My September 5, 2012 article, “2nd Circuit Says Yes to Louboutin’s Red Sole Trademark,” poses the question: “is this decision a true victory for Louboutin or YSL?”  Tamlin H. Bason’s article in Patent, Trademark & Copyright Law Daily seems to suggest that both sides are claiming victory. 

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Reproduced with permission from Patent,Trademark & Copyright Law Daily, (Sept. 12, 2012). Copyright 2012 by The Bureau of National Affairs, Inc. (800-372-1033) <http://www.bna.com>

By Tamlin H. Bason 

Both parties claimed victory after the U.S. Court of Appeals for the Second Circuit Sept. 5 determined that Christian Louboutin’s trademark on red soled shoes was valid and that Yves Saint Laurent’s monochrome red shoe did not infringe the registered mark. Christian Louboutin S.A. v. Yves Saint Laurent America Holding Inc., 2d Cir., No. 11-3303-cv, 9/5/12).

“We are absolutely thrilled with the court’s decision,” David H. Bernstein of Debevoise & Plimpton in New York told BNA.

Bernstein, who argued the case on behalf of YSL, said that the ruling went beyond his expectations. Rather than merely affirming the district court’s refusal to grant a preliminary injunction, he noted, the appeals court instead disposed of the entire trademark infringement claim. “We didn’t anticipate that this would be the likely outcome of the appeal,” Bernstein said, reacting the Second Circuit’s decision.

Louboutin, however, also had cause to celebrate the decision, particularly since the district court had threatened to cancel its trademark registration pursuant to its determination that a single color can never serve as a protectable trademark in the fashion industry (158 PTD, 8/16/11). That threat, coupled with the district court’s order rejecting Louboutin’s motion for a preliminary injunction against YSL’s continued sale of monochromatic red shoes, promoted Louboutin to seek interlocutory review from the Second Circuit.

“I think the [Second Circuit’s] decision is about as important as it gets,” Louboutin’s attorney, Harley I. Lewin of McCarter & English, New York, told BNA. “I don’t know how you can get more important than fighting for the lifeblood of your company and winning.”

Lewin added, however, “I could have done without the monochromatic exception.”

Appeals Court Rejects Per Se Rule

Judge Victor Marrero of the Southern District of New York determined that Christian Louboutin’s trademark registration for red soled shoes was not enforceable. In fact, the court indicated that it was inclined to cancel the registration.

Single color trademarks can never be enforceable in the fashion world, Marrero said, because such trademarks would stifle competition and give the mark’s owner an unfair competitive advantage. Thus, the district court recognized a per se rule against single color marks in the fashion industry. Moreover, the district court determined that the red sole mark was aesthetically functional, and therefore could be not enforced against Yves Saint Laurent. Both determinations were made pursuant to the court’s rejection of Louboutin’s motion for a preliminary injunction that would have prevented YSL from selling its monochromatic red shoes. Because the court’s order came at such an early stage in the proceedings, the record was not yet fully developed, a fact seized upon by many critics of Marrero’s decision.

“People in the fashion were shocked by this per se rule that was created with no record and that said fashion was different” than other fields in which single color marks can serve as a protectable mark, Susan Scafidi, a law professor at Fordham University, New York, and founder of the Fashion Law Institute, told BNA.

Lewin said he was also caught off-guard by the district court’s ruling. “Judge Marrero’s decision changed the game,” Lewin said. “What began as a question of enforcement of a registered trademark … became a question of [whether the trademark was valid] because of what Marrero did,” Lewin said.

The Second Circuit soundly rejected the per se rule. Looking to Qualitex Co. v. Jacobson, 514 U.S. 159, 34 USPQ2d 1161 (1995), Judge José A. Cabranes said, “the Supreme Court specifically forbade the implementation of a per se rule that would deny protection for the use of a single color as a trademark in a particular industrial context.”

Modification of Mark ‘Unorthodox’ But ‘Efficient.’

Registered with the Patent and Trademark Office in 1998 for women’s high fashion designer footwear, Louboutin’s trademark (No. 3,361,597) “consists of a lacquered red sole on footwear,” according to the registration’s description.

A court can, under 15 U.S.C. § 1119, “order the cancellation of registrations, in whole or in part, restore canceled registrations, and otherwise rectify the register with respect to the registrations of any party to the action.”

The appeals court exercised those powers to modify Louboutin’s mark so that it was protectable only against red soled women’s shoes that had a contrasting upper color. The court instructed the PTO “to limit the registration of the Red Sole Mark to only those situations in which the red lacquered outsole contrasts in color with the adjoining ‘upper’ of the sole.”

