Planet Money - The Good, the Bad, and the Uggly

Episode Date: September 15, 2022

Eddie Oygur is an Australian businessman who's sold sheepskin ugg boots for years. But one day, he was hit with a lawsuit for breaking American trademark law. On today's show — what's in the name ugg? Subscribe to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This is Planet Money, from NPR. A while back, I found out about this kind of odd confrontation playing out in the courts that I just could not resist digging into. The case was focused on a particular kind of footwear that a lot of people seem to love, and a lot of other people love to hate on. Eddie Oiger, the Australian businessman at the center of this legal case, he falls somewhere between those two camps. It's a sheepskin boot for God's sake. They are ugly if you really look at them. That's why they're called Ugg. That's right. This story is all about

Uggs, which if you haven't seen these boots, they're usually about calf high, sort of suede on the outside, woolly on the inside. And Eddie runs a leather goods business out of Sydney, Australia. Been in the game for over 40 years. In addition to leather jackets and earmuffs, Eddie makes his daily bread from selling what he calls UGG boots. And I didn't understand this kind of key thing about these boots until Eddie explained it to me. And I didn't understand this kind of key thing about these boots until Eddie explained it to me. Any footwear that's made from sheepskin and has fur on it in Australia, it's called UGG. This kind of blew my mind. For Australians, UGG is not just a particular brand of boot.

It is also a generic category of footwear. You know, like cowboy boots or flip-flops. And the problem at the center of Eddie's legal fight is what you're allowed to call these boots. How you're allowed to use the word UGG. For him, it all started back in 2016 when he arrived at work one morning to find an official-looking piece of mail from the U.S. It was a letter from an American company called the Deckers Outdoor Corporation. It was a letter from an American company called the Deckers Outdoor Corporation. It was a court proceedings order. They want to take me to court for selling Ugg boots into the United States

and that I violated their trademark. Deckers owns the American trademark for the Ugg brand, and apparently they had evidence that Eddie's company had sold a few pairs of boots online to buyers in the United States. Boots that were listed as Uggs. And if you look at Ugg brand boots next to any generic Australian Uggs, including the ones Eddie sold online, it can be kind of hard to tell the difference. Deckers claimed that what he had done was trademark infringement.

And now they were hitting him with this big, menacing lawsuit. They wanted my bank accounts. They wanted all the URLs. They wanted all my stock for destruction. I'm going, what? These guys are dreamy. Eddie didn't know all that much about trademarks at this point. He'd run his business mostly on handshake deals over the years. But he did know that in Australia, UGG was a commonly used everyday word. Every man and his dog knows that it's Australian term for sheepskin boots. So it didn't make sense to him that this American company was claiming ownership over the word. Eddie got his lawyer on the phone, asked him if he really even had to respond to this thing from all the way in the U.S.

The lawyer told him, yes, Eddie, this is serious business. Because a case like this could cost hundreds of thousands of dollars, maybe even enough to bankrupt Eddie's company. And he gave me two options. He said, we can talk to them and tell them that you're not going to sell anything out of America anymore. Because Eddie was not the first producer of generic Australian Uggs to have been sued by Deckers. Over the years, the company had come after several mom-and-pop Ugg shops. And many of those businesses went for option one, to avoid enormous legal costs and settle with Deckers. But Eddie Oiger, he does not respond well to intimidation. They thought if they bully me like this, I would buckle up and say, oh, I'm sorry,

I won't do it again. And I keep within Australia. I said, no, no, I'm not a weak person. What is right is right. And I'm here to do what's right. That word belongs to Australia. It does not belong to them. It should never have been trademarked. Eddie and his lawyers decided they would not be settling with Deckers over this lawsuit. Instead, they were going with option two. They were going to counter-sue. Eddie would take on Deck's at huge financial risk. His mission? To push the case as far as it needed to go in order to cancel the trademark itself. I said the fight is a fight. I've never lost a physical fight. I'm not going to lose this one

either. What did you know about, you know, international trademark law when this all started? Nothing. Tell you what, now I've got a PhD on it. Hello and welcome to Planet Money. I'm Alexi Horowitz-Ghazi. Since the 1980s, Ugg boots went from a cozy niche in the world of footwear to a multi-billion dollar global market, warming the illustrious toes of Britney Spears and Sarah Jessica Parker. And along the way, the word UGG itself became this invaluable piece of intellectual property. Today on the show, Eddie Oiger's quest to free the humble UGG boot from the iron grip of the Decker's Outdoor Corporation. What it tells us about this system where everyday words can be fenced off as private property,

and the force threatening every trademark in existence. I don't know about you, but when somebody mentions the word UGG these days, it makes me think of Lindsay Lohan, circa Mean Girls, or Tom Brady and Giselle snuggled up apres-ski in some snow-covered lodge. The boots have become a sort of icon of basic taste, along with the pumpkin-spiced latte or the Live Laugh Love poster. But as Brian Smith will tell you, this was not always the case. My name is Brian Smith, and I'm the founder of UGG Boot Company. Do you have people ever gotten you confused with the inventor of UGGs? Well, if there was an inventor of UGGs, maybe, but nobody knows who invented the first pair.

