Amazon & Valentino: IP Partnership in the Changing Luxury Retail Landscape

Amazon & Valentino: IP Partnership in the Changing Luxury Retail Landscape

Carol Trudell

COVID-19 has led most of us, corporations included, to reconsider how and where we spend our money. Whereas concerns of diversity, sustainability, and originality would have previously come second to a good deal, consumer consciousness around these subjects is on the rise.^[1] Your favourite quarantine impulse-buy supplier, Amazon, has taken note. Amazon’s forced arbitration clause, governed by the US Federal Arbitration Act,^[2] has been invoked frequently by Amazon and its contractual partners. However, Amazon’s recent joint-suit with Italian luxury retailer, Valentino, could signal a changed approach.

            In a first for both companies, Amazon and Valentino are pursuing a counterfeiting law suit against a third-party retailer on Amazon’s website, Kaitlyn Pan Group, LLC (“Pan”). Pan distributed counterfeit Valentino shoes—in particular, Valentino’s famous Rockstud heels—on Amazon’s website, until Amazon shut down their seller account in September 2019. Because Amazon filed suit in New York, it is unclear how their forced arbitration clause will implicate the proceedings. The significance this decision will have for the Canadian arbitration community is twofold. Broadly, the case will set an important precedent in fashion and IP law, which could guide legal strategies for pursuing or defending counterfeiting claims. More specifically, the case could draw clearer parameters on the interpretation and enforceability of the arbitration clause in Amazon’s contracts with its many third-party retailers, when Amazon itself seeks to subvert it.

            A pivotal question in this case is whether or not Kaitlyn Pan will challenge the forum-- precisely the controversy in Williams v Amazon.^[3] In Williams ^[4], Amazon’s standard arbitration clause was upheld by the British Columbia Supreme Court, after Williams accused Amazon of overcharging customers under the Business and Consumer Protection Act.^[5] The clause was considered valid and enforceable, compelling the plaintiff as a third-party retailer to settle disputes in arbitration.^[6] Similar to Williams, Pan is a third-party retailer on Amazon’s site. Seemingly, Amazon should have to arbitrate with Pan, just as Williams had to arbitrate with Amazon, but not if Valentino gets their way.^[7]

            While at first brush suing one third-party retailer over a single shoe design may appear trivial, the Rockstud design is valuable IP. In a 2019 article describing Valentino as “luxury fashion’s fastest growing brand”, Vogue Magazine attributed Valentino’s recent successes to their “well-received products” explicitly mentioning the Rockstud shoes.^[8] As a regular Vogue reader, I can confirm that even if you do not like some product, the second Vogue mentions it - you consider buying it. They are the fashion equivalent of the Supreme Court—ultimate arbiters of style. Once influencers and fashion-bloggers started advocating for the Kaitlyn Pan shoes as an affordable alternative to Valentino’s Rockstuds, Valentino’s IP claim is a reasonable attempt to protect their record-setting sales.^[9] Clearly, Pan is undercutting Valentino’s market, as occurred in WIlliams,^[10] What remains unknown is how New York courts, traditionally highly deferential to arbitration, will respond to the joint suit.

            Amazon has clearly aligned itself with Valentino. Despite stating in its Form 10-K public disclosure that liability for third-party goods is an “unsettled” legal matter,^[11] Amazon has claimed that Pan’s sales violate Amazon’s policies.^[12] Notably, Amazon has agreed to grant Valentino any proceeds from the joint-suit but^[13], is this an act of altruism or a calculated alliance? Perhaps Amazon realizes that it could be complicit with third-party counterfeiting on its website that is harmful to creatives. Conversely, Amazon could be trying to gain a competitive advantage in the fundamentally shaken luxury retail market, which struggling to adapt to the rise of fast fashion retailers, the apparent demise of fashion weeks, and the transition to fully-online sales after COVID-19.^[14]

            Interestingly, about a week after filing suit with Valentino, Amazon launched a Counterfeit Crimes Unit to hold counterfeiters “accountable to the maximum extent possible”.^[15] It is not clear if Amazon will only hold the most-threatening counterfeiters, like Pan, accountable to facilitate partnerships in the luxury industry or if the Unit will turn its attention to less egregious offenders too. Either way, how the New York courts handle the enforceability issue that was central in Williams is likely to have consequences for whether Amazon will be able to arbitrate future third-party counterfeiting claims, and also for the operations of the new Unit.^[16]

CJCA blog posts represent the individual opinions and perspectives of their authors. The Canadian Journal of Commercial Arbitration does not maintain or publish a collective or institutional view on any legal or political issue.