Smart clothes: Fashion’s forward-looking lawyers

As fashion brands explore blockchain, AI tools, and NFTs, it is tech-savvy lawyers who steer them in the right direction. Muireann Bolger speaks to counsel working the seam of apparel and tech.

Fashion rarely stands still, and the same goes for the lawyers charged with safeguarding this sector’s valuable IP.

But as legal teams are tasked with identifying and recommending the best technology to help clients hone their brand and fight infringement, the pace has accelerated even more.

It’s all in a day’s work for Richard Penfold, partner and fashion IP expert at Withers, who was appointed late last year to the expert panel of the Union des Fabricant’s College of Experts—a membership organisation for international fashion and luxury brands.

Very soon, it became clear to Penfold that the industry was at a turning point.

“What’s very interesting is that these brand owners are all scratching their heads when it comes to dealing with new technologies—both in terms of the opportunities but also the challenges,” he tells WIPR.

Cutting through the hype

This is where, he believes, today’s tech-savvy IP lawyer needs to step in.

“As a lot of businesses strive to understand the potential, as well as the risk factors of artificial intelligence (AI), the metaverse and the use of the blockchain in their product management, we can help them cut through the hype to make the right commercial decisions," explains Penfold.

“Undoubtedly, the rise of digital fashion and the metaverse presents numerous challenges for fashion brands. Of course, they do want to embrace it but, at the same time, they need to ensure that these don’t become platforms for pirates and counterfeiters.”

The milestone MetaBirkin dispute is a case in point: last year saw Hermès triumph over designer Mason Rothschild in a much-scrutinised case involving infringing non-fungible tokens (NFTs) of the Birkin bag.

But as Robecca Davey, chartered trademark attorney and fashion IP expert at Marks & Clerk, explains, brands should tread carefully before deriving too much solace from that outcome, or worse, ignoring the implications of new technology altogether.

A false sense of security

“It’s almost impossible to know which way the market will turn next; so we really need to arm our clients with all the relevant information,” she explains.

“With MetaBirkin, there is potentially a concern that businesses will take too much comfort from that case, and that it offers a false sense of security for brands that may not have protection in the metaverse.

“While it’s a fascinating case study, brands must remain diligent. What applies to a fashion powerhouse like Hermes might not be relevant elsewhere.”

Consequently, the fashion house was, she explains, able to rely on that stellar reputation— even though it didn't have protection in the metaverse—and draw upon this prestige at trial.

“Some smaller brands might not be able to do that. So companies shouldn’t think that they rely on that case, because they may struggle to win later on.”

Also offering a cautionary tale, Penfold warns that the fashion sector should take note of the past travails of the music industry.

“We’re seeing a convergence in fashion a bit like what we saw in the music industry 20 years ago when that sector failed to embrace or address new technology,” he says.

“That, of course, gave the rise to Napster and peer file sharing until the industry realised that digital was actually a commercial channel and was, in fact, going to be the future of the music industry.”

Unprecedented pressures

But while the music kingpins initially dragged their heels, fashion leaders are showing a tentative, yet growing, willingness to engage with new technologies.

Or, in some cases, playing counterfeiters at their own game by using better, smarter technology, including AI, to stop them in their tracks.

“By doing this, brands will become better prepared to enforce against counterfeiting and piracy,” predicts Penfold.

On the other hand, this places unprecedented pressure on attorneys and their legal teams to aid with finding, or recommending, the technology providers that are up to the task.

As Carlo Alberto Demichelis, partner at Withers, notes, this is where due diligence comes into its own.

Pointing to his firm’s success in representing a high-profile tennis player faced with a swathe of infringing NFTs online, he describes that particular case as “a delicate one” that required in-depth research and scrutiny.

“We needed to find and select highly skilled technological providers with a competitive edge, so we could identify the right provider of services specifically aimed at controlling this issue.

And he adds, these efforts paid off. “After a few weeks of refining our approach, we essentially removed all the infringing NFTs from the market and from the main platforms.”

Sophisticated counterfeiters

In these scenarios, Penfold agrees with his colleague that the careful selection of a technology provider—with a gamut of tools at their disposal—is paramount.

