BY ALEX S. GABOR
For many years before the internet rolled up the global media complex, one could find ads for “How to Form Your Corporation Without a Lawyer for $50” in the back of such magazines as Business Week, Entrepreneur Magazine and Money.
What the book, which cost around $14.95, didn’t tell you was that if you form a corporation and it get’s sued; you cannot represent it in Federal Court without a lawyer who is admitted to practice law before that court.
If you are a genius and you do come up with some innovative ideas that make your products, services and company unique in the marketplace, you are liable to be terrorized if you go up against the lawyers who are behind some of the world’s largest corporations.
Most civil lawsuits are a form of legalized harassment or threat of financial terrorism when it comes to beating someone over the head to get a point across. We’ve all heard that only the lawyers win when the courts are concerned, particularly in family law courts.
Take for example LVMH, a globally dominating corporation that deals in luxury goods, fashion, leather, watches, perfumes, and alcoholic beverages under more than 50 different brand names. How many alcoholics drink Hennessy?
LVMH’s Louis Vuitton unit sued a fledgling company named Haute Diggity Dog over a line of canine products it called “Chewy Vuiton.”
During the first round of their legal battle defending against the behemoth, a federal court ruled in favor of Chewy Vuiton, whose products are decorated with a pattern reminiscently similar to the luxury-goods maker’s famed logo.
Judge James Cacheris wrote this opinion in ruling in favor of the little doggie biscuit maker; “The fact that the real Vuitton name, marks and dress are strong and recognizable makes it unlikely that a parody — particularly one involving a pet chew toy and bed — will be confused with the real product.”
Understand that both sides had to pay retainers for their lawyers, and that the cost of goods in America today has a tremendous amount of price inflation built into the economics of product marketing due to the legal costs of doing business. Naming a product is part of marketing.
You don’t have these kinds of problems in China which recently became the largest market for initial public offerings of stock in the world, beating out the NASDAQ and the London Stock Exchange.
The first round victory was a costly one because the legal fees for Chewy Vuiton added up to more than $200,000. During the process of defending against an unjust goliath it lost distributors and had merchandise sent back as a result of the lawsuit.
But it’s not over because Louis Vuitton says it will appeal. “It’s been a horrible experience,” says one of the five employees at the Las Vegas company, which has less than a million in annual sales. But we had no choice but to fight back, she adds, “because we would have had to go out of business.”
That is usually the intention behind any type of lawsuit brought on by a big corporation whose finances are threatened - to put the defendant out of business, but in this case, the entire action will probably add a few pennies to the cost of a Louis Vuitton purse in the United States if nothing else.
Big companies are the most litigious in protecting their brand names. Last year alone, Louis Vuitton conducted more than 7,000 anti-counterfeiting raids around the world and began more than 15,000 new lawsuits. Those pennies keep adding up so no wonder a leather purse costs around $500 these days.
The ruling in Chewy’s favor surprised trademark lawyers. A change in the U.S. Federal Trademark Dilution Act that went into effect in early October favors companies trying to protect their trademarks, lowering the bar for proving damage. Instead of showing actual dilution of a trademark, the company would have to prove only a “likelihood” this has happened.
“We believe the court’s ruling misinterprets the law, which is designed to protect freedom of speech, not to allow companies like Haute Diggity Dog to make money by exploiting the good name and trademark of Louis Vuitton,” said lawyers for LVMH, which makes a few posh pet products, like leashes and collars for up to $1,600. Are you paying attention Paris Hilton?
It would appear that any tiny threat to LVMH’s $13 billion in global sales in the first three quarters of 2006 and their 60,000 employees worldwide is more important to defeat than dealing with sweatshop labor it probably employs from factory workers around the globe. Its’ stock trades at over $100 per share with a market cap in excess of $50 billion on the Paris stock exchange.
Haute was represented by Bob Mason of Mason & Petruzzi in Dallas, who said, “Sometimes famous marks don’t see the humor that the rest of us see.”
It is very unlikely that the owners and employees of Haute saw anything funny in being terrorized by the legal brutality of a company that sells highly price inflated products to mostly women whose husbands really cannot afford to have their credit cards racked up this Christmas season because they have already tapped out the equity in their home three times over the past decade to stay ahead of the neighbors.
LVMH is controlled by billionaire Bernard Arnault of France, whose family controls the world's largest luxury goods group. His $17 billion worth of stock makes it easy for him to hire big law firms to harass little business men half way around the world with hired legal hands, just to protect his wealth from being encroached upon by some upstart little dog biscuit company.
Last month Arnault announced he was partnering with Belgian billionaire Albert Frere to go on a corporate shopping spree. Arnault, the world's seventh-richest man, said that he and Frere had decided to form a joint investment company, with the objective of providing it with an equity financing capacity of 1 billion euros ($1.3 billion).
They are looking at Aston Martin. "It falls within the scope of their investment fund," an anonymous person close to the pair told the Financial Times. Any bid for the luxury car unit would be worth more than 1 billion euros, the newspaper added.
Frere sold his 25% stake in the media giant Bertelsmann back to the German company through his investment vehicle Groupe Bruxelles Lambert last May.
His net worth will be close to $8 billion. Bertelsmann agreed to pay 4.5 billion euros ($5.8 billion) for Frere's stake to avoid a public listing of the firm.
Many upper crust Europeans know him as a workaholic who claims he'll never retire; the 80 year old Baron Frere is a connoisseur of fine wine and already co-owns the Chateau Cheval Blanc vineyard with Arnault.
Many upper crust Europeans know him as a workaholic who claims he'll never retire; the 80 year old Baron Frere is a connoisseur of fine wine and already co-owns the Chateau Cheval Blanc vineyard with Arnault.
Arnault had a bonanza year in 2005. LVMH posted record sales of $16.6 billion and with Christmas around the corner, it looks like he will be able to afford to buy Aston Martin and start acting like an elderly James Bond.
