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From Fast Fashion to Wearable Technology – the pro’s and con’s of today’s licensing and collaboration in the fashion industry

Moschino’s inspired use of one of the world’s  best known fast-food brands in its 2014 Autumn/Winter Collection has been a run-away success, with handbags, iPhone cases, sweaters and backpacks already sold out. Some critics have accused Moschino of mocking the working class, who could not afford to buy luxury products but far from damaging the reputation of either brand, the successful tie-up has enhanced both brands, giving McDonalds the opportunity to gain status and credibility with a different group of customers and increasing brand recognition for Moschino. So, what is the key to successful brand licensing and collaborations in the fashion industry and what can go wrong?

BrownbagHistorically, brand licensing has been used by the fashion industry as an easy way to target a new audience and expand into new categories and geographies. The most common form of licensing has been licensing-out of a brand name, logo, product design or fabric design into an associated product category. Many fashion designers license their brand name to accessory manufacturers (luggage, sunglasses, footwear etc) and perfume makers. Designers may also license the copyright in their print or textile designs for use on furniture, luggage or other products. Another more challenging option is to collaborate with a well-known brand in another industry to create a new product-line, such as Matthew Williamson’s wallpaper in collaboration with Osborne & Little.

Collaborations allow a designer to test a new market by leveraging the existing knowledge and experience of a well-established brand in that market. Stella McCartney’s collaboration with Gap Kids preceded the launch of Stella McCartney Kids. Collaborations can be particularly useful for new and emerging designers, as a way to increase profile and brand awareness without the designer needing to make a big investment. It can provide revenue to the designer without the designer having to spend money or take risks on manufacturing and marketing the products. H&M has successfully collaborated with many fashion designers in this way.

Moschino however has done something different. By apparently subverting the usual rules and licensing-in the use of a very well-known high street brand in its own product both Moschino and McDonalds have asserted the strength and market-leading position of their own brand to push the boundaries. Moschino has produced a truly unique and innovative collection and McDonalds has been able to reach a new target audience. But it is not always easy to get it right.

There are potential pit-falls with licensing and collaborations. There is a real risk that licensing-out a brand can damage or dilute the brand if the licensed product is poor in quality. In 2000 Calvin Klein sued its biggest licensee, Warnaco, for diluting the Calvin Klein brand when Warnaco started producing sub-standard products and trading with discount retailers. Similar reputational damage can occur with collaborations if the jointly created product is of sub-standard quality. The licence terms should therefore be carefully negotiated to include the right to carry out quality control checks. The licensee must also be prevented from using the licensed mark in any manner which would lead the mark to become generic. The representation of the mark must be completely accurate at all times and carried out in accordance with the detailed instruction of the licensor. Good licensing produces distinctive products which affirm the brand’s core values.

It is also very important to choose a partner carefully. When choosing a partner, it helps if the brands are complementary and the licensee (or licensor) shares the ethos of the designer. A mismatch of brands with different messages can potentially be quite damaging, as illustrated by some of the accusations made against Moschino in connection with its tie-up with McDonalds.

When granting an exclusive licence to a third party, for example, for use of a brand, fabric design or product design on or in other products, it is important to ensure that the terms of the licence are clear about the scope of the licence, including the duration, the categories of goods licensed and applicable territories. If the designer is not certain what rights have already been granted to third parties it can potentially restrict the granting of future licences, or, worse, lead to claims from earlier licensees that the terms of their licence have been breached.

Particular issues also arise with true collaborations, where the designer works together with a third party to produce a jointly created fabric or product design. A designer will be very reluctant to cede any control over his or her designs or the way in which the product is marketed or distributed. This leads to extensive contracts and potentially protracted negotiations, particularly with well-established designers. Consequently, it is worthwhile discussing the key terms of collaboration at the earliest stage of the project as possible. The parties will need to decide early on how ownership of the intellectual property in the jointly produced products will be held. In relation to copyright works, such as fabric designs, if a work is jointly owned, neither party will be able to exploit it without the other party’s consent. This can lead to works being tied up and never used if the parties fall out and haven’t considered and agreed up front all ways in which each party can use the works. For example, can one party licence the design to a third party without the consent of the other and how will royalties be divided on sales by a licensee? It is also important to work out at the beginning which party will be responsible for registering any intellectual property, such as a registered design and who will bear the cost of maintaining the fees for registration of the design. What will happen to those rights and how they are subsequently exploited on termination?

On the other hand, successful collaborations can be the key to producing truly innovative and attractive fashion items, heightening brand appeal for both sides. The recent trend for collaborations between the tech industry and the fashion industry for cutting edge designs for “wearable technology” is a good example. Apple’s IWatch and Google’s Glass by DVF have created a real buzz. Intel has just released details on a series of collaborations with Opening Ceremony, Barneys New York and the Council of Fashion Designers of America. The result will be a smart bracelet designed by Opening Ceremony, powered by Intel and sold exclusively this Autumn at Barneys New York. In joining forces with the Council for Fashion Designers of America, Intel has shown how ground-changing interaction between technologists and fashion designers will change how we live in the future.

First published in Intellectual Property Magazine September, 2014