CHAPTER 4 - § 4.04

• Jurisdiction: United States

§ 4.04 TWO PESOS AT THE SUPREME COURT

The Supreme Court granted certiorari in Two Pesos with the apparent motive of resolving the conflict among the circuit courts regarding the question of whether trade dress that is inherently distinctive is protectable under section 43(a) of the Lanham Act absent a showing that the trade dress has acquired secondary meaning.

The Supreme Court ultimately agreed with the Fifth Circuit, while also seeking to clarify the test for inherent distinctiveness. The Court began its analysis by first setting out the general principles applicable to the protection of trademarks and trade dress under section 43(a) of the Lanham Act.⁶⁶ In particular, the Court noted that trademarks and trade dress must identify and distinguish an owner's goods or services from those of others.⁶⁷ With this background, the Court then addressed classification, referencing the Abercrombie scale.⁶⁸ The Court explained that "marks are often classified in categories of generally increasing distinctiveness; following the classic formulation, they may be (1) generic; (2) descriptive; (3) suggestive; (4) arbitrary; or (5) fanciful."⁶⁹ In its appeal, Two Pesos had agreed that this scale was appropriate for measuring the protectability of Taco Cabana's trade dress.⁷⁰ The Court further explained that the "latter three categories of marks, because their intrinsic nature serves to identify a particular source of a product, are deemed inherently distinctive and are entitled to protection."⁷¹

The Court noted that at the lower end of the Abercrombie scale are descriptive and generic marks, which are never capable of inherent distinctiveness.⁷² Marks that are merely descriptive of a product cannot be inherently distinctive because when they are used to describe a product, they do not inherently identify a particular source.⁷³ However, it is possible for descriptive marks to acquire distinctiveness, otherwise known as secondary meaning, which will allow them to be protected under the Lanham Act.⁷⁴ The Court specifically noted that Section 2 of the Lanham Act provides that a descriptive mark, which otherwise could not be registered under the Act, may be registered if it "has become distinctive of the applicant's goods in commerce."⁷⁵

The Court then explained how a trademark or trade dress may be considered distinctive. "The general rule regarding distinctiveness is clear: An identifying mark is distinctive and capable of being protected if it either (1) is inherently distinctive or (2) has acquired distinctiveness through secondary meaning."⁷⁶

Notably, the Supreme Court's ruling in Two Pesos focused on the specific issue of the inherent distinctiveness of Taco Cabana's trade dress. The Supreme Court did not address whether Taco Cabana's trade dress was correctly held to be at least "suggestive" by the Fifth Circuit, or whether the trade dress was functional overall.⁷⁷ Rather, the Supreme Court focused specifically on the Fifth Circuit's use of the Chevron test to determine that Taco Cabana's trade dress was inherently distinctive:

In going on to affirm the judgment for respondent, the Court of Appeals, following its prior decision in Chevron, held that Taco Cabana's inherently distinctive trade dress was entitled to protection despite the lack of proof of secondary meaning. It is this issue that is before us for decision, and we agree with its resolution by the Court of Appeals.⁷⁸

On this issue, the Supreme Court held that there was no apparent reason to apply to trade dress a general requirement of secondary meaning that was not required for establishing trademark infringement under section 43(a) of the Lanham Act.⁷⁹

The Court characterized Two Pesos's argument on secondary meaning as contradictory (which it was).⁸⁰ On one hand, Two Pesos argued that the jury's finding of no secondary meaning in the Texas market for the trade dress was, in itself, a finding that the trade dress was not inherently distinctive.⁸¹ On the other hand, Two Pesos argued that it was possible for trade dress to be inherently distinctive in some cases.⁸² The Court considered the Fifth Circuit's analysis of the issue and affirmed its conclusion:

Petitioner argues that the jury's finding that the trade dress has not acquired a secondary meaning shows conclusively that the trade dress is not inherently distinctive. The Court of Appeals' disposition of this issue was sound: Two Pesos's argument—that the jury finding of inherent distinctiveness contradicts its finding of no secondary meaning in the Texas market—ignores the law in this circuit. While the necessarily imperfect (and often prohibitively difficult) methods for assessing secondary meaning address the empirical question of current consumer association, the legal recognition of an inherently distinctive trademark or trade dress acknowledges the owner's legitimate proprietary interest in its unique and valuable informational device, regardless of whether substantial consumer association yet bestows the additional empirical protection of secondary meaning.⁸³

After confirming that the analysis used by the Fifth Circuit was correct, the Court then went on to develop its position on why an absolute requirement of secondary meaning was not appropriate. First, the Court called out Two Pesos for its admission that trade dress could be inherently distinctive without secondary meaning:

[Petitioner] appears to concede elsewhere in its brief that it is possible for a trade dress, even a restaurant trade dress, to be inherently distinctive and thus eligible for protection under § 43(a). Recognizing that a general requirement of secondary meaning imposes "an unfair prospect of theft [or] financial loss" on the developer of fanciful or arbitrary trade dress at the outset of its use, petitioner suggests that such trade dress should receive limited protection without proof of secondary meaning.⁸⁴

While Two Pesos acknowledged this admission, it sought to minimize its impact by limiting its applicability to "new" trade dress: "Petitioner argues that such protection should be only temporary and subject to defeasance when over time the dress has failed to acquire a secondary meaning."⁸⁵ After some consideration, the Supreme Court disagreed with this argument as well.⁸⁶

Rather than focusing on traditional "secondary meaning" factors, such as sales and marketing expenses, and other extrinsic factors, the Court looked to the nature of the trade dress itself to determine whether inherent distinctiveness was possible:

If temporary protection is available from the earliest use of the trade dress, it must be because it is neither functional nor descriptive, but an inherently distinctive dress that is capable of identifying a particular source of the product. Such a trade dress, or mark, is not subject to copying by concerns that have an equal opportunity to choose their own inherently distinctive trade dress.⁸⁷

Thus, the Court recognized that the features of trade dress that make it fall within the category of inherent distinctiveness are chosen by the developer of the trade dress and tied to the specific design...