Brian says the UGG boot, as a generic kind of footwear, has been around Australia since the mid-20th century. And by the 70s, they'd become a kind of staple of the surf culture there. There are several apocryphal stories about how these woolly boots got their name. Some say it's simply short for ugly. Others chalk it up to a joke about what cavemen might have called their primitive sheepskin boots. You know, like Uggs.

But whatever the etymological origin, Brian says the story of how Ugg went from an everyday word to a piece of international intellectual property goes back to a fall day in Malibu in the late 1970s. Brian had been studying to be an accountant in Australia, but his heart wasn't really in it. Most days he'd rather be surfing or meditating. You were kind of like a psychedelic accountant.

On the weekends, yes. Eventually, Brian decided to move to California. He wanted to find some big new business trend that he could bring back to Australia and make a fortune. And he'd still be able to surf in his free time. A few months in, Brian still hadn't found anything when he realized his golden goose might have been laying at his feet all along. I was sitting on the beach after surfing. The water was really cold. And I was pulling on my sheepskin boots that I'd brought from Australia. And I went, oh, my God. And I got this massive dose of goosebumps.

And I thought, there's no Ugg boots in America. Back home across the Pacific, Brian says, basically every other person he knew had a pair. They were ubiquitous. And I extrapolated, well, there's 20 times more people in America. This is going to be, you know, instant millionaire stuff. It wasn't quite instant, but Brian started by doing two things. First, he imported an initial 500 pairs of boots from Australia. And second,

he decided to look into getting a trademark in the U.S. He knew that all the most successful brands here were built around some particular name. You know, Tide, Marlboro, Coca-Cola. And if he was going to follow in their footsteps, he would need to own a distinctive word himself. footsteps, he would need to own a distinctive word himself. He thought, well, the word UGG became a household name in Australia. Why fix what isn't broken? So he hired a lawyer to look into trademarking the word UGG, spelled U-G-G. And the first thing he did was a search for trademarks. Yeah. And there was something like gummy bear candy and, you know, little space cadet type toys. Okay. But there was no UGG in the sheepskin footwear category.

Okay. And that's important, right? Because you don't want something in the same product space. That's right. Yeah. It's called a class. Our class was footwear. Brian knew the trademark would be an essential ingredient to growing the business. Most Americans had never heard of an UGG. It was going to take a lot of marketing work to put them on the map and to convince skeptical American buyers to put their unsocked feet into these woolly boots. Brian wanted to make sure that all that investment would be rewarded, that a wave of other UGG importers couldn't just swoop in and capitalize on his hard work. So he filed the paperwork, paid a few thousand bucks.

It was money I couldn't afford, but I knew it was the most critical money to spend. After he got the trademark, Brian says he filed it away in a drawer and kind of forgot about it for a while. Because the most pressing issue was actually making sales. Because the most pressing issue was actually making sales. Brian spent the first few years selling his boots out of the back of his van, going to swap meets and trade shows, working his way from the summer surfer set to the wintry apres ski crowd. And by the mid-90s, Brian had grown UGG into a decent-sized company,

making millions of dollars in sales a year. By which point, he was kind of ready to get out of the game, to sell the company. I really didn't fit the corporate lifestyle, the closed-door meetings and all the schedules. I like the chaos and the fluidity of entrepreneurship. You can't put the psychedelic accountant back in a suit now. That's so true.

And it's around this time in the mid-90s that Brian finds kind of the perfect buyer for Ugg. It's this outfit called the Deckers Outdoor Corporation, run by a guy who, weirdly enough, actually used to sell flip-flops in the Malibu Beach parking lot alongside Brian. Since then, Deckers had had this kind of financial glow-up. They made a big deal with Teva Sandals just as the outdoor adventure market was taking off. And they'd gone public right when Brian was looking to sell. And I just got goosebumps again, you know, because I thought our business died every summer and his business died every winter. But I said, OK, if ever we're going to do it, now's the time.

