With trade tensions, supply chain challenges, increased costs and AI technology impacting the luxury market, luxury brand executives discussed how those trends are affecting their businesses – from brand innovation to IP and copyright issues – at a roundtable in New York, hosted by Blank Rome on 10 November and moderated by firm partners Clara Feldman, David M. Perry, and Shawn M. Wright, in the run-up to Luxury Law Summit New York.
As AI becomes increasingly embedded into the way organisations operate, luxury brands need to be confident any content generated with AI assistance can be protected. To ensure this is the case, the chief legal officer at a brand accelerator business said they tell their teams that any AI-generated content must have a significant human touch, and the input into the AI system has to be original to the business. “If the input comes from something else, then we have to be a lot more careful,” they said.
The legal head at a European clothing brand said their business uses an internal AI system that helps mitigate the risk of IP infringement because it will not be able to draw on existing designs as opposed to a public AI system that may create its outputs based on third-party IP. The company also ensures its design teams document the prompts they use at every stage of the creative journey, because if there is real originality and creativity in the design or pattern, then you have to be able to document it, the legal head said.
In addition to documenting the prompt journey, the global legal director at a beauty brand said it is also important to scrutinise the output separately, because even if the prompt is original, the AI system may inadvertently create something that infringes somebody else’s IP rights. They said they do this by running the output through Google to see if there is anything else similar already out there.
Trade dress issues
Another key area of discussion that is top of mind among luxury brand executives relates to issues around trade dress. An IP technology lawyer at a US law firm said as with AI prompts, it is vital to document trade dress elements if businesses want to secure protection. “Keeping track and showing market connection and distinctiveness over time is very important,” the IP lawyer said.
“There’s a tendency when companies decide there’s a colour or a feature they identify their brand with, that they don’t have a track record, so when they go to protect it, they lack the evidence. My advice to clients is always to start that process now. If there is a feature or colour that is unique to your product, you need to memorialise it.”
This can be a challenge though for some luxury fashion brands if they are bringing out new collections every six months and they are unsure which designs will be a success.
“You never know what’s going to really work, so investing in protecting each design in a collection becomes a real issue,” said the CEO of an independent fashion brand. They said they protect as much as they can, but they also recognise there is only so much protection the business can realistically do.
“Since we’re so heavily invested in design, you have to let go at a certain point,” the CEO said.
Tariff impacts
Like many industries, the US tariff agenda is having a big impact on the luxury market, particularly around supply chains. This has meant brands have either had to negotiate with suppliers to get better deals, move production to new jurisdictions or potentially raise prices for consumers if they are unable to absorb all of the cost increases themselves.
For some brands, it is too early to measure the impact of tariff increases on sales, given that many were reluctant to immediately raise prices. For one luxury brand CEO, this meant holding out until the start of September before adjusting the company’s prices.
“We had no idea where it was going to land because it was all up in the air for so long, the last thing we wanted to do was make a knee jerk response that in two months time was going to change again,” the CEO said. “Internally within our own stores, it’s not that big of an issue, but with third-party wholesale partners, particularly department stores, it becomes a big issue.”
Another fashion brand that had previously relied on Chinese suppliers to produce much of its goods was forced to reconfigure its supply lines and raise prices, though they said price increases were not imposed blindly across the board.
“You have to pick and choose strategically, because you also don’t want to burn any bridges with your consumers,” they said.
Cyber concerns
Finally, another area that is top of mind for luxury brand executives relates to issues around cyber security. One luxury brand CEO said their company had suffered a ransomware attack, which impacted the business to varying degrees based on geography.
“In the US we were backing up everything each night in the cloud, so we got hit, but we didn’t lose everything – other regions were wiped out,” the CEO said.
This experience meant the business took steps to strengthen its IT security, for instance by fracturing its entire infrastructure ecosystem so that even if a hacker did get in, there is only so much damage they can do.
Another luxury brand said aside from investing in cyber defences such as multi-factor authentication, they also focus heavily on employee training.
“You have to make life difficult for hackers so they see they can’t get in easily and so they give up,” they said.
A law firm partner added that it is also important to communicate cyber breach incidents to everyone in the business to limit the chances of another employee clicking on the same malicious link.
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