the girl from auntie

By now, some of you have heard about the U.S. Supreme Court’s antitrust ruling yesterday on resale price maintenance — I know, because you’ve e-mailed me! I haven’t downloaded and read the decision yet, but the court changed the law and, as this article suggests, lifted the ban on distributors fixing minimum prices for their retailers. (No, the case had nothing to do with yarn; it was about handbags.)

This doesn’t mean that all resale price maintenance is legal. What the court did (in a 5-4 decision) was abolish the rule that resale price maintenance is per se illegal, because sometimes fixing minimum prices could actually promote competition (this is not the same as conspiring among competitors to fix a minimum price; this is just about a distributor telling its retailers to sell at a fixed price). Instead, each case of resale price maintenance must be evaluated on a case-by-case basis to determine its anticompetitive effects. In the case at bar, the fixed minimum price gave small businesses the opportunity to compete on customer service against discount chains (whom, I assume, did not sell the exact same high-quality product).

You can imagine that distributors will probably be quite pleased with this. At first blush, I can see that the argument makes sense with goods that are carried by large and small retailers alike and that are, as far as the consumer is concerned, non-substitutable. Consider what happened to small, independent book stores. You don’t hear readers saying “I’d like to read the Discworld series, but I don’t want to spend all that money on the books. Can anyone recommend a cheaper substitute that has some sort of special, unseen school for wizards?”* Someone’s going to buy the book, or they’re not; if multiple retailers want to compete, they have to carry the exact same book, not some substitute book about wizards. Considering the number of small shops that have folded, perhaps customers do not attribute a value to customer service that’s equivalent to the price difference between a local bookshop and the local big box store that can afford to discount the retail price. A fixed minimum price might have helped those shops.

One the other hand, it makes less sense when the product is substitutable with goods of similar quality. To bring this back into our context, knitters look for substitute yarns all the time, so even yarns from different suppliers compete on price and quality. Sure, some yarns are unique, but there’s often something just as good, depending on the knitter’s standards. A yarn shop doesn’t need to compete with exactly the same products; it can choose to carry Cascade 220 or Ella Rae Classic, and make its customers understand that the yarns are perfectly substitutable.** If a yarn is competing against other yarns sold by other retailers, then insisting on a minimum retail price arguably harms competition. If a yarn was only competing against itself, because it was the only pure silk yarn spun with pure gold beads shaped like Elvis that was rated for use in -40°C weather,*** then the competition would be between shops selling the same item, and a minimum price may make sense.****

Interestingly, I’m not certain where patterns fit into this. Lots of people will substitute one pattern for another, because they just want a sock with a certain type of heel, or a raglan with some kind of cable decoration, but they don’t want to pay for a pattern, or they have a low ceiling on the price they’re willing to pay. Some patterns, though, are less substitutable than others.

Off to digest.

* Pretend we don’t have libraries.
** Yes, I know some people might threaten a lawsuit over claims that certain yarns are substitutable with certain other yarns. This is the gateway to the fascinating intersection of trademark and antitrust law; trademarks and other intellectual property rights are a form of permissible legal monopoly, contrary to the basic premise that monopolies are bad; businesses are within their rights to legitimately exercise their IP rights to compete against others. Identifying when wielding IP rights becomes an anticompetitive abuse of those rights is a fun question.
*** Don’t get any ideas.
**** I am only making a crazy hypothesis; I am not saying that producing pure silk yarn spun with pure gold beads shaped like Elvis that was rated for use in -40°C weather will keep you on the right side of any country’s antitrust laws.

Today’s lesson is to watch what you say, and how you say it… even when you say it through your lawyer.

Artyarns is seeking a declaratory judgment against Tilli Tomas (or rather, the people behind it, since Tilli Tomas is a business name) because of alleged threats that Tilli Tomas made against Artyarns’s business.

The source of the dispute? Yarns with bling. You know, the ones that command high prices.

