Knock It Off!

U.S. Supreme Court Deals with Garment Copycat Issues

The knockoff industry may really take off, or it may simmer down slightly, thanks to a decision from some unlikely fashion consultants -- on the U.S. Supreme Court.

An important case, decided in March of this year, sets some limits on the popular practice of copying hot designs. However, the case also makes the ground rules more clear, which may signal a green light for knockoff artists where there once was a yellow one.

The case involved Samara Brothers Inc., a maker of children's wear, and Wal-Mart Stores Inc., the low-price retail giant. Samara specializes in infant-and toddler-sized seersucker one-piece outfits, which are decorated with appliques of hearts, flowers and fruits.

The case began when Samara received a complaint from one of its customers, JCPenney Co., charging that Wal-Mart was selling Samara's seersucker outfits at a price below which Penney's was allowed to sell them under its contract with Samara. The claim was a surprise to Samara -- it didn't sell its line to Wal-Mart. When Samara went into Wal-Mart to investigate, the company found knockoffs of its styles. Samara also found knockoffs in Caldor, Hills, Kmart and Goody's stores. It turns out that all of the copies were produced by one manufacturer, to which Wal-Mart had given photographs of the Samara designs to use as a model.

Samara responded by sending each of the retailers a cease-and-desist letter and then filing suit against them for copyright and trademark infringement. In its complaint, Samara alleged that the knockoffs infringed on Samara's copyrights on the original artwork on the clothing and on its unregistered "trade dress," which is a form of trademark. Just bringing the lawsuit worked well for Samara. All but Wal-Mart settled before trial.

Wal-Mart, which purportedly had more than $1 million in gross profits on the line, decided to let the courts decide the dispute. A jury and an appellate court both ruled in favor of Samara, awarding Samara damages, interest, costs and fees totaling almost $1.6 million, as well as injunctive relief. Most of that award was attributable to Samara's copyright claims on specific details of its designs, but some was based on the trademark claim, It is the success of that trademark claim that sent a chill through the bankbooks of dedicated knockoff artists and retailers of those goods. Wal-Mart appealed to the Supreme Court.

Where Do You Draw the Line in Determining Design Integrity?

Samara's case against Wal-Mart was based on the Lanham Act and court decisions interpreting that law. The Lanham Act permits the registration of trademarks, which it defines as any word, name, symbol or device, or any combination thereof, used 1) to identify and distinguish a producer's goods from those manufactured or sold by others, and 2) to indicate the source of the goods. Trademarks include not just word marks, such as Nike(R), and symbol marks, such as Nike's "swoosh" symbol, but also what is known as "trade dress."

Trade dress constitutes a "symbol" or "device" used to distinguish a producer's goods. Trade dress originally included only the packaging, or "dressing," of a product. However, in recent years, trade dress has been expanded by federal courts to include the design of the product itself. Packaging trade dress refers to the overall look, image or particular features of a product's packaging (such as the squat, brightly decorated plastic bottles of Tide(R) liquid laundry detergent), while product design trade dress is the design or overall image of the product itself.

Wal-Mart argued to the Supreme Court that the jury's determination on Samara's trademark claim was not supported by the evidence because Samara's clothing designs were not sufficiently distinctive to be legally protected as product design trade dress.

The Court's Decision

In Wal-Mart Stores Inc. v. Samara Brothers Inc., the Supreme Court noted that trade dress must be distinctive to be legally protected, because without distinctiveness the trade dress would not identify the origin of the goods to the consumer. A trademark can be distinctive in either of two ways. First, it is inherently distinctive if its intrinsic nature serves to identify a particular producer. Marks that are arbitrary, fanciful or suggestive are inherently distinctive. Second, a mark that is not inherently distinctive may still become distinctive by acquiring a meaning in the minds of the public that identifies the mark with the source of the product. This acquired meaning is referred to as "secondary meaning."

The Supreme Court concluded that design, like color, is not inherently distinctive. However, said the justices, if a color or design acquires secondary meaning, it may be protected as trade dress. As an example, the high court noted a case in which a manufacturer of green-gold dry-cleaning press pads successfully sued a company that starting selling pads of a similar color. In that instance, the manufacturer was able to prove that over time customers had come to treat that particular color of the product as signifying its brand.

The Supreme Court distinguished between the protection available to product packaging and the protection available to product design. Packaging may be inherently distinctive and protected without specific proof of secondary meaning. But product designs will always require proof of secondary meaning before trademark protection can be provided.

Therefore, the issue in Samara became whether the design of appliques of hearts, flowers, fruits and the like on Samara's seersucker clothing has acquired meaning in the minds of the public identifying this design feature with Samara. That issue was not directly considered by the lower courts. Therefore, the Supreme Court reversed the decision of the court of appeals and remanded the case for further proceedings.

The Next Proving Ground

This means that the case is not over yet. And Samara now has a significant hurdle to overcome. The Supreme Court found that consumers are aware of the reality that, almost invariably, even the most unusual product designs are intended not to identify the source, but to render the product itself more useful or appealing. On remand, therefore, Samara will have to show that its seersucker and appliqu[acute{e}] design has acquired secondary meaning in the minds of consumers, associating the design with Samara. Evidence such as consumer surveys and trade press recognition are some of the forms of evidence that can be used to prove secondary meaning.

The court's decision has implications for the apparel, home furnishings and jewelry industries. However, it remains to be seen whether the Supreme Court's decision will significantly hamper companies' efforts to protect the intellectual property embodied in their fashion designs. Instead, it may change the focus of those efforts.

As the Supreme Court noted in Samara, protection from copycats will often be available for designs under the patent and copyright laws, even if the product design has not yet acquired a secondary meaning under the trademark law. For example, the clothing at issue in Samara contained appliqu[acute{e}]s that were protected under the copyright laws as original artwork. Indeed, most of the damage award was based on Samara's copyright claim. And a producer may still succeed in a trademark claim by demonstrating that a particular design has acquired a secondary meaning in the minds of consumers, associating the design with the producer of the goods.

Expect both designers and the knockoff industry to watch the final outcome of this case closely, and possibly to change the way they do business.

Brenda A. Jacobs is a partner and Lisa A. Crosby is an associate in the International Trade and Customs Practice Group of the law firm of Powell, Goldstein, Frazer & Murphy LLP, In its Washington, D.C., office.

COPYRIGHT 2000 Miller Freeman, Inc.
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