Copycat Crackdown

June 30, 2008  by in UnCategorized   

By Home Furnishings Business in Accessories on July 2008 When it comes to knockoffs of furniture designs, legal experts and manufacturers say lawsuits aimed at protecting original designs are on the upswing, and retailers are increasingly the target of those legal actions.

Susan Farley, an attorney specializing in protecting original designs of home furnishings, explains the situation bluntly: “If I can’t easily get the manufacturer (overseas), I’m not going to chase my tail. I’ll go right to the source that’s causing the (design originator) pain. If it’s at the retail level, it’s at the retail level,” said Farley of Helsin & Rothenberg, Albany, N.Y., who frequently presents intellectual property law seminars for the Foundation For Design Integrity, a coalition of home furnishings companies.

DESIGN CREATORS LESS RELUCTANT TO TARGET STORES

Traditionally, furniture manufacturers were extremely hesitant to take action against retailers in the belief those store owners might one day become customers.

Patent Attorney Jack Hicks of Greensboro’s Womble Carlyle Sandridge & Rice said the hands-off policy on retailers is changing.

“I see more lawsuits where retailers are named and there’s more consideration (when initiating lawsuits) on whether to name retailers,” said Hicks, who has both targeted copycats in design lawsuits and defended large furniture manufacturers in intellectual property disputes. “If you have multiple defendants, and you have one U.S.-based retailer and the other defendant is a (manufacturer) based outside the United States who may be difficult to serve in a lawsuit, in those cases, the retailer may have some exposure and the manufacturer may not stand up and defend him.”

Examples of the trend in recent months include a lawsuit against Ashley Furniture that was dismissed in March. When it was filed by several fabric makers two years ago, the lawsuit named the operators of two Ashley HomeStores, as well as the manufacturer itself, over fabric designs in top-of-the-bed packages. Earlier this year, upholstery manufacturer DeCoro brought a lawsuit against Rooms To Go of Seffner, Fla. In that case, DeCoro alleged that Rooms To Go stopped purchasing a DeCoro product, and then had a similar design manufactured and sold in its stores.

RETAILERS OPPOSE COPIES, BUT SAY FACTORIES SHOULD BEAR RESPONSIBILITY

While those cases have sparked headlines, retailers contacted by Home Furnishings Business expressed little concern over the prospect of becoming embroiled in lawsuits, saying manufacturers and importers are ultimately responsible for ensuring that their designs are original.

Keith Koplan, president of the Western Home Furnishings Association, strongly believes producers of knockoffs should be punished. “If (a manufacturer) represents to the retailer that it is within the law by making it available for sale, I fail to see how the retailer can be held responsible,” said Koplan, who operates Koplan’s Furniture in Vancouver, Wash. “In all my years in the business, it has never entered my mind to ask a vendor if they have the right to market something,” he said. “I assume they have acted properly.”

City Furniture President Keith Koenig said, “It is impossible to know all patents and researching them all before making a buying decision,” but added retailers may need to put more focus on those issues if manufacturers begin targeting retailers with more frequency.

NHFA President Doug Kays said he’s seen the impact of stepped-up copyright enforcement in other industries and believes furniture retailers could be targeted in a similar way in the near future.

“I own two large indoor swap meets (or flea markets),” he said. “We have to be extremely diligent about keeping out knockoffs of designer handbags, watches and even DVDs because landlords can be held liable for infringement even when they’re not selling it. There have been some substantial decisions against landlords on that. ... In furniture, retailers can be liable for selling (copies) even if they don’t realize it’s a knockoff.”

Farley, who once helped win a $4.8 million judgment in a furniture copying case, said legal actions involving retailers often result in the furniture store dropping the offending collection immediately and asking the manufacturer to take it back.

Hicks said most manufacturers have indemnification agreements with retail customers, meaning the manufacturer agrees to take on lawsuits in intellectual property disputes. However, Farley said an indemnification agreement doesn’t mean the retailer can’t be the subject of a legal action. “The retailer is still responsible, but they can go back to the vendor” and seek to recoup the costs of the legal action, she said.

