsman now also has the power, for example, to order content on websites to be removed or block or restrict access to websites.
3.1. Consumer protection regulations
The requirement of the Consumer Protection Act’s for the identification of marketing has two dimensions. First, the commercial purpose of the marketing must clearly be shown, in addition to which it must be clear on whose behalf the marketing is carried out. Further, marketing may not be misleading.
The purpose of the identification requirement is that consumers can see when and on whose behalf someone attempts to influence them commercially. This requirement applies to all marketing regardless of its method. The identification of marketing has given rise to a great deal of debate both in Finland and abroad. The Council of Ethics in Advertising of the Finland Chamber of Commerce has issued numerous (non-binding) statements on the identification of marketing on, for example, social media. One statement issued concerned the identification of an advertisement on the Instagram Story feature. The Story post in question was marked as commercial cooperation by putting text in the upper corner of the post. However, this text was partially covered by the influencer’s username and profile picture. The white font of the text also partially blended in with the background, which hindered identification. The ad was not sufficiently identifiable.
The identifiability of advertising is always subject to an overall assessment. For example, using the Instagram Story feature emphasizes the requirement for clarity, because the feature uses quickly changing pictures and videos. The fact that a post is an advertisement must be apparent, and the name of the advertiser must be clearly marked on advertisements published using the feature in such a way that they can be seen at a glance. Therefore, advertisers have to know their environment, and it is essential to know what platforms are being used for advertising and what the influencer’s target audience is like.
Additionally, the overall impression created by marketing cannot be misleading. For example, it would be misleading to say, ‘we have doubled the amount of recycled material’, if the original amount of recycled material in the product was negligible.
3.2. Physical store and online store layout
The world is becoming more and more visual, and the devices used to view and consume information no longer differ from one another very much, with the differences often being found more in user interfaces and applications.
Online store elements, such as the general visual appearance, can be protected through design rights. Many companies today have also developed their own iconography for their online stores, which could also be effectively protected by design rights. Some companies in Finland have protected their icons, but the full potential of this form of protection has not been tapped in this respect either.
4 . What are the most relevant unfair competition rules for fashion businesses and how do the Courts interpret and enforce these rules?
Unfair competition between business enterprises is prohibited by the Unfair Business Practices Act (1061/1978) providing that no conduct contrary to good business practice or otherwise unsuitable for another trader may be used in the course of business. The act also forbids an enterprise from using improper and misleading statements with regard to its own or another enterprise’s activities that would affect the demand for the product or service, or cause damage to the other party’s business enterprise. The harmful conduct of the competitor can be ruled unfair by the Market Court and the act is well-known and used by specialized law practitioners. In several decisions, the Market Court has established that, for example, a product name or a distinguishable package or label not protected by industrial property registrations may only be imitated by competitors as long as the imitation is not misleading and not contrary to equitable business principles. If these requirements are not met, the practice constitutes an unfair business practice.
The Trade Secrets Act (595/2018) provides that no one is allowed, without permission, to obtain or attempt to obtain information regarding trade secrets. The act also concerns the use of business secrets in certain situations and provides a certain amount of protection against the disclosure of illegally gained information, but it does not protect from the disclosure of confidential information between two independent parties. Hence, trade secrets must be protected by using non-disclosure agreements or clauses. As there are no statutory limits for the length of the non-disclosure, perpetual clauses can also be used.
It is possible and quite customary to use liquidated damages, or more accurately, contractual penalty clauses concerning the disclosure of confidential information. It should be borne in mind, however, that the court can adjust the amount of liquidated damages if it finds the amount of damages excessive and unfair to the party obligated to pay the damages.
5 . Is there any regulation specifically addressing sustainability or ESG (Environmental, Social and Governance) in the fashion industry?
Sustainability has been a hot topic in the fashion industry and amongst consumers in Finland over the last few years. A recent documentary series on the garment industry and sustainability called ‘Blood, Sweat and T-shirts’ (Verta, hikeä ja T-paitoja) just won the esteemed Golden Venla prize in the documentary-style reality program category. Sustainability is considered to be an important part of modern business, good management and risk management.
The production chains of Finnish fashion brands are typically long and global. Some companies still have production in Finland, but the structural change that the industry has undergone means that operations in Finland are focused on the extreme ends of the chain: product development, design, procurement as well as the management of sales and marketing. With respect to sustainability, the network that needs monitoring is often extensive. Local companies also tend to find communicating on sustainability challenging due to, for example, the challenge of the scale as companies measure their sustainability in many different ways.
