Trade dress lawsuits: unique, 'nonfunctional' design signatures are key to copycat cases

Nation's Restaurant News, Oct 9, 1995 by Mark Hamstra

Operators intent on protecting their trade dress - the elements that make up their concepts' decor and ambience - should incorporate as many distinctive "non-functional" features into their designs as possible, experts on trade-dress law advise.

But despite a 1992 Supreme Court decision that helped establish that axiom and made it easier for restaurateurs to protect their proprietary design elements, restaurants continue to be targets for knock-off artists.

In many cases the "copycats" come from within a chain's own ranks or from within a chain's franchise system. But pinning down an airtight basis for a prosecution - or a defense - can be tricky.

Trade dress - unlike registered trademarks, service marks and patents - can be difficult to define. Further confusing the issue are a number of conflicting rulings throughout the nation's court systems, many of which have been based on consumer-goods packaging and broadened to apply to restaurant design as a "package" for the restaurant's "goods."

"The courts define trade dress as the total image," said attorney Louis T. Pirkey of the firm of Arnold, White & Durkee in Austin, Texas. "I don't think one can say with certainty how many [individual similarities] have to add up" to prove infringement. "The question is: Is it in fact likely to cause confusion with other restaurants?

"All of these cases are very fact-dependent," he added, "meaning that each case really depends on the facts of a particular situation. It's a very nebulous area."

The federal Lanham Trade-Mark Act of 1945 established basis for trademark and trade dress protection to prevent unfair business practices.

Section 43(a) of the Lanham Act specifically protects "package design" as intellectual property, and the definition has since been broadened to include restaurant decor.

In order for a business' activities to be considered unfair under the Lanham Act, those activities must have the potential to confuse consumers about the "source" or "sponsor" of the goods or services they are paying for.

In other words, an operator must have a decor or style that is so similar to another's that consumers might become confused about whether both restaurants are versions of the same concept and were created by the same company or individual.

Anyone element of a decor package by itself - such as an interior paint color - may not be enough to constitute a trade dress, but when single elements are combined with other elements, a distinctive, protectable style can be established.

"I think the question you have to ask is, are these features a trademark?" said Jack Clifford, head of the trademark practice section at the Minneapolis law firm of Merchants & Gould. "Because these restaurants have `x, `y' and `z' features, do customers think they are in a Taco Cabana?"

In the landmark trade-dress case ultimately decided by the Supreme Court in 1992, the 52-unit Taco Cabana chain of Mexican eateries accused 36-unit Two Pesos of copying several of the nonfunctional design features Taco Cabana used in its restaurants to create a "festive atmosphere." The features included overhead garage doors separating a patio area from the dining room, certain color schemes and a distinctive roof design.

Those elements first used by Taco Cabana all were nonfunctional in the sense that they were embellishments not essential to competition, and thus they were protectable. But it was ruled that common, functional elements of Taco Cabana's business - such as its serving Mexican food and having drive-up windows - could not be claimed as that chain's intellectual property and thus were permitted to be used by Two Pesos.

The Supreme Court ruled in favor of Taco Cabana after two appeals by Two Pesos, affirming a lower court's order for Two Pesos to pay Taco Cabana $3.7 million in damages and alter the decor of Two Pesos units, among other requirements.

The ruling became a significant "case of record" for subsequent trade-dress rulings.

What was important about the case was that Taco Cabana was relieved by the Supreme Court from having to prove that particular decor elements had become part of the chain's identity in the minds of consumers. It simply had to prove that its decor was "distinctive," and that Two Pesos was using the same distinctive elements in its restaurants.

Plaintiff companies formerly had to call consumer witnesses and cite extensive, formal studies to demonstrate that similarities with other concepts had misled customers into believing the establishments might be related or that the plaintiff's restaurant perhaps was the copycat.

"Taco Cabana-Two Pesos is a huge case in the area. It goes through a lot of the elements that the court found to be important," said attorney Annette Ellinger, whose firm of Harkelroad & Hermance in Atlanta currently is handling a trade-dress case for the Steak-Out restaurant chain.

"That was the first time recently that the Supreme Court dealt with trade dress in restaurants," Clifford added. "Everyone who read it thought it was favorable for all trademark owners."