Managing risks and disputes in the fashion industry

March 2021

By Heike Wollgast, Chiara Accornero, WIPO Arbitration and Mediation Center, Geneva, Switzerland and Ida Palombella and Federica Caretta, Deloitte Legal, Milan, Italy

Fashion is going digital, and so too is advertising. The digitalization of the fashion industry was already gathering pace when the pandemic hit, but home confinement and social distancing have further boosted the trend. Consumers stranded at home spend more time on social media. Brands are acutely aware of this. Building an effective and strong digital presence that aligns with brand values, and effectively communicating such values to consumers through the screens of their mobile phones, is what increasingly makes the difference between staying relevant and a huge flop.

To stay relevant in the market you certainly need at least one of the following elements: an eye-catching advertising campaign, a well-organized e-commerce website, a catchy pay-off or slogan, an efficient and reachable customer service, and marketing initiatives to keep your fan base involved and interested in the brand. Even better, you need a mix of all these elements …and oh yes, you need a great product, but that’s a given, right?

Stakeholders in the fashion industry are on the lookout for efficient and affordable ways to resolve disputes.

Behind each marketing initiative stand legal pitfalls that may cause any brand to have to deal with a storm of angry customers posting not-so-kind comments on their social media accounts. Sound familiar?

Luckily, there are ways to avoid such pitfalls: prior vetting of advertising campaigns, new brands and new e-commerce platforms to ensure they comply with the applicable laws can help avoid the need to shut off a campaign or change a brand, or take other remedial action, once it is already out in the world.

Similarly, well-written contracts help brands understand what to do should anything go wrong. These can make a real difference when you are at loggerheads with your business partner – which can be highly stressful. Finally, we all know how important it is to keep the brand-fan community active and engaged by, for example, creating games or having the right influencer wear your products during the most fashionable event. Legal checks ensure that you have all necessary licenses and authorizations in place to be able to unleash your creativity without fear of associated legal wrangles.

But what if, despite all the above, something goes wrong? Within the fashion industry, cross-border disputes are not uncommon. Now, more than ever, the fashion business is global, reaching consumers in many jurisdictions. On a daily basis, brand owners enter into contracts with partners in different parts of the world and with influencers that are relevant to specific markets. With such a web of contracts in place, it is important for brand owners to have access to a dispute resolution method that is reputable, knows the business and allows for fast and effective decisions.

Advantages of alternative dispute resolution (ADR) for disputes in the fashion industry

Stakeholders in the fashion industry are on the lookout for efficient and affordable ways to resolve disputes and are increasingly turning to mediation and arbitration to resolve issues that were previously handled by the courts. When well managed, mediation and arbitration can translate into substantial savings and commercially useful outcomes, making them a more affordable and flexible avenue for resolving fashion disputes, including on advertising and image rights. The advantages of alternative dispute resolution (ADR) include:

• Time- and cost-savings: mediation and arbitration allow parties to save significant costs compared to multi-jurisdictional court proceedings. As the fashion lifecycle can be short, parties to fashion and advertising disputes are keen to avoid costly and lengthy proceedings. A typical WIPO Mediation takes four months, but may be completed more rapidly at the request of the parties. Parties may also opt for the procedural framework established by the WIPO Expedited Arbitration Rules; such expedited arbitration proceedings have been concluded in as little as five weeks.
• A single procedure: through mediation and arbitration, parties can resolve disputes covering issues protected in several jurisdictions in a single proceeding. This allows them to avoid the expense of litigation in multiple jurisdictions and eliminates the risk of inconsistent results across national borders. Advertising and fashion collaborations, which typically involve multiple parties from different geographical locations with varying legal systems and business cultures, can benefit from such a simplified procedure.
• Party autonomy and expertise: because mediation and arbitration are private in nature, parties can exercise greater control over the way their dispute is resolved. For example, they can select streamlined or more extensive procedures, a mediator or arbitrator who is a specialist in the subject matter in dispute, the applicable law, location, and language of the proceedings. Moreover the WIPO Mediation, Arbitration and Expert Determination Rules (WIPO Rules) may be modified by party agreement, or may otherwise provide a firm procedural basis for the dispute to be resolved.
• Confidentiality: mediation and arbitration allow parties to keep the proceedings and the outcome confidential. This helps parties focus on the merits of their dispute without fear of negative publicity or damage to their business reputation, a key consideration in the fashion industry, especially in disputes relating to image rights.
• Preserving business relationships: mediation gives the parties an opportunity to negotiate creative solutions that satisfy their business interests, in terms of preserving existing business relationships or forging new ones. Seventy percent of WIPO mediation procedures settle, and for arbitration, over 30 percent of WIPO cases are settled by the parties before any formal decision is issued.

In recent years, the WIPO Arbitration and Mediation Center has received an increasing number of cases relating to the fashion and luxury industries. Such disputes relate to, among others, trademarks, patents, industrial design, copyright, software, product development, Internet retail and e-commerce as well as IP infringements. Disputes have arisen out of agreements relating to licensing, distribution and franchising, manufacturing, software, sponsorship and marketing.

These cases have involved large-sized companies and SMEs in the fashion industry, manufacturers, inventors, retailers and service providers.

The WIPO Center and the National Chamber of Italian Fashion join forces

In light of the potential usefulness of ADR, especially arbitration, in resolving fashion-related disputes, the National Chamber of Italian Fashion (CNMI) and the WIPO Center have joined ranks to establish a tailor-made mediation and arbitration process for fashion industry-related disputes.

Behind each marketing initiative stand legal pitfalls that may cause any brand to have to deal with a storm of angry customers posting not-so-kind comments on their social media accounts.

Under the collaboration, CNMI members will benefit from WIPO mediation and arbitration services at reduced rates as well as services that are specially designed for fashion-related disputes. CNMI members will also be able to choose mediators and arbitrators experienced in fashion from the WIPO List of Neutrals, and can benefit from expert procedural advice from both CNMI and the WIPO Center, respectively. In this way, CNMI members will enjoy a more practical and efficient avenue to resolve their cross-border disputes, with the assurance that arbitral awards can be readily enforced internationally.

Source: https://www.wipo.int/wipo_magazine/en/2021/01/article_0008.html