Pebble Beach

The following article appeared in the National Law Journal in May 1999.

5th CIRCUIT “ACES” PEBBLE BEACH

The past year has seen the circuit and district courts struggle with trade dress claims on products as diverse as water faucets and cookbooks. Chief Judge Posner of the U.S. 7th Circuit Court of Appeals recently expressed the courts' frustration in struggling to define a standard for when trade dress is inherently distinctive enough to qualify for trademark protection. Judge Posner articulated the dilemma faced by the courts. "[A] seller should be encouraged to make his products recognizable by consumers at a glance as his product and not that of another seller." However, a seller should not be able to use trade dress and obtain a monopoly over elements that are not associated with a single producer or do not indicate source. The difficulty is with applying these basic principles to a given set of facts, and Judge Posner agreed that, "critics who argue that in application the concept is mischievously vague certainly have a point". Judge Posner's opinion did not consider whether the defendant willfully copied the plaintiff's cookbook cover. The court held that plaintiff's cookbook cover was either not distinctive or was functional, and thus, not entitled to protection as trade dress.

This view must be contrasted with a panel of the U.S. 2nd Circuit Court of Appeals, which recently upheld a jury verdict that Wal-Mart Stores' intentional copying of the plaintiff's line of children's clothing constituted trade dress infringement . In Samara Brothers, Inc. v. Wal-Mart Stores, Inc., the majority opinion was persuaded that plaintiff's distinctive fabric combinations were protectable trade dress, and accepted the jury's finding of infringement. The majority noted that there was ample evidence in the record to support "…the finding that Wal-Mart's marketing was willful piracy with an intent to deceive customers as to the source". The 2nd Circuit panel quoted Professor McCarthy's text for the proposition that a close similarity of trade dress in many details raises serious issues of copying and intent to confuse consumers. The majority noted that in such a situation, the defendant must come forward with an explanation for its conduct. Since the defendant had no explanation for its conduct, the jury properly found that Wal-Mart intended to take the plaintiff's clothing line as its own, and draw customers to its clothes under the pretense that they were the plaintiff's.
The May 18, 1998 issue of The National Law Journal included my article criticizing the decision of the 6th U.S. Circuit Court of Appeals in Rock and Roll Hall of Fame and Museum v. Gentile Productions. In a 2-1 decision, the majority ignored 6th Circuit trade dress precedent, and simply held that a competitive poster of the unique I.M. Pei designed building did not infringe the trademark rights of the Rock and Roll Hall of Fame in a similar poster. The Court majority stated that the defendant’s title for its poster, Rock N’ Roll Hall of Fame, “may very well constitute a fair use of the Museum’s registered service mark.”

The 5th U.S. Circuit Court of Appeals faced a similar challenge concerning trade dress rights in golf hole designs in Pebble Beach Co. v. Tour 18 I Ltd. The defendant in Pebble Beach created two golf courses in Texas that contained “copies” of golf holes from famous golf courses, including the 18th hole at Harbour Town Golf Links, Hilton Head Island, S.C.; the 14th hole at Pebble Beach Golf Links, Monterey, CA; and the third hole of Pinehurst No. 2 Golf Course, Pinehurst, N.C.

The defendant used topographic maps, photos and videos to re-create each of the original golf holes, and he even built a small-scale replica of the landmark Harbour Town lighthouse. The owners of the Harbour Town, Pebble Beach and Pinehurst courses filed suit, alleging service mark and trade dress infringement. The trial court held that the defendant infringed and diluted the plaintiffs’ marks, including the lighthouse. The court issued an injunction that limited the defendant’s use of the marks Harbour Town, Pebble Beach and Pinehurst to inform the public of the holes that were copied, and also required the defendant to include a conspicuous disclaimer in all advertising. Both sides appealed, and Tour 18 raised virtually every possible defense to a claim of trade dress infringement, including: functionality, lack of distinctiveness, no likelihood of confusion, nominative use and the effect of Sears, Roebuck & Co., v. Stiffel Co. and Compco Corp. v. Day-Brite Lighting, Inc.

Functionality
Judge King, writing for a unanimous panel of the 5th Circuit, noted that a collection of functional features does not necessarily result in the overall combination being functional. The court rejected Tour 18’s argument that if a functional feature contributes to a product’s success, it may not be protected under trademark law. Such a rule would destroy trademark protection for product designs, since a defendant could always claim that by copying the most successful product on the market it avoided a claim of trade dress infringement.

Distinctiveness
The court then analyzed the claims that the respective golf hole designs were not distinctive. It affirmed the trial court’s finding that the two (2) specific holes copied from the Pebble Beach and Pinehurst courses were neither distinctive nor had they acquired secondary meaning. However, the court agreed that Harbour Town’s lighthouse hole had acquired secondary meaning through extensive publicity and advertising promoting that particular golf hole.

Next, the Court analyzed the likelihood of confusion factors, applying the 5th Circuit test set out in Conan Properties. No golfer would be confused into thinking she was playing Pebble Beach while standing on a golf course in Texas. However, it is reasonable for a golfer to believe that Tour 18’s copying and promoting these famous golf holes was done with the permission of the owners. The plaintiff’s survey, and the testimony of several golfers who had played Tour 18’s courses, confirmed that consumers believed Tour 18’s course had received the permission of Harbour Town, Pebble Beach and Pinehurst to build the holes and promote them.

