Another kind of Italian beauty contest: Kiko v Wycon

The Court of Appeal of Milan decided in April this year on a design case which is quite special in its own right in that this was a case where it had to be decided whether there was an infringement of a concept store design.

Kiko and Wycon are both cosmetic products retailers. Since 2009, Kiko has been accusing Wycon (previously known as Wjcon) of copying its concept stores before the Courts of Rome and Milan but, on those occasions, unsuccessfully. Again in 2013, Kiko decided to bring suit against Wycon in Milan for infringement of Article 2598 (unfair competition) of the Italian Civil Code and Article 2(5) of the Law on Copyright (Legge sul diritto d’autore L 633/1941).

The Court backed Kiko's claims at first instance (decision No 11416/2015) and now also on appeal (decision No 1543/2018).

First of all, the IPKat wishes to thank Mr Fabio Ghiretti, one of the lawyers who acted for KIKO, for providing the text of decision.

Facts

In order to stand out from the crowd, Kiko decided in 2005 to invest €70,000 in a remodelling project which completely changed the appearance of its shops. The goal was to realise a new, innovative and highly characteristic layout (layout which was granted a design registration in Italy, No 91752). Starting July 2006, several new Kiko shops opened (there are nearly 300 in Italy alone) based on this new project. The new layout looked like this:

An open space, walls with plexiglass storage for the make-up products, curved islands in the middle of the shop and the preponderant use of the colours white, black and pink/purple.

Since 2009, Wycon allegedly started acting unfairly by copying every aspect of the shops, from the salespeople’s uniforms to the layout of the webpage: overall the combination of the characteristics which made their shops similar to Kiko's.

As mentioned above, there had been previous suits brought by Kiko unsuccessfully because, on those occasions, the Courts found that all cosmetic shops’ elements can be considered necessary and that there was a widespread use of the same shops characteristics across the market.

The first instance decision

But 2013, the Court of Milan decided in favour of Kiko for the following reasons:

• the project of interior furnishing was protected under Article 2(5) of the Law on Copyright and the rights of economic exploitation of the project belonged to Kiko and not to the architecture firm that has realised the project. Wycon also argued that this type of project could not be afforded protection. The Court held that originality lies on the subjectivity of an idea and how it is expressed. Furthermore, protection of interior furnishing under Article 2(5) had been already established by case law, subject to the creative result not being imposed by the functional technical problem that the author wishes to solve;
• the defendant was in breach of Article 2598(3) of the Italian Civil Code for its parasitic conduct entailing not only of copying the look of the shops but also the systematic imitation if Kiko’s entrepreneurial initiatives which can encompass the imitation of the products, of publicity, commercial techniques etc.

The Court made Wycon pay damages on the amount of €716,250 (€700,000 for the lost profits and €16,250 for damages suffered and reimbursement of investigations and assessments) and ordered the publication of the judgement on one of the most widespread newspapers in the country.

The interior furnishing of the two shops at a glance

The appeal

Wycon was not happy with this decision anddecided to fight it on appeal on the following grounds:

1. Only the architect could sue in relation to the IP dispute

The Court rejected this argument on the basis that, essentially, if someone is willing to spend €70,000 on a project they don’t want anybody to misappropriate it. Also, as previously affirmed in the first instance judgment the right of economic exploitation of the work belongs to Kiko as it was transferred to it by the architect’s firm behind the concept store design: the architect had signed an affidavit stating that, while he would always retain the moral rights, the economic exploitation had been subject to transfer.

2. Incorrect interpretation of Article 2(5) of the copyright act

Wycon argued that the project at hand was not interior furnishing as established in first instance but instead interior design, which is protected by Article 2(10) of the copyright law. In order to enjoy copyright protection, an interior design project has to have artistic value, which can be demonstrated by the winning of artistic prizes, exposition in art galleries or similar and being cited in art books. The Court did not agree with this interpretation as it held that, generally, the notion of interior design pertains to single elements of furnishing, such as a lamp or a couch. The concept of interior furnishing, instead, is more appropriate when looking at the combination of various single elements.

