Feature

The rise of copyright infringement lawsuits—and what retailers can do about it

While copyright infringement is often regarded as the domain of publishers of printed materials, music, and movies, designers and manufacturers of patterns and fabrics are increasingly targeting retailers with lawsuits, according to a new report from legal strategist Lex Machina.

Released this month, the company’s "Copyright Litigation Report" used its Legal Analytics intellectual property (IP) litigation platform to uncover filing trends, settlement rates, damages and other insights from thousands of copyright infringement cases filed in U.S. District Courts from January 1, 2009 through June 30, 2015.

The analysis found that retailers are now one of the top groups of defendants in copyright infringement cases surrounding textile patterns. The top four defendants are Ross Stores, TJX (parent of the T.J.Maxx, Marshalls and other brands), Amazon, and the Burlington Coat Factory. Other retailers targeted include Forever 21, J.C. Penney, Nordstrom, Sears, and Wal-Mart.

“They have a lot more copyright litigation than trademark litigation,” Brian Howard, legal data scientist and director of Analytics Services for Lex Machina, told Retail Dive. That means that the cases involve questions of infringement on prints and patterns, not trademarked logos such as Gucci’s interlocking Gs.

As the number of these types of cases begin to rise, Retail Dive looks at ways retailers can avoid a lawsuit—and what to do if they do find themselves facing legal action. 

Four plaintiffs, many payments

The four leading plaintiffs—L.A. Printex, Star Fabrics, United Fabrics International, and Unicolors Inc.—filed 67 cases in 2009, increasing their activity steadily to 106 cases in 2014. The four companies are on track to outpace last year’s total again in 2015, and all are represented by Doniger/Burroughs, an IP firm based in Venice, Calif.

When taking cases to court, Burlington Coat Factory hasn’t won many, Howard says, and Amazon has defended itself successfully a few times. Just 2.3% of copyright infringement cases result in compensatory damages; among the top four retailers targeted, Ross has paid the most, $1.7 million; TJX came in second with $240,000.

More common are dismissals and settlements, however, so damages paid don’t tell the whole story. 

“They do not have to disclose the terms of a settlement," said Howard. "The reasonable assumption is that many cases settled involve money changing hands.”

For retailers, defending a case at trial often isn't worth the cost. A case seeking the recovery of $1 million to $10 million in losses, for example, costs an average of $415,000 to defend through discovery, and $710,000 to pursue through trial, says a 2013 report from the American Intellectual Property Law Association (AIPLA). “It makes sense to quantify the cost of the litigation, and decide whether this sum of money could be better spent,” Howard says.

Settle on a strategy

No retailer wants litigation to interfere with business, so they should be ready should a copyright case come up. Avoiding accidental infringement of copyrighted prints and patterns may not be economically feasible in chains with large inventories, Howard says. “Finding good counsel is probably the best preparation. Figure out who has experience with this kind of case.”

Depending on the situation, a settlement may be the best strategy. “If you are sued and you are litigating against a law firm that is very experienced in this, it may influence your strategy,” Howard says. “A smaller retailer may just decide to settle, while a larger one may want to litigate.

“It might make sense to look at the top plaintiffs, and be especially careful about their stuff,” he adds. “Just like you would have flood and fire insurance, you may want to have a discussion with your counsel to see if there’s something you can do to avoid being on these companies’ radar. And make sure that if the time comes, you know who to call.” 

Filed Under: Consumer Trends Corporate News