So Brian ended up getting out of the company, selling UGG to Deckers for about $14.5 million. And with that purchase, Deckers had just bought not only UGG's supply chain and distribution network, but maybe more importantly, they now owned the funny trademarked word at the center of it. And over the next few years, Deckers decides to basically do with UGG what they had

done with Teva, to take this moderately successful brand and make it into a household name. They start dropping millions of dollars in advertising, getting pretty trendy. This is the year of UGGmania. By the early 2000s, even NPR had picked up on it. This season, the gotta-have-it accessory is a pair of Uggs. Deckers was shipping them to fashion stylists and film sets, hoping to get celebrity endorsements. And they eventually show up on Hollywood red carpets and on the set of TV shows like Baywatch. They become one of Oprah's favorite things. Take a look at this. They become one of Oprah's favorite things. Take a look at this.

The classic Sparkle Ugg boots. They retail for $175, but for you, my dear audience, they are free. All of a sudden, Uggs felt like they were kind of inescapable, from college campuses to middle school cafeterias to suburban book clubs. While UGG is exploding in popularity, Decker's is also working to strengthen their brand. They file for the UGG trademark in more and more jurisdictions, eventually in over 130 countries. And unlike the psychedelic accountant who used to own it, Decker's polices their trademarks a little more aggressively.

To understand why, you need to know about the world of trademarks. Because in buying the rights to this specific word, Deckers had acquired a powerful but highly vulnerable piece of intellectual property. Owning IP works differently than, say, buying a cotton gin or a garment factory. I asked trademark whisperer Jennifer Jenkins to walk me through this system that Deckers was navigating. Let's just get this out of the way at the top. Are you an UGG owner? Do you own a pair of UGGs? Oh, man. I mean, Oprah recommended them. What was a girl to do? You don't say no to Oprah.

In addition to owning several pairs of Uggs, Jennifer teaches intellectual property law at Duke. And she says the point of an intellectual property system is to incentivize innovation. The thinking goes that no one's going to go to the trouble of inventing a new mousetrap or writing a new novel if someone else can just swoop in and sell it themselves. That is why we have patents and copyrights, to allow creators to profit from what they make. Trademarks, she explains, work a little differently in that they protect the investments of a given manufacturer by giving them the exclusive right to a word or symbol. This logic goes back to the guilds of medieval Europe. Back then, brands were often literally branded right into the

merchandise as a way for customers to differentiate between manufacturers and potentially return to the ones they like. And that is still basically the central function of the modern trademark system. The goal of trademark law is to protect the goodwill that producers have built up, associate it with their brands, and also to prevent consumer confusion in the marketplace. To give consumers an easy way of discerning the source of whatever product they're thinking about buying. And while you might typically associate a trademark with something like a word or a logo, Jennifer says the trademark umbrella these days is actually much broader than that. Sounds can serve as trademarks

if consumers associate them with a particular product, such as a TV show, The Three Chimes of NBC. You know, the TV show that goes, dun-dun, that say law and order to you. Sounds like a Dick Wolf production to me. Or, you know, you know, you know, don't, don't. Even in some cases, unusually smells can serve a trademark function. What smells are trademarked? Play-Doh. That gross smell of Play-Doh. I personally think Play-Doh smells nasty. But don't try to copy it or you'll be in big trouble. Exactly. So if you're making modeling clay, whatever the generic term for Play-Doh is, you got to make it smell like something else. And trademark protection doesn't just kick in as soon as you are approved for a trademark. It is this ongoing proactive

process. Less set it and forget it and more of a use it or lose it situation. Jennifer says there are two big reasons that companies like Decker's are motivated to stop competitors from using their trademark. The first one is kind of obvious. They want to stop competitors from using their mark because it would allow other companies to make sales off their hard-earned reputation. And if the quality were off, it would risk tarnishing their brand in the minds of consumers. But the second reason is where trademark law kind of goes off the rails and gets pretty fun. It has to do with how trademarks are perceived in the minds of consumers. Yes, companies want to publicize their product to build their customer base and brand loyalty, but they don't want to become so popular that their trademarked word comes to stand in for a whole category of products.

