Legal spotlight Germany: Intellectual Property is Fashion’s best friend

Authors: Dr. Thomas J. Farkas, LL.M. (London), and Dr. Julia Traumann, both German qualified attorneys at law at Eversheds Sutherland (Germany) specializing in intellectual property and related commercial matters. They have several years of experience in contentious and non-contentious matters focusing in particular on advising clients from the retail and fashion industry in trademark, design, copyright and unfair competition law.

The fashion sector is depended on trends and is therefore, by its nature, constantly changing. Many fashion companies participate in the race of offering new designs rapidly: Fast, Faster, Super-Fast Fashion.

Obviously, the fashion sector also faces challenges of the market and consumer behaviour. In times of a global pandemic, parts of the fashion sector have suffered a substantial dip in demand. Digital shopping has shifted the consumer behaviour away from brick and mortar sales and the corresponding consumer experience. Apart from Fast Fashion, consumers tend to be more conscious about social and environmental aspects. Many consumers changed their mindset to “less is more”. In order to be, remain or become successful, fashion companies have to constantly optimize their strategies and to create or follow the latest trends. In Germany, brick and mortar retail has been struggling and several German fashion brands had to file for insolvency.

Consumer behaviour may be different when life turns back to normal

In addition, consumer behaviour may be different when life turns back to normal. One might expect that consumers preferences could shift to bifurcated spending, accelerated adoption of e-commerce and increased demand for purpose-driven brands and sustainable fashion.

However, two aspects will not change. First, fashion will always play a role for the consumer. Second, the protection of brands and fashion designs by IP rights will always remain a key for being successful. Therefore, let’s take a closer look at the relevant IP rights for fashion brands in Germany.

Generally, design rights, copyrights and trademarks may apply to fashion designs (while patents and utility models rather play a minor role). Further, the German Act Against Unfair Competition may also offer protection against slavish imitations. In detail:

Design rights: A design right protects many features of the appearance of a product. It is defined as the appearance of the whole or a part of a product resulting from the features of, in particular, the lines, contours, colours, shape, texture and/or materials of the product itself and/or its ornamentation. Design rights can be obtained through registration or use.

As design rights are harmonized by the corresponding EU Law, there are two choices: either protecting a design with the European Union Intellectual Property Office (EUIPO) before it is commercialised by obtaining a registered Community design (RCD, so called “Gemeinschaftsgeschmacksmuster”). Alternatively, a design resp. the corresponding product can be directly commercialised without any fees and registration. Protection can then be achieved by relying on what is known as the unregistered Community design (UCD) right.

The option you eventually choose will depend on the impact that it has on your design portfolio strategy. A registered design is an unexamined right. Therefore, you will obtain the registration without the most relevant criteria (novelty and individual character) being assessed by the EUIPO. The validity of the RCD will only be assessed in aftermath of the registration, i.e. in corresponding proceedings.

In practice, it can already be a successful strategy to claim protection by proving that you have an (unexamined) registered right. Also, it is not necessary for the infringer to have knowledge about the prior design. The unregistered design is cheaper (i.e. no costs) and can be useful when there are simply too many items to be registered. It must be noted, however, that in order to find for an infringement, it must be proven by the holder of the design that the infringer had positive knowledge about the prior design. This might be more difficult.

On the German national level, you only have the option to choose registered designs, which are however, relatively cheap (official fees for the German Patent and Trademark Office are below EUR 100,00 for an application).

When registering a design of whatever kind, it is essential that the uploaded image of the design only, but precisely covers what is sought to be protected (e.g. no images with a closet, a hanger and any hangtags, etc.).

Copyrights: Fashion items can also be protected by copyrights. Contrary to intellectual property rights, copyrights arise with the fixation, resp. creation of the work. There are no formal requirements to be met. In contrary to the US, there is no copyright register in Germany. The German copyright law grants the author exclusive rights to exploit his or her work. The author (designer) of an item can, however, not transfer his copyright. It is a cornerstone of German copyright law that the copyright as such is non-transferable. However, exploitation rights can be granted. Especially in case designs are created by freelancers (or employees), an agreement should govern the exploitation rights granted to the company. According to the relevant jurisprudence, a “total buy out” clause (i.e. a clause that grants “any rights”) is likely to be void. Therefore, any right to be granted must be explicitly mentioned in an agreement making relevant clauses rather long and complex. They should be drafted with great care.

