Proof of secondary meaning is not required to prevail on a claim under § 43(a) of the Lanham Act where a trade dress at issue is inherently distinctive
Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763 (1992), was a
secondary meaning in suits to protect their trademark.[2] The Court upheld an award of $3.7 million in damages, and Taco Cabana ultimately acquired all of Two Pesos' assets in 1993 for $22 million.[3]
Background
Lanham Act protections for trademarks
The Lanham Act prohibits "the deceptive and misleading use of marks" to protect business owners "against unfair competition."[4] The Act defines trademarks as "any word, name, symbol, or device or any combination thereof" used by any person "to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods, even if that source is unknown."[4] A trademark is considered "distinctive and capable of being protected" if it "either (1) is inherently distinctive or (2) has acquired distinctiveness through secondary meaning."[5] However, a claim for trademark infringement requires "proof of the likelihood of confusion."[6]
Initial lawsuit
In 1978,
federal district court for trade dress infringement under the Lanham Act and for theft of trade secrets under Texas common law.[10] Both the district court and the United States Court of Appeals for the Fifth Circuit agreed that Two Pesos deliberately infringed upon Taco Cabana's trade dress, and Two Pesos appealed to the Supreme Court of the United States.[11]
Opinion of the Court
Dallas, Texas
Writing for the majority of the Court,
secondary meaning requirement for trade dress, concluding that "a secondary meaning requirement for a nondescriptive trade dress would hinder improving or maintaining the producer's competitive position."[14] Furthermore, he concluded that a secondary meaning requirement would have anticompetitive effects because a competitor could "appropriate the originator's dress in other markets" prior to the establishment of the secondary meaning and "deter the originator from expanding into and competing in these areas."[15] Consequently, the Court ordered Two Pesos to pay $3.7 million in damages to Taco Cabana.[3] Justice Antonin Scalia wrote a concurring opinion,[16] while Justice John Paul Stevens and Justice Clarence Thomas wrote opinions concurring in the judgment.[17]
Subsequent developments
In November 1992, Taco Cabana filed another lawsuit against Two Pesos seeking $5 million in damages for not complying with the Supreme Court's ruling and for creating further confusion among customers. Two months later, Taco Cabana agreed to buy Two Pesos' assets for approximately $22 million.[3] Richard Cervera, president and chief executive officer of Taco Cabana, stated that converting Two Pesos' restaurants to Taco Cabana restaurants would be “aided by the very striking physical resemblance of the two chains.”[18]
^ abcJamison Dean Newberg, The Same Old Enchilada? The Supreme Court Simplifies the Protection of Inherently Distinctive Trade Dress in Two Pesos v. Taco Cabana, 13 Rev. Litig. 299, 330 n. 27 (1994).
^Two Pesos, Inc., 505 U.S. at 769 (citing Restatement (Third) of Unfair Competition § 13, pp. 37–38, and Comment a (Tent. Draft No. 2, Mar. 23, 1990)).
^Two Pesos, Inc., 505 U.S. at 776 (Scalia, J., concurring).
^Two Pesos, Inc., 505 U.S. at 776, 785 (Stevens, J. and Thomas, J., concurring in the judgment).
^Jamison Dean Newberg, The Same Old Enchilada? The Supreme Court Simplifies the Protection of Inherently Distinctive Trade Dress in Two Pesos v. Taco Cabana, 13 Rev. Litig. 299, 330 n.27 (1994) (quoting Greg Hassell, A Tex-Mex Merger: Taco Cabana Gets Its Two Pesos' Worth, Hous. Chron., Jan. 13, 1993, at Business 1).
