A Down Under trademark dispute could turn Uggly

A principle rule of geography is that strange fashion trends flow from California to the East Coast. So, it's no surprise that folks in New England are just now warming up to Uggs, those sheepskin boots that have warmed the feet and calves of Southern Californians for years. Now that the heavily populated East Coast has developed the warm fuzzies for Uggs, it should shock no one that sales for the footwear have also increased dramatically.
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A principle rule of geography is that strange fashion trends flow from California to the East Coast. So, it's no surprise that folks in New England are just now warming up to Uggs, those sheepskin boots that have warmed the feet and calves of Southern Californians for years. Now that the heavily populated East Coast has developed the warm fuzzies for Uggs, it should shock no one that sales for the footwear have also increased dramatically.

What is surprising is that this latest footwear fetish -- photographed on stylish celebrities like Gwyneth Paltrow and Oprah Winfrey -- concerns a product that has historically been considered…well…ugly.

We don't mean to insult the design and look of sheepskin boots, but Ugg really is short for "ugly." Decades ago, Australians created the Ugg slang term to describe this style of sheepskin boots. The term is ubiquitous, so all boots of this type, no matter the brand, are referred to as Uggs. For years, more than a dozen companies -- many of them small family businesses -- have used the term Ugg as they've marketed and sold sheepskin boots in Australia and New Zealand. But this might change.

Deckers Outdoor Corp., owner of the Ugg brand since 1995, has begun to more aggressively protect its Ugg trademark -- including the Ugg trademark in Australia -- and compel all other companies to no longer use the word Ugg with relation to their products. While Deckers declined to comment on any specific current legal action, the New Zealand Herald reported in February that Deckers sent letters to 20 Australian companies, and "informed them that Deckers owned all rights to the name Ugg and instructed them to stop using it or face litigation."

Also, according to the New Zealand Herald, Australian footwear manufacturer Mortels "was ejected from eBay, the internet auction site where it sold Uggs to American consumers." Deckers CEO Doug Otto told SNEWS® that most of Deckers' legal actions concern Internet sales. "Some people on the Internet don't understand trademark law," Otto said. "You'll have a mom-and-pop operation producing sheepskin who will say, 'Well, I'm going to sell some Ugg boots,' and they put them on the Internet. It's not that they're doing it on purpose, they just don't know any better."

Beyond the Internet, Australian companies believe they will be affected dramatically if they are no longer able to use the word Ugg in local marketing and sales. In fact, several manufacturers plan to fight the trademark in court. As Brian Iverson, owner of Blue Mountain Ugg Boots, said in the New Zealand Herald, "It's like saying you can't call a car a car."

But Otto tells SNEWS that Deckers has been successful in defending the Ugg name, which is trademarked in 41 countries. "The courts and other legal authorities have consistently supported our actions and upheld the validity of our trademark," Otto said. "In February, the National Arbitration Forum handed down a unanimous decision that upheld the validity of our trademark, and ordered the transfer of 27 infringing (Internet) domain names to us."

While some of the companies Down Under view Deckers as a Goliath trying to squash foreign mom-and-pop competition, Otto said, "It's not that we're trying to stop everybody from producing boots -- I mean, we love the competition -- we just don't want them to deceive people into thinking they're getting the Ugg brand boot."

New South Wales National Party leader Andrew Stoner has a very different take, and issued a statement in January ridiculing the attempt by Deckers. "Ugg boots were an Australian icon and the threat by the American manufacturer was insulting to local makers. Ugg boots are as Australian as the kangaroo, yet we now have this bunch of corporate lawyers throwing their weight around with small manufacturers across NSW. Threatening to sue people who have manufactured footwear under the generic label of Ugg boots for decades is a joke."

Even the Australian Parliament appears ready to take issue with Deckers. Sharryn Jackson, a member of the House of Representatives, stated in a speech before the House on Feb. 11, 2004, "The actions of the Deckers Outdoor Corporation have caused much anger in the community who fail to understand how a U.S. firm was allowed to trademark the work 'ugg' in the first place. 'Ugg' or 'ugg boot' is a generic term used to describe a product, just as you would use the word 'trainers' or 'runners' or 'sneakers' to describe a number of different brand products. In Australia, we have been calling sheepskin boots 'ugg boots' for about 85 years. It defies belief that an Australian icon would be trademarked in the U.S. when it is a generic term….I have written to the minister and called for his immediate intervention in respect of this matter." Read the full speech here: www.saveouraussieicon.com/SJackson.pdf .

Meanwhile, a group of Australian companies have banded together, forming the Ugg Boot Footwear Association to fight their large foe -- go to www.saveouraussieicon.com. They hope to pool their resources and argue that Ugg should have never received a trademark for a term so widely used. It's a strange twist for sure. Rather than a battle over something beautiful, we have a fight to see who has the right to be ugly.

SNEWS View: Can a company claim a trademark over a common term? Scott Hervey, a partner in the California-based law firm Weintraub, Genshlea, Chediak and Sproul, specializing in the areas of intellectual property and trademark law told us, "In the U.S., the case is pretty ironclad. The trademark has been registered here for 10 years and when they received the trademark, Ugg was not deemed to be descriptive, at least here in the U.S. I suspect that since Ugg is a descriptive term in Australia and New Zealand that Deckers will have a much harder time defending the company's position there." Bottom line Hervey tells us, Deckers owns the right to the name in the United States and that means no other company can sell products in the United States using that name.

In any case, we do feel this issue will become more wooly, simply because the sheepskin boot category is growing rapidly. Ugg's global sales leaped from $23.8 million in 2002 to $36.9 million in 2003. Deckers' Otto told SNEWS that in a late February earnings report, he gave guidance for $60 million to $65 million in sales. While Ugg owns 90 percent of the U.S. market, its competitors are also faring well. Chris Watt, owner of Aussie Dogs, says that his sales have grown 15 percent to 20 percent a year for the past four years, and by September of this past holiday season, Aussie Dogs sold all the product it could possibly produce by Christmas. As with any rapidly growing product segment, more people are going to want to jump in the game, and Ugg will have to defend its trademark even more aggressively.

As for those companies Down Under, we get the distinct feeling the Aussies and Kiwis are not going to be very willing to give up without a fight for the right to sell on their own turf under the Ugg banner. We also suspect Deckers seriously underestimated the power of a countrywide icon to galvanize passion.

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