The lawsuit, filed last month, alleges that Tilli Tomas (purveyor of various beaded yarns, such as Rock Star) started it by sending a letter (via its lawyer) to Artyarns, threatening to commence suit against Artyarns unless Artyarns stopped selling its own beaded silk yarn. (Memo to Artyarns: ditch the frames. Thanks.) The letter claimed that Artyarns had wrongfully duplicated Tilli Tomas beaded silk yarn designs in 2006 and/or 2007, and that Artyarns had committed acts of unfair competition by contacting Tilli Tomas’s supplier of beaded silk yarn and obtaining samples of that yarn in 2005. The letter also apparently claimed that the Artyarns beaded silk yarns were inferior to the Tilli Tomas yarns. These claims, naturally, are denied by Artyarns. Artyarns wants a declaration that Tilli Tomas has no protectable rights in the configuration, construction, or appearance of beaded silk yarns, and that Artyarns has not engaged in unfair competition.

An aside: lawsuits of this nature (seeking relief in the form of a declaration that the plaintiff isn’t doing anything wrong, contrary to allegations made by the defendant outside of a lawsuit) aren’t unheard of; and in countries where declaratory judgment actions are a known risk, like the United States, the wording of a letter to a competitor setting out one’s rights is very important: flatly threatening a lawsuit for infringement of rights may be sufficient basis for the competitor to sue you, first, claiming the opposite. Strategically, this puts the would-be plaintiff on the defensive, and gives the competitor more control over the course of the action. Sometimes it’s difficult to avoid this ultimatum in a cease-and-desist letter; you’d either have to bank on the competitor not starting that declaratory judgment action, or start a lawsuit yourself, but delay serving the complaint and try to negotiate a settlement quickly.

The “beaded silk yarn designs” reference, I think, was meant to refer to the design of the yarn itself rather than pattern designs. In a nutshell, Tilli Tomas appears to think its luxury niche product was being copied, and didn’t like it.

Artyarns’s complaint explains that beaded yarns and fabrics have been known for decades, and notes the existence of yarns from companies such as Anny Blatt and Crystal Palace Yarns. While it doesn’t directly address the allegation that Artyarns had somehow unfairly contacted Tilli Tomas’s supplier (one would think such contact would only be unfair if Artyarns secured the supplier’s identity in circumstances involving confidentiality or non-compete obligations), the complaint does explain that Artyarns had started working on a beaded yarn product by contacting potential suppliers as early as July 2004. I don’t know when Tilli Tomas’s products first launched, but the domain name was registered in December 2004, and the earliest Internet mention of Tilli Tomas at TNNA that I could find was only January 2006, although they were certainly out before then: sometime in 2005, certainly.

Artyarns is not seeking damages in this lawsuit; what they want is a declaration that they didn’t do anything wrong. The allegations of unfair competition and inferior quality were made in a letter from legal counsel, so they were not actually made publicly by Tilli Tomas (as far as I know… I was tipped off to search for a lawsuit because of a passing comment from a retailer who observed that Tilli Tomas was upset about the Artyarns yarn, and had taken it to their attorneys). Naturally, starting this lawsuit causes these allegations to be made public via Artyarns’s complaint, but that’s unavoidable (especially when I get hold of it); absent further information, this doesn’t seem to be a case for unfair competition or some kind of misrepresentation on Tilli Tomas’s part.

I personally wouldn’t expect this lawsuit to go all the way to trial. In Artyarns’s place, I’d be hoping to settle with a written agreement from Tilli Tomas that my business was engaged in legitimate competition, and that Tilli Tomas wouldn’t ever attempt to seek any legal remedy against me involving beaded yarns, or any yarn’s appearance, for that matter. After all, with far more dye artisans and distributors of yarns than there are producers, duplication of yarn types is inevitable: consider Artyarns’s Regal Silk, and the subsequent release of very similar, but not identical, Debbie Bliss Pure Silk.

If plying yarns with beads had been a new concept, never seen before, then beaded yarn itself might have been suitable subject matter for a patent (some new, inventive way of combining the beads with the yarn might be patentable, but I don’t think we’ve seen that here). The yarn’s beaded ornamentation might even be suitable subject matter for a design patent, but again, that ornamentation must have been new. In either case, though, it seems that it would be the actual manufacturer of the yarn — not the dye artist — who would have been the party entitled to seek that protection (although that right could be assigned to someone else).

It’s also conceivable that a range of yarns with a very particular ornamental appearance, in the colour or arrangement of the beads, might become sufficiently distinctive of a particular distributor that it could be the subject of trade dress protection (think of it as having trademark rights in the yarn’s appearance) — although as the Artyarn complaint indicates, the letter it received did not particularize what trade dress rights Tilli Tomas thinks it might have, and besides, the Artyarns yarn has different construction and different-sized beads.

