Sheppard Mullin Richter & Hampton LLPS: Second Circuit Digs Its Heels Into Louboutin Dispute; Finds "Red Sole" Trademark Protectable, But Limited in Scope

Sheppard Mullin Richter & Hampton LLPS: Second Circuit Digs Its Heels Into Louboutin Dispute; Finds "Red Sole" Trademark Protectable, But Limited in Scope

By Tyler Baker and Ted Max

On September 5, 2012, the United States Court of Appeals for the Second Circuit issued its long-awaited and highly anticipated decision in Christian Louboutin S.A. v. Yves Saint Laurent Am. Holding, Inc., Docket No. 11-3303-cv. The Second Circuit reversed the lower court decision, in part, holding that Christian Louboutin's "red outsole" trademark was valid and enforceable, and affirmed in part, holding that such trademark protection was limited to uses in which the "red outsole" contrasts with the color of the remainder of the shoe. As a result, the appeal of Christian Louboutin ("Louboutin") was not successful and the fashion atelier Yves Saint Laurent ("YSL") was not enjoined from using a red sole as part of amonochrome red shoe. The ruling, deciding a novel and hotly debated issue of U.S. trademark law regarding aesthetic functionality, is a victory for both sides in some respects, yet certainly leaves the door open for future debate and lawsuits about the scope of the Louboutin mark's protection.

Christian Louboutin is known worldwide for its signature red-lacquered soles which have come to be a symbol of high fashion, quality, and style in the realm of high-end women's footwear. The United States Patent and Trademark Office ("USPTO") issued a trademark registration and granted Louboutin trademark protection in the "red sole mark" in 2007 based upon a Section 2(d) Declaration demarcating the strength of the fashion world's recognition of secondary meaning for the red sole trademark. In 2011, YSL introduced a line of YSL shoes which featured a single monochromatic color (meaning the insole, heel, and entire outside were all the same color). Believing that such a monochromatic red shoe would infringe its "red sole mark," Louboutin brought an action and sought a preliminary injunction to prevent the manufacture, sale and distribution of the monochromatic red shoe, and brought claims for trademark infringement and counterfeiting, false designation of origin, and trademark dilution. YSL counterclaimed, in part seeking cancellation of Louboutin's red sole mark on grounds that the mark was merely ornamental and functional, citing the doctrine of aesthetic functionality.

On August 10, 2011, Judge Victor Marrero of the United States District Court for the Southern District of New York denied Louboutin's motion for a preliminary injunction against YSL. In his opinion, Judge Marrero held that a single color can never be protected by trademark in the fashion industry and that, as a result, Louboutin's trademark was likely not enforceable. The district court ruled that in the fashion industry, single-color marks are per se inherently "functional" (that is, color cannot be used as a brand identifier because it serves significant aesthetic functions unique to the fashion industry), and that any such registered mark would likely be held invalid. Louboutin brought an interlocutory appeal challenging the district court's application of the "aesthetic functionality" doctrine, and sought to reverse the decision denying that Louboutin's red sole trademark was entitled to legal protection.

On appeal, the legal issue presented to the Second Circuit was "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." The Second Circuit concluded that the district court erred by holding that a single color per se can never serve as a trademark in the fashion industry because such a holding was inconsistent with U.S. Supreme Court precedent on aesthetic functionality and single color trademark protection. After a discussion of the history of both the utilitarian and aesthetic functionality doctrines, the Second Circuit stated that a "mark is aesthetically functional, and therefore ineligible for protection . . . where protection of the mark significantly undermines competitors' ability to compete in the relevant market." (Emphasis in original.) The Second Circuit reasoned that Supreme Court precedent did not sanction an industry-based per se rule that would deny protection for the use of a single color as a trademark, in this case, as it related to the fashion industry.

The Second Circuit then observed that, although the red sole mark was ineligible for trademark protection insofar as it would preclude competitors' use of red outsoles in all situations, including YSL's monochromatic use, the Louboutin red sole mark had achieved "secondary meaning," and thus the requisite "distinctness" to merit protection, when used as a red outsole contrasting with the rest of the shoe. Thus, the Second Circuit reasoned that YSL's use of red color on a monochromatic shoe did not infringe Louboutin's red sole mark because the use of the red was not a trademark use.

The Second Circuit held that there was no reason why a single-color mark could not acquire secondary meaning in the context of the fashion industry and serve as a brand identifier if it were used "so consistently and prominently by a particular designer that it becomes a symbol, the primary significance of which is to identify the source of the product rather than the product itself." Citing Louboutin's substantial advertising and marketing expenditures over the years to foster goodwill in the red sole, and the successful fame and association of the red soles with Louboutin, the Second Circuit concluded that the red outsole had come to identify and distinguish the Louboutin brand, and thus was a distinctive symbol that qualified for trademark protection under the Lanham Act. However, the Second Circuit was careful to limit the mark's protection to the bottom sole, explaining that the secondary meaning of the red sole mark did not extend to uses in which the sole does not contrast with the upper part of the shoe, e.g., a monochromatic shoe, stating that the Louboutin mark is closely associated with the contrast between the red sole and the upper sole. The Court of Appeals consequently instructed the USPTO to limit the mark's registration to only cases where the red sole contrasts with the upper part of the shoe. The Second Circuit also stated that "either party may restore jurisdiction" to the Court "to consider whether argument remain or arise relating to this case by sending a letter to the Clerk" and that "[a]ny such proceedings will be argued to [the same] panel."

The Second Circuit's decision, while a landmark ruling in the fields of trademark law, fashion law, and to a certain extent, pop culture, leaves a number of questions unanswered. For example, where exactly is the line to be drawn between "contrasting" and "monochromatic"? At what point does a non-infringing monochromatic red shoe become an infringing contrasting shoe with a pink top and red sole? Such highly fact-specific questions may remain on the horizon so long as competitors seek to trade upon the market power and allure of the red sole trademark. If nothing else, the Second Circuit's decision represents a reasoned compromise: on the one hand, rewarding a company that devoted years and millions of dollars into building a world-known fashion brand, while on the other, preventing that company from overreaching with its color trademark in an industry wholly dependent on the artistic sensibilities, creativity, and ingenuity of its designers.

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