Diluting Designers
Kalina D. Parker
Diluting Designers: An Analysis of Whether Designer-Department Store Partnerships Constitute Self-Dilution and Whether Such Behavior Should Have Legal Consequences
Table of Contents
I. The Lilly Pulitzer-Target Partnership
A. The Agreement and Goals of the Partners
B. Consumer Responses Pre- and Post-Debut
C. The Harms to the Lilly Pulitzer Brand from This Arrangement
II. Anti-Dilution Laws
A. Anti-Dilution Law in its Inception
B. Anti-Dilution Law as Enacted in the United States
C. What Anti-Dilution Law is Truly Protecting
III. Designer Partnerships as Harming the Designer Brand’s Aura
IV. Conclusion
“Style isn’t just about what you wear, it’s about how you live.” – Lilly Pulitzer
Lilly Pulitzer consumers seem to have taken these words of their beloved fashion designer seriously. When Target, early in 2015, announced a spring partnership with the fashion house Lilly Pulitzer, some consumers were overjoyed at the possibility of purchasing the colorful, beach-y designs at a lower price. Other “true” Lilly Pulitzer consumers, however, were less than excited about the upcoming collaboration. These true Lilly Pulitzer consumers expressed feelings that a partnership with Target selling the designer line at lower prices cheapened the brand and damaged the brand’s exclusivity—generally, they believed that this partnership was a poor decision for Lilly Pulitzer.
True designer consumers purchase expensive designer goods because owning goods bearing particular trademarks signals elite status and wealth to those around them. These true consumers feel harmed by designer-department store collaborations because such collaborations decrease the designer’s goods’ exclusivity and, therefore, decrease the mark’s ability to act as a status signal.
This paper will consider whether trademark law protects against the harm felt by these true consumers by analyzing trademark dilution law in the United States. Though in its incipiency anti-dilution law was only meant to protect highly distinctive trademarks against a whittling away of their distinctiveness, in practice today, anti-dilution law seems to be applied to protect famous marks against impairment of the mark’s aura or ability to act as a status symbol. If courts are applying anti-dilution law to protect against such a broad harm, then designers are potentially causing the same harms to their brands that other mark owner’s have brought cases against third parties for causing. This paper will conclude that, if a designer self-dilutes her mark through a partnership as described above, any third party that a designer may try to bring a claim against in the future for harm to the designer’s brand aura should be permitted to bring a self-dilution defense.
I. The Lilly Pulitzer-Target Partnership
A. The Agreement and Goals of the Partners
On January 6th, 2015, Target made an announcement in New York City that they expected would excite their consumers and “leave [them] longing for the warmth of Palm Beach”: beginning April 19th, 2015, Target would be carrying a limited-edition Lilly Pulitzer for Target line.[1] Through their partnership, Lilly Pulitzer would design a collection for Target that would only be stocked once.[2]
The partnership between Lilly Pulitzer and Target was particularly short-term, but each company expected to derive benefits from the arrangement. Despite the limited nature of the agreement, after the announcement by Target of the collaboration, Lilly Pulitzer saw a marked increase in both Google searches of their brand and in Facebook traffic to their page.[3] This collaboration was also appealing for Target. Target has pursued such designer collaborations over 150 times in the past[4] and noted specifically that the Lilly Pulitzer collaboration was the most talked-about partnership on social media.[5] Furthermore, these collaborations gave Target the opportunity to sell exclusive, often limited-edition lines that, due to this limited, exclusive nature, tend to sell out.[6] When consumers know that a particular line of goods is going to be limited edition and the line is in high demand because of its connection with a luxury designer, the consumers are more likely to purchase the goods knowing that they will not have the opportunity to do so again in the future.
