Trademark and Copyright Royalty Statistics
Chapter 7 The apparel and accessories industry is a mature business in the United States. Women are the primary driving force for this industry, and represent the major source of revenue. Consumers, particularly women, are willing to pay extra to differentiate themselves in terms of fashion. This allows manufacturers to produce huge collections of apparel and accessories, for a wide spectrum of price points. Major players within the United States include Coach, Jones Apparel, Liz Claiborne, VF, and Polo Ralph Lauren. These manufacturers attract customers by promoting an array of established brands. Changing consumer tastes are a continuing challenge for the industry. This drives demand for new product, but also generates uncertainty in terms of production planning, forecasting, inventory management, production systems, and distribution. Another challenge is introduced by the continuing threat from counterfeit products. Economic conditions can greatly impact sales and profits for industry participants. During downturns, consumers reduce spending on discretionary luxury items. As income is reduced, consumers focus their spending on essentials. Money for new clothes and accessories is often not part of their strained budgets. The industry is also impacted by seasonal fluctuations, because apparel products and accessories are frequently given as gifts, resulting in substantial seasonal fluctuations in sales and operating profits. The Everlast trademark reminds everyone of boxing gloves, trunks, and headgear. Its distinctive curved lettering is now appearing on other forms of sports clothing and sporting goods, bringing to the market a locker room feeling of strength, and no-nonsense athleticism. USA Classic has been licensing the Everlast trademark for use on a wide variety of non-boxing sporting goods, and paying the licensor six percent of sales. Lotto is an Italian company, and owns the trademark to the Lotto brand name. The Lotto brand name adorns mens’, womens’, and childrens’ athletic shoes, apparel, and accessories. Aarica Holdings designs, manufactures, and distributes athletic footwear, apparel, and accessories in Mexico, for U.S. and European brands. Aarica is the exclusive distributor of the L.A. Gear and Lotto brands in Mexico. In 1998, Lotto and Aarica entered into a license agreement, whereby Lotto granted Aarica an exclusive license to use technical information, and the Lotto trademark, for manufacturing, packaging, and distribution of products in the Mexican market. The specific products covered by this ten-year agreement are to be agreed upon seasonally. In consideration for this license, Aarica agreed to pay Lotto a semi-annual royalty, equal to five percent of net sales. Disney licensed the use of a portfolio of its characters to Sun Green River, a Japanese manufacturer, for use on swimwear and suspenders in Japan. Disney will get a ten percent royalty on the wholesale price of the garments. Ralph Lauren and Polo Ralph Lauren Corporation were involved in a dispute with their largest licensee, Jones Apparel, over the designer’s department store apparel line. Lauren wanted Jones to give back the license at the end of 2003, while Jones maintained that it had until 2006. Jones annual sales amounted to approximately $1 billion, and the licensed apparel accounted for over fifty percent of revenue. In 2002, Jones sold $548 million of the Lauren brand, and $37 million of the Ralph Casual collection. Jones licenses from Ralph Lauren three product lines: Polo Jeans, Lauren, and Ralph. Currently, the Polo Jeans line is not part of the dispute. Jones pays seven percent of sales on all three lines. In the 1980s, fashion designers like Ralph Lauren raced to sign up licensees to manufacture and distribute branded clothing, bed linens, towels, and other furnishings. Currently, designers want more control over their brands, so they are buying back their licenses. In 2000, Polo spent $200 million to buy back its European licensees; in 2003, they spent another $70 million to acquire their Japanese licenses, with plans to produce the lines itself. Jones is a $4 billion company—the second-largest publicly traded clothing-maker in the United States. Approximately twenty-five percent of its sales come from the licensed Ralph Lauren lines. To stay profitable, Jones must have a strong-selling, well-known brand as leverage with its retailing customers. If Jones loses the Ralph and Lauren lines, but keeps the Polo Jeans line, it contractually cannot replace the lost lines with competing designers. Licensed artwork is a broad category, not including original works of art, such as oil paintings. The type of artwork discussed here adorns almost every conceivable product, including paper towels. Royalty rate information for this category is scarce, but some data have been found, as presented below. Leon B. Rosenblatt Textiles won damages against a licensee for failure to pay royalties A federal judge in New York City ordered a corporate principal to personally pay $56,685, in damages and attorney fees, for breach of contract and willful copyright violation (Leon B. Rosenblatt Textiles v. Griseto). The judge entered a default judgment and fee award, after the officer’s repeated failure to appear in court and produce tax returns. Leon B. Rosenblatt Textiles licensed Nicholas Griseto’s company to sell copyright-protected textile patterns, for a three percent royalty. After Rosenblatt was not paid, it sued Griseto in the Southern District of New York, for copyright infringement and breach of contract. After defense counsel withdrew, Griseto appeared pro se and a default was entered against him. Griseto failed to comply with orders to produce copies of personal and corporate income tax returns. He also failed to appear at a status conference, and a scheduling conference. The judge granted Rosenblatt a default judgment, rejecting Griseto’s assertions that he was not notified of the conference dates. The judge found bad faith in his failure to disclose the tax returns and awarded: $8,737 in contract damages, based on unpaid royalties on actual sales; $8,737 for willful infringement, for knowingly selling copyrighted patterns without paying royalties; $2,888 in interest; and $38,330 in attorney fees. While the attorney fees were awarded under the Copyright Act, a substantial portion of that amount could also have been awarded as a sanction, for failing to comply with discovery orders, and for missing court ordered conferences. Food Food processing is one of the largest manufacturing sectors in the U.S. The largest sectors of the industry, as measured by value, are meat, dairy, fruit & vegetable preservation and specialty foods. Other niche sectors include bakeries and tortilla manufacturing, grain and oilseed milling, sugar and confectionary, animal food manufacturing and seafood products. Food companies are facing rising criticism that they are contributing to obesity in children. Reducing fat and sugar content in foods and ensuring that products are intelligently marketed is the challenged faced by this industry. The leading industry participants U.S. include Archer Daniels Midland Company, Bunge, Kraft Foods, and Tyson Foods.
Trademark and Copyright Royalty Statistics
APPAREL
Everlast™
Lotto™
Disney
Ralph Lauren and Polo
ARTWORK
Textile Patterns
Andretti™