“We're using providers who are using a variety of AI tools and who have developed their own algorithms. Some have even developed proprietary algorithms or are building on top of their existing algorithms,” he explains.

Despite the confusion evoked by new technologies, Davey also believes that the sector— with some arm twisting from their legal counsel—is making progress.

“While customs seizures, online takedowns and website blocking orders have been the traditional approach in dealing with counterfeit goods in the past, many luxury brand owners now feel the need to up their game,” she explains.

“This is particularly pressing given the sophisticated nature of counterfeits items that can be produced, and the nature in which these items are now quite commonly bought and sold, ie, via third party resale platforms.”

For context, the Organisation for Economic Co-operation and Development valued the fake and pirated goods market at $3 trillion in 2022—triple the amount in 2013.

Indeed, one French customs raid carried out that year is said to have confiscated enough fake Louis Vuitton fabric to cover 54 tennis courts.

More recently, the EU Intellectual Property Office released a report in June 2024, revealing the alarming impact of counterfeits on the fashion sector, which had lost nearly $12 billion ($13 billion) in annual sales (corresponding to 5.2 % of the sector’s overall turnover).

Ahead of the game

In the face of such stark challenges, the race is truly on to harness the potential of AI in the war against counterfeiters.

In 2022, Deloitte released ‘Dupe Killer’, an AI-powered image recognition tool that identifies fake goods.

According to Deloitte, Dupe Killer “is the first technology that uses AI to learn the shape and configuration of a [genuine] product” and if a copycat product “looks like the real thing, Dupe Killer will find it.”

Another recent anti-counterfeiting technology called ‘Authentique Verify’ launched by the LVMH-owned brand Patou uses digital verification technology.

As Gina Bibby, partner at Withers, explains:“The technology involves associating a unique digital fingerprint with a physical luxury product whose authenticity can be verified by consumers when they scan the area of the digital fingerprint with a smartphone using the Authentique Verify app.”

Meanwhile, Burberry—one of the world's most counterfeited luxury brands– reportedly uses AI-powered image recognition technology to determine the authenticity of a product.

“The technology, which requires a photograph of only a tiny section of a product, reportedly analyses minute details in weaving and texture, and detects counterfeits with 98% accuracy,” says Bibby.

Certain brands, particularly in the luxury realm, are already adept at using less recent technologies such as Blockchain to battle counterfeiters, which uses smart tags technology– RFID tags, QR codes, NFC chips—to track goods from production to the end consumer.

“It’s great to see that some big players in the industry have embraced blockchain as an authentication tool for their goods, and this could be the way forward,” says Davey.

“This tool works by verifying ownership history and provenance, and possibly including information such as city and date of first purchase, composition, etc, of the item in question which gives buyers—particularly those on the second-hand market, comfort that they are buying a genuine item.”

Penfold echoes this view, adding that Blockchain can go even further in helping the sector combat the counterfeit gangs that are rife across Europe, Turkey and China.

Citing examples, he says: “We've got a number of clients who use blockchain for certification and provenance. So for example, if a brand grows cotton in India, they want to ensure that it is sustainable, and that cotton fabrics are made by employees who are paid a living wage.”

An eye on tomorrow

By using Blockchain, he explains, a client can track the product from the growth or production of the material all the way through the supply chain, to the end user.

“That helps prove the authenticity of the product, providing reassurance that it's not counterfeit, and it's not a parallel import.”

While fashion fads are, in general, fleeting, it seems that the growing need for lawyers to be acutely aware of groundbreaking technologies is one trend that isn’t going anywhere.

Bibby is optimistic about the opportunities that lie ahead. “Technology, by its very nature, will produce limitless options for solving the counterfeiting conundrum,” she predicts.

Davey takes a similar view.

“As lawyers, it's our job to provide a complete overview of exactly what is out there and to make sure that fashion clients are aware of these developments, and are protected.”

This sharp-eyed scrutiny, she emphasises, should extend “not just to what they're using for today, but what they may want to use tomorrow”.