This article originally appeared in Bloomberg Law Big Law Business.

Pop-star Selena Gomez is an international celebrity with 144 million followers on Instagram. That’s second only to soccer icon Cristiano Ronaldo who trumps her by 500 followers.

So you might think companies would jump at the opportunity to enlist them as brand ambassadors. But companies are increasingly turning away from deals with mega stars like Gomez and Ronaldo and tapping lesser known social media personalities to represent their products. Too often, though, the liabilities involved in working with so-called micro-influencers are overlooked.

Companies can do more to protect themselves by simply using the same high level of caution with non-celebrity influencers as is used when entering arrangements with household names.

Influencers are becoming sought-after for two primary reasons:

  • they are considered more cost effective, and
  • their endorsements are often seen as being more authentic and better able to reach a highly engaged audience.

In fact, it is estimated that nearly 80 percent of professionals in fashion, luxury, and cosmetic industries in the U.S. and Europe implemented influencer campaigns last year.

However, the line between the traditional celebrity and the influencer is not as clear-cut as it once was. While influencer marketing continues to be far cheaper and can be more effective in reaching potential buyers, many influencers have shifted from casually filming videos in their bedrooms to becoming highly recognizable household names. Influencers are increasingly transforming this celebrity to build their own brands. With this transformation comes more risk.

While many companies have rapidly embraced influencer marketing, their legal strategies haven’t always kept pace. Missteps around content ownership and the lack of cohesive policies around disclosure requirements have led to costly and drawn out legal battles.

Accordingly, we suggest treating influencers like more conventional celebrities, specifically by focusing on the following.

1. Social Media Content Ownership

Companies should ensure that influencers are aware that sharing any image containing copyright-protected works might be infringing on third-party intellectual property and privacy rights and establish indemnity clauses and/or holdbacks for infringement by an influencer in any contract.

Further, while it is standard for influencers to own the content in social media posts, the brand should be sure both to retain the right to re-use it for future campaigns or advertisements and the ability to require the influencer to take down a post.

2. Design Collaborations

As influencers grow in popularity, many have established or are seeking to establish their own “brand” identity. Deals with influencers now go beyond mere endorsements, as many influencers aspire to launch their own product lines. This creates a gray area: does that, let’s say, pocket design belong to the company or is it emblematic of the influencer’s own brand?

In 2015, when Becca Cosmetics entered into a partnership with makeup artist and influencer Jaclyn Hill, it appears the company failed to establish ownership of the product packaging design of their wildly popular “Champagne Pop” collection. When another cosmetics company called Morphe later collaborated with Hill to launch a new “Vault” eyeshadow pallet with an arguably similar packaging design, Becca sent Morphe a cease and desist letter, prompting Morphe to file a lawsuit, leaving the two makeup companies embroiled in a legal battle. (See Morphe LLC v. Becca Inc., No. 2:18-cv-06667, C.D. Cal.)

Where both company and influencer may be competing for brand recognition, agreements with influencers should clearly specify which party owns the various elements relevant to the design collaboration and require an assignment of rights where necessary.

3. Risk of Reputational Harm

Brands may also want to make sure contracts with influencers protect against the reputational harm that can be associated with an influencer’s behavior, and not just focus on number of followers.

Influencers, like conventional celebrities, can become embroiled in scandals which can embarrass companies they work closely with. For example, beauty guru Laura Lee’s eponymous makeup line was recently dropped by Ulta Beauty after fans of rival beauty guru Jeffree Star uncovered racially charged tweets Laura sent in 2012.

To protect against these potential reputational risks, Companies should add mortality and non-disparagement clauses to the influencer’s contract, allowing them to terminate the relationship and/or recover damages in the event the influencer does anything that would reflect unfavorably on the brand.

4. Disclosure Requirements

In April 2017, the FTC sent letters to 90 influencers and marketers reminding them of their obligation to clearly disclose their relationships with brands when endorsing them on social media. The issue here is not always whether companies know that influencer disclosure requirements exist, but rather whether brands monitor their influencers’ compliance with these requirements.

Indeed, lack of compliance is so widespread that the FTC cracked down on companies and influencers and released updated FAQs clarifying how and when to comply with the 2008 Endorsement and Testimonial Guides.

While companies can’t shift the legal burden of disclosure to an influencer, they can protect themselves by crafting proactive compliancy policies, training influencers in the best practices for disclosure, and including a clear, simple, and specific disclosure mandate in the influencer’s contract. Companies must also actively monitor the influencer’s compliance.

Final Thoughts

As marketers have enthusiastically seized on influencer marketing as a relatively inexpensive and powerful way to reach their target consumers, the influencer economy has evolved. Influencers have increasingly transformed themselves into quasi-celebrities, building their own brands as they amass larger followings and command higher fees and more lucrative brand deals.

