New York federal court issues injunction on JLM Couture-Hayley Paige dispute
Karen Artz Ash and Alexandra Caleca of Katten Muchin Rosenman explore the legal battle between a popular bridal designer and a bridal gown company over the use of social media accounts
A preliminary injunction recently issued by a New York federal court, in an evolving legal battle it described as “a novel dispute, over the control and use of social media accounts, between a leading bridal wear designer and the manufacturer from whose employ she recently resigned,” highlights a number of valuable trademark, contract and public relations lessons for any brand operating in modern social and digital landscapes.
Specifically, JLM Couture Inc v Hayley Paige Gutman, 20-CV-10575-LTS-SLC (SDNY 2021), illuminates the legal risks associated with founding a namesake fashion brand, as the lines between the individual designer and the brand itself become increasingly blurred through social media.
The designer in this case, whose legal name is Hayley Paige Gutman (Gutman), began working for JLM Couture Inc (JLM), a luxury bridal gown company, pursuant to a 2011 employment contract. She agreed terms to design a line of brides and bridesmaids dresses and to perform other duties commensurate with her designer position, including to assist with JLM’s advertising programmes.
In addition, the contract granted JLM the exclusive worldwide right and license to use and trademark the name ‘Hayley Paige’ and any variations thereof in connection with the design, manufacture, marketing, and/or sale of bridal apparel. JLM exercised its rights under the contract and registered the HAYLEY PAIGE name, as well as various derivatives, with the USPTO.
JLM’s launch of HAYLEY PAIGE lines of gowns and accessories was a commercial success. Gutman’s popularity in the bridal industry likewise grew rapidly. While employed by JLM, Gutman created social media accounts, including one on Instagram, using the handle ‘@misshayleypaige’. She used the accounts to document and share events in her personal life as well as in conjunction with JLM’s advertising programmes to display her gowns and related accessories, all with collaborative assistance from JLM employees regarding specific content and branding tactics. In fact, the parties agreed that the social media accounts’ blend of product and Gutman’s personality was an important part of JLM’s marketing strategy “because then brides feel closer to the brand.”
As brides became closer to the brand, however, a divide between Gutman and JLM widened. Amid lengthy negotiations for a new contract in 2019, Gutman changed the log-in credentials for the @misshayleypaige Instagram account, thus removing JLM employees’ access. Beginning in the summer of 2020, Gutman also entered into ‘influencer’ deals with third parties unrelated to the bridal industry and used the account commercially to promote such products for alleged direct and indirect compensation.
By November 2020, Gutman informed JLM that she would no longer post any JLM-related content to the @misshayleypaige social media channels and then publicly announced, on different social media accounts, the end of her business relationship with JLM, despite being under contract through until August 2022.
JLM filed suit against Gutman asserting federal and state law claims of trademark infringement and dilution, unfair competition, breach of contract, breach of fiduciary duty, and unjust enrichment, among other claims, arising principally from her activities on social media and obtained a temporary restraining order barring Gutman’s use of the accounts.
Opinion and order
In a 57-page memorandum opinion and order issued on March 4 2021, the United States District Court for the Southern District of New York granted JLM’s motion for a preliminary injunction and enjoined Gutman from using and/or making any changes to the @misshayleypaige social media accounts, using her “name, trademarks and any derivatives or anything confusingly similar in trade or commerce,” and “engaging in or associating with any person or entity engaged in design, manufacture marketing or sale of goods in categories competing with JLM” for the duration of the case.
As a threshold matter, the court noted that Gutman’s public resignation announcement did not extinguish her duties as an employee of JLM because the 2011 contract did not provide her with unilateral termination rights. While a preliminary injunction cannot enforce contract provisions governing performance of personal services, the court found that it can, however, prohibit Gutman from engaging in conduct that would otherwise result in breach.
The court then noted that the contract unambiguously transferred Gutman’s name to JLM for use in connection with bridal goods, and reasoned that JLM’s rights applied not only to the trademark as affixed to the goods, but also in connection with the @misshayleypaige social media accounts. The court therefore held that Gutman’s use and continued exploitation of accounts derived from a trademark to which JLM has permanent and exclusive contractual rights, created by Gutman during the course of her employment by JLM, and developed with the use of JLM’s resources and employees’ efforts, breached the parties’ agreement.
The court also agreed with JLM that Gutman breached the duties commensurate with her position as lead designer to assist with advertising by refusing to post content related to JLM. As the court noted, "No reasonable, objective reading of [Ms. Gutman's employment contract] could logically exclude social media from the scope of Defendant's advertising assistance duties, particularly where JLM specifically asked Ms. Gutman to make social media posts of content on an account whose handle is the exclusive property of the company."
Furthermore, the court found that Gutman conveyed to JLM any rights she had created in the bridal business-related material she created, including that on social media. Not only was such content conveyed in the contract, but the court concluded that it was a work made for hire under the Copyright Act because the material was created by Gutman within the scope of her employment at JLM.
Finally, the preliminary injunction also prohibited Gutman from using her name to promote any goods or services of others, including on social media or through appearances on television or any other form of media. While this prohibition was explicit under the employment contract, the court also found reasoning under principles of trademark law. Since Gutman assigned all trademark rights to her name to JLM, and JLM owned federal and common law trademark rights to the name, the court held that Gutman’s use of her name in commerce was likely to cause consumer confusion with JLM’s products.
Furthermore, JLM established that “enjoining Ms. Gutman’s control of the [Hayley Paige] social media accounts” and the Hayley Paige name “in commerce during the pendency of this litigation serves the public interest,” and “will protect [its] trademark rights, prevent consumer confusion, and enforce the contract against Ms. Gutman’s ongoing and imminent willful violations.”
The court, however, refused to prohibit Gutman from discussing the litigation publicly, as her contract did not unambiguously waive her First Amendment rights. Accordingly, Gutman may continue to engage with her fans as this case evolves not only in a federal court, but in a court of public opinion comprised of consumers that may be unable to distinguish between the designer and the brand itself.
This case and the ongoing legal battle provides an important lesson, both to designers that convey exploitation rights to their names and branding to corporate partners, and to businesses that build their business on the name of an individual. In each circumstance, the relationship of the parties have the potential to have a profound effect on the individual’s life and the vitality of the business. Parties are also well advised to pay special attention to the terms and conditions of employment agreements for branded designers.
Karen Artz Ash
Partner, Katten Muchin Rosenman
Associate, Katten Muchin Rosenman