A HUSH-HUSH ATMOSPHERE

Patent attorneys and manufacturers say knockoff cases involving furniture rarely wind up in the headlines. In most cases, a cease-and-desist letter to the copyist from the design’s originator—along with the threat of legal action—is enough to cause the knockoff to be immediately dropped.

Cases that advance further through the legal system are often settled with legal agreements that forbid either party from discussing the case publicly. The details of many other cases get lost as legal actions drag on for two or three years.

Home Furnishings Business spoke to a top executive at a Top 20 manufacturer who has been accused of copying in two recent cases. He will not be named in order to provide a deeper understanding of an aspect of the industry that is often cloaked in secrecy. Over the past two to three years, that executive said, a rising number of lawsuits aimed at stopping knockoffs is changing what was once a near-certain route to profitability for many companies.

“The easiest way to get business is to copy, and sell it cheaper, but it’s not the most profitable way to get business” any longer, he said, noting that lawsuits can cost millions and take years to defend.

ONE LETTER SCRAPS SCORES OF ORDERS

The executive said his company was one of at least five that received cease-and-desist letters from Palliser earlier this year after showing a wooden bedroom collection similar to one the Canadian company claims to have originated.

“I sold an unbelievable amount of it, but we never made it,” he said. “When we got the letter, I canceled every order on the spot. ... There’s very little you look at in the industry that’s new and innovative, especially at the promotional level, and there are a lot of people that copy. We’ll be much more careful about checking patents from now on because there is so much more sensitivity to it. In addition to the legal costs, you wouldn’t believe how time-consuming it can be for (executives) within the company. If there’s a lawsuit, it can take a day of my time out of every week just answering questions, (and) preparing and going through records. It’s not worth it.”

Efforts to reach Palliser executives for comment were not successful.

Ashley Furniture Chairman Ron Wanek said the company’s manufacturing arm has stepped up its efforts to crack down on copies over the last couple of years.

“Ashley spends a lot of time on customer research, product design, engineering and marketing, and there’s no question that we’ve become more aggressive in our design protection,” Wanek said.

He said it can be frustrating to have designs copied by overseas manufacturers with limited assets in the United States, which makes it hard to bring court actions. “It’s unfortunate we have to spend so much of our time on it,” he said, adding that most of Ashley’s designs are protected by patents or copyrights. “We send out a lot of cease-and-desist letters, and most of the time these companies will drop it when they’re challenged, with a few exceptions.”

He could not comment on a recent case Ashley settled with Lifestyle Enterprise over three patents on the ornamental design of Ashley’s South Shore and North Shore bedroom collections. According to a news release, Lifestyle agreed to stop selling a similar group and paid an undisclosed amount to Ashley. Officials at Lifestyle declined to comment on the settlement.

RETAILERS’ KNOCKOFF HEADACHES

For most retailers, the main frustration with knockoffs involve instances where nearby competitors sell products that shoppers have a hard time distinguishing from the original, patented or copyrighted design.

“The consumer does get confused and they only pay attention to certain elements of the design,” said Howard Haimsohn, who operates Lawrance Contemporary in San Diego and is president of the Contemporary Design Group, a retailer buying organization. “A few years ago, there was a fabric that became very popular, and we had it on a sofa that sold at $799 and down the street you could find it on a $599 sofa. ... The customer never got past the fabric. They would say they saw the same sofa down the street. They didn’t say, ‘I saw something like it.’ They said, ‘I saw the exact same sofa,’” he said. “The scary part is all the people who don’t tell us that out loud.”

More than a decade ago, Eleanor McKay felt many of the same frustrations over knockoffs as CEO of Niermann Weeks, a high-end furniture maker focused on the design and contract businesses. Seeking solutions, she joined the then-new Foundation for Design Integrity (FFDI), a coalition of more than 100 mostly high-end home furnishings companies focused on raising awareness about knockoffs and educating members how to fight copyists.