A copy of the complaint, filed May 15, 2007, is available here.

I warned you about the puns.

Those of you — whoever you might be, and I doubt you exist — who were waiting on the edge of your seat waiting for the next move in the game of chess that is litigation over SIERRA as a yarn name, I’m happy to state that your days of balancing precariously on your beanbag are over.

Cascade voluntarily dismissed its action, with prejudice, against Crafts Americana on January 26. Yes, that’s all she wrote. There was no need for an explanation; Crafts Americana did not have to file an answer to the complaint. In fact, it’s looking like Crafts Americana may not have been served with the complaint to begin with (as far as the court knows). It was over that fast!

Now we will never know what transpired, or what really motivated the filing of this lawsuit to begin with. And now, I will not have the opportunity to point out that — understanding, of course, that the Internet is not determinative of anything — it was not until 2001 or 2002 that Cascade added the Sierra yarn to its website (with a “new”) icon, according to the WayBack Machine (Nov 30, 2001 vs Jan 18, 2002). If this addition represented a completely new addition to the Cascade line, as opposed to merely an addition to the website, then this might contradict the allegation in the complaint that the mark had been in use on yarn since at least as early as 1997. But, like I say, no opportunity to point this out.

2007 may be the year of resolution and settlement. There were, in fact, two other lawsuits I had wanted to post about last year that were still live, and now they’re either resolved or very nearly. One was between two Oregon yarn shops with similar names. (I’ll give you two guesses as to what words were in these names.) That one has been resolved with a consent judgment — someone’s giving up their previously asserted rights. The other involved KFI(!) and Coats — a brief mention here. That one should have settled by now, but there was a bit of a tiff about returning confidential documents as part of the settlement. Guess who’s being blamed for that hiccup.

I’ve been doing work-work, and haven’t had time to articulate further incomplete thoughts about the nature of… anything. But I’m still on the subject of “taking sides”, so to speak.

But there has been some late-breaking news… or at least, cross-postings.

If your knitting mailing list or forum received a request to take a survey at surveymonkey.com, and you are not taking the survey (or you already have), here is some context, after the jump (so if you haven’t taken the survey but intend to, you can try to avoid tainting your answers to whatever extent possible).

(more…)

One thing you have to understand about intellectual property attorneys, see, is that they like to make jokes. Sometimes very bad, punny jokes. In the middle of meetings with clients, or maybe during trial. In that sense, they share a trait with many bloggers, who like to try to make up hilarious blog post titles that really aren’t that funny at all.

So, I’d like you to know that I auditioned a number of titles for this post:

The Treasures of the Sierra Trademark
The Trademark of the Sierra Madre
You Sierra, I Sue Ya
Cascade gets KnitPicky
Cascade has a knit to pick with KnitPicks
same as above, but “Crafts Americana” instead of “KnitPicks”
Sierra you later, says Cascade to KnitPicks
A Cascade of Litigation falls on KnitPicks

Have you figured out what this post is about, yet?

Here’s a hint: Cascade Yarns, whom you may know as KFI’s bestest buddy, and who would never, ever dream of starting off an industry-wide controversy alleging that its fellow distributors’ merino/acrylic/cashmere yarns lacked the cashmere content they claimed, right before — oops! introducing its own competing version with exactly the same content, complete with a test report confirming the advertised quantity of cashere, sued Crafts Americana in December for false designation of origin, unfair competition, and trademark dilution because its KnitPicks division has been using SIERRA as a trademark for yarn. Cascade, according to their complaint [PDF], has been selling its SIERRA yarn since 1997. Cascade’s yarn is a pima cotton/wool mix. KnitPicks’s version is wool and superfine alpaca. (Neither company has filed a U.S. trademark application for SIERRA, by the way.)

I’ve been wondering whether yarn companies actually hash these things out. Since only in extreme cases do lawsuits actually get started (and only in the extreme of extreme cases doee the lawsuit not settle and go to trial), I guess that yes, they do squabble about this sort of thing, particularly now that there are so many competitors.

It’s early days, yet. Crafts Americana has not yet filed a defence.

This complaint might have merit, but in view of last year’s (continuing) events, one can’t help but think of instances where companies have tried to protect their market share by negative campaigns and lawsuits against competitors. Because, you know, there are others.