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Christian Louboutin S.A., Christian Louboutin, L.L.C., Christian Louboutin v. Yves Saint Laurent America Holding

September 5, 2012

CHRISTIAN LOUBOUTIN S.A., CHRISTIAN LOUBOUTIN, L.L.C., CHRISTIAN LOUBOUTIN,
PLAINTIFFS-COUNTER-DEFENDANTS-APPELLANTS,
v.
YVES SAINT LAURENT AMERICA HOLDING, INC., YVES SAINT LAURENT S.A.S., YVES SAINT LAURENT AMERICA, INC. , DEFENDANTS-COUNTER-CLAIMANTS-APPELLEES, YVES SAINT LAURENT, (AN UNINCORPORATED ASSOCIATION), JOHN DOES, A TO Z, (UNIDENTIFIED), JANE DOES, A TO Z, (UNIDENTIFIED), XYZ COMPANIES,1 TO 10, (UNIDENTIFIED), DEFENDANTS-APPELLEES.



The opinion of the court was delivered by: Jose A. Cabranes, Circuit Judge:

11-3303-cv

Christian Louboutin S.A. v. Yves Saint Laurent Am. Holding, Inc.

Argued: January 24, 2012

Before: CABRANES, STRAUB, and LIVINGSTON, Circuit Judges.

Fashion designer Christian Louboutin brings this appeal from an August 10, 2011 order of the United States District Court for the Southern District of New York (Victor Marrero, Judge) denying a motion for a preliminary injunction against alleged trademark infringement by Yves Saint Laurent, a competing fashion house ("YSL"). The District Court found that Louboutin's trademark was likely not enforceable and declined to enter a preliminary injunction against YSL's use of the trademark. 1

We conclude that the District Court's holding that a single color can never serve as a trademark in the fashion industry, Christian Louboutin S.A. v. Yves Saint Laurent Am., Inc., 778 F. Supp. 2d 445, 451, 457 (S.D.N.Y. 2011), is inconsistent with the Supreme Court's decision in Qualitex Co. v. Jacobson Products Co., 514 U.S. 159, 162 (1995), and that the District Court therefore erred by resting its denial of Louboutin's preliminary injunction motion on that ground. We further conclude that Louboutin's trademark, consisting of a red, lacquered outsole on a high fashion woman's shoe, has acquired limited "secondary meaning" as a distinctive symbol that identifies the Louboutin brand. As explained below, pursuant to Section 37 of the Lanham Act, 15 U.S.C. § 1119 we limit the trademark to uses in which the red outsole contrasts with the color of the remainder of the shoe. We conclude that the trademark, as thus modified, is entitled to trademark protection. Because Louboutin sought to enjoin YSL from using a red sole as part of a monochrome red shoe, we affirm in part the order of the District Court insofar as it declined to enjoin the use of red lacquered outsoles in all situations. However, we reverse in part the order of the District Court insofar as it purported to deny trademark protection to Louboutin's use of contrasting red lacquered outsoles. We enter judgment accordingly, and we remand for further proceedings with regard to YSL's counterclaims.

Affirmed in part, reversed in part, and remanded.

