By Benjamin S. Seigel, of Counsel to Greenberg & Bass in the January issue of Fashion Manuscript
(The names used in this article are fictious. Any resemblance to actual names is unintended and is purely coincidental)
Does this sound familiar? Modern Girl, a 50-store chain of women’s apparel is sued for infringement of a copyright claimed to be owned by Happy Prints. Modern Girl purchases hundreds of fabrics from suppliers all over the world. It has enjoyed a substantial profitable business resulting from it’s unique fabrics containing colorful geometric and floral designs. Happy Prints is seeking millions of dollars in damages as a result of the claimed infringement of its copyrighted floral print design fabric used to manufacture skirts that are being sold in the Modern Girl’s store. Modern Girl attempts to contact the Chinese manufacturer of the fabric it’s purchased but learns that it is no longer in business.
Modern Girl attempts to resolve the litigation through settlement discussions with Happy Prints principal without success. It then retains a lawyer to defend the action and there follows months of intense litigation; interrogatories, requests for production of documents, requests for admission, depositions and related Court hearings resulting in tens of thousands of dollars spent in attorney fees and costs. Modern Girl claims it was unaware that the design was copyrighted because it was very similar to dozens of other fabric designs used by it and its competitors over the past decade. In the course of the litigation Happy Prints produced a
copy of the patent registration. Although the designs were similar there were differences that could be pointed out to a judge or jury. Modern Girl believed that the differences were substantial and could be detected by any reasonable person.
The parties agree to go to mediation in an effort to resolve the litigation. After a day of mediation Modern Girl is told by its attorney that continuing the litigation and going to trial will be risky. A judge or jury could decide in favor of Happy Prints and award untold damages and perhaps even require Modern Girl to pay the attorney fees incurred by Happy Prints. After continuing the mediation into the evening hours, Modern Girl makes a business decision and agrees to settle for $500,000 and destroy the remaining inventory containing the infringing ﬂoral print.
How could Modern Girl have avoided the litigation? There are precautions that can be taken. However, none will guarantee that litigation such as this will not be brought by attorneys, referred to as “patent trolls” who initiate bringing numerous actions of this nature. Here are some things that could prevent or defeat patent troll litigation:
1. When a pattern is shown, ask the manufacturer if it has been copyrighted. If not then ask for an indemnifcation agreement. If suit is brought the indemnifcation agreement will provide the
basis for a cross-complaint against the fabric supplier.
2. If the fabric supplier advises that the pattern is copyrighted, obtain a copy of the copyright registration, which includes a sample of the copyrighted design.
3. If the supplier will not provide an indemnifcation agreement or a copy of the copyright registration think twice before purchasing the fabric. If you decide to go forward, understand
the risks that there are patent trolls lurking in the background.
4. Your attorney may be able to search the copyright registration records to determine if there are similar designs that have been copyrighted. If so, obtain copies and understand the risk that the fabric being purchased, if similar, may be grounds for litigation.
5. In the event that you are sued by a patent troll, you may still have the right to cross-complain against the fabric supplier for indemnifcation if it is still in business. However, suing such a supplier who is in a foreign country presents enormous challenges and substantial costs and attorney fees. Even if you succeed in obtaining an indemnifcation judgment, there are
problems in collecting the award, particularly when the supplier is in a foreign country.
In today’s business atmosphere if you know and understand the risks involved in purchasing printed fabrics from suppliers who are not well known to you, who are under-fnanced or have other operational problems that could lead to their inability to respond to an indemnifcation claim, and you are still willing to go forward with the purchase, the risk may be just another cost of doing business that you are willing to bear.