IP HAPPENINGS – MARCH 2018

11.03.2018

THE RED SHOES

By Lawrence Hoffman

This article is not about Anderson’s fairy tale or the 1948 film based on it, but about trademark protection for colors. In particular, can someone own the exclusive right to use color to distinguish a product? The answer is – maybe.

Christian Louboutin sells luxurious (and rather high priced) stiletto-heeled shoes with red soles and has gone to considerable effort to protect this feature as a trademark. The Company has obtained registrations protecting its red-soled shoes in the U.S. and in several European countries, and it has brought several lawsuits seeking to prevent others from selling shoes with red soles. However, these efforts generated limited success.

Recently, in a final decision of Switzerland’s highest court of appeals, Louboutin was denied a trademark registration on the ground that red soles are merely aesthetic and as a result, cannot serve as a trademark. Also, in a lawsuit in the U.S. against Yves Saint Laurent (“YSL”) in 2012, a federal appeals court ruled that Louboutin had only proved distinctiveness in respect to shoes in which the shoe itself was not red. Therefore, it could not prevent YSL from selling shoes that were completely red. Now, however, Louboutin is facing a significant risk that it will lose the right to protection throughout the EU.

Let’s back up a bit. Trademark laws almost everywhere clearly specify that, subject to certain conditions, trademark protection is available for what is often referred to as “trade dress,” i.e., the appearance of the product or its packaging, or that associated with a service. An example of trade dress for a service mark would be the appearance of a restaurant or the color of United Parcel Service’s delivery trucks. An important limit everywhere with respect to trade dress, however, is that the design must not be dictated by the function of the article or its packaging. Moreover, obtaining protection for trade dress generally requires proof of acquired distinctiveness or “secondary meaning” based on extensive and substantially exclusive use and promotion as a trademark.

In the European Union, national trademark law must conform to the 2008 Trademark Directive. This makes the non-functionality requirement explicit in Article 3(1)(e), which excludes registration for “signs which consist exclusively of: (i) the shape which results from the nature of the goods themselves; and (ii) the shape of goods which is necessary to obtain a technical result.” In the U.S. Trademark Act, § 2(e)(5) imposes a similar limitation, prohibiting registration of “any matter that, as a whole, is functional.”

How does color fit into this scheme? In the U.S., the Supreme Court has declared that a single color standing alone cannot be inherently distinctive since it does not automatically tell a customer that it refers to a brand. It can, however, be eligible for registration and enforceable as trade dress as used in a particular industry, subject to the other requirements for protection of trade dress, e.g., it cannot be functional and it must have acquired distinctiveness.

In Europe, single colors and color combinations are eligible for registration, subject to generally the same requirements as in the U.S. However, to obtain registration in the EU (as distinguished from individual national registrations), distinctiveness must be shown to exist throughout the EU.

Subsection 3(1)(e)(iii) of the Trademark Directive also prohibits registration where “the shape…gives substantial value to the goods”. Louboutin’s current problem arises under this subsection.

In 2012, Dutch shoe manufacturer Van Haren began selling its own brand of red-soled shoes. Based on a Benelux registration, Louboutin sued Van Haren in the District Court of The Hague, which issued a preliminary injunction in Louboutin’s favor. Van Haren appealed and the Court of Appeals, regarding the validity of Louboutin’s registration under Section 3(1)(e) as a new question of law, referred the matter to the Court of Justice of the European Union (CJEU) for a preliminary opinion.

By way of background, the CJEU includes eleven Advocates General (“AGs”) whose role is to consider the written and oral submissions to the Court in every case involving new questions of law and to deliver impartial opinions to the Court on the legal solution. The AGs do not take part in the court’s deliberations, and while their opinions are not binding on the Court, they are followed by the Court in a majority of cases. Sometimes, the Court reaches the same conclusion via different legal reasoning.

The initial three-judge CJEU panel referred the matter to AG Szpunar to determine whether protection under the European Trademark Directive extends to non three-dimensional properties of the goods, such as their color. In June 2017, AG Szpunzar issued an initial opinion, in response to which the initial panel referred the matter to an enlarged 13-member panel. The case was reargued last November. AG Szpunar was asked to provide a second opinion, which he issued on 6 February 2018.

In the new opinion, AG Szpunar reaffirmed his initial view that a sign combining color and shape is potentially caught by the prohibition contained in Article 3(1)(e)(iii). |He further reaffirmed his initial view that “the mark at issue should be equated with a sign consisting of the shape of the goods and seeking protection for a colour in relation to that shape, rather than one consisting of a colour per se.” However, he noted that classification of the mark was a question of fact for determination by the trial court.

What seems to be the determinative point in the AG’s opinion relates to whether the shape in question exclusively gives substantial value to the goods within the meaning of Article 3(1)(e)(iii) of the Trademark Directive. On this, he again noted that it was an issue of fact for determination by the trial court. However, he also remarked that the question of substantial value has no absolute answer, but rather it is one that relates to possible variation in public taste over time. Therefore, what might be regarded as substantial value at a particular time might later lose that value at a later point, and thus might become a subject for trademark protection.

In addition, the fact that substantial value may depend in part, on public perception does not mean that account may be taken of the reputation of the trademark or its proprietor as part of the assessment of substantial value under Article 3(1)(e)(iii). Otherwise, Article 3(1)(e)(iii) could be interpreted very broadly and improperly, having regard to its objective, namely to assure the availability of esthetic features to all competitors. This strengthened the AG’s view that Article 3(1)(e)(iii) should be interpreted to mean that that provision applies to signs consisting of the shape of the goods and seeking protection for a color in relation to that shape.

What, then, does the AG’s opinion mean to the parties involved here and to others seeking protection of shapes and colors as trademarks in the EU? The answer, of course, is that we don’t know and won’t know until the court issues its opinion. Some observers have interpreted the two opinions as favorable to Louboutin, while others (seemingly the majority) view it as unfavorable. To me, however, the most interesting point raised is the fact that a purported sign that is primarily esthetic today, may become protectable as a result of shifting public perceptions and tastes.

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