THE FOUNDATION FOR DESIGN INTEGRITY

“FFDI was a godsend for me when i joined, because I was talking with other people for the first time who were also manufacturers of original designs, and I found out how to fight knockoffs. You have to really know how to use the law, and it’s not an easy thing to do,” McKay said.

Four years ago, a well-known catalog’s Christmas edition featured a chandelier on its cover that bore an unmistakable—but not exact—resemblance to one McKay had created and patented a short time before, and she swung into action. “My attorney wrote a cease-and-desist letter, and, to their credit, the company said it didn’t know (about the patent). They didn’t sell any, and here it was on the cover of their Christmas catalog. Some people are not as honorable, and you have to use stronger (tactics) with them.”

Through FFDI education events—like the seminars Attorney Susan Farley presents at least annually—McKay learned about the power of copyrights and patents. “We routinely copyright everything now. In the past, we didn’t do that. We didn’t know how.”

Up until now, she said, cease-and-desist letters have brought the desired results in nearly all cases. In one instance, she considered filing a lawsuit against a well-known manufacturer, but stopped short. “It’s a huge, unknown legal cost,” she added, “and I have a small company. Most companies in furniture design are small, and there’s a limit to the extraneous cash they have to fight these lawsuits.”

A $4.86 MILLION JUDGMENT

At about the time FFDI started, knockoffs were rampant and some courts didn’t see them as a major problem. Farley said the tide has turned since 1993 when she was involved in a case that produced a $4.86 million judgment on behalf of a garden furniture company called Imagineering (Weatherend Estate Furniture) against Van Klassens, a manufacturer that has since ceased operations.

Over time, the rules have become clearer. When a design is patented, competitors are restricted from producing designs that, in one legal test, are “substantially similar to the eye of the ordinary observer.” A second legal test hones in on “appropriating the points of novelty,” so a knockoff with two, three or more elements that are “substantially similar” could be judged a knockoff.

Of course, Farley said there’s as much leeway involved in determining whether a piece of furniture is a copy as there is in judging “what’s pretty.” She said it’s much easier for a jury to make a decision about a very distinctive piece of furniture than it is when an item is a common form like a picnic table with very little adornment. In the end, though, it ultimately comes down to a judgment call.

A SWITCHEROO

Farley said she’s had at least one jury case where the original piece of furniture and an alleged copy were displayed in the courtroom.

“The (defendant’s attorney) spends a lot of time talking about all the distinctions and differences, and basically asks, ‘How can any idiot confuse the two?’”

During a break when the courtroom emptied, Farley switched the pieces and later “asked the jury, ‘Did you realize they were switched?’ Their jaws dropped,” and Farley’s client won the case.

Ultimately, she said, cases come down to a question of fairness.

“A jury will frequently look at a case and say, ‘They were clearly trying to benefit unfairly. ... They were trying to benefit from all of the advertising and marketing (the originator) had already done.’ ... Original designs involve a lot of risk and expense, because not everything is a hit,” she said. “For every one that is a hit, there are several that aren’t. If copies are allowed, who is going to invest in original designs?”

Lawrance Contemporary, which operates two stores, emphasizes original design and would never sell one. But, like many retailers, Haimsohn said it can be difficult to determine what’s a knockoff

“Even original designs are, in some way, a variation of another original design. There’s no question that a retailer can buy a knockoff and not necessarily know, but I’d like to think that’s pretty rare. ... On the other hand, I’ll tell a manufacturer we deal with that I’ve seen a copy of their design because usually I’m carrying that original design at a much higher price, so I want it to be protected.”



Furniture and Intellectual Property Law

Patents: Design patents protect new and non-obvious ornamental designs of useful objects such an entire sofa arm or a table leg and have a 14-year lifespan. Utility patents protect functional aspects—like recliner mechanisms or a method of manufacturing for 20 years. A patent excludes others from making or selling the item in the U.S. in exchange for public disclosure of the invention.

