Fab.com Files Counterclaim Against JustFab, Says JustFab Is A “Predatory” Bargain Clothing Peddler

The latest chapter in the legal dispute between online retailers Fab.com and JustFab is unfolding. In July 2013, JustFab filed a trademark infringement lawsuit against Fab.com, accusing it of infringing on JustFab’s trademark by using a “confusingly similar” name, along with related allegations including unfair competition. Now Fab.com has hit back with a counterclaim that accuses JustFab of “predatory conduct.”

In its counterclaim, Fab.com claims its reputation has been hurt by JustFab’s “questionable business practices,” which it says is just the latest in a string of misleading marketing tactics at companies operated by JustFab’s founders. Fab.com also says that a filing JustFab made to the U.S. Patent and Trademark Office (USPTO) while applying to register its “Just Fab” trademark in 2011 contradicts its trademark infringement lawsuit. Fab.com asked the court to dismiss JustFab’s complaint and order it to pay for Fab.com’s legal fees. We’ve embedded the full complaint below.

“This case is an example of the old adage that those who live in glass houses should not throw stones. We look forward to having the court hear the entire story regarding the two companies’ business practices rather than the selective, one-sided story presented in JustFab’s complaint,” Fab.com lawyer Lance Etcheverry told TechCrunch. We’ve asked JustFab for comment.

(In other Fab.com news, the company announced today that co-founder Bradford Shellhammer is leaving the site. Co-founder Jason Goldberg will stay on as CEO.)

JustFab has raised $149 million in funding, while Fab.com has raised $336 million. As Ingrid Lunden noted in July, the two have another interesting parallel. Both Fab and JustFab have projected that they will make $250 million in revenue this year. Fab.com and JustFab are targeting the same class of online consumers–those willing and able to buy fashion online–and as two of the biggest players in the market, it is unsurprising that the two are duking it out so aggressively.

JustFab’s lawsuit, filed on Oct. 21 in the U.S. Central District of California, requested that Fab.com be prevented from selling any items that compete directly with JustFab, and to pay for damages of any lost business resulting from confusion over the brands. Fab.com hit back at JustFab’s claim that Fab.com not only shares a similar name, but offers a service that is too similar to JustFab’s.

“Operating under the guise of a ‘designer-quality’ fashion retailer, Just Fabulous [JustFab’s original name] is in reality a peddler of bargain-priced, often low-quality, women’s shoes, handbags, denim and jewelry that uses offers of discounted pricing and endorsements by celebrities (such as Just Fabulous’s President and Counterdefendant Kimora Lee Simmons) to lure unsuspecting consumers into a negative option continuous service membership plan,” Fab.com said in its counterclaim.

Fab.com referenced customer complaints that accused JustFab of using confusing marketing practices to get customers to sign up for a “VIP membership” in which shoppers who purchase a pair of JustFab’s $39.95 women’s shoes are automatically enrolled in the program and their credit or debit cards are charged $39.95 a month, whether or not they make another purchase on JustFab.

In its counterclaim, Fab.com also cited other instances in which companies operated by JustFab’s co-CEOs Adam Goldenberg and Don Ressler have been accused of questionable business practices. Goldenberg was COO of Intermix Media when the State of New York filed a lawsuit accusing the company of secretly downloading adware and spyware onto millions of home PCs. Intermix agreed to pay $7.5 million in penalties to the State of New York as a result of the lawsuit. 

Goldenberg and Ressler also founded the company Intelligent Beauty (of which JustFab is a subsidiary), which was sued by a group of California prosecutors for false advertising in its marketing of Sensa, a diet product that claimed to help consumers lose weight with a flavored food additive called “tastants.” Intelligent Beauty eventually settled the lawsuit by agreeing to pay $900,000 in penalties and restitution. The company was also ordered to give clear disclosures before enrolling customers in a membership plan, which Fab.com says echoes customer complaints against JustFab.

Fab.com also claims that statements JustFab made to the USPTO while applying to register “Just Fab” as a trademark invalidate its current claim that “Fab” and “Just Fab” are easily confused.
The USPTO initially refused to register the “Just Fab” mark because it said it would be confused with the mark Fab, which was registered in 2006 by a swimwear and lingerie  company called Fab Product Designs that is unrelated to Fab.com or JustFab. In response, JustFab (then called Just Fabulous) argued that “Just Fab” and “Fab” were unlikely to be confused. 

As JustFab told the USPTO trademark examiner: “To be ‘just fab’ (or ‘just fabulous’) means to be happy, wonderful or great in some way, shape or form. It connotes a present sense of being.”

“Fab,” on the other hand, does not share this same connotation,” JustFab explained to the USPTO. “While ‘FAB’ by itself could be taken to mean ‘fabulous,’ it could also be interpreted as an acronym for another phrase or an abbreviation for a different word. Because ‘Fab’ by itself does not share the same connotation as ‘Just Fab,’ Applicant submits the likelihood of confusion here is very remote.”

This is not the first time that Fab.com has dealt with a trademark infringement lawsuit, although last time it was on that plaintiff’s side (that suit, against Touch Of Modern, has now been settled). Meanwhile, Just Fab has been dealing with other fashion sites that use the word “Fab” in their brand names in another way — it’s been buying them. In January 2013, it bought Fab Kids; and in May it bought European site Fab Shoes. That route would be trickier with Fab.com, which is now apparently valued at $1 billion.