As the line between traditional celebrity and the influencer blurs, risk to brands engaged in influencer marketing increases. Legal departments can no longer engage with influencers as unsophisticated amateurs and should rethink the way they enter into agreements, incorporating some of the same protections they would when engaging with traditional celebrities.

On July 27, 2017, Crowell & Moring will be presenting a webinar hosted by the United States Fashion Industry Association on the hottest IP Supreme Court decisions from 2017 that will affect the fashion and retail industries.  Anne Li and Preetha Chakrabarti of Crowell will be discussing Star Athletica, LLC v. Varsity Brands, Inc. and Impression Prods., Inc. v. Lexmark Intl. Inc. The Star Athletica case involving the copyrightability of cheerleader uniform designs will have a significant impact on not only the fashion industry, but other industries that rely on copyright protection, such as consumer product manufacturing and 3D printing.  And the Lexmark decision involved the doctrine of patent exhaustion, and held that a patentee cannot sue for patent infringement after the first sale of a patented item, even if that first sale is outside the United States. Thus this case too will have an impact on any retailer that deals with IP and operations abroad.

For more information and to register for this webinar, please visit Crowell.com.

 

UPDATE to our September 2015 post

On March 22, 2017, a 6-2 Supreme Court found Varsity Brands’ designs on cheerleading uniforms to be copyrightable, holding that “an artistic feature of the design of a useful article is eligible for copyright protection if the feature (1) can be perceived as a two- or three-dimensional work of art separate from the useful article and (2) would qualify as a protectable pictorial, graphic, or sculptural work—either on its own or fixed in some other tangible medium of expression—if it were imagined separately from the useful article into which it is incorporated.” See Star Athletica, LLC. v. Varsity Brands, Inc., 580 U.S. __ (2017) (No. 15-866), Op. at 1-2.  In doing so, the Court affirmed the Sixth’s Circuit decision below.

Continue Reading A-F-F-I-R-M-E-D! The Supreme Court Upholds Copyright Protection for Cheerleading Uniform Designs

U-P-D-A-T-E! On May 2, 2016, the U.S. Supreme Court granted certiorari to address the question: “What is the appropriate test to determine when a feature of a useful article is protectable under § 101 of the Copyright Act?”. The answer to this question may have far-reaching implications for the retail and fashion industries – stay tuned for future u-p-d-a-t-e-s!

Group of Cheerleaders in a Row

Originally published September 10, 2015

A recent decision from the Sixth Circuit highlights the ongoing significance of copyright law for the retail and garment industries. On August 19, 2015, the Sixth Circuit, in reversing the lower court’s decision, held that the “stripes, chevrons, zigzags, and colorblocks” on Varsity Brands’ cheerleading uniforms are protectable by copyright. In Varsity Brands et al v. Star Athletica, the Sixth Circuit dipped into the murky waters of copyright protection for fashion design, reiterating the need for greater legislative or judicial guidance when it comes to fashion design and copyright law. Nonetheless, the Court ultimately found, as other Circuits have, that “fabric design”, unlike “dress design”, is protectable.

At the district court level in Tennessee, Varsity Brands sued Star Athletica for infringing its registered copyrighted designs for cheerleader uniforms. On summary judgment, the district court determined that a cheerleading uniform cannot exist without the hallmark “stripes, chevrons, zigzags, and colorblocks,” and therefore found Varsity’s copyrights of such designs invalid as inseparable from the utilitarian aspect of a cheerleading uniform.

Continue Reading UPDATE: R-E-V-E-R-S-A-L Spells Reversal! The Sixth Circuit Holds Varsity Brands’ Cheerleading Uniform Designs to be Copyrightable.

FLC Pic

On February 12, 2016, the Federal Bar Association will host a day-long Fashion Law Conference at Parsons School of Design (Starr Foundation Hall in the New School’s stunning new University Center) on the last day of New York Fashion Week!

Speakers include in-house counsel from The Estee Lauder Companies, Inc., Tiffany & Co., New York & Company, and Global Brands Group.

Topics include cover anti-counterfeiting, FTC and trademark considerations, ethical sourcing and labor issues, the regulatory framework of labeling and disclosure, mergers/acquisitions and antitrust considerations, and the current legal issues in e-commerce and mobile apps.

We are privileged to have the Honorable Claire R. Kelly from the U.S. Court of International Trade provide opening remarks, and Professor Susan Scafidi, Academic Director of the Fashion Law Institute—and one of the foremost leaders in the field of fashion law—as our luncheon keynote speaker.

Please join Crowell & Moring’s, Cheryl Falvey, Chahira Solh, Frances Hadfield and a host of other speakers and experts for our cutting-edge fashion law panels (and of course plenty of networking opportunities). We look forward to seeing you there!

