In 2024, courts across the US will hear and resolve key legal questions affecting the fashion, apparel and beauty industry. This term, the United States Supreme Court is expected to decide a key case at the intersection of First Amendment and trademark law examining procedure at the United States Patent and Trademark Office (USPTO). Elsewhere, federal courts will preside over intellectual property disputes affecting some of the biggest brands in the fashion and beauty fields in areas including fast fashion, trademark enforcement, resale, sustainability and more.

Vidal v. Elster: trademark examination

By summer 2024, the US Supreme Court will decide an as-applied constitutional challenge to a longstanding rule in trademark examining procedure – namely, that applicants must receive the written consent of any individual whose name, portrait or signature appears within the mark itself. Consistent with this rule, the USPTO refused a trademark application filed by Steve Elster, the respondent, for “TRUMP TOO SMALL”, covering shirts. The Trademark Trial and Appeal Board affirmed the refusal, but the Federal Circuit reversed. The Supreme Court heard oral arguments on 1 November 2023.

Elster argues that the application of the relevant statute, 15 U.S.C. § 1052(c), to his case is unconstitutional as an undue burden on protected speech. This approach is only the latest in a series of First Amendment-driven attacks on the Lanham Act, which resulted in the invalidation of related provisions in Matal v. Tam, 582 U.S. 218 (2017), and Iancu v. Brunetti, 139 S. Ct. 2294 (2019). In Vidal, Elster argues that the “names clause” of the Lanham Act has the “intent and effect” of disfavouring ideas and suppressing unwanted speech. The names clause has, as Elster argues, created a shield for powerful people to block the use and registration of trademarks that criticise them. The Federal Circuit agreed, holding that, as applied here, the names clause involves content-based discrimination that cannot pass strict nor intermediate scrutiny.

The petitioner, Katherine Vidal, argues that a more lenient standard of review should apply. She believes that the names clause merely imposes a “condition” on a government “benefit” – here, the granting of federal trademark registration. She also cites at least three reasons why the names clause serves reasonable government interests. Chief among these reasons is the bedrock principle of avoiding a likelihood of consumer confusion about an individual’s affiliation with a product. As Vidal argues, registering an individual’s name without the individual’s consent will provide federal support for a mark that inherently confuses the public about the owner’s affiliation with the individual.

Update: In the Court’s opinion, issued the same day that this Article was first published, a five-justice majority held that the Names Clause passes First Amendment scrutiny due to the “history and tradition” of similar restrictions in common-law and early American trademark jurisprudence. Unlike the restrictions in Matal and Iancu, the Names Clause imposes a content-based, but viewpoint-neutral, bar to U.S. trademark registration. And while content-based regulations of speech are “presumptively unconstitutional as a general matter,” according to the Court, such regulations are inherent in trademark examination. There is a rich historical pedigree of restrictions on the unauthorized use of another’s name, the Court concludes, which tracks the underlying goal of trademark law to preserve the source-identifying function of a party’s mark.

Ultimately, all nine justices agreed that the USPTO was right to refuse registration of “TRUMP TOO SMALL” without Donald Trump’s written consent. The case was 9-0 in favor of the government. But, the justices splintered on the rationale supporting the decision. While Justice Thomas cobbled together a five-justice majority for an argument rooted exclusively in history and tradition, Justices Barrett, Sotomayor, Kagan, and Jackson framed the issue differently. Justice Barrett, in her concurrence, argued that the legislative history of the Lanham Act provided support for the Names Clause apart from its debatable historical underpinnings. Justices Sotomayor, Kagan, and Jackson reached the same conclusion through First Amendment principles. They argued that the Names Clause is constitutional as a proper, content-based, viewpoint-neutral restriction on speech.

Unlike Matal and Iancu, the Court’s decision in Vidal preserves the status quo and is unlikely to lead to dramatic changes in trademark examination. As the first in the trilogy to reject the petitioner’s First Amendment challenge, Vidal may signal to would-be litigants that the justices have soured on constitutional critiques of the Lanham Act. Interestingly, though, the case explicitly leaves unresolved the constitutionality of a viewpoint-neutral, content-based restriction in the field of trademark examination without the “historical pedigree” of the Names Clause. Because of the Vidal majority’s exclusive reliance on this history, the next challenge might well come out the other way.

