A Federal Court in L.A. Deals a Blow To Retailers Finding Them Liable For Willful Infringement of Fabric Design Copyright

On December 5, 2014 the U.S. District Court in Los Angeles entered a judgment for Novelty Textile, Inc. against defendants Hot Shot HK, LLC doing business as “Brat Star” and The Wet Seal, Inc. The court found both defendants liable for “the deliberate and willful copyright infringement” of three copyright designs owned by Novelty. Novelty Textile Inc v. The Wet Seal Inc et al, California Central District Court, Case No. 2:13-cv-05527. An example of one of such designs as well as an allegedly infringing garment sold by The Wet Seal are shown below.


The court ordered a judgment against Hot Shot in the amount of $250,000 (plus costs and attorneys fees) and against The Wet Seal in the amount of $400,000 (plus costs and attorneys fees).

According to the industry publication California Apparel News, this is not the first time Novelty Textile has sued a retailer and an apparel maker for copyright infringement. Apparently, Novelty has been a plaintiff in at least 14 cases against retailers such as Nordstrom, Windsor Fashions, Charlotte Russe, Love Culture, Ross Stores and Rue21 Inc.

You might ask how on earth anyone could claim a copyright to such a commonplace pattern as a floral design. Well, you can, according to the U.S. Copyright Act and the U.S. Copyright Office (the U.S. Library of Congress) who administers the Copyright Act by registering copyright to various works. The degree of originality required to claim copyright interest in a work—visual art or literary work or any work—is very minimal. “To be sure, the requisite level of creativity is extremely low; even a slight amount will suffice,” noted the Supreme Court in leading Feist Publ’ns, Inc. v. Rural Tel. Serv. (In Feist, the Supreme Court held that listings in Yellow Pages may be possess the required minimum degree of creativity under certain circumstances and therefore may be copyrightable.) Floral designs as well as basic geometrical shapes and many other things are not included in the list of noncopyrightable subjects in Section 102 of the Copyright Act. (Such a list of things that are per se not copyrightable includes “ideas, procedure, process, system, method of operation, concept, principle, or discovery.”)

Some would call Novelty a copyright troll. The essence of trolling is that the plaintiff is more focused on the business of litigation than on selling a product or service or licensing their IP to third parties to sell a product or a service.

Whether or not Novelty, L.A. Printex and other owners of textile copyrights qualify as copyright trolls is a subject for another day. It is curious though that some experts evaluate that at least 300 lawsuits are filed a year involving fabric design copyright infringement. Most of those are in Los Angeles with others in New York and Canada. Most of those cases result in settlements paid by the retailers and manufacturers who decide not to engage in costly litigations, but rather pay some (usually undisclosed) amounts to the alleged owners of textile designs.

How can retailers protect themselves from lawsuits like the one by Novelty? The most obvious tool is to include robust warranties and indemnity provisions in retailers’ agreements with their fabric vendors and clothing manufacturers. Such provisions aim to assure retailers that vendors (or manufacturers) own the copyright to the fabric’s design or have a license to sell the designs. As a retailer, your agreement with the vendor should state that the vendor “will defend or settle, at its own expense, any claim or suit against you alleging that any product it supplied infringe any copyright or trademark (or patent or trade secret).” Of course, an indemnity provision will not guarantee that you will not be sued. However, in the absence of such an indemnity provision you will have fewer legal tools, should you face a lawsuit by a copyright tro…, sorry, by an owner of textile copyright. Simply put, you will be screwed.

Good news is courts generally do honor indemnity clauses. As recently as in November 2014 a Delaware court actually sided with an entity that was trying to enforce an indemnity provision. Avaya, Inc. v. Charter Communications Holding Company, LLC, C.A. No. N14C-03-052. Plaintiff Avaya, Inc. delayed for ten months to raise its indemnification rights against the vendor (a software vendor in that case). The vendor tried to use the plaintiff’s delay as a legal pretext not to honor the indemnity by moving for a summary judgment. The judge however declined to grant summary judgment without exploring the reasons for the delay and all the facts and circumstances. Duane Morris Delaware Business Law blog wrote about Avaya in more detail.

Of course, whether or not the vendor will voluntarily comply with its indemnification obligations can be another issue. Industry operates on very thin profits margins. A vendor can go under, can stonewall …. The bottom line: having warranties and indemnity provision in agreements with vendors will not insure you against all business risks, but it certainly will provide the minimum legal protection, and it is a precaution that you cannot afford not to take.

Text © Maxim A. Voltchenko 2014

* This piece is for informational purposes only, and is not intended to be a legal or fashion industry review. This posting may not necessarily represent the views of the author’s employing law firm. Although every effort has been made to verify the accuracy of items in the Sputnik Blog(SM), readers are urged to check independently on matters of specific concern or interest.