Trademarks: Fashion designs as a whole or in parts can also be protected by trademarks (e.g. shape marks, position marks, pattern marks). In the EU, there is a four-tier system for registering trademarks. Further, there are unregistered trademarks. What to choose depends on the needs of the particular business. In most cases, however, it is the brand as an indication of origin that will be protected by trademarks rather than a single design. This may be different in cases where a design or feature is regarded as indication of origin (e.g. the Levi’s Red Tab or the red-lacquered sole of Louboutin high heels).

German Act Against Unfair Competition (“Gesetz gegen den unlauteren Wettbewerb”, “UWG”): This act also provides protection, in particular against slavish imitations. To some extent, it reflects the notions of trademark law (no confusion to the origin of the goods). Thus, it does not provide a right but a claim. It requires a so-called competitive originality which basically means that the fashion object must be different from previously available objects and rather well-known. In many cases, however, the UWG offers a protection very similar to an IP right. Amongst others, it must be noted, however, that the statute of limitation for a claim based on the UWG is only 6 months (instead of the general 3-year period).

All the rights and claims just mentioned may overlap and apply to the same fashion item. Generally, it is advisable to apply for a registration of an IP right, even if unregistered rights are available. Providing proof of unregistered rights and competitive originality in litigation is often more expensive (and far more difficult) than the registration costs.

How are fashion brands legally protected in Germany?
Brands are best protected through trademark registrations. A trademark through use can only be obtained if a relevant number of the consumers recognise the brand. If at all, only brands with very well-known trademarks should rely on unregistered trademark rights in Germany.

What about IP licensing in the fashion industry in Germany?
For fashion companies, licensing agreements are a particularly important tool. By granting licenses, a fashion company as the rights holder can achieve both an increase in the customer base in geographical terms and an expansion of the product range with regard to new goods. In practice, it is common that several different licensees usually produce (different) goods for a fashion brand.

For fashion companies, licensing agreements are a particularly important tool

The ownership of rights plays a key role in the granting of licenses. A license can only be granted if the licensor, i.e. the respective fashion company, has a right that can be licensed. If, for example, a fashion company plans to extend its brand to a new territorial market, it must be the owner of a corresponding trademark (in the case of an extension to Australia, for example, a trademark designating Australia). If the license is to be granted for a new range of goods such as sunglasses or cosmetics, these goods must be covered by the respective trademark. Therefore, a tailored trademark strategy is vital.

License agreements permit the temporary use of an intellectual property right or of rights of use and exploitation under copyright law. As such, the license agreement is not a firmly defined contract type but can be drafted differently depending e.g. on the license type wanted by the parties.

What options do rights holders have when enforcing their IP rights in Germany? Are there options for protecting IP rights through enforcement at the borders?
The thoughtful protection of your achievements by means of IP rights is a first step to survive and be successful on the market. However, IP rights are obtained or registered not only to document intellectual property, but also to protect and exploit it.

Thus, it is essential to monitor and potentially enforce your IP rights. Germany offers similar enforcement options to other European jurisdictions. IP rights can be enforced against registrations (at the relevant offices), against uses/infringements (at the courts) and against counterfeits being imported into Germany/the EU (at the customs office).

For example, as holder of a trademark or design, you can first try to solve the problem in an amicable way by contacting the infringer directly, by sending them, for example, a query concerning entitlement or a cease-and-desist letter. Please note: If a cease-and-desist letter is unjustified, the recipient of the cease-and-desist letter may, under certain circumstances, be entitled to claim compensation from the person issuing the cease-and-desist letter.

Germany is often considered to be a favourable jurisdiction for litigation, particularly in urgent cases

If no settlement can be reached, the District Courts have jurisdiction for the enforcement of your rights in the case of trademark and design infringements.

Germany is often considered to be a favourable jurisdiction for litigation, particularly in urgent cases. Preliminary injunctions are often granted within a few days, during trade fairs sometimes even within a few hours. The statutory lawyer fees are to be reimbursed and court fees are capped. The financial risk can therefore be calculated in advance.

In the end, IP protection is essential for fashion companies. German Law has several favourable tools to protect IP, but a tailored strategy is essential to make the most out of your creations and ideas.