The Court of Appeals for the Second Circuit recently ruled in Christian Louboutin S.A. v. Yves Saint Laurent Am. Holdings, Inc. that there exists no per se rule preventing a single color from serving as a trademark in the fashion industry. Rather, like in other industries, consistent use of a color by a fashion designer may result in a trademark. And such a trademark may be successfully enforced if, among other things, enforcement does not run afoul of the so-called aesthetic functionality doctrine that was recognized and validated by the United States Supreme Court in Qualitex Co. v. Jacobson Products Co., 514 U.S. 159 (1995).
The Louboutin fashion house of France brought suit against Yves Saint Laurent, another French fashion company, seeking injunction of the latter’s distribution of women’s high fashion shoes with red lacquer outsoles. Louboutin has, since 1992, distributed its signature footwear that features a bright, lacquered red outsole, which nearly always contrasts strikingly with the color of the rest of the shoe. In the words of the Court, this red outsole has become closely associated with Louboutin in the high-stakes commercial markets and social circles in which these things matter a great deal.
In the District Court, Louboutin requested preliminary injunction of YSL’s distribution of shoes with a red lacquer outsole (whether or not the color of the outsole contrasted with the color of the rest of the shoe). The District Court denied that request stating that issuance of injunction would violate a per se rule that a single color can never be protected by trademark in the fashion industry. According to the District Court, in the fashion industry, single-color marks are inherently functional and, as such, any such mark is likely to be held invalid. According to the District Court, “there is something unique about the fashion world that militates against extending trademark protection to a single color.”
Upon review, the Circuit Court found that reference by the District Court to a per se rule was error. The Circuit Court noted that Qualitex expressly held that “sometimes[ ] a color will meet ordinary legal trademark requirements[, a]nd, when it does so, no special legal rule prevents color alone from serving as a trademark.” Qualitex forbids application of a per se rule.
Rather than refuse injunction on the basis of a per se rule, the Circuit Court held that the District Court should have come to a particularized conclusion as to whether, or not, the Louboutin mark is functional and, thus, unenforceable. Courts in the United States have long held that certain trademarks that act not only as a source indicator but also “satisfy a demand for the aesthetic” are sometimes vulnerable to an affirmative defense of aesthetic functionality. According to the Circuit Court, a mark is aesthetically functional, and therefore unenforceable against a competitor, only where protection of the mark significantly undermines competitors’ ability to compete in the relevant market. In making the determination, courts must carefully weigh the competitive benefits of protecting the source-identifying aspects of a mark against the competitive costs of precluding competitors from using the trademark feature. The courts must inquire as to whether recognizing the trademark would put competitors at a significant non-reputation-related disadvantage.
The Circuit Court did not itself apply an aesthetic functionality analysis to the mark at issue in the case. It used other grounds to refuse to enforce Louboutin’s claimed trademark against YSL. Specifically, the Court instructed the Director of the Patent and Trademark Office to limit the registration of Louboutin’s mark to only those situations in which the red lacquered outsole contrasts in color with the adjoining “upper” of the sole. Since the accused YSL shoes are monochromatic (i.e., the outsoles are of the same color as the uppers), the trademark (as modified) is not infringed.
There are at least three points to make about this case.
1. Narrowness of Trademark. This Circuit Court opinion modifies the Louboutin trademark to include only those situations in which the “red lacquered outsole contrasts in color with the adjoining “upper” of the shoe.” Monochromatic shoes do not even arguably infringe the mark. Further, there is not even an argument to be made by Louboutin that it can prevent another shoemaker from distributing shoes with outsoles of a color other than red. For example, white or yellow outsoles. Query whether the Circuit Court should have taken another limiting step by narrowing Louboutin’s trademark to outsoles of a particular shade of red. The Court could have, for example, narrowed the trademarked color by reference to a Pantone number.
2. No Application of Defense by Court. Very importantly, as noted above, the Circuit Court in this case did not actually apply the aesthetic functionality test that it took pains to outline. Thus, even after this opinion, Louboutin may be unable to succeed in an action enforcing its trademark. A future defendant may very well be able to defend against an infringement claim by convincing a District Court or jury that Louboutin’s trademark is in fact aesthetically functional under the test outlined by the Second Circuit. This case merely disallows the per se rule referenced by the District Court. It does not eliminate the defense of aesthetic functionality. The lower courts in the Second Circuit remain entitled to refuse to enforce single-color marks in the fashion industry upon a particularized finding of functionality. Which, in the end, may happen with regularity. The per se rule merely becomes a de facto rule.
3. Market Analysis. Under the case law, determining whether a mark is aesthetically functional boils down to the court conducting a market analysis. As noted above, and as ruled in this case, a mark is aesthetically functional, and therefore unenforceable against a competitor, where protection of the mark significantly undermines competitors’ ability to compete in the relevant market. Thus, in a hypothetical future case brought by Louboutin, if the trial court defines the relevant market broadly as the market in women’s shoes, it would be less likely to find the mark functional. This is true because, it would seem, a shoemaker can likely compete in that industry even if it is locked out of producing women’s shoes with contrasting red outsoles. If, on the other hand, the trial court defines the relevant market more narrowly as, let’s say, the market in women’s high heeled shoes, the court would be more likely to find that blocking a competitor from distributing red contrasting outsoles has a significant negative effect on competition within that market. The problem with this market analysis approach is that ultimately, when a court applies this analysis, it needs to be asking itself questions like “Why do women prefer red contrasting outsoles on their high heel shoes?” and “How much do women prefer red contrasting outsoles on their high heel shoes?” and “How much more do women desire red contrasting outsoles than outsoles of a different color?” This is not where the courts want to be, and this is one reason why the temptation to declare a per se rule against single-color trademarks in the fashion industry is so great.