“Modifying the mark may have been more efficient, and less traumatic to Christian Louboutin than cancelling the mark and forcing them to reapply for a registration,” Scafidi said. “So while it is a little unorthodox to modify a trademark without making a clear determination on something like an aesthetic functionality defense, I think it was efficient decision making on behalf of the court,” Scafidi said.

Marc Reiner, chair of the Intellectual Property Group at Anderson Kill & Olick, New York, also thought that the court’s modification of the registration was “unusual.” In a statement, Reiner said:

Louboutin claimed that it owned trademark rights to any red sole on a woman’s high-heeled shoe. The court added the limitation that the red sole must contrast with the color of the rest of the shoe. This definition is probably a more accurate description of what customers associate with Louboutin, but courts generally rule whether the party’s stated trademark is valid or not rather than define the parameters of the trademark. That said, I believe this is the correct ruling

Robust Guidance on Aesthetic Functionality

Although the appeals court never ruled on whether Louboutin’s trademark was aesthetically functional, it dedicated a considerable portion of its order fleshing out that doctrine and how it applies to the fashion industry.

“Even if Qualitex could be read to permit an industry-specific per se rule of functionality (a reading we think doubtful), such a rule would be neither necessary nor appropriate here,” the court said. Thus, although it agreed with Marrerro that “in the fashion industry, color can serve as a tool in the palette of a designer, rather than as mere ornamentation,” that fact alone does not mean that single color marks can never be protectable in fashion, it said.

The focus of every aesthetic functionality analysis should be whether the registered mark “can accommodate consumers’ somewhat conflicting interests in being assured enough product differentiation to avoid confusion as to source and in being afforded the benefits of competition among producers,” the court said, quoting Stormy Clime Ltd. v. ProGroup Inc., 809 F.2d 971, 1 USPQ2d 2026 (2d Cir. 1987).

However, before reaching that analysis in the instant case, the court determined that Louboutin’s registration only applied to contrasting colors. It thus modified the registration, and held that YSL’s monochromatic shoes were not infringing.

Lewin said the court’s guidance on the aesthetic functionality doctrine will be invaluable going forward. He said that at the conclusion of the January oral arguments Cabranes asked him what he wanted out of the court’s ruling. Lewin told him that in addition to a reversal of the district court’s decision, Louboutin wanted an order that provided methodical guidance on how the aesthetic functionality doctrine should be applied in future cases.

“Though the court made no ruling on functionality, it took six pages of its decision in laying out exactly what we requested,” Lewin said. “It is very clear that they intended to guide at least the circuit, more carefully perhaps than prior decisions [have done].”

Is Louboutin’s Mark Still in Danger?

Bernstein also welcomed the court’s aesthetic functionality guidance, and suggested that we may not have to wait long to see how district court’s interpret the Second Circuit’s opinion.

The Second Circuit remanded the case so that the district court could rule on YSL’s counterclaims, one of which seeks a cancellation of Louboutin’s mark.

“Right now it is our intention to pursue our counterclaims, Bernstein said. “We brought them because we think they are appropriate.”

Bernstein noted that although this case dealt with a monochromatic line of shoes, in the past YSL has made red soled shoes that had contrasting uppers.

“It is our view that nobody should be able to preclude Yves Saint Laurent from using red in the future, if it is making the choice not to indicate the brand, but using it for aesthetic fashion related reasons,” Bernstein said.

Bernstein predicted that after viewing the entire record, Marrero will agree and will cancel Louboutin’s trademark for being aesthetically functional.

Should Case Have Been Brought?

“This case was an example of why it’s so important to pick your battles well,” Reiner said in a statement. “YSL was not only a well-funded opponent, but there also was a reduced likelihood of confusion because YSL’s shoe was monochromatic and the red sole did not stand out. Because of this poor choice, Louboutin not only wasted resources on the litigation but also needlessly put its valuable red-sole trademark in jeopardy. Had Louboutin lost the ability to prevent others from using a contrasting red sole, the result would have been catastrophic for the brand.”

Bernstein agreed. “They frankly never should have brought the case in the first place,” he said. “I think Christian Louboutin is in a substantially worse position than when they brought the lawsuit,” he added, noting that Louboutin’s trademark has been scaled back from its original registration.

Although Lewin didn’t speak to whether his client should have filed the complaint in the first place, he said that Louboutin was eased with the Second Circuit’s ruling.

“We are very aware that lawyers, judges, and the fashion industry in general has been closely watching this case around the world, and we think a decision like this will aid Christian Louboutin enormously.”