The use of sustainability and environmental claims in marketing has also increased significantly during the recent years. The discussion on this topic and questions, such as what it means that a product is sustainable, has been vivid. One example of the local discussion was when a Finnish clothing brand launched a ‘100% sustainable clothing line’ in September 2020. The line did not include a single piece of clothing, and the webstore and store were empty. The company wanted to make the point that it is impossible to make completely sustainable clothing.
Sustainability claims can be more than just verbal expressions. A symbol or other graphic presentation referring to an environmental feature of a product or package could also be considered such a claim. This being the case, companies should not add symbols of their own devising to, for example, product packaging if they could give the misleading impression that the product has an official environmental or sustainability certificate.
With green claims having become more common, it is noteworthy that the ICC’s new marketing rules published in 2019 contain more detailed rules applicable to marketing with environmental and sustainability claims. According to the ICC guidance, marketing should not make unconditional use of expressions such as ‘environmentally friendly’, ‘eco-safe’, ‘green’, ‘sustainable’, ‘climate-friendly’ or similar statements that communicate that the product or service has no negative environmental impacts or that the impacts would be positive. Using such statements always requires sound evidence. Furthermore, claims referring to sustainable development should not be used until there are ways to measure or confirm sustainable development.
6 . Customs monitoring: do any special import and export rules apply to fashion products?
Counterfeits imported into Finland are rarely intended for sale in Finland. Most of the counterfeits found by the Finnish Customs arrive from China and are on their way to Russia, but this has changed in recent years, due to global politics and logistics routes, and Finland no longer being a real transit country.
With respect to the fashion industry, the most common product categories of counterfeits have been clothes, footwear and bags. When Customs stops goods that it suspects to be counterfeit, it sends a notification to the trademark holder. However, customs enforcement is time consuming and expensive, and often requires that packages be physically opened, which poses challenges to effective enforcement.
In 2020, Finnish Customs stopped approximately 120,000 articles suspected to be counterfeit goods, their worth amounting to approximately EUR 215,000.
7 . Frequently Asked Questions
What is the governing law?
The contracting parties are free to agree on what law will govern their agreement. A clause requiring the Finnish court to apply foreign substantive law is valid under Finnish law. The Finnish courts will apply foreign law in trying a case as long as invoking foreign law would not be considered against public order.
Finnish courts of law do not usually know the substance of foreign law, therefore it would be the responsibility of the parties to prove the substance of the foreign law.
Such proof could be very expensive as it often requires an extensive amount of translation and expert testimony to disentangle the nuances of foreign court practice. If the substance of foreign law remains unclear to the court, it will apply Finnish law. Procedural issues are determined solely by Finnish law.
Does a trademark license need to be recorded with the Trademark Office? If not, is there any benefit to doing so?
The license does not have to be recorded, but this is possible. The license can be recorded already at the application stage or any time during the term of registration. Recording a license makes it public: a non-registered license will not affect a third party who has obtained the trademark right in good faith. The application to record a licence can be submitted either by the trademark owner or by the licensee.
What should be taken into account when establishing online stores?
There are some key points an online retailer should be aware of, the first of which is that online selling is subject to extensive disclosure obligations as it is considered distance selling under the Consumer Protection Act. Obligations relating to information and consumer rights apply to these operations, and they may not be deviated from to the detriment of consumers. Further, all necessary information to the consumer as regards the goods being sold (e.g. the information about the seller, the price of the product with tax, and terms for the delivery) should be clearly visible and accessible to the consumer.
In the context of fashion, it is important for an online retailer to develop functional customer complaint procedures. Moreover, the consumer is entitled to a mandatory 14-day right of withdrawal when purchasing from online stores. This right may not be derogated from, and the consumer must be informed about the aforementioned right.
An online store does not need to be maintained in Finnish or Swedish. Nonetheless, if the online store is accessible in one of these languages, it may be worth considering to provide customer service in Finnish or Swedish. If the online store is directed at Finnish consumers but customer support is not provided in one of the aforementioned languages, the consumer should be informed about this clearly and transparently.
Finally, an online store should have comprehensive, clear and transparent terms and conditions for orders from the website. These terms and conditions should take into account all relevant consumer protection provisions. In addition, also data protection elements should be considered.