Sally Beauty Company v. Beautyco Inc.

Majority - Murphy, Circuit Judge

Yes, a genuine issue of material fact exists regarding the likelihood of confusion between the parties' respective trademarks and trade dresses, meaning summary judgment for Beautyco on the infringement claims was improper. The court reversed the district court's decision on trademark and trade dress infringement but affirmed on false advertising and Beautyco's counterclaims. For trademark infringement, the court applied the 'likelihood of confusion' factors. While visual and aural differences between "Generic Value Products" and "GENERIX" favored Beautyco, their similar meaning favored Marianna, though this factor, on balance, weighed slightly for Beautyco. However, strong evidence from a supplier's fax and deposition testimony suggested Beautyco had an intent to copy Sally Beauty's entire 'Generic' line, which creates a strong inference of likelihood of confusion. A survey showing 6.7% confusion over trademarks was deemed de minimis (neutral), but the court noted actual confusion isn't necessary, especially for inexpensive, impulse-purchase products. The similarity of products and marketing strongly favored Marianna, as both parties sold similar hair care products through competing beauty supply stores. The degree of care exercised by consumers was deemed low, as Beautyco's owner testified its products were often impulse buys. Lastly, the strength of Marianna's mark was favored, as PTO registration created a rebuttable presumption of distinctiveness that Beautyco failed to overcome. Weighing these factors, particularly the strong intent to copy, product/marketing similarity, low consumer care, and mark strength, the court found a reasonable jury could find a likelihood of confusion, thus precluding summary judgment. For trade dress infringement, the court first addressed distinctiveness. It found a genuine issue of material fact whether Sally Beauty's trade dress was descriptive (conveying the product as a comparable, lower-priced alternative) but had acquired secondary meaning due to millions in sales and Beautyco's intent to copy. For likelihood of confusion, several factors mirrored the trademark analysis. The similarity of trade dresses was very high (white, bullet-shaped bottles, black caps, black-and-white marks, product/ingredient comparisons, overall black-and-white scheme), strongly favoring Sally Beauty. The strength of Sally Beauty's trade dress was considered relatively weak as descriptive, weighing against confusion but less significantly given other factors. However, a survey showing 26% (adjusted) actual confusion based on packaging was deemed strong evidence for Sally Beauty. Combined with strong evidence of intent to copy, product/marketing similarity, and low consumer care, a genuine issue of material fact existed regarding likelihood of confusion, precluding summary judgment. On false advertising, the court affirmed summary judgment for Beautyco because Plaintiffs failed to present any evidence that Beautyco’s use of “generic version of” on its packaging was materially false or misleading. Plaintiffs did not make arguments on appeal to refute this lack of evidence. Finally, for Beautyco's counterclaims, the court affirmed the summary judgment for Plaintiffs. Beautyco had conceded that if Plaintiffs' infringement claims survived appeal, then its counterclaims (alleging the lawsuit itself violated antitrust/unfair competition laws) would fail. Since the trademark and trade dress claims were reversed and remanded, the counterclaims were appropriately dismissed.