One example of this is the word escalator. Starting in the early 1900s, that word referred to this specific company Otis's model of mechanical moving staircase. Until the 1950s, when a judge determined that enough people were using the word escalator to refer to the broader idea of a moving staircase and cancelled the trademark. Their piece of private intellectual property was swallowed up into the public linguistic commons. And there's actually a pretty dramatic name for when this happens. It's called genericide. And, Jennifer explains, the English language is littered with the skeletons of old intellectual property. Product names that cease to point to one brand in particular because they became so widely used in everyday conversation. So things like

zipper, cellophane, Pilates. Aspirin, thermos, linoleum, shredded wheat, all of these were former trademarks that became the generic term for the cereal or for the floor or for the stairway that goes up. And so they all suffer genericide and they can no longer be trademarked because you don't want to keep someone else from being able to use the common name for the product that they're producing. So for Deckers and other companies, holding onto a trademark means constantly defending against genericide by trying to shape the way people use certain words. Like in advertising and packaging,

they try to make a clear distinction between their trademark term and the type of product they make. And Jennifer says you see this linguistic battle playing out all the time. You know, you're shopping, right? And it's like Band-Aid brand bandages and Q-tip brand cotton swabs and Kleenex brand tissues. These are efforts by companies to try to keep trademarks that are really in danger from becoming generic by juxtaposing the brand name they want to keep with what they think the common name of the product is. The company Velcro went as

far as making a kind of silly viral internet video a few years ago where their lawyers were pleading. But if you keep calling these Velcro shoes, our trademark will get killed. Like, please do not use the word Velcro to describe a random piece of sticky fabric. Use the generic term, which apparently is called hook and loop. All of this helps us understand Decker's motivations, why they were sending threatening lawsuits to anyone else using the word UGG to describe generic sheepskin boots. If, you know, if a whole bunch of people are using the word UGG to describe generic sheepskin boots. If a whole bunch of people are using the word UGG with boots, and Decker doesn't stop them, and it just goes on and on and on and on and on, then that could chip away at the protection that they enjoy.

In the years after they bought UGG, Decker's expanded their web of trademark protection all around the world. Except Australia. They lost their trademark there. So generic UGG makers in Australia can still domestically sell their UGGs as UGGs. But in most other countries, if someone were to use the word UGG to describe a sheepskin woolly boot they were selling, they would step right into Decker's legal web. Which brings us back to Eddie Oiger, the Australian businessman who was ensnared after selling some 12 pairs of generic Australian Ugg boots online to American buyers. Because among

those buyers was the Deckers Outdoor Corporation itself. Their investigators actually bought four pairs from Eddie's website, which they then used as evidence to bring charges against him. Unlike many of the folks who'd been sued by Deckers and decided to settle and sell their boots under a different description, Eddie decided to fight back. Eddie says that what Deckers was demanding when they filed their lawsuit, that he destroy his stock and shut down his website, those things threatened the viability of his business. So he was going to respond in kind. He was going to try to destroy their business by going after one of the things that made it so valuable in the first place. Their trademark on the word UGG.

On one side you have a $9 billion company and on the other side you've got this poor little company. But you know what? They pissed on the wrong tree. I'm sorry for using this language, Alexei. These dogs have pissed on the wrong tree. After the break, the tree pisses back. When Duckers first filed their suit against Eddie Oiger in 2016, they came with a menacing list of demands. And Eddie, feeling like his back was against a wall, decided to fight fire with fire, to take legal aim at Decker's claim to the word UGG itself. And the argument at the center of Eddie's countersuit, Jennifer Jenkins explains, rested on one of the most fundamental principles of trademark law, kind of the inverse of genericide.

Just as you lose your escalator trademark once everyone uses the word generically their product because we don't allow people to monopolize the English language. Look, you cannot trademark a generic term. UGG was a generic term for sheepskin boots back when Brian Smith was granted a trademark in the mid-80s. It should never have gotten that protection in the first place. And the U.S. courts should essentially rectify that earlier mistake by dissolving Decker's grip on the word UGG. The problem with Eddie's argument, Jennifer explains, is that Trademark is territorial. Each nation has its own registry of trademarks, and the system is meant to prevent confusion amongst consumers in each particular market. So, Deckers argued, what Australians think doesn't matter. What matters is what consumers in the U.S. think.

Are Uggs a category of shoe or a particular brand of shoe? And the way the court assessed this empirical question is the way they often do in big corporate trademark cases, by consulting a study commissioned by the litigants themselves. In the survey that Decker's Outdoor conducted, their target audience, the relevant purchaser, conducted, their target audience, the relevant purchaser is evidently women, primarily, between the ages of 16 and 54. They asked 600 women in that demographic, and 98% of those American women identified UGG as a brand, which is why we're willing to shell out the $200 for a pair of boots that I'm pretty sure didn't cost $200 to make. Eddie didn't have the money to fund his own linguistic survey, so he couldn't refute their evidence.

But his legal team had a second argument. Basically, they said, fine, the word UGG may not invoke a generic category of boots in the minds of most American consumers, but there is a specific rule in U.S. trademark law forbidding the protection of generic words in other languages. It is a rule called the Doctrine of Foreign Equivalence. The Doctrine of Foreign Equivalence. Yes. And under that doctrine, you cannot trademark the foreign equivalent of a generic term.

