This is Bloomberg Law with June Grosseo from Bloomberg Radio.
We found the best activewear tight set dupe at Costco and it is nearly identical to Lululemon or Athleta. It's seriously made with the same material and has the same pockets. We love the waist and we love all of the fun colors.
If you go to hashtag Lululemon dupes, you'll find social media influencers promoting knockoffs or dupes of their apparel, like hoodies, jackets, and pants at Costco that look authentic but sell for a fraction of the price. Well, Lululemon is making a federal case out of it, taking Costco to court for copying their designs. My guest is Susan Scaffiti, a professor at Fordham Law School and director of the Fashion Law Institute.
Susan a very basic question to start off with. Are dupes what we used to call knockoff?
We have definitely seen an evolution in nomenclature, right, So it used to be counterfeits and knockoffs, and then replicas and then reps and now dupes. And I think honestly part of the story of the public accepting them more is they sound cute and adorable? Now you know you could have a pet dupe, you cannot have a pet counterfeit.
Well, also, social media right is blasting out where to find these precisely dupes are being sold all over. Is selling a dupe illegal?
Well, it depends right. Dupe like knockoff before, it is a broad ambi us term when they are very exact. And in those cases in which the IP is protected, yes that is illegal. But if we're getting a little further away from the original, or if the original itself is not protected under US law, then no it is not. So we do indeed have a lot of gray area here and not a chic little chuckoal or dove, something a lot more sinister from the brand's perspectus.
Lula Lemon, of course, pioneer your yogaware, tell us what it's accusing.
Costco of salul Lemon is claiming that the things that have been copied and are being sold at Costco do in fact cross the line into illegal. And what's so interesting about this case, June is that they have gone through the entire list of potential IP claims and are basically throwing everything except copyright. At Costco, they're looking at patents, a specifically design patent, because they do have a design
patent on their scuba design. For hoodies, they are looking at trade dress protection, that subset of trademark that focuses on, among other things, product design. Right, So when a product design itself is so iconic, like the red souls on Lobaton's or the ermes burkeens, the design is so iconic that it serves as its own source indicator that can be protected. So they're claiming that kind of protection in
the case of their fine jackets. Then they're claiming unregistered protection for men's trousers, They're claiming wordmarks in the case of scuba, and a wordmark for the colored Tidewater teal that they say is proprietary to them, and then they're throwing in some state law unfair competition claims. So they are really going across the board looking at Costco in house brands like Kirkland, but also other brands being sold at Costco like dan Skin and Jockey in this case.
So they are really taking a very broad brush approach to the items that Costco is selling that lu Lemon believes are protected intellectual property.
Costco is known for that Kirkland brand, and people often say that their products are high quality but sold for much less than name brand products. What kind of a price differential are we talking about with Lululemon apparel.
Well, in the case of the men's trousers, they were saying eight dollars versus one hundred and eighteen dollars, quite a bit less, which has actually been consistent with the prices of knockoffs over the years. We always say somewhere between five and twenty percent when we're looking at knockoffs across the board.
That is quite a big price difference. Susan, What would Lulu Lemon have to prove if this case went to trial?
In these cases, the first step is going to have to be convincing of the jury that the claims that Lula Lemon is making are actually valid with regard to what Lulu Lemon owns. Now they've done their homework, they have warmed up, stretched and prepared for this particular case by registering some of those marks, trademarks and design patents. So in the case of a registration, there's already an assumption,
but it's an assumption that can be overturned. So Lululemon is going to have to be able to prove that these particular marks are indeed sourced indicators, or in the case of design patents, that they are indeed new these designs. With regard to the things that are not registered, they have a somewhat higher far to pass in order to convince the jury that they deserve protection. But if they can do that, then they actually have to be able to show that the Costco items are close enough the
Lululemon items that they actually infringe. In other words, it's a two step process. Is the IP valid and if so, are the Costco items infringing? And they do need to persuade a jury. This is a jury claim.