B. Consumer Responses Pre- and Post-Debut
Though Target and Lilly Pulitzer entered into what they believed to be a beneficial arrangement, the consumer responses immediately after the announcement of the partnership made it unclear whether a majority of consumers were truly excited about this collaboration. Some customers showed all of the enthusiasm that the partners were expecting by tweeting comments such as “I WANT IT ALL!!!!” and “OMG Lilly Pulitzer for Target!!!! I could not be freaking out more! So excited!”[7] However, many other customers expressed concern that this collaboration “cheapen[ed] the brand” and that “the brand is going to lose its exclusivity now.”[8] One clearly established Lilly Pulitzer customer stated, “Tbh [To be honest,] I’m not happy about Lilly for Target. What’s the point of investing in their clothes if you can just buy it for cheap at Target now? ?”[9]
Despite the mixed reviews, when April 19th arrived, thousands of enthusiastic customers lined up or waited at their computers with anticipation through the middle of the night to get their hands on the limited-edition products.[10] Within only a few hours, the stores were entirely sold out of the Lilly Pulitzer line,[11] and the heavy traffic online caused the Target website to run incredibly slowly,[12] although, according to a Target representative, it apparently did not crash entirely.[13] After all of the confusion and mayhem in the initial opening hours, many of the customers who had been positive about the collaboration quickly became frustrated with the entire process, with one customer stating that “[a]ll the hype was a waste.”[14]
Target had not placed any limit on the number of products that any one customer was permitted to purchase, so those lucky first customers filled entire carts with the Lilly Pulitzer for Target line, while those arriving at the displays later were left with nothing to purchase.[15] To add to their customers’ frustrations, Target and other sources repeatedly commented that the Lilly Pulitzer for Target line would not be restocked, and that customers who were not able to purchase the products simply had to check with their local Target to see if any of the products had been returned.[16] However, the vast number of the Lilly Pulitzer for Target products that purchasers subsequently posted on eBay at incredibly marked-up prices[17] left customers feeling quite certain that none of the products would be returned to Target stores.[18]
C. The Harms to the Lilly Pulitzer Brand from This Arrangement
While many consumers became angry about varying aspects of the collaboration, Lilly Pulitzer and Target both viewed the partnership as a success. Lilly Pulitzer seemed to take the position that all press was good press.[19] Due to the increase in traffic to their Facebook page and the number of Google searches of the brand name, Lilly Pulitzer viewed the collaboration as positive despite any negative feedback—their goal seemed to be to get consumers talking about their brand.[20] Target, meanwhile, minimized its customers anger towards the sell-out and subsequent marked-up prices on eBay[21] and, rather than seeing the rapidity with which the stores ran out of product as poor management in the way that the customers viewed the experience, believed that the quick sell out was the customers telling Target that they knew what they wanted and did not need time to think about it.[22]
However, a quick glance at the reactions of consumers demonstrates that there were at least two different groups of dissatisfied customers: those angered by their inability to purchase the limited product due to what they perceived as poor management by Target and those angered by Lilly Pulitzer’s choice to sell its luxury brand at lower prices in a non-exclusive store.
This group of customers[23] comprised consumers who bought what they would probably consider “true” Lilly Pulitzer products prior to the partnership. Their comments focused specifically on feelings that the “classy and exclusive” Lilly Pulitzer brand was going to be cheapened by the partnership and that generally the “brand [was] going to lose its exclusivity . . . .”[24] Other consumers provided additional strong responses:
“Sorry but @Lilly Pulitzer should not be sold at Target. Sucks if you can’t afford it but that’s life.”
“if people say they got something from Lilly at Target….the name will lose its prestige. The brand was kinda built on class??”
“I completely agree. It took away the exclusiveness of the brand. Poor marketing and branding on Lilly.”