So, for example, you can't trademark milk for milk. But you also can't trademark leche for milk. And you can't trademark lait, excuse my French, for milk. Ooh la la. The reasoning behind the doctrine of foreign equivalence is similar to the one we just described. If there are a significant group of consumers who speak a foreign language in your country, say, Spanish-speaking milk drinkers here in the U.S., if you let one company monopolize the word leche,

different milk producers will be limited in how they can describe their products, and customers will likely get confused. So, Eddie's lawyers were arguing, Australia is a foreign country. UGG is obviously generic there. Therefore, it should be considered generic here. But... Minor issue? They speak English in Australia, and we speak English in the United States.

Jennifer says this argument might have had a better chance if UGG were an aboriginal term. But generally, American courts have not applied the doctrine of foreign equivalence to English words. But Eddie and his team had one last strategy up their sleeve to try to free the term UGG from the U.S. trademark system. Kind of a Hail Mary approach in case his countersuit failed. Eddie was making a public case that Australia could and should offer UGGs a different kind of intellectual property protection, known as a geographical indication. So that is what we call things like Parmigiano-Reggiano from Italy or Port from Portugal.

The French own champagne. Greeks own feta. Why can't Australia have ag? Jennifer explains geographical indications point to where something is produced. And wrapped up in that designation is the idea that something about the product in question is inextricably, almost chemically linked to a single place. You know, when I see champagne, I expect a certain amount of effervescence, right? A certain amount of flavor. It'll get me drunk. It associates something that makes me want

to buy the product with the place that it comes from. The terroir. A terroir, oui. Jennifer says it isn't clear sheepskin boots could even have a terroir. And more practically, the question of whether something gets designated as a geographical indication is more about political willpower than it is about legal reasoning. But the Australian government did not seem keen on expending its political capital to protect their domestic UGG industry. So, Eddie's main avenue for justice was the U.S. courts and U.S. trademark law. In the spring of 2019, Eddie Oiger and his legal team arrived at the U.S. District Court

in Chicago to make their case. Their fundamental argument, remember, was that Brian Smith should have never been granted a trademark for UGG back in the 80s because it was already a generic term. Decker's deputy general counsel, Lisa Beretta, told me, for them, things were much more cut and dry. From our perspective, it really came down to, we have a protectable trademark, and those were infringed in the United States.

It was really very simple. Policing your trademark is one of the ways you stave off genericide. It's the way that you protect and strengthen your brand. And sometimes aggressive legal maneuvers are required. Last year, UGG had about $2 billion worth of sales, so the trademark is pretty essential to Decker's business. I think Crown Jewel could be a good way to describe it. It's certainly one of our most prized possessions. After years of legal wrangling,

the decision over the fate of the world's most well-known sheepskin boot came down to a four-day trial. First day, it was okay. Second day, it started getting really heavy. Eddie would study the judge, looking for clues. Third day, I knew from the judge's looks, the whole thing was just a setup. To me, in my eyes, it was a total setup. There is something a little tragic about this whole story. Because Decker's was doing what the trademark system incentivizes them to do. They came at Eddie hard in order to quash an unauthorized use of their trademark.

And there were a few times that Eddie could have settled, agreed to stop selling his Uggs in the U.S., or just continue to sell them by a different name. But the tenor of Decker's lawsuit stoked Eddie's sense of indignation. He felt that he had no other choice but to meet their force with equal force. And the extremity of those positions made it nearly impossible to find middle ground. In the end, Eddie lost. A jury found that UGG was not a generic term in the United States, and a judge held that the doctrine of foreign equivalence did not apply here. He was found guilty of trademark infringement and counterfeiting. Yeah, fined me $450,000 U.S. for breaching their trademark, plus all their fees for their lawyers, which worked around $3 million.

I have to pay equivalent to $4 million Australian dollars for selling 12 pairs of boots. Where's the justice in this? Eddie says Deckers has yet to claim their legal fees. And to this day, he continues to sell the boots in question on his website. But here in the U.S. anyway, he calls them sheepskin boots. He does not call them Uggs. Are you a teacher who uses Planet Money Summer School or other Planet Money episodes in the classroom? If so, we would love to hear from you. Head to npr.org slash planetmoneyclassrooms and let us know what you teach and how you use Planet Money. This episode was produced by Willa Rubin

and mastered by Debbie Daughtry. It was edited by Jess Jang. I'm Alexi Horowitz-Ghazi. This is NPR. Thanks for listening. And a special thanks to our funder, the Alfred P. Sloan Foundation, for helping to support this podcast.