Chanel, Inc. v. What Goes Around Comes Around, LLC: luxury reselling

On 6 February 2024, a New York jury unanimously sided with luxury fashion brand Chanel in its years-long trademark infringement case against noted reseller What Goes Around Comes Around (WGACA). As counsel for WGACA noted immediately after the verdict, the case is not over – the court has yet to rule on post-verdict motions. In addition, Chanel is seeking additional equitable remedies including a permanent injunction and disgorgement of WGACA’s profits.  

This closely watched case operates at the intersection of high fashion and commercial resale. Chanel is a world-renowned luxury fashion brand with annual sales well into the hundreds of millions of dollars while WGACA describes itself as “the leading global purveyor of authentic luxury vintage accessories and apparel, including Chanel accessories and apparel”. In the lawsuit and at trial, Chanel argued that WGACA’s use of Chanel’s trademarks on its website and in advertisements and promotions was likely to mislead consumers into thinking that Chanel had authorised WGACA’s commercial activities. Chanel also alleged various violations under the Lanham Act and the New York laws of unfair competition and false advertising. WGACA argued that the doctrine of nominative fair use shielded it from liability. Among the many issues considered, Chanel argued that WGACA could not verify the authenticity of its Chanel products, despite WGACA’s declarations otherwise, because WGACA vetted the products itself.  

It is too early to identify the full impact the jury verdict may have on the secondhand market for luxury fashion, but resellers and brand owners will likely have strong reactions to the decision.

The Shein cases: a battery of IP issues

Singapore-based Shein is a fast-fashion retailer that rose to international prominence during the Covid-19 pandemic through targeted marketing on popular social media platforms such as TikTok and Instagram. Critics have attributed Shein’s success to manufacturing strategies and promotional campaigns that capitalise on younger audiences’ attraction to trendy, low-cost fashion. In 2022, at its peak, Shein received a valuation of approximately $100bn. It is expected to launch an initial public offering this year.

Shein’s explosive growth has tapered off in recent months, amid questions about conditions in its Chinese factories and a battery of lawsuits accusing it of copyright infringement, unfair competition and other illegal business practices.

In 2021, Hennes & Mauritz (H&M) filed a complaint in Hong Kong alleging that Shein had infringed the copyright that H&M holds in several of its most popular designs. More recently, in 2023, Shein was hit with similar lawsuits in the US from the California luxury brand Chrome Hearts, and from its direct rival Temu. Then, in January 2024, the Japanese retailer Uniqlo filed a copyright claim in Tokyo district court alleging that Shein had copied the design of Uniqlo’s viral mini shoulder bag. Each of these lawsuits is pending.

These cases, which are but a representative sample of those filed against Shein in recent years, underscore not only the intellectual property protection issues raised by fast fashion, but Shein’s white-knuckle business strategy that arguably compels a “race to the bottom”, as some commentators have noted with concern. Shein, which first opened its operations in China, has benefitted from favourable tax treatment to offer its products in the US at low prices. While H&M argues that Shein has engaged in unfair trade practices, some critics say its lawsuit represents an anti-competitive attempt to bully Shein out of the American market entirely. Among younger consumers, Shein represents a rare entry point into the fashion market without the usual obstacles of price and style. In doing so, it offers an alternative to the secondhand markets that have flourished recently, too. The outcome of these lawsuits may determine if these developments were well earned or, if they came illegitimately through unfair and illegal business practices.

Nike, Inc. v. Lululemon USA (Southern District of New York): patent advantage

In January 2023, Nike sued Vancouver-based apparel retailer Lululemon over allegations of patent infringement for the second time in as many years. After Lululemon’s successful entry into the footwear field in early 2022, Nike ramped up its efforts to defend its market position and protect its footwear designs. In this case, Nike contends that Lululemon ripped off certain Nike ‘Flyknit’ patents when it created Lululemon’s Chargefeel Mid, Chargefeel Low, Blissfeel and Strongfeel athletic shoes.

The Flyknit technology at the centre of this lawsuit has been the subject of other cases in recent years. In 2018 and 2022, Nike sued Puma North America, Inc. and Adidas respectively for patent infringement of the Flyknit shoe ‘uppers’, specifically the part of the shoe that covers the top of the foot. That same patent forms the basis of the present suit against Lululemon. Additionally, while the Lululemon case has been pending, Nike filed additional complaints against long-time rivals New Balance and Skechers for infringement of the Flyknit technology. The Puma and Adidas cases have settled, while the cases against New Balance and Skechers are ongoing.

