Two Pesos, Inc. v. Taco Cabana, Inc.

United States Supreme Court
505 U.S. 763 (1992)

ELI5:

Rule of Law:

Inherently distinctive trade dress is protectible under § 43(a) of the Lanham Act without a showing that it has acquired secondary meaning.

Facts:

In 1978, Taco Cabana, Inc. opened its first Mexican restaurant in San Antonio, Texas.
Taco Cabana developed a distinct trade dress, described as a 'festive eating atmosphere' with specific interior and exterior decorations, a stepped building exterior, bright colors, murals, and neon stripes.
By 1985, Taco Cabana had opened five more restaurants in San Antonio.
In December 1985, Two Pesos, Inc. opened a restaurant in Houston with a motif and trade dress very similar to Taco Cabana's.
Two Pesos then expanded rapidly into Houston and other markets.
In 1986, Taco Cabana began expanding into Houston, Austin, and other Texas cities where Two Pesos was also operating.

Procedural Posture:

Taco Cabana sued Two Pesos in the U.S. District Court for the Southern District of Texas for trade dress infringement under the Lanham Act.
A jury found that Taco Cabana's trade dress was inherently distinctive and nonfunctional, but had not acquired secondary meaning.
The jury also found that Two Pesos's use of the trade dress created a likelihood of confusion.
The District Court entered judgment in favor of Taco Cabana, awarding damages.
Two Pesos, as appellant, appealed to the U.S. Court of Appeals for the Fifth Circuit.
The Fifth Circuit affirmed the trial court's judgment, holding that a finding of inherent distinctiveness is sufficient for trade dress protection.
The U.S. Supreme Court granted certiorari to resolve a conflict among the circuit courts.

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Issue:

Does § 43(a) of the Lanham Act protect inherently distinctive trade dress that has not acquired secondary meaning?

Opinions:

Majority - Justice White

Yes. Inherently distinctive trade dress is protectible under § 43(a) of the Lanham Act without proof of secondary meaning. The general principles for trademark protection apply to trade dress, as both serve the Lanham Act's purpose of preventing consumer deception and protecting goodwill. Marks are classified on a spectrum of distinctiveness; those that are suggestive, arbitrary, or fanciful are deemed 'inherently distinctive' and are protectible immediately upon use. There is no textual basis in § 43(a) to treat trade dress differently from trademarks by imposing an additional requirement of secondary meaning. Doing so would undermine the Act's goals, particularly by disadvantaging new and small businesses that could have their unique, nonfunctional designs copied by competitors before they have time to establish widespread consumer recognition.

Concurring - Justice Scalia

Concurred, stating agreement with Justice Thomas's analysis of the language and common-law derivation of § 43(a) but finding it complementary to the majority's opinion.

Concurring - Justice Stevens

Concurred in the judgment. While the Court's conclusion is correct, it represents a significant judicial expansion of § 43(a) beyond its original textual meaning, which was limited to false designations of geographic origin and passing off. However, this judicial transformation has been consistent with the statute's purposes and was subsequently endorsed by Congress in the 1988 Trademark Law Revision Act. Therefore, stare decisis supports the conclusion that inherently distinctive trade dress is protectible without proof of secondary meaning.

Concurring - Justice Thomas

Concurred in the judgment. The decision should rest solely on the text of § 43(a), which codifies common-law torts like passing off. At common law, inherently distinctive trademarks were presumed to indicate source. While trade dress was historically treated differently, courts now recognize that a product's packaging or image can be as arbitrary or fanciful as a word or symbol. Therefore, an inherently distinctive trade dress is fully capable of serving as a designation of source under § 43(a) and is entitled to protection without a showing of secondary meaning.

Analysis:

This decision resolved a circuit split and established a uniform national standard that equates the protection of trade dress with that of trademarks under the Lanham Act. By applying the Abercrombie spectrum of distinctiveness to trade dress, the Court eliminated a significant barrier to protection for new businesses. The ruling incentivizes companies to invest in unique, nonfunctional designs, knowing they can secure immediate federal protection against infringement without the costly and time-consuming process of proving secondary meaning.

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