The question presented is whether a single color may serve as a legally protected trademark in the fashion industry and, in particular, as the mark for a particular style of high fashion women's footwear. Christian Louboutin, a designer of high-fashion women's footwear and accessories, has since 1992 painted the "outsoles" of his women's high-heeled shoes with a high-gloss red lacquer. In 2008, he registered the red lacquered outsole as a trademark with the United States Patent and Trade Office ("PTO").*fn1 We are asked to decide whether that mark is protectable under federal trademark law. Louboutin, Christian Louboutin S.A., and Christian Louboutin, L.L.C. (jointly, "Louboutin"), bring this interlocutory appeal from an August 10, 2011 order of the United States District Court for the Southern District of New York (Victor Marrero, Judge) denying a motion for a preliminary injunction against alleged trademark infringement by Yves Saint Laurent America Holding, Inc., Yves Saint Laurent S.A.S., and Yves Saint Laurent America, Inc. (jointly, "YSL"). The District Court, in addressing a difficult and novel issue of trademark law, held that, because a single color can never be protected by trademark in the fashion industry, Louboutin's trademark was likely not enforceable. It therefore declined to enter a preliminary injunction to restrain YSL's alleged use of the mark. We conclude that the District Court's holding that a single color can never serve as a trademark in the fashion industry, Christian Louboutin S.A. v. Yves Saint Laurent America, Inc., 778 F. Supp. 2d 445, 451, 457 (S.D.N.Y. 2011) ("Louboutin"), is inconsistent with the Supreme Court's decision in Qualitex Co. v. Jacobson Products Co., 514 U.S. 159, 162 (1995) ("Qualitex"), and that the District Court therefore erred by resting its denial of Louboutin's preliminary injunction motion on that ground. We further conclude that Louboutin's trademark, which covers the red, lacquered outsole of a woman's high fashion shoe, has acquired limited "secondary meaning" as a distinctive symbol that identifies the Louboutin brand. As explained below, pursuant to Section 37 of the Lanham Act, 15 U.S.C. § 1119, we limit the trademark to uses in which the red outsole contrasts with the remainder of the shoe (known as the "upper"). We conclude that the trademark, as thus modified, is entitled to trademark protection. Finally, we conclude that, because the monochrome design employed by YSL is not a use of Louboutin's modified trademark, we need not, and indeed should not, address whether YSL's use of a red outsole risks consumer confusion or whether the Louboutin mark, as modified, is "functional." We therefore (1) affirm in part the order of the District Court, insofar as it declined to enjoin the use of all red lacquered outsoles; (2) reverse in part the order of the District Court insofar as it purported to deny trademark protection to Louboutin's use of contrasting red lacquered outsoles; and (3) enter judgment accordingly. We remand for further proceedings with regard to YSL's counterclaims.

BACKGROUND*fn2

This appeal arises out of an action for injunctive relief and enforcement of a trademark brought by Louboutin, together with the corporate entities that constitute his eponymous French fashion house, against YSL, a venerable French fashion institution. Louboutin is best known for his emphasis upon the otherwise-largely-ignored outsole of the shoe. Since their development in 1992, Louboutin's shoes have been characterized by their most striking feature: a bright, lacquered red outsole, which nearly always contrasts sharply with the color of the rest of the shoe.

Christian Louboutin introduced his signature footwear to the fashion market in 1992. Since then, his shoes have grown in popularity, appearing regularly on various celebrities and fashion icons. The District Court concluded, and YSL does not dispute, that "Louboutin [had] invested substantial amounts of capital building a reputation and good will, as well as promoting and protecting Louboutin's claim to exclusive ownership of the mark as its signature in women's high fashion footwear." Louboutin, 778 F. Supp. 2d at 447. The District Court further found that Louboutin had succeeded in promoting his shoes "to the point where, in the high-stakes commercial markets and social circles in which these things matter a great deal, the red outsole became closely associated with Louboutin. Leading designers have said it, including YSL, however begrudgingly." Id. at 447-48. As a result of Louboutin's marketing efforts, the District Court found, the "flash of a red sole" is today "instantly" recognizable, to "those in the know," as Louboutin's handiwork. Id. at 448.

On the strength of the fashion world's asserted recognition of the red sole, Louboutin on March 27, 2007 filed an application with the PTO to protect his mark (the "Red Sole Mark" or the "Mark"). The trademark was granted in January 2008, and stated: "The color(s) red is/are claimed as a feature of the mark. The mark consists of a lacquered red sole on footwear." Id. at 449 (capitalization altered). The written description was accompanied by a diagram indicating the placement of the color:

In 2011, YSL prepared to market a line of "monochrome" shoes in purple, green, yellow, and red. YSL shoes in the monochrome style feature the same color on the entire shoe, so that the red version is all red, including a red insole, heel, upper, and outsole. This was not the first time that YSL had designed a monochrome footwear line, or even a line of footwear with red soles; indeed, YSL maintains that since the 1970s it had sold such shoes in red and other colors. In January 2011, Louboutin avers, his fashion house learned that YSL was marketing and selling a monochrome red shoe with a red sole. Louboutin requested the removal of the allegedly infringing shoes from the market, and Louboutin and YSL briefly entered into negotiations in order to avert litigation.