What about the fact that, you know, there's that hashtag Lululemon dupes and apparently some dupes are being sold on Amazon, Walmart, Target and elsewhere. So why is Lululemon focusing on suing Costco? And you know, will Costco be able to say, but look, they're selling these elsewhere?
Well, Costco will be able to do that. But of course, when you're engaged in brand protection, you need to make choices. No company, not even the very largest, wealthiest ones have unlimited legal budgets, much to the sadness of their lawyers, do they make choices, And I think choosing Costco is
smart in some ways. It's one stop shopping. They're suing that only Costco or its house brand, but they're suing over some of the other brands that Costco carries, and they are suing an entity that is highly recognizable and trusted by the American public. So it's going to get attention when they go after Costco, much the way it got attention when Arimez said, yes, we know there are lots of counterfeit Burken's out there, but we're going after
the work in the Walmart Burgen. So if that kind of press release aspect to a complaint is relevant here, they want the attention on this case. They may not win the hearts and minds of consumers. They may not change this social tide toward the acceptance of dupes as something to be celebrated rather than hidden, but they will be able to convince some people that these dupes are
not a good thing. And they will also be able to send a warning to vendors across the board that Lululemon is not to be messed with, and of course Lula Lemon has a history of bringing other lawsuits in the past, so this has been a long term strategy for them to try to become a harder target, if you will.
And what happened with the copy of the Birken.
Bag, Well, they're no longer available for sale at Walmart. So let's assume that one has settled, which is I think the likelihood here is that we will get a settlement. It would be from a legal respective, wonderful to see what a jury thinks and then what the pellate court thinks about how close is too close in these cases, But more than likely we will get a settlement. If this in Europe, of course, this would be a very
short complaint. We would simply have that other category of design protection, so we wouldn't be looking separately at trademarks and patents and asking whether the law applies in these cases. We would go straight to design protection and be done with it.
Just suppose it does get to trial. Is it an uphill battle for Lululemon to convince a jury.
I think it's going to vary amongst the different styles claimed. I think for the registered trade dress and registered design patents. That's going to be an easier sell for the claims of unregistered for ti deetion like for the men's ABC trousers and the Tidewater teals color. It's going to be a little more difficult, but not impossible.
And does Lula Lemon have to prove that consumers are confused by the dupes.
With regard to the trademark related claims, so the trade dressed claim, they do have to prove likelihood of consumer confusion, which is why something like hashtag Lululemon dupe is maybe not helpful to Lululemon. It certainly fuels the fire to go after these dupes, but it's also saying that consumers may not be confused, at least at point of sale. Now there's always post steal confusion. There's the concern that consumers will see others wearing the dupes and think that
they're Lululemon. So there's that form of consumer confusion that might be easier to prove in the era of hashtag Lululemon dupes, but it's problematic if consumers are not actually confused. You know, It's interesting in that regard June is that Lululemon it actually has is a trademark application pending for the phrase Lululemon dupe in the context of retail stores. They haven't said exactly how they'll use it, and they don't have to do that yet, and the trademark has
not yet issued. They filed the application back in December, but they're obviously thinking about playing in this field in another way as well.
You say, most of these cases are settled, but is a lot of money spent just reaching the point of settlement? What are legal fees like?
Oh?
Of course, just developing this complaint with a dozen different claims has taken a lot of time, and surely there has been some conversation between the companies in advance of this. So it has already been an expensive process. It may be worthwhile because again it is a legal process and a public relations process. You know, if it's some one thing that a company that makes yoga pants is familiar with, it's inversions, and I think they would really like to
be able to invert the public's perception of dupe. That's really the goal here from a public perspective, much the way that just as you know, a few years ago, Lululemon set up a dupe swap in a mall in Los Angeles and said, look, bring us your dupes, any brand. We will give you genuine, aligned Lululemon trousers. They are so great that you'll be able to tell the difference immediately and you will become Lululemon fans. So they are playing both a legal game and an extra legal game
as part of their brand protection strategy. And it's something that they've done for years. So if they can start to again invert the perception of dupes, maybe restore them to their former sub rosa underground, splitely shameful status, or at the very least convinced people that Lulemon products are of higher quality so that they can recapture some of the folks who would have instead gone to Costco or elsewhere. That's going to be a win without ever getting as far as a jury.
