Earlier this month, seven-employee cosmetics maker Chroma Makeup Studio sued Khroma Beauty, a new cosmetics line from the Kardashian sisters, alleging trademark infringement. The lawsuit has attracted gobs of light-hearted coverage from celebrity bloggers and the Hollywood press corps. Reporting on the David vs. Goliath battle has been steeped in the kind of snarky schadenfreude that is a hallmark of reality TV.
For Lisa Casino and Michael Rey, who opened Chroma in Beverly Hills in 2000, their federal lawsuit is no joke. They worry that their high-end cosmetics line will be spurned by retailers distributing Khroma Beauty products who don’t want to carry two similarly named makeup lines. “We didn’t ask for this fight, but we have to stand up to protect what we’ve worked so hard for over the last 12 years,” says Casino.
Upstart companies pushing knockoffs are often irritants for large brands, but the cost and time involved make it relatively unusual for a small business to pursue a powerful, wealthy company in court, says Alexandre Montagu, a Manhattan attorney specializing in intellectual property law, who isn’t involved in the case. “Attorneys don’t do these cases on a contingency basis, and trademark infringement litigation is extremely expensive. It could cost $1 million in legal fees alone” to bring a viable case, he says.
Infringement cases also tend to be highly subjective. “There’s not a bright line” to prove infringement, Montagu says, because “the standard is the likelihood of confusion,” which must be demonstrated by consumer surveys.
A celebrity licensing company representing the Kardashians issued a statement on their behalf, saying Khroma Beauty had legal rights to its trademark and did not believe there was a likelihood of confusion with Chroma, since their cosmetics are marketed in conjunction with the Kardashian brand.
It’s important for small companies to legally protect and monetize their trademarks and other intellectual property, as well as to ensure they are not stepping on any other company’s toes, Montagu says. Chroma never filed for formal legal protection of its trademark, but Casino insists it’s protected because the company has operated under that name for a dozen years.
The lack of formal protection is likely to put Chroma in a weaker position legally and leave the company with a lower likelihood of success, says Montagu. But many infringement cases are settled, even when they involve smaller companies suing larger ones. “Even big companies would rather not face protracted litigation” because it is so costly, he notes.
There is very rarely hard-and-fast evidence of intent to infringe, because typically the two companies have never had contact before they meet in court. But there was additional evidence in another David vs. Goliath case, also in the beauty industry, that resulted in an $8.1 million jury verdict earlier this month.
On Nov. 2, Kim Etheredge and Wendi Levy, co-founders of Mixed Chicks in Canoga Park, Calif., which sells hair care products formulated for mixed-race individuals, won actual and punitive damages against Sally Beauty Supply (SBH), a Denton (Tex.)–based retail chain it sued for infringement. The entrepreneurs filed suit in U.S. District Court in Los Angeles in March 2011 when their distributors and retailers began calling them about Sally’s new products for mixed-race women called Mixed Silk, Etheredge says. The packaging and branding were similar to theirs, but the price was about half. “It was shocking, especially when we saw the packaging and the word ‘mixed’ being used,” Levy says.
Levy adds that the idea of suing was daunting, especially since Mixed Chicks is a $5 million company with 10 employees and Sally has more than 3,000 stores and revenue of $3 billion. “This was scary, but you don’t really feel you have a choice but to fight,” Etheredge says.
In addition to testifying about the product similarities, Etheredge and Levy explained they had been approached at trade shows by representatives from the larger company with requests to carry Mixed Chicks’ products. She and Levy rejected those requests, Etheredge says.
The legal battle cost Mixed Chicks nearly $2 million, not counting time lost on branding and new product development, says Etheredge, who was pregnant during the 10-day trial in October. “I had a panic attack in court one day, and I was afraid I was going to go into labor,” she says. An attorney for Sally Beauty Supply did not return calls for comment on the case.
Despite the stress and cost, Levy says, she is glad they held out. “A lot of small companies buckle early on when they see how time-consuming it is. The big company tries to wear you down, approaching you with crappy settlements, but we felt we created this niche market and it meant something to us. We couldn’t just give up.”