In a major opinion issued on September 5, 2012, the Second Circuit held that Christian Louboutin's red sole trademark for shoes is valid, but only when the red color contrasts with the color of the shoe upper. It rejected the District Court's holding that color per se could never be a valid trademark for fashion-related goods.
However, the court affirmed the refusal of a preliminary injunction against the monochromatic red shoes of defendant Yves St. Laurent (YSL) since these shoes lay outside the scope of protection for Louboutin's trademark. While Louboutin failed to obtain the relief it sought, the decision creates the basis for future enforcement against competitors who imitate the distinctive Louboutin contrasting red sole. More broadly, it also is a victory for trademark owners who seek to incorporate a nonfunctional color into their overall branding scheme.
The District Court's opinion in Christian Louboutin S.A. v. Yves St. Laurent America Holding, Inc., 778 F. Supp. 2d 445 (S.D.N.Y. 2011) had sparked wide criticism due to its sweeping holding on the protectability of color trademarks. Although the District Court acknowledged that the Louboutin red sole trademark was widely recognized and had acquired secondary meaning, it held the mark invalid, and ordered cancellation of Louboutin's Federal registration, on the basis of aesthetic functionality. "There is something unique about the fashion world," said the District Court, "that militates against extending trademark protection to a single color." Louboutin, 778 F. Supp. 2d at 451.
Reversing on this point, the Second Circuit held that such a sweeping per se rule was contrary to the Supreme Court's decision in Qualitex Co. v. Jacobson Products Co., 514 U.S. 159 (1995), which mandates an "individualized, fact-based inquiry into the nature of the trademark." In this case, said the Court, "Louboutin's marketing efforts have created a "brand with worldwide recognition," and "[b]y placing the color red in a context that seems unusual, and deliberately tying that color to his product, Louboutin has created an identifying mark firmly associated with his brand" (internal quotes and citations omitted).
The appellate court held that the doctrine of aesthetic functionality is a valid defense in the Second Circuit in cases "where protection of the mark significantly undermines competitors' ability to compete in the relevant market" (emphasis in original). A mark is aesthetically functional if granting exclusive protection to the feature "would put competitors at a significant non-reputation-related disadvantage," citing TrafFix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23, 32-33 (2001).
Curiously, however, while the Court spends considerable time setting forth the principles of aesthetic functionality, it makes no express finding either that the red sole is aesthetically functional when used in a monochromatic red shoe, or aesthetically nonfunctional when the sole contrasts with the shoe upper. Rather, the Court focuses entirely on the issue of secondary meaning to reach those same conclusions. It finds that Louboutin succeeded in proving the distinctiveness of the contrasting red sole, but failed to demonstrate distinctiveness when the sole does not contrast with the upper. It goes on to hold that the mark is valid in the former case, and invalid in the latter, and orders that the USPTO limit the Louboutin registration to "only those situations in which the red lacquered outsole contrasts in color with the adjoining 'upper' of the shoe." In doing so, however, it does not return to the functionality issue.
Having thus limited the scope of Louboutin's trademark, the court of appeals disposes of the issues of both likelihood of confusion and functionality by stating that it is "axiomatic that we need not—and should not—address either the likelihood of consumer confusion or whether the modified mark is functional." Presumably, the Court forecloses the likelihood of confusion inquiry because all of the accused YSL shoes are monochromatic and therefore outside the scope of Louboutin's modified trademark. This, too, is somewhat curious, since trademark rights may, at least in theory, extend to marks which lay outside the strict parameters of the mark as registered. And, as noted above, while the Court finds that the modified "contrasting color" mark has acquired secondary meaning, and implicitly finds that it is not aesthetically functional, it is not clear why the court would not make an express finding on that issue.
Despite the lack of an express finding, however, the Court's decision will relieve a great deal of the anxiety created by the District Court's opinion, which appeared to threaten the validity of single-color trademarks generally. It seems clear that in the Second Circuit, where a color is used in a striking and recognizable way and has no utilitarian functional purpose, the doctrine of aesthetic functionality will not preclude protection of the color as a trademark.
A copy of the decision may be found here: Christian Louboutin S.A. v. Yves St. Laurent America Holding, Inc.
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