I remember when if you had a knock off, well you hid the fact that it was a knockoff. You tried to pass it off as the real thing.
Nowadays they don't care exactly. There has been a huge shift in perception over fifteen years. It used to be that brands didn't want to talk about counterfeits, or knockoffs. Then they finally acknowledged the problem. But consumers I have also gone from hiding the fact that their items were knockoffs or trying to pass them off as the real thing, to bragging about them on social media, and that is actually of almost greater concern. The law hasn't changed a lot,
but consumer perception has changed. So the law still is not great in the US with regard to protecting fashion, but there are these bits and pieces of law that can protect fashion a little bit. But the perception, the social norms have changed dramatically. You know, in my classes, I tell my students that when we're dealing with law, we're dealing with it at several levels. We think about black letter law when we go to law school that
come out of legislatures and courts. But then there's also rules things like in the fashion context, office dress codes or school dress codes. But at the most basic, simple, diffuse level, there are social norms. Sometimes those social norms are subsequently written into law what's decent or indecent, for example. But social norms are really powerful in terms of controlling how we dressed, how we perceive what we dress, how we perceive what other people dress, and we've seen a
shift in social norms here. We haven't seen a shift into law. We've seen a shift in the norms so that it went from being knockoffs their bad and shameful and cheap and to be hidden, to knock offs their to be celebrated. And that's part of what Little Lemon is addressing in this case.
In December, Benefit lost a lawsuit to ELF over their last and role mascara, which is six dollars compared to Benefits twenty nine dollars misscara. Does that have any relevance to this case.
It's another time trade dress lawsuit. Because the actual word elf was right on there, there was an undermining of the question of likelihood of consumer confusion. So here well to back up, when we're dealing with counterfeits, when we're dealing with substantially identical copies of trademarks that we can identify. So if we were dealing with copies of the wordmark Lululemon, or if we were dealing with copies of its little symbol that looks a little bit like an omega, right,
that would be easy. There's no question of whether or not consumers are confused. We just assume that if we're dealing with those substantially identical copies, when we move into the realm of trade dress, and we are talking about infringement rather than counterfeitings, so we're dealing with things that are not necessarily quite as identical but merely confuse the consumer, then yes, that likelihood of consumer confusion does have to be proven by Lululemon in this case, in other words,
by the plaintiff. And that's a little bit tougher. It's a little bit of extra work that has to be done. It's why this case is interesting. It's why Little Lemon is going for full on four waste stretch in this regard. They're not going for easy things. They're not going for counterfeits that would not probably be sold at costco the copies of the signs, the symbols that we all recognize easily as trademarks. They're going for product configuration trade dress. Right,
So there are two kinds of trade dress. There's product packaging, so the shape of a coke bottle or the shape of some shampoo bottles. And then there's the product design. And that's where fashion has to live because we get so little protections on the three dimensional aspects of a garment generally. So if we are going to claim trademark beyond the label, beyond the logo, we're looking at product configuration,
trade dress. We are going to have to show that, first of all, consumers recognize that trade dress as a source indicator. It's not just a great looking warm up jacket. It's one that looks like Lululemon, one that we recognize as Lululemon, just on the basis of curved themes, right, So we have to be able to prove that consumers see what Lulemon says consumers see, and then we have to show that those consumers are confused when they see
a knockoff. And it's not easy, it's not impossible, but it is definitely going to be a.
Battle, or, as you say, perhaps a settlement. Always great to have you on, Susan, thanks so much. That's Professor Susan Scaffiti of Fordham Law School, and that's it for this edition of the Bloomberg Law Show. Remember you can always get the latest legal news on our Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify, and at www dot Bloomberg dot com. Slash podcast Slash Law, and remember to tune into The Bloomberg Law Show every weeknight
at ten pm Wall Street Time. I'm June Grosso and you're listening to Bloomberg