From shoes to suits: Diesel footwear gets an airing in court

If you have a figure that fits the brand image, says Fashionista, it's great to be kitted out in Diesel. This is so even if some cynics, pointing to some ads, say that Diesel -- like Abercrombie & Fitch -- is a brand that is more associated with taking clothes off than keeping them on.

Right: happier times -- Diesel's 2009 offering

Be that as it may, Fashionista was troubled to see Diesel, through its no doubt fully-attired lawyers, putting in an appearance at the European Court of Justice this week in their ten-year quest to stop economy retail outlet Makro selling 'Diesel' footwear to which, the company says, it did not give its blessing.

The real action, which is taking place in the Dutch courts, has been running since October 1999. After rumbling through the original trial and a couple of appeals, the Dutch judges gave themselves a break for 15 months by sending it across the border to Luxembourg together with a couple of questions for Europe's Finest to ponder on. Yesterday the European Court of Justice gave its answer, which means that the case goes back to the Netherlands again in search of a final decision.

What actually happened here was that, as long ago as 1994, Diesel licensed its distributor, Difsa, to market its footwear in Spain, Portugal and Andorra. Difsa in turn licensed another company, Flexi, under an agreement that let Flexi conduct 'market tests' on Diesel shoes and to make shoes to its own design in order to do so in order that the shoes, if successfully tested, could be offered to Diesel for distribution or for the ‘assignment of the manufacturing licence’. Flexi in turn licensed yet another company, Cosmos, to make and sell shoes, bags and belts bearing the Diesel trade mark. The effect of this seems to have been that Cosmos could make and sell Diesel brand shoes without the express approval of any kind from Difsa or Diesel.

When Diesel found Makro selling shoes which bore Diesel trade marks and which Makro obtained from two other companies which bought them from Cosmos, it said "hey, these aren't Diesels" and sued both for trade mark and copyright history. Makro said, "hold on there -- you must surely have implicitly agreed to the use of your trade marks on these shoes, so you can't very well invoke your trade mark rights against us now: they've been 'exhausted'".

The Luxembourg judges, first checking their own earlier cases, have confirmed that even an implied consent on Diesel's part will exhaust their entitlement to sue Makro in respect of those items of footwear, but there's a catch. The implied consent can only be implied if there is evidence that Diesel unequivocally renounced its right to enforce its trade mark. Now it's up to the Dutch to sift through the evidence and decide whether the shoes are genuine Diesels or not.

Fashionista wonders how many shoppers who brought the fought-over footwear still have them in their cupboards, wondering whether it's safe to wear them yet. She also wonders how much of her favourite fashion purchase each month consists of items that have been designed by a company that was licensed by a company that was licensed by a company that was licensed by a company that owned the brand ...

For legal buffs, the sad story can be read here in Case C-324/08 Makro Zelfbedieningsgroothandel and Others.

"Aura of luxury" as Dior squeezes Copad in corset clash

Fashionista is pleased to say that, with her hourglass figure and svelte lines, she has never yet required the use of a corset. If she did have such a need, she is sure she'd add the upmarket Christian Dior product to her "must-try" list -- but where would she go to buy it? Her choice may now be a little more limited, following the European Court of Justice's ruling this week that Dior can -- at least in theory -- use its trade mark rights to stop the resale of fashion goods by pile-them-high-and-sell-them-cheap retailers who acquire them from legitimate distributors.

The case in question is Case C‑59/08 Copad SA v Christian Dior couture SA and others, and it all happened like this: Dior licensed SIL to sell "luxury corset goods" under its CHRISTIAN DIOR mark. The licence prevented SIL selling the products to discount stores without prior written consent. When business got tough, SIL asked if it could sell the corsets outside Dior's selective distribution network; Dior said "non!". However, SIL still sold the goods anyway to Copad discount stores. Dior sued and the top French court sought a ruling on three preliminary issues.

According to the ruling, (i) Dior could sue SIL for trade mark infringement for being in breach of a licence that bans, on grounds of the trade mark’s prestige, sales to discount stores, so long as -- on the facts -- that contravention "damages the allure and prestigious image which bestows on those goods an aura of luxury"; (ii) it was plain that, if SIL breached a "don't sell to the cheapo stores" obligation, no-one could say that the sale of those goods by SIL or indeed by Copad was with Dior's consent; (iii) even if Dior had let SIL sell the corsets to Copad, Dior could still
oppose their resale if it could prove that, on the facts, such resale would damage the reputation of the trade mark.

Fashionista sees this as a victory for fashion houses that run selective distribution schemes to stop their upmarket goods going on sale in the wrong sort of places. But this is not the end of the story. For one thing, it's still necessary to show that the resale will damage the brand's aura of luxury -- and the courts in Europe have yet to tell us what this means. Secondly the European Commission, which loves pro-competitive markets, sided with Copad in this case and might yet move to curb brand enforcement in similar cases through legislation.