Commercial Awareness Update – W/C 19th February 2024

UNIQLO SUING SHEIN OVER ITS BANANA-SHAPED BAG

Uniqlo’s banana-shaped bag, also known as ‘the Mary Poppins bag’ for its surprising capacity, has become the subject of a legal dispute between Uniqlo and Shein.

Given the bag’s popularity, which was sparked by a 43-second TikTok video of user @caitlinphillimore unpacking items from the ‘round mini’, it is logical for Uniqlo to protect its highly lucrative IP asset.

The banana-shaped bag has become Uniqlo’s bestselling bag ever, selling out several times in 2022 and 2023, and was named one of the hottest products by the global fashion search platform Lyst.

Wider trend implications

Uniqlo filed a claim in December 2022 in the Tokyo district court against Shein Japan and Shein’s parent groups, Roadget and Fashion Choice. Uniqlo alleged Shein for selling “imitation products” that “significantly undermines the high level of customer confidence in the quality of the Uniqlo brand and its products”.

The Japanese company asked for injunctive relief to stop Shein’s sale of the copycat bags and compensation for damages incurred due to Shein’s sales.

Shein, the Chinese fast-fashion company, has faced a series of copyright claims, with Uniqlo’s lawsuit being the latest. In 2023 alone, Shein faced a copyright lawsuit brought by H&M in Hong Kong and another lawsuit on trademark infringement and unfair competition from Chrome Hearts regarding its alleged copying of the luxury brand’s cross designs. Similar accusations have been filed in the US by three independent designers – Krista Perry, Larissa Martinez and Jay Baron.

This reflects a broader trend in which fast-fashion brands have been looking beyond the runway for design ideas to include their close competitors – other mass-market brands.

Pricing is a race to the bottom in the fast-fashion vs. fast-fashion sphere. Contrary to the significant price differential between the copycat item and its high-end product, the difference in price offerings between the two mass-market brands is marginal. In a period of high inflation, low prices can be the secret sauce for maintaining company profitability.

Given the increasing IP claims that fast-fashion companies are likely to face, one may question the sustainability of a business model reliant on copying ideas from luxurious brands or rivals. Besides, mass-market brands like Shein have faced allegations of labour abuse and unsustainable manufacturing processes.

With consumers becoming more aware of environmental impacts and increased regulatory scrutiny, companies with poor environmental practices would not be sustainable in the long term. However, they might prosper in times of economic downturn and high inflation.

How does this impact on law firms?

In copyright litigation cases, IP lawyers assist with defending companies or representing claimants. In the case of Uniqlo v. Shein, a contentious point might be on the ‘distinctiveness’ of Uniqlo’s bag – whether a bag shaped like a banana with very little visual detail can qualify for IP protection.

Other retailers, including H&M, have also been selling similar cross-body bags, casting doubt on Uniqlo’s claim merits. The ultimate question is whether consumers would specifically associate the banana-shaped cross-body bags with Uniqlo.

Lawyers can advise companies on pre-emptive strategies to safeguard their designs and IP rights. Areas of registered rights on trademarks and designs and unregistered rights, including passing off, are considered.

Moreover, companies should not underestimate the use of non-disclosure and employment agreements to protect their IP rights.

The article was written by Trinh Nguyen

ANTI-SUIT INJUNCTIONS

An anti-suit injunction (ASI) is an interim or, better defined, an interlocutory order that prohibits a party from commencing or advancing any proceedings before a court or arbitral tribunal in support of the enforcement of an arbitration agreement.

This is a rare form of injunctive relief in the common law system, primarily used to halt parallel proceedings in another jurisdiction. Therefore, an ASI is an ostentatious display of a court’s coercive power, especially in international arbitral settings.

Its application in international arbitration

Dating back to the 15^th century, ASIs were initially developed for sole use in the UK jurisdiction. However, their use subsequently expanded to the Commonwealth and its current state of play in the international legal circuit.