Copyright: In furniture, protect original, non-utilitarian design elements. In a piece of furniture, the design elements must be “conceptually separable,” or able to exist on their own, such as fabrics designs, carvings, metal work or other accents.

Trade Dress: Generally restricted to iconic designs like an Eames chair, the designation protects a product’s design, packaging, color or other distinguishing, nonfunctional elements.

Trademarks: Can cover a manufacturer’s name, logo or the names of collections (as well as other symbols, sounds or colors). Unlike patents, trademarks can remain in force forever.

Source: Jack Hicks, Womble Carlyle, Sandridge & Rice



Case Studies In Knockoffs: Fontana and Visions

Meet Fontana: The bedroom collection from Broyhill debuted in 1985 and became the industry’s best-seller for the next decade, as well as one of the most widely copied styles in recent memory.

Still a strong seller with a unique style that moves from casual to cottage to Southwestern and coastal, Fontana did not capture the industry by storm when it debuted 23 years ago, recalls Gary Huffstetler, Broyhill’s corporate director of case good product design. At the time, Huffstetler was the chief designer of occasional and upholstery, and he helped create the early look of Fontana.

Initial reaction was so mixed, in fact, that the first dining group was dropped.

“Fontana was so unique for its time that many retailers did not want to commit to the entire collection,” said Huffstetler, who designed Fontana’s original occasional tables and an entertainment armoire prior to the look being expanded to include bedroom and dining. “It wasn’t until the bedroom sales took off that the dining room was added (back) in.”

Doug Kays, president of the National Home Furnishings Association and an executive with McMahan’s during the ‘80s, recalls that Fontana was an exceptionally “fresh” look at a time when many furniture showrooms were dominated with dark woods. “It was probably a year before there were a lot of copies, but by then, (Fontana) was huge, and lots of companies jumped on it. It was definitely novel, and kind of led back to other introductions with lighter woods.”

Huffstetler said that after encountering some initial skepticism, it took about six months to realize that Broyhill had a major hit on its hands, and by the end of a year, copies were rampant. “Unfortunately, we did not protect the design; hence it was widely emulated in the industry,” he wrote in an e-mail response to questions.

He said Broyhill set out to design a group that would appeal to a range of ages and not be limited to any one region of the country. “Because it was difficult to categorize the collection as a specific style, it had a very broad appeal, which we believe led to the long-standing success of the group.”

At Creative Elegance, a much smaller company, the Visions square dining table didn’t become the industry’s best-seller when it debuted in 1999. But, over the past decade, the set’s basic form—and details like its frosted glass inset and benches for seating—has been copied dozens of times and is a familiar presence in national catalogs and stores.

Mark Popel, a co-owner of Creative Elegance, South El Monte, Calif., said, “It’s been knocked off incredibly from top to bottom, and some of the knockoffs were obscene as far as duplicating all aspects of it. One thing was that we showed a combination of chairs and benches. You also saw the whole thing translated into all kinds of styles from traditional to casual and outdoor.”

Like Broyhill, Creative Elegance realized its new collection was a major hit within a few months, and the knockoffs started soon after. In some cases, Popel said retailers who weren’t Creative Elegance customers had local cabinet makers recreate the design to undercut the price of the company’s dealers.

As a small company, Popel said there was little Creative Elegance could do. It had not copyrighted or patented any aspect of the design.

“The cost of fighting something like that can be really high, and we also realized that, by making just a few changes, a company could get away with it,” he said, adding that the company has since taken steps to protect newer designs.

He said it can be frustrating to see the design sold so widely, but said the original Visions version remains a top seller for Creative Elegance. He said the company’s dealers can compete with lower-priced copies by stressing the benefits of the company’s made-to-order customization options, as well as quality and service. Creative Elegance also is a longtime promoter of eco-friendly designs and is a founding member of the Sustainable Furniture Council, which has a lot of appeal for some shoppers, he said.