June 10th, 2016

Los Angeles and San Francisco Daily Journal

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Fashion lawyers have seen textile copyright litigation increase over the past five years – Los Angeles and San Francisco Daily Journal

Fashion lawyers have seen textile copyright litigation increase over the past five years

By Amanda Schallert

Plaintiffs’ firms continue to score big in textile copyright infringement suits in the Central District courts in the first half of 2016, seeing a wider variety of plaintiffs and high judgments as corporate retailers ramp up efforts to cover their bases.

Fashion lawyers point to the successes of Venice-based Doniger/Burroughs as the reason textile copyright litigation has increased over the past five years, due to the firm’s six-figure jury verdicts and the sheer number of complaints it churns out.

Other small firms have also started appearing in the arena, following a lucrative trend, and attorneys on both sides indicate it’s becoming more important for manufacturers to buy from reputable fabric vendors and have aggressive indemnification provisions.

Doniger/Burroughs had its most recent public win in May when it reached a $413,000 settlement against Urban Outfitters, Inc., Anthropologie and The TJX Companies, Inc. during trial. Classical Silk Inc v. Dolan Group, Inc. et al, CV14-9224 (C.D. Cal., filed Dec. 1, 2014)

And the firm has been busy the past month, filing at least 15 new cases against retailers, accusing them of selling clothing that infringed on client copyrights, said Stephen M. Doniger.

Textile lawsuits migrated with the fashion industry from New York City to L.A. Last year about $43 billion in apparel imports were set to enter the city’s ports, well-situated nearer to Asia, according to the CIT Group Inc.’s 2016 L.A. Area Fashion Industry Profile.

The Central District of California is also prime for copyright litigation in general. From 2011 to 2015, it saw about 2,500 cases, or 26 percent of U.S. copyright litigation, according to a Lex Machina report from last August.

Of those cases, 417 came from four textile manufacturers represented by Doniger/Burroughs, namely, Star Fabrics, Inc., Unicolors, L.A. Printex Industries Inc. and United Fabrics. Those four companies have yet to show clear signs of diminishing caseload in 2016, said Brian C. Howard, legal data scientist and director of analytics services at Lex Machina.

For example, from the start of 2016 to the end of May, Star Fabrics has filed 34 suits. In 2015, the company filed 80 and in 2014 it filed 56, so it’s still operating at a high level compared to some previous years, Howard said.

Big retailers such as Ross and TJX saw the most litigation from 2011 to 2015, according to the report. Ross has had 30 cases this year and 61 last year, Howard said.

There’s definitely merit to many of the cases, said Robert A. Darwell, a Sheppard, Mullin, Richter & Hampton LLP partner and defense counsel.

“On the other hand, given all of the decades and centuries of people wearing clothes, there’s kind of only so many ways that you can do animal prints or a leopard print or a zebra type of pattern,” Darwell said.

The Copyright Act requires a work to be sufficiently original. So, while a simple geometric shape would not be entitled to protection, a combination or arrangement of unprotectable elements in a textile could constitute a protected design.

For its part, Doniger/Burroughs has prompted more litigation by showing that it pays to sue. In November 2014, a jury awarded Novelty Textile, Inc. $650,000 after it sued Hot Shot HK and Wet Seal, accusing them of sampling a fabric design and then copying it and reproducing it through a Chinese manufacturer. The retail sales in the case were less than $200,000. Doniger/Burroughs and another recurring L.A. plaintiffs’ firm, Jeong and Likens LC, represented Novelty, and the Adli Law Group PC in L.A. represented Wet Seal. Novelty Textile Inc v. The Wet Seal Inc et al, CV13-5527, (C.D. Cal., filed July 31, 2013)

“Once that one hit, people were like ‘Wow, that’s a big number,'” said Stephen Y. Ma, an Early Sullivan Wright Gizer & McRae LLP partner and defense counsel.

Doniger/Burroughs has been filing fewer claims so far this year, but said the number of clients they serve has gone up from about five in 2009 to more than 20 now.

There’s some consensus among defense counsel that 9th U.S. Circuit Court of Appeals and Central District case law favors plaintiffs in damages and copyright registration disputes. In these lawsuits, attorney fees can also run from $200,000 to $400,000, lawyers said.

F”Copyright favors the copyright claimant, particularly in fashion cases … But defendants do have a number of defenses at their disposal to obtain outright dismissal or limit exposure and position the case for settlement,” David Martinez, co-chair of the retail industry practice group at Robins Kaplan LLP and defense counsel, said in an email.

For example, Martinez in April won a motion for summary judgment for a women’s apparel retailer accused of copying a chevron print textile design. In contrast with the L.A. Printex case, where registration was considered a minor technical error, the court found Urban’s copyright registration invalid because it had published parts of its “unpublished collection” while trying to sell them before the registration. Urban Textile, Inc v. The Cato Corporation et al, CV14-6967 (C.D. Cal., filed Sept. 5, 2014)

California firms that don’t seem to be significantly building their fashion law practices, but some companies are imposing broader indemnification provisions in vendor contracts and asking more questions when vendors produce textiles without hiring any designers, several attorneys said.

It’s difficult for defendants to figure out what has been copyrighted since no database tracks it, said Early Sullivan partner and defense counsel Sophia Lau.

“Retailers rely on their vendor and the indemnification language. It’s hard to know the entire pedigree, and a lot of these fabrics are sourced from overseas,” said Matthew L. Seror, senior counsel of Buchalter Nemer’s litigation group.

Additionally, an indemnity provision may only be as good as its enforcement, and not all defendants are willing to go abroad to hold a manufacturer to a contract, Seror said. Given the price point fabric is sold at and the expense of settling a lawsuit, it wouldn’t be surprising if some plaintiffs use litigation to subsidize business, he added.

Doniger/Burroughs, however, has a different take as it said it repeatedly encounters the same offenders.

“What that shows us is that these infringers see these lawsuits as a cost of doing business,” Scott A. Burroughs said. Instead of hiring artists, “they’d rather go out and look at what is popular and copy those designs.”

“If you don’t know what the providence of the artwork you’re working with is, caveat emptor,” Doniger said.

Often, wholesalers and retailers will settle or pay some sort of license fee to avoid the hassle of a lawsuit, Darwell said.

And until there’s a significant defense-side ruling, many retailers are going to keep settling, Ma said, so new law defining infringement and the scope of damages could be slow making it to the books.

The parties in many textile copyright lawsuits can benefit from arbitration and early settlement, said Margaret A. Nagle of JAMS in a JAMS article. Nagle has presided over hundreds of these cases in the Central District.

“The longer it goes, the more costly it’ll be to defend. ADR really is beneficial to curb litigation costs, which are often very substantial in these cases,” Nagle said in the JAMS article. “If you’re potentially picking up two attorneys’ fees, it behooves you to get a handle on how exposed you are as early as possible through early neutral evaluation. You can agree to limited discovery, and perhaps you can settle. You then avoid a doubling down of cost. To me, any action which has the specter of attorneys’ fees is an action that you should look at ADR pretty early.”