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July 22, 1996

ESTEE LAUDER, INC., Plaintiff, against THE GAP, INC. d/b/a OLD NAVY CLOTHING COMPANY, Defendant.

The opinion of the court was delivered by: KAPLAN

 LEWIS A. KAPLAN, District Judge.

 Estee Lauder Inc. ("Lauder") recently introduced a new skin moisturizer which, depending upon which of the parties is speaking, is called either "100%" or "100% Time Release Moisturizer." The defendant, The Gap, Inc. ("Gap"), is about to launch a line of personal care products in its Old Navy ("Old Navy") clothing stores under the umbrella name, "100% Body Care." Lauder seeks to enjoin Gap from doing so, claiming that Gap's use of "100% Body Care" infringes Lauder's trademark as applied to goods of this character. This is the Court's decision following a bench trial.

 The Genesis of the Dispute

 The Parties

 The Estee Lauder Companies are among the leading skin care, makeup and fragrance companies in the world. They consist of Lauder, the plaintiff in this case, as well as Clinique, Prescriptives, Origins, Aramis and other entities. Their total worldwide sales in fiscal 1995 were approximately $ 2.9 billion, of which slightly less than half were made in the United States. (PX 1, *fn1" P 4)

 Lauder produces makeup, fragrance products, and a wide array of skin and other personal care products. It currently sells face care products, body lotions, shampoos, hair conditioner, hair spray, sun care products, eye cream, moisturizing products, anti-perspirants, among other products. (Id. P 5) Its total sales of skin and other personal care products in the United States last year exceeded $ 225 million, and it spent over $ 30 million on advertising and marketing support. (Id.)

 Gap is an international retailer of apparel and other products. It sells through its own well-known retail stores -- Gap, GapKids, Banana Republic, Old Navy and, most recently, Baby Gap. (DX EEE-HHH) Old Navy, the chain at issue in this case, was created in 1992 in consequence of marketing studies that revealed that approximately one-half of the domestic apparel market consisted of sales in a market segment in which Gap was not represented, a segment that Gap refers to as the mass middle market. (DX BBBB *fn2" PP 4-6) The segment is characterized, according to Gap, by real estate format (stores located in strip malls and so-called power centers as distinguished from free-standing metropolitan department stores and regional enclosed shopping malls), customer income in the $ 30,000 to $ 70,000 range, and retail prices. (Id. PP 5, 9-13)

 The Products and Name Selections

 The record reveals that the parties independently began the process that resulted in each selecting the name "100%" for its products. Once the initial decisions were made, however, their efforts to clear use of their preferred mark yielded a sketchy outline of the conflict that now has matured. As time went by, the picture became clearer, especially to Gap, but the parties continued on a collision course.

 Gap began considering the introduction of personal care products in its major divisions at least as early as late 1993 and hired Gary McNatton to develop such lines in February 1994. (DX CCCC *fn3" P 1) McNatton's group began development of a personal care line for Old Navy in approximately December 1994, after first having done so for the Gap and Banana Republic stores. (Id. PP 5, 9) In August 1995, McNatton, who "had a good idea of which products [he] would include" in the line, began to focus on their identifier. (Id. PP 9-10) By September or October, he settled on the percentage sign ("%") as his preferred symbol and decided that he would like to use "100%" for the line. (See id. PP 11-12)

 Lauder's Initial Efforts

 During 1995, Lauder started planning to introduce in the spring of 1996 a new skin moisturizer product in lotion form because skin moisturizing lotions are among the most popular skin treatment products with women. The new product incorporates over 70 minerals and delivers moisture to the skin over an extended period through a trademarked moisture delivery system called "AquaSpheres." (PX 1, PP 6-7)

 In November or December 1995, Lauder's creative group considered a number of possible trademarks for the new product. Exactly what that group decided is a matter of some dispute. According to Dianne Osborne, Lauder's vice president - skin care marketing, she decided to adopt "100%" as the trademark because it "would suggest to consumers certain attributes of" the product -- its long lasting quality and the notion that it is the best such product available. (Id., P 8) Gap, on the other hand, points to Lauder internal documents that refer to the product as "100% Time Release Moisturizer" to support its contention that this longer phrase, rather than "100%" standing alone, is the trademark and that Lauder so intended until it took its present position for litigation purposes. As indicated below, the question whether "100%," standing alone, is a trademark or used in a trademark sense does not depend upon Lauder's intentions, which are no more than circumstantial evidence of likely consumer perception. Accordingly, no definitive conclusion need be reached as to Lauder's intention, if indeed Lauder may be said to have had any.

