Aesthetic Functionality and the Use of “Color Marks” in the Fashion Industry

by Quinn Emanuel Urquhart & Sullivan, LLP
Contact

For more than a century, courts have grappled with whether to extend the protections of trademark laws to colors. In 1995, however, the Supreme Court recognized that both the “language . . . and the basic underlying principles” of the Trademark Act of 1946, 15 U.S.C. §§ 1051-1127 (Lanham Act), “would seem to include color within the universe of things that can qualify as a trademark.” Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 162 (1995) (“We cannot find in the basic objectives of trademark law any obvious theoretical objection to the use of color alone as a trademark, where that color has attained ‘secondary meaning’ and therefore identifies and distinguishes a particular brand (and thus indicates its ‘source’).”).

Holding that “color alone, at least sometimes, can meet the basic legal requirements for use as a trademark,” id. at 166, the Qualitex court acknowledged, however, that in some circumstances, “to permit one, or a few, producers to use colors as trademarks will ‘deplete’ the supply of usable colors to the point where a competitor’s inability to find a suitable color will put that competitor at a significant disadvantage. Id. at 168. In such circumstances, the competitor’s use of a color mark may be subject to a defense of “aesthetic” functionality:

When a color serves as a mark, normally alternative colors will likely be available for similar use by others. . . . Moreover, if that is not so – if a “color depletion” or “color scarcity” problem does arise – the trademark doctrine of “functionality” normally would seem available to prevent the anticompetitive consequences . . . .”

 

Id. (citations omitted). The Qualitex court anticipated that such “aesthetic” functionality concerns would cause courts evaluating the validity of color marks to “examine whether the use [of a color or range of colors] as a mark would permit one competitor (or a group) to interfere with legitimate competition through actual or potential exclusive use of an important product ingredient [i.e., all usable colors],” and that such examination would, “ordinarily, . . . prevent the anticompetitive consequences of . . . ‘color depletion.’” Id. at 170.

The Second Circuit recently analyzed that aesthetic functionality defense to a single-color trademark in Christian Louboutin S.A. v. Yves Saint Laurent America Holding, Inc., 2012 WL 3832285 (2d Cir. 2012). At issue was a dispute between two European fashion houses over the right to color the “outsole” of women’s shoes red. In 2008, the plaintiff, French shoe designer Christian Louboutin, registered a mark consisting of “a lacquered red sole on footwear” (the “Red Sole Mark”). Since Louboutin began designing shoes in the early 1990s, he had featured red outsoles to contrast with the colors of other parts of the shoes. The district court concluded that, through Louboutin’s marketing efforts, the “flash of a red sole” had become “instantly” recognizable as “Louboutin’s handiwork.” Id. at *2 (citing district court).

In 2011, the fashion company founded by the late Yves Saint Laurent (“YSL”) designed a line of “monochrome” ladies shoes of various colors, including red shoes that “featured the same color on the entire shoe, so that the red version is all red, including a red insole, heel, upper, and outsole.” Id. After YSL rejected Louboutin’s demand that it remove its monochrome red shoes from the market, Louboutin sued and sought a preliminary injunction. YSL opposed in part on the ground that the Red Sole Mark was invalid as aesthetically functional.

Relying on Qualitex, the district court concluded that a “color is protectable as a trademark only if it ‘acts as a symbol that distinguishes a firm’s goods and identifies their source, without serving any other significant function.’” Id. at *3 (quoting district court). Noting the supposedly “unique characteristics and needs – the creativity, aesthetics, taste, and seasonal change – that define production of articles of fashion,” the district court held that single-color marks are inherently “functional” in the fashion industry, and on that basis denied Louboutin’s requested injunction. Id.

On review, the Second Circuit recognized the Qualitex court’s concerns about the potential anti-competitive consequences of single-color marks and discussed at length the “aesthetic functionality” defense to a trademark infringement claim. In addition to the traditional “functionality” defense, which asks whether a product feature like color is “‘functional’ in a utilitarian sense,” id. at *8, aesthetic functionality goes a step further in considering whether a design feature has a “significant effect on competition.” Id. After analyzing various formulations of the aesthetic functionality tests that it and other circuit courts have applied, the Second Circuit held that “a mark is aesthetically functional, and therefore ineligible for protection under the Lanham Act, where protection of the mark significantly undermines competitors’ ability to compete in the relevant market.” Id. at *10.

Having decided on the standard for evaluating aesthetic functionality, the Second Circuit turned to the district court’s “per se rule of functionality for color marks in the fashion industry.” Id. The court profits opinions, and after conducting an eight-day evidentiary hearing, the judge excluded the expert’s testimony because it was speculative and lacked any reliable basis.

The Court of Appeal reversed, ruling that any challenges to the expert’s reasoning were for the jury to resolve, but Quinn Emanuel successfully petitioned the California Supreme Court, which grants review in less than 1.5% of civil, to review case. Arguing in the California Supreme Court only two days after being before the U.S. Supreme Court, Kathleen Sullivan, the head of the firm’s appellate group, persuaded the California Supreme Court to overturn the Court of Appeal and rule for USC in a unanimous 7-0 decision.

In addition to protecting USC against $1.18 billion in lost profits, the California Supreme Court’s decision in Sargon Enterprises v. USC establishes that California trial courts have a duty to exclude speculative and unreliable expert testimony. Using language similar to Daubert, the Court held that trial judges have a “gatekeeping” responsibility, which requires them to exclude expert testimony that is based on invalid or unreliable reasoning. This now clearly established responsibility will enable businesses litigating in California courts to exclude speculative and unreliable expert testimony. Also, by bringing California practice more in line with federal practice, the Sargon decision removes a significant incentive for forum-shopping in complex business cases.

The Sargon decision also establishes another principle that may have a wide ranging impact on business litigation. It is well settled that new businesses seeking lost profits bear a heavy burden because they have no track record of profitability. Small businesses such as Sargon frequently claim that they would have grown into much larger companies absent some tort or breach of contact but that they should not be subject to the standard for new businesses because they already were earning some small profit. The Sargon decision makes clear that claims that a small business would grow into a much larger entity are subject to the same burden of proof. This ruling will change the dynamic in cases in which start-ups and other small companies seek large lost profit awards based on growth that they alleged that they would achieve. Moreover, because of California’s leading role in the high-tech industry involving so many start-ups, this aspect of the Sargon decision is likely to influence decisions in other jurisdictions.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Quinn Emanuel Urquhart & Sullivan, LLP | Attorney Advertising

Written by:

Quinn Emanuel Urquhart & Sullivan, LLP
Contact
more
less

Quinn Emanuel Urquhart & Sullivan, LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.