In a public comment, a Skechers spokesperson alleged that Nike has been filing these lawsuits to flex its market power “rather than compete in the marketplace”. Over the past decade, Nike has allegedly spent upwards of $100m creating and refining its Flyknit technology; mesh-top athletic shoes, the embodiment of the technology, have become ubiquitous. Yet Nike’s victory in this suit is not a foregone conclusion. Lululemon and Skechers have both indicated their intent to challenge Nike’s exclusive rights in the Flyknit patents on multiple grounds. If either party succeeds, Nike stands to lose a key market advantage, and the floodgates will open for third-party footwear companies to incorporate Flyknit-like technology into their own designs.

Rhode-NYC, LLC v. Rhodedeodato Corp.; more reverse confusion

On 5 March 2024, Judge Hellerstein of the Southern District of New York re-opened a trademark infringement suit against Hailey Bieber and her fashion corporations, after the parties failed to settle. The dispute began in 2022, when Bieber launched her skincare line ‘rhode’ over the opposition of Rhode, a fashion label from Los Angeles in operation since 2014. The latter company has owned RHODE-formative federal trademark registrations since 2017, but argues here that ‘reverse confusion’ is bound to result from Bieber’s operation and promotion of ‘rhode’ products.

Reverse confusion occurs when a large junior user saturates the market with a trademark arguably similar or identical to that of a smaller, senior user. In the usual likelihood-of-confusion case under 15 U.S.C. § 1114(a), the goods and services of the junior user are most likely to be confused with those of the senior user. In other words, consumers are likely to associate the junior user’s products with the senior user. In the case of reverse confusion, the opposite is true; the senior user is likely to be swallowed by the junior user, given the latter’s prominence and notoriety. In this case, there is no dispute that Rhode-NYC, LLC, is the senior user. However, due to the notoriety of Hailey Bieber and her brands, Rhode-NYC argues that the use and registration of ‘rhode’ will compromise its market position, despite its priority of use.

The revival of this case appears to signal that the parties have reached an impasse in settlement negotiations. It may even indicate that Rhode-NYC has reconsidered its seniority and lost the incentive to negotiate entirely. That position would place Hailey Bieber and her companies in a vulnerable position, and jeopardise the success of the ‘rhode’ brand that has already amassed millions of followers worldwide.

Benefit Cosmetics, LLC v. E.L.F. Cosmetics, Inc.: reverse confusion

Among other products, California-based Benefit Cosmetics, LLC (Benefit) markets a line of mascara under the name ‘Roller Lash’. The Roller Lash mascara features a distinctive pink-and-black colour scheme and uses a brush covered by the trademark HOOK ‘N’ ROLL. In January 2023, Benefit became aware that its competitor, e.l.f. Cosmetics, Inc. (E.L.F.), was marketing a mascara product featuring a pink-and-black colour scheme under the mark LASH ‘N ROLL. The next month, Benefit filed a complaint in federal court alleging that E.L.F. had violated Benefit’s rights in its distinctive trademarks and trade dress.

While the case has received little attention from the media, it offers valuable insight for businesses looking to enforce common law trade dress rights. Benefit does not own a state or federal registration for its Roller Lash trade dress; it relies on common law rights to which it claims ownership since 2015. Despite the “intensely factual nature of unregistered trade dress claims”, as the court put it, Benefit overcame E.L.F.’s partial motion to dismiss, sufficiently articulating its claimed trade dress and alleging enough facts to support a claim of infringement. In particular, the court found that Benefit had plausibly alleged, through seven years of continuous investment and marketing, that its trade dress had acquired secondary meaning, despite E.L.F.’s contention that that inference was unwarranted.

The court’s order on Benefit’s trade-dress claim provides a useful framework for companies – especially companies in the cosmetics industry – looking for additional enforcement tools for their intellectual property. Depending on how this dispute resolves, it may also provide a data point for cosmetics brands to use in their marketing and design strategy; a win for Benefit would signal that these brands should be especially wary of designs that look similar to those of their competitors, even if the imitation is unintentional.

Jeffrey Green is a Foley partner and co-chair of its fashion, apparel and beauty industry team. He is based in New York and can be reached at [email protected] or +1-212.338.3454.

Foley associate Owen Miklos is part of the firm’s trademark, copyright and advertising practice. He is based in Milwaukee and can be reached at [email protected] or +1-414.297.6096.