“The fact that #lillyfortarget is happening is such a shame. It’s so degrading for the product and name.”[25]
One consumer who felt especially let down by Lilly Pulitzer wrote, “So basically I just spent almost 200$ on a dress that is going to now be about 50$ at target. What. The. F[]. Lilly Pulitzer.”[26]
Some even responded as though feeling a personal connection with Lilly Pulitzer herself, writing as though she too would have felt betrayed by this collaboration.[27] These frustrations are focused on a fear about what this collaboration would do to what the Lilly Pulitzer brand stood for in the minds of the consumers: luxury, exclusive resort products. As compared to certain other designers, Lilly Pulitzer prices are not extravagantly high.[28] Despite this lower pricing in relation to other designers, some consumers of “true” Lilly Pulitzer view the brand as exclusive.[29] When a consumer chooses to purchase “true” Lilly Pulitzer products, part of the intended benefit of the purchase is that the rest of the world will see her wearing expensive clothing. These consumers purchase goods bearing particular marks because they want the marks to “inform[] the public of [their] refined taste, status, and income.”[30]
Based upon the comments from what this paper will refer to as “true Lilly purchasers,” the harm they are experiencing is frustration about damage to what we will call the brand’s aura—the sense of exclusivity and the prestige provided to consumers when they purchase a product bearing the mark “Lilly Pulitzer.” Whether the law currently protects these aspects of a trademark is not clearly answered by the texts of United States trademark laws. The two primary laws protecting trademarks are those protecting against infringement, the Lanham Act (focused on likelihood of consumer confusion between similar marks), and those protecting against dilution (protecting against a similar mark whittling away a mark’s distinctiveness, i.e., the mark’s ability to immediately call to the consumers’ mind the mark owners’ goods or services). Neither law explicitly protects the consumers’ perception of the brand aura;[31] however, some scholars suggest that courts have recognized this harm.[32] The next portions of this paper will discuss what harm anti-dilution law was meant to protect against and what harm it may actually be protecting against to determine whether any party should face repercussions based on the harm felt by the true Lilly purchasers. The next part of the paper will discuss what type of harm anti-dilution laws were meant to protect against when first conceptualized and whether, as applied, the harm felt by these consumers concerning brand aura is what is actually being protected by anti-dilution laws today.
II. Anti-Dilution Laws
A. Anti-Dilution Law in its Inception
Trademark law has always been primarily focused on concerns about likelihood of confusion. The law providing protection to trademarks was designed to serve a particular purpose in the marketplace: to protect marks that act as source identifiers for consumers.[33] Generally speaking, trademarks reduce search costs for consumers by assuring them that if they purchase the same product bearing the same trademark as they have purchased in the past, then they will have a similar experience concerning the characteristics and quality of the product.[34] Trademark protection, therefore, has usually been focused on trying to protect consumers from being misled into purchasing a product thinking it came from one source when it truly came from a different source bearing a similar trademark.[35]
However, in 1927, Frank Schechter began promoting his belief that United States trademark law should protect against another harm beyond a likelihood of confusion based on similar marks being used on (at least to some extent) related products. Schechter believed that the United States needed to protect against a harm known as dilution.
As compared to the common likelihood of confusion theory of trademark protection, dilution is generally seen as protecting the owner of a trademark through protecting the mark as property more so than protecting consumers against facing confusion in the marketplace.[36] Regardless, Schechter saw dilution harms as serious evils worth protecting trademark owners against, and he described the harm of dilution as the impairment of a mark’s distinctiveness.[37] Schechter based his theory of dilution law on cases from foreign countries and thought it was important that the dilution claim was not based on a theory of registration, but rather on “principles of fair trade.”[38] He describes the German case of the Odol mark for mouthwash as the moment when Germany recognized a cause of action for dilution. Primarily, because the second user of Odol (for steel goods) could have chosen any other pleasing word to apply to his goods, the court determined the defendant “chose the word . . . because this mark had acquired an especially favorable prestige through the efforts of the complainant.”[39] This notion that the junior user has only chosen the mark because of the selling power acquired by the senior user seems to drive Schechter’s theory that such behavior constitutes unfair trade practices.
In the article in which he laid out his initial argument for an anti-dilution statute, Schechter had three requirements a trademark holder needed to satisfy before being able to claim that its mark was being diluted: (1) the mark must possess distinctiveness in the marketplace (to show that the mark acts as a source identifier); (2) the mark must be of the highest level of distinctiveness (“coined, arbitrary, or fanciful”[40]); and (3) the mark must possess a singular association between itself and the underlying product. (“a mark must be ‘associated in the public mind with a particular product, not with a variety of products.’”)[41] Based on these requirements, under a Schechter dilution analysis, only a very specific group of trademark owners could actually bring a claim of dilution.[42] While trademark law acknowledges five levels of distinctiveness (only four of which can possibly receive protection as trademarks),[43] only marks falling into the category of the “highest level” of distinctiveness could bring a claim of dilution under Schechter’s dilution analysis.