Photo credit: Federal Bar Association

Danielle Air Jordans

Michael Jordan has settled two high-profile right of publicity lawsuits with two now-defunct grocery chains – Jewel Food Stores and Dominick’s Finer Foods.  In August, a jury awarded Jordan $8.9 million after a federal judge determined that Dominick’s violated Jordan’s rights under the Illinois Right of Publicity Act.  Jewel and Jordan were scheduled to start their trial in December.

Both grocers placed ads in a commemorative issue of Sports Illustrated honoring Jordan’s induction into the Basketball Hall of Fame.  Jewel’s full page ad “salute[d] #23 on his many accomplishments” and  “honor[ed] a fellow Chicagoan who was ‘just around the corner’ for so many years,”  playing off of the chain’s slogan that it was “just around the corner.”  Dominick’s touted Jordan as “a cut above” and featured a coupon for steak.

According to Jordan, he would “absolutely not” have allowed the grocers to use his name and identity in an ad.   Jordan, who testified that he “doesn’t do single ads” and does not do any deal for less than $10 million in the Dominick’s trial, claimed that the two grocers used his likeness for commercial gain without his permission.

The settlement serves as a cautionary tale for brands that might use a celebrity likeness without permission.

Image Courtesy of Flickr by David Woo

Crowell & Moring is partnering with the United States Fashion Industry Association (USFIA) for an October 20 webinar covering the emerging legal landscape for the fashion industry in the digital media age. The webinar will run from 2:00 to 3:00 pm ET and will explore how to:

  • Best protect your intellectual property rights as fashion goes high tech.
  • Avoid advertising and regulatory pitfalls.
  • Minimize “at the border” customs delays or litigation.
  • Safeguard your interests in an age of heightened data capture.

The panelists from Crowell & Moring will include:

  • Cheryl A. Falvey, partner in the Washington, D.C., office and co-chair of the firm’s Advertising & Product Risk Management Group. Cheri is the former general counsel of the Consumer Product Safety Commission (CPSC).
  • Lora A. Moffatt, partner in the New York office and a member of the firm’s Intellectual Property Group, focusing on brand protection.
  • Frances P. Hadfield, counsel in the New York office and a member of the firm’s International Trade Group, focusing on customs litigation and regulatory compliance.

Registration is free for USFIA members or affiliates and $95 for non-members. Please click here for more information and to register at usfashionindustry.com.

On Wednesday, September 16, 2015, Advertising and Product Risk Management partners Cheri Falvey and David Ervin and Intellectual Property and Legal Affairs Counsel for the Ralph Lauren Corporation, Tracie Chesterman, presented at an exclusive breakfast hosted by Crowell & Moring and Women’s Wear Daily. The speakers discussed the “New Rules of Digital Marketing” and provided a roadmap for avoiding legal and regulatory pitfalls. Among other topics, Ms. Falvey and Mr. Ervin provided an overview of  key legal considerations when releasing internet-connected wearables into the market and to manage the lifecycle of the product — from design through marketing and brand protection.

 

Group of Cheerleaders in a Row

A recent decision from the Sixth Circuit highlights the ongoing significance of copyright law for the retail and garment industries. On August 19, 2015, the Sixth Circuit, in reversing the lower court’s decision, held that the “stripes, chevrons, zigzags, and colorblocks” on Varsity Brands’ cheerleading uniforms are protectable by copyright. In Varsity Brands et al v. Star Athletica, the Sixth Circuit dipped into the murky waters of copyright protection for fashion design, reiterating the need for greater legislative or judicial guidance when it comes to fashion design and copyright law. Nonetheless, the Court ultimately found, as other Circuits have, that “fabric design”, unlike “dress design”, is protectable.

At the district court level in Tennessee, Varsity Brands sued Star Athletica for infringing its registered copyrighted designs for cheerleader uniforms. On summary judgment, the district court determined that a cheerleading uniform cannot exist without the hallmark “stripes, chevrons, zigzags, and colorblocks,” and therefore found Varsity’s copyrights of such designs invalid as inseparable from the utilitarian aspect of a cheerleading uniform.

In a 2-1 decision, Continue Reading R-E-V-E-R-S-A-L Spells Reversal! The Sixth Circuit Holds Varsity Brands’ Cheerleading Uniform Designs to be Copyrightable.

Caveat Brand Owner: We are in the beginning of a two-month “sunrise period” for trademark owners to register their marks as second level domain names in “.sucks.” While the purported purpose of the “.sucks” domain name is to provide a forum for customers to voice constructive criticism, trademark owners may disagree.  The hefty price tag associated with the sunrise period, along with the uncertainty of how much protection owning a “.sucks” domain actually provides, leaves brand owners with a lot to consider.  For further details, please click here.