Nominative Use Defense
Tour 18 then argued that it only used the plaintiffs’ marks to identify its own golf holes, not to confuse consumers about an affiliation, endorsement or sponsorship of the Tour 18 golf courses by the owners of the famous courses. The nominative use doctrine was first enunciated by the 9th U.S. Circuit Court of Appeals in New Kids on the Block v. News Am. Publ’g., which held that one may use or refer to another party’s trademark solely to identify that other party’s product, but only if such use does not suggest an affiliation, sponsorship or endorsement between the parties. The 5th Circuit agreed with the trial court that Tour 18’s use of the marks Harbour Town, Pebble Beach and Pinehurst on Tour 18’s own services was in the nature of indicating source, that is, trademark use. As a result, the court correctly concluded that use of the plaintiff’s service marks by Tour 18 on its own services destroys any claim of nominative use.

The 5th Circuit carefully analyzed and distinguished the nominative use defense from the “fair use defense”, which allows a party to use another's trademark as a descriptive term, so long as the use is in a non-trademark fashion. The fair use defense applies even if that descriptive term is a registered trademark and even if a likelihood of confusion exists. However, if the defendant uses the descriptive term as a trademark the defense will not succeed. It is instructive to compare the 5th Circuit analysis in Pebble Beach against the 6th Circuit’s analysis in Rock and Roll. Plaintiff in Rock and Roll owned a registration of Rock and Roll Hall of Fame for posters. The 6th Circuit stated that the defendant’s use of the words "Rock N' Roll Hall of Fame" on its posters may very well constitute a fair use of the plaintiff’s registered trademark. The 6th Circuit majority reasoned that the words "Rock N' Roll Hall of Fame" are simply a description of the defendant’s own goods. Unfortunately, the defendant was using Rock N' Roll Hall of Fame as its own trademark for its poster. The majority made no attempt to explain how a defendant's trademark use of the plaintiff's trademark as its own trademark could constitute fair use. However, the 5th Circuit panel in Pebble Beach correctly pointed out that the fair use defense does not apply to use of another's trademark to identify one's own goods or services.

Sears-Compco resurrected?
Tour 18’s last defense was that Pebble Beach’s trade dress claims are pre-empted under the Sears -Compco doctrine. Although one commentator has suggested that the 6th Circuit decision in Rock and Roll Hall of Fame is supportable under the Sears and Compco cases, the 5th Circuit was totally unpersuaded.

The Supreme Court held in the companion cases of Sears and Compco merely that state trade dress protection laws are pre-empted by federal patent law, and that state unfair competition laws may not be used to prohibit copying of products that are not protected under federal patent law. The 5th Circuit panel in Pebble Beach noted that in Bonito Boats, Inc. v. Thunder Craft Boats, Inc., the Supreme Court reaffirmed that Sears-Compco is limited to state protection of product designs and does not limit federal trademark protection. The federal patent laws and trademark laws have entirely different yet consistent purposes, and each deals with different concerns.

The 5th Circuit carefully examined prior case law and, rightfully, found no need from a policy standpoint to produce conflict between the patent and trademark laws. Rather, any perceived conflict can be avoided with a proper application of trademark law, focusing on the traditional issues of distinctiveness, likelihood of confusion and functionality. The court noted that the Supreme Court has recently stated that the functionality doctrine prevents useful product features from receiving protection under trademark law.

From a purely practical standpoint, the 5th Circuit was impressed with the fact that in the more than thirty years since the Supreme Court handed down Sears-Compco, both Congress and the courts have agreed that product design and configuration may be protected under trademark law without running afoul of patent law. Congress specifically expanded the definition of trademark to include “any word, name, symbol or device, or any combination thereof” in the 1988 Trademark Law Revision Act, a point the Supreme Court found compelling in Qualitex v. Jacobson Prods.Co., Inc. In a footnote, the 5th Circuit questioned the 10th U.S. Circuit Court of Appeals’ decision in Vornado Air Circulation Sys., Inc. v. Duracraft Corp., which held that a nonfunctional feature that is part of a claim in a utility patent can not be protected under trademark law. Rather than finding a conflict between the patent and trademark laws, the 5th Circuit reasoned that application of the traditional trademark analysis could have produced the same result and avoided creating a conflict between patent and trademark law.

In the end, the 5th Circuit merely modified the trial court’s injunction. Tour 18 was permitted to operate both golf courses and use the words Pebble Beach, Pinehurst and Harbour Town, but in a limited, non-trademark manner, and only to inform the public which golf holes it had copied from the famous courses. The defendant was also required to prominently display a disclaimer that made it clear that the Tour 18 courses were not licensed by or affiliated with the owners of the famous courses. Finally, the defendant was enjoined from using or depicting the Harbour Town lighthouse in any fashion.

The trademark bar should commend the 5th Circuit for the straightforward trademark analysis used in Pebble Beach. The 5th Circuit saw no need to devise a new test applicable only to trade dress - or golf course holes; the court simply applied the Lanham Act. Effective October 31, 1998, Congress amended Section 33(b)(8) of the Lanham Act to provide an affirmative defense to any infringement claim, on the grounds “[T]hat the mark is functional,” without defining the word “functional” in the Lanham Act, or even limiting the defense to trade dress or product shapes. There is no legislative history. This defense is similar to the functionality language in the proposed Trade Dress Protection Act that failed to make it out of the judiciary sub-committee in 1998.34 The functionality defense will be required in virtually all trademark cases. Several circuits have developed their own tests for functionality, and this new, undefined defense is unlikely to resolve the conflict among the circuits.

Many courts have developed “indigestion” following the Supreme Court’s holding in Two Pesos v. Taco Cabana. Some courts are merely reluctant to afford non-word trademarks the same protection provided to coined words. Other courts may be truly confused and believe there is an inherent conflict between trademark and patent laws. However, the 5th Circuit clearly made a hole-in-one with its analytical framework in Pebble Beach, and it is hoped that other courts follow their lead and avoid the hazard!