KikoKat

3. Absence of plagiarism

Wycon submitted that there was no plagiarism by putting forward several counterarguments, such as that: there was not one same Kiko concept store but that there were different types; that Wycon stores do not all look alike and that most of the stores in the market look the same. The Court rejected this argument as the Kiko's project is absolutely constant in most of the sale points. The fact that now Kiko shops have a different concept because they are based on a different project cannot sustain Wycon’s argument.

4. No parasitic competition

To argue against the claim of parasitic competition as per Article 2598(1), Wycon asserted that there were different elements characterising Wycon's and Kiko's sales activities and that for every similar elements in the shops there are necessary or standard shapes or structures. The Court replied that it would not start an analytic analysis of each element as, as already held at first instance, the imitation of the shops carried out was so evident that there was parasitic competition beyond any reasonable doubt.

5. No damages should have been awarded

In its fifth plea, Kiko argued that even if there was an infringement, Kiko did not spend more money because of the "clonation" of the shops neither lost any profits: the damages were awarded based purely on a mental construction. Also, in case any damages had to be awarded, they should be limited to the € 70,000 paid by Kiko for the project. The Court disagreed with both claim as it stated that Kiko had lost profits, namely the profits it would have gained if Wycon legitimately acquired the right to use their concept store, referred to as "the right price for consent". Furthermore, €70,000 is not enough to cover the damages as Wycon did not only save money to essentially refurbish their stores in style but also the sums to set up each shop. Given that it was not determined how many "cloned" shops were opened, the award of € 700,000 is to be considered a realistic amount.

The Court conceded to Wycon that 60 days were not enough time to dismantle the infringing shops (as also a penalty of €10,000 per day after the expiry of the 60 days applied) and extended this period to 150 days.

Foreign decisions

Kiko brought infringement cases against Wycon also in Lisbon (Portugal) and in Liège (Belgium).

The Portuguese courts did back Kiko's claim neither at first instance nor on appeal, in that they held that several other cosmetic shops have a similar layout to Kiko's and Wycon's and that the former had failed to prove that also such shops are infringing. The courts also held that the colours used in the shops are very common (black, white and grey) or evoke the cosmetics sector (purple). I personally do not associate purple with cosmetics but my synaesthetic abilities might be off. The Court of Appeal of Lisbon  rejected also the unfair competition claim, adding also that the fact that the companies use their trade marks, quite different from one another, in a very visible manner, corroborates the finding of lack of unfair competition.

The same conclusion was reached by the Commercial Court of Liège, which did not think that Kiko fulfilled the originality requirement in order to enjoy the copyright protection sought, holding that the composition of the concept stores does not reflect the personality of the architect that created it. 

Comment

This Kat thinks that this decision is fair, not to mention interesting, especially the difference used by the Court between interior design and interior furnishing and the whole logic behid finding the infringment because of the general look-and-feel of the shop as opposed to looking at every detail in it.

This decision is the next step on the economic protection of a shop as part of a brand in itself and, in this perspective, the CJEU decision in Apple v DPM (C-421/13) comes to mind. That case was different in that Apple was arguing (and was found to be right) that the layout of its stores should enjoy trade mark protection. However, the reasoning of the Court could very well be transposed here, for example at paragraphs 19 and 20 where it stated: "the representation (...) which depicts the layout of a retail store by means of an integral collection of lines, curves and shapes, may constitute a trade mark provided that is is capable of distinguishing the products or services of one undertaking from those of other undertakings" [...] the representation, by a design, of the layout of a retail store is also capable of distinguishing the products or services of one undertaking from those of other undertakings". The CJEU also added that the distinctive character of the sign must be assessed in concreto by reference to the goods or services and the perception of the public.