The negotiations having failed, Louboutin filed this action on April 7, 2011, asserting claims under the Lanham Act, 15 U.S.C. § 1051 et seq., for (1) trademark infringement and counterfeiting, (2) false designation of origin and unfair competition, and (3) trademark dilution, as well as state law claims for (4) trademark infringement, (5) trademark dilution, (6) unfair competition, and (7) unlawful deceptive acts and practices. Louboutin also sought a preliminary injunction preventing YSL from marketing, during the pendency of the action, any shoes, including red monochrome shoes, bearing outsoles in a shade of red identical to the Red Sole Mark, or in any shade which so resembles the Red Sole Mark as to cause confusion among consumers.

In response, YSL asserted two counterclaims: (1) seeking cancellation of the Red Sole Mark on the grounds that (a) it is not "distinctive,"*fn3 but instead merely "ornamental,"*fn4 (b) it is "functional,"*fn5 and (c) it was secured by fraud on the PTO; and (2) seeking damages for (a) tortious interference with business relations and (b) unfair competition. On July 22, 2011, after a limited and expedited discovery process, the parties argued the preliminary injunction motion. As noted above, see note 2, ante, the District Court did not hold an evidentiary hearing.

On August 10, 2011, the District Court issued a Decision and Order denying the injunction and holding that the Louboutin fashion house had not shown a likelihood of success on the merits of its claims. As the District Court saw it, the "narrow question" presented by the case was "whether the Lanham Act extends protection to a trademark composed of a single color used as an expressive and defining quality of an article of wear produced in the fashion industry"―that is, "whether there is something unique about the fashion world that militates against extending trademark protection to a single color." Louboutin, 778 F. Supp. 2d at 451.

Interpreting the Supreme Court's holding in Qualitex, the District Court explained that color is protectable as a trademark only if it '"acts as a symbol that distinguishes a firm's goods and identifies their source, without serving any other significant function."' Id. at 450 (quoting Qualitex, 514 U.S. at 166) (alteration omitted). The District Court further observed, albeit without citation to authority, that "whatever commercial purposes may support extending trademark protection to a single color for industrial goods do not easily fit the unique characteristics and needs--the creativity, aesthetics, taste, and seasonal change--that define production of articles of fashion." Id. at 451. For that reason, the District Court held that, in the fashion industry, single-color marks are inherently "functional" and that any such registered trademark would likely be held invalid. Id. at 457. The Court therefore held that Louboutin was unlikely to be able to prove that the Red Sole Mark was eligible for trademark protection, and denied Louboutin's motion for a preliminary injunction.*fn6 Id. at 449-50, 457. This appeal followed.

On appeal, Louboutin argues that the District Court erred in (1) holding, based on the doctrine of "aesthetic functionality," that the Red Sole Mark was not entitled to legal protection; (2) applying the doctrine of aesthetic functionality to hold that a single color on a fashion item could not act as a trademark; (3) failing to give weight to the statutory presumption of validity deriving from the Red Sole Mark's registration; (4) applying an improper analysis of trademark infringement and dilution; (5) ignoring allegedly undisputed proof of likelihood of confusion and irreparable harm; and (6) announcing a per se rule of functionality in a manner that violated Federal Rule of Civil Procedure 52.*fn7

DISCUSSION

I. Standard of Review

The District Court may grant a preliminary injunction if the moving party establishes "(a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief." UBS Fin. Servs., Inc. v. W. Va. Univ. Hosps., Inc., 660 F.3d 643, 648 (2d Cir. 2011) (internal quotation marks omitted). We review the denial of a preliminary injunction for "abuse of discretion." Dexter 345 Inc. v. Cuomo, 663 F.3d 59, 63 (2d Cir. 2011); cf. Sims v. Blot, 534 F.3d 117, 132 (2d Cir. 2008) (explaining that the term of art "abuse of discretion" includes errors of law).

We address the District Court's order in three parts. We first consider whether a single color is protectable as a trademark, both generally and in the specific context of the fashion industry. We then address the doctrine of "aesthetic functionality" and consider whether, as the District Court held, a single-color mark is necessarily "functional" in the context of the fashion industry―with the result that no such mark could ever be trademarked in that industry. Finally, we determine whether the Red Sole Mark is a valid trademark entitled to the protection of the Lanham Act.

II. Trademark Protection of Single-Color Marks

We begin by briefly recalling what trademark law is--and ...


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