 The Trademark Searches and the Dana Contacts

 In September or October 1995, McNatton's group at Gap asked Julie Kanberg, Gap's in-house trademark counsel, to determine the availability of "100%" as a trademark for personal care products to be sold in Old Navy stores. (DX CCCC P 12; DX DDDD *fn4" P 3) Ms. Kanberg promptly discovered that the trademark "100% HUNDRED PER CENT." had been registered with the United States Patent and Trademark Office ("PTO") for toilet preparations, perfumery, and cosmetics by Les Parfums de Dana, Inc. ("Dana"). (DX DDDD P 4) She then consulted outside counsel and commissioned a private investigator to determine whether Dana used the mark. (Id. P 5)

 While Gap was attempting to learn whether Dana had any rights in the mark 100%, Lauder started down the same path and, in fact, overtook Gap's efforts. On December 13, 1995, Lauder's legal department ordered a trademark search report and promptly discovered the Dana registration. (PX 45, *fn5" P 4) While still unable to determine with certainty whether Dana's mark was in use, Lauder, on December 20, 1995, filed an application with the PTO to register "100%" on an intent-to-use ("ITU") basis as a trademark for cosmetics, toiletries and fragrances. *fn6" (Id. PP 5-6; PX 47) On January 11, 1996, just a few weeks later, Kanberg, who did not yet know anything of Lauder's plans or of Lauder's ITU application, filed ITU applications to register "100%," "100% BODY CARE" and "100% BODY CARE AND DESIGN." *fn7" (DX DDDD P 6)

 Given Lauder's uncertainty as to whether Dana was using the "100% HUNDRED PER CENT." mark, Lauder opened discussions with John Jackson, Dana's general counsel, with a view to obtaining an assignment of Dana's rights. In the meantime, Gap's investigator reported back that Dana had abandoned its mark. (DX DDDD P 5) Nevertheless, Kanberg, concerned that the Dana registration would block her own applications, asked her investigator to seek an assignment from Dana. (Id. P 7)

 Dana suddenly was confronted with an embarrassment of potential riches -- two bidders for an abandoned *fn8" trademark registration -- and sought to take advantage of the situation. When contacted on behalf of Gap, Dana's Mr. Jackson disclosed that there was another bidder and, although it did not identify Lauder by name, reported to Gap's investigator that it "was a high-end cosmetics company" that was "on the road to production." *fn9" (Kanberg Dep. 86-87) Kanberg made no effort to identify the other bidder and, thinking the figures mentioned by Jackson too high, broke off discussions with Dana. (Id. 83-90) In late February, however, Gap made one last attempt to procure the Dana registration. In the course of settling an unrelated dispute, it sought to have Dana include its registration in the deal but learned that the registration already had been assigned. An on-line search for the assignment revealed, on February 27, 1996, Lauder's December 20, 1995 ITU application. (DX DDDD P 11) Thus, the Court finds that Gap, as of February 27, 1996, knew not only of Lauder's ITU application, but knew also that Lauder had acquired the Dana registration and was the "high end cosmetics company" that was "on the road to production" of a new product or products using "100%" as its trademark.

 The Subsequent Applications

 At this point, caution might have suggested that Gap discuss the looming conflict with Lauder. Gap, however, first sought to improve its position.

 On March 7, 1996, Ms. Kanberg requested a further trademark search. (DX DDDD P 12; DX RRR) Finding that Lauder had not amended its December 1995 ITU application to allege use, she filed a number of additional ITU applications on behalf of Gap on March 12, 1996. (DX DDDD PP 12, 10; DX LLL) These additional applications consisted of "100%" followed by another word or phrase, most of them being the generic name of a product, such as "100% Body Scent." (DX LLL)

 Ms. Kanberg asserts that Gap had decided that it would not proceed with "100%" alone if Lauder objected and that she had no knowledge of any actual use by Lauder upon which Gap would infringe with the proposed uses in Gap's ITU applications. (DX DDDD PP 12, 15) That no doubt is so. *fn10" Nonetheless, the Court finds that Gap, knowing that Lauder had a new "100%" product in the pipe line, embarked on a race to be the first to use a "100%" mark and that Gap's March 12, 1996 ITU applications were designed to place Gap in the strongest possible position to preempt Lauder from using any "100%" mark if Gap won the race to first use. *fn11"