In alluding to the general terms of injunctions, an ASI is operable on a in personam basis; that is, it will bind the legal entity against whom it is made. Whilst injunctions are common, ASIs are rarely granted owing to their far-reaching consequences.

That being said, some of the circumstances applicable for the grant of an ASI include, but are not limited to;

• Preventing a suit from occurring in another jurisdiction for fear of an unjust trial or litigation process or to retain perceived ‘home court’ advantages. Also, commencing an international parallel jurisdictional process could mean incurring additional expenses, and perhaps a party’s litigation budget would not accommodate such costs.
• Compelling another party to uphold a term of an agreement in the contract law sphere; therefore, a party cannot litigate on specific agreement terms once bound by an ASI or, indeed, outside of contract law.

In giving clear demarcation, ASIs are applicable in two ways: in contractual and non-contractual instances, with the right to apply for such relief being rooted in s. 37 of the Senior Courts Act 1981.

Concerning contractual terms, an ASI may be sought against ‘an exclusive jurisdiction or arbitration clause which is relied upon’ so long as the applicant can reach the requisite threshold as per the ‘strong reasons’ test, whereas in non-contractual settings, it is not necessary to prove the breach of a contractual term to attempt the prevention of a foreign action from taking place.

ASIs are not to be confounded with anti-enforcement injunctions (AEIs). AEIs are injunctive reliefs available to prevent a privy party to an arbitration agreement from enforcing any judgments or awards. That being said, it is essential to note that granting an ASI does not halt current litigation; rather, it prevents the commencement of new actions or stops a respondent from attempting to halt ongoing proceedings.

Influence on the legal sector

Whilst the UK was an EU member state, the rarity of the granting of ASIs was even greater, and in the occurrences when they were granted, the EU almost always dismissed such grants. To exemplify, in Allianz SpA and Others v West Tankers Inc [2009], the CJEU made clear that upholding an English arbitration clause through an anti-suit injunction to halt proceedings in another member state was incompatible with Council Regulation (EC) 44/2001.

In Nori Holdings v PJSC Bank Otkritie Financial Corporation [2018], the High Court (Commercial Court division), although it was willing to grant an ASI in one jurisdiction, refrained from doing so in another, stating that the CJEU’s judgment in West Tankers Inc. remained good law.

Following Brexit and the repeal of the European Communities Act 1972, the critical piece of legislation directly transposing EU laws in the UK by the EU Withdrawal Act 2018, ASIs are now within closer reach, although grants remain rare.

Perhaps surprisingly, the judgments in West Tankers Inc. and Nori Holdings are retained EU law,  although they are now considered persuasive instead of binding. Thus, the UK courts, especially the Supreme Court, may stray from those judgments, with lower courts following suit, should the circumstances require it in line with legislation and practice statements.

This potentially more ‘liberal’ grants of ASIs means that legal professionals with expertise in international arbitration will be busier than usual, courtesy of increased ASI applications or opposing said applications. It would also mean challenges, most likely welcomed as a means of expanding expertise, would be more remarkable owing to the increased liberality of ASI grants in the UK.

Yet, as compelling a transnational remedy it is, there are controversies surrounding its use. For one, ASIs can cause jurisdictional conflicts despite this form of injunctive relief applying to a private legal entity within the external jurisdiction instead of against international courts, as seen in the case between Kaepa Inc., an American shoe manufacturer and Achilles Corporation in 1994.

Also, national courts are typically resistant to the reach of international courts, and many applicants are savvy to this resistance. Applicants can, therefore, capitalise on this stance by seeking anti-anti-suit injunctions from their national courts. This action can lead to increased costs, unnecessarily prolonged litigation due to greater complexities, and tension that can potentially spill into political grounds. But perhaps most importantly, an ASI can limit the realisation of justice for some.

It remains to be seen if the UK courts, now able to freely adjudicate as per their jurisdiction and without EU constraints, wholly depart from the pre-Brexit stance or do so piecemeal.

Irrespective of their decisions, an ASI will likely retain its power and reach, and perhaps its scope even expanded.

The article was written by Aqua Koroma