 Having staked out Gap's position, Ms. Kanberg telephoned Lesley Moradian, the Lauder attorney whose name was on Lauder's ITU application, on March 13, 1996. Moradian indicated that she was aware of Gap's January ITU applications for 100% and 100% BODY CARE and stated that Lauder was about to launch a new product using the 100% mark standing alone, that it was planning an entire line of skin care products using that mark, and that it might have a problem with one or both of Gap's applications. *fn12" (DX DDDD P 14; see also DX F) Ms. Kanberg suggested that the parties exchange proposed product packaging in an effort to avoid any trade dress problem, but Ms. Moradian declined. (DX DDDD P 14)

 On the following day, Ms. Kanberg wrote to Ms. Moradian. Her letter had several purposes. First, she wished to confirm that Lauder intended to use "100%" by itself and to state that Gap would not use "100%" apart from the words "BODY CARE." (DX F) Second, she renewed Gap's offer to exchange proposed packaging to ensure that there would be no confusing trade dress. (Id.) Finally, she put Lauder on notice of her position that Dana had abandoned use of its mark and that Lauder therefore acquired no rights by the assignment. It is significant to note, however, that Ms. Kanberg, Gap's experienced trademark counsel, referred to Lauder's "100%" as "suggestive" (DX F, at 1566), a term of art in the trademark field of no mean significance. *fn13" Indeed, she testified at trial that she believes that "100%" standing alone is suggestive and protectible absent proof of secondary meaning. (Tr. 170-71)

 On March 25, 1996, Ms. Moradian responded. She raised the question whether "the use of the term 100% by The Gap infringes Estee Lauder's prior rights in the trademark 100%." (DX G) In addition, she provided specimens of Lauder's proposed trade dress and stated that her letter was "written and the enclosed information . . . furnished in the context of settlement discussions and with the understanding that it may not be used in any litigation . . ." (Id.) There ensued a variety of discussions between the two companies that failed to resolve the dispute. *fn14" Neither party, it may be noted, fully disclosed its position to the other -- Gap did not disclose its March 12 ITU applications, and Lauder did not inform Gap of an application to register "100% Time Release," an application it withdrew the day before it commenced this action.

 The Allegedly Conflicting Uses

 Lauder's Product Launch

 On April 16, 1996, Lauder launched its product on a preview basis at Macy's Herald Square and Bloomingdale's 59th Street in anticipation of a national launch on June 1, 1996. (PX 1, P 11)


 The product is contained in a 1.7 fluid ounce dispenser which is packaged in a small, light blue box, the front and rear panels of which measure approximately 5-5/16 inches in height and 1-15/16 inches in width. The top of the front panel contains Estee Lauder's EL logo with the words ESTEE LAUDER printed immediately below the logo. Approximately 3-3/4 inches from the top of the panel appears the following text (PX 18): *fn15"


 Time Release


 with BioMineral Water

 1.7 FL. OZ./50 mlC

 This presentation, it should be noted, is quite similar to packaging for a host of other Estee Lauder skin products, which the parties sometimes called the "blue line" in reference to their similar blue packaging. As PX 19-30 demonstrate, the marks under which these skin care products are sold -- for example, "Fruition" (PX 19) -- all appear in the position comparable to "100%," also in a type face slightly bolder and larger than words beneath it which indicate the type of product -- e.g., "triple reactivating complex" for Fruition -- just as the words "time release moisturizer" appear beneath "100%."

 Point-of-Sale Promotion

 Lauder began shipping the product to retailers around the country between May 1 and May 7, and it was available in approximately 2,600 retail store locations by June 1. (PX 1, P 15) Since that date, three point-of-sale items have appeared in those stores, an in-store screen (PX 3), a poster (PX 4), and a tester (PX 80). (PX 1, P 16; Tr. 73)

 The screen, which measures approximately three by two feet, depicts a bottle of product against a background of blue water on the left half and contains text on the right. The text, which is far more prominent than the lettering on the bottle of product, appears approximately as follows:

 Your skin will never

 feel thirsty again.

 Estee Lauder invents


 Time Release Moisturizer

 with BioMineral Water

 The Estee Lauder house mark appears across the bottom of the right side of the screen in type approximately the same size as the phrase "Time Release Moisturizer." Thus, "100%" is by far the most prominent type on the screen.

 Your skin will never

 feel thirsty again.

 Estee Lauder ...

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