Kicking off New York Fashion Week a day early, on September 5, 2012, the Court of Appeals for the Second Circuit issued its long-awaited decision in Christian Louboutin S.A. v. Yves Saint Laurent America Holding, Inc.1 , in which it upheld the validity of Louboutin’s famous red shoe sole as a trademark. More specifically, the Court held that a trademark consisting of a red lacquered outsole of a women’s shoe is valid when the sole color contrasts with the shoe upper, but excluded protection for a red outsole when it appeared on a shoe with a red upper. The Court also directed the U.S. Patent and Trademark Office to restrict Louboutin’s trademark registration to a red outsole only on contrasting-color shoes, and affirmed the lower court’s denial of a preliminary injunction prohibiting the sale of monochromatic shoes having a red outsole. This is the first decision by an appellate court discussing the extent to which a single color may be protected as a trademark for clothing, shoes or other fashion products, where aesthetics are the focus.

Based on this decision, if a specific color is applied in a consistent and unique way, such as, for example, a yellow coat lining, an orange collar or a purple handbag strap, it is likely to be entitled to trademark protection if there is evidence that the public relies on the specific use of the color to identify the source of the product. It is possible that the reasoning of this decision may be extended to other products beyond the fashion industry, particularly where the product’s design is a key element.

As covered in an earlier e-alert, the case stems from an April 2011 lawsuit filed by the French design house Christian Louboutin S.A. against its competitor, Yves Saint Laurent (“YSL”), accusing it of selling shoes that infringed Louboutin’s well-known registered trademark of lacquered red outsoles for women’s shoes as shown below:

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Louboutin claimed that YSL had infringed its trademark by using a red sole as part of a monochromatic red shoe in which the insole, heel, upper and outsole were the same color, as shown below:

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In denying Louboutin’s request for a preliminary injunction barring YSL’s sale of red-soled shoes, the lower court held that Louboutin’s trademark was unenforceable because in the fashion industry a single color could never be protected as a trademark because of the court’s concern that no single color be appropriated by a single fashion designer.

The Court of Appeals found that the red sole, which Louboutin has used since 1992, has become closely associated with Louboutin and served to identify the source of Louboutin’s products. The Court analyzed Louboutin’s rights by first considering the doctrine of aesthetic functionality, which prohibits trademark protection for marks that significantly undermine a competitor’s ability to compete in the relevant market. The analysis for aesthetic functionality is highly fact-specific, and requires a court to balance the trademark owner’s “right to enjoy the benefits of its effort to distinguish its products” and the public’s right to competitive products. However, the Court also warned that “courts must avoid jumping to the conclusion that an aesthetic feature is functional merely because it denotes the product’s desirable source.” Contrary to the lower court’s ruling, the Court of Appeals clarified that there is no per se rule that colors used in the fashion industry are functional and therefore unprotectable as trademarks.

Although colors generally can function as protectable trademarks, a single color on its own is almost never inherently distinctive, and is entitled to trademark protection, therefore, only after it has acquired secondary meaning. In this case, the Court found that the red sole mark was widely recognized as identifying a Louboutin shoe, but only when the red sole contrasted in color with the rest of the shoe. Accordingly, the Court held that the lacquered red outsole, as applied to a shoe with an upper of a different color, had become a distinctive symbol that qualified for trademark protection. Because the record did not show that the red sole had also become distinctive of a shoe having a red upper, the Court held that trademark protection did not extend to this type of monochromatic use (which is arguably functional), and directed the Patent and Trademark Office to modify Louboutin’s trademark registration to limit protection of its red sole only to use with an upper of a contrasting color. The Court also affirmed the lower court’s denial of a preliminary injunction against YSL’s sale of monochromatic red shoes.

Although the protection of color as a trademark for fashion products has not been widely litigated, it has long been settled that where a product’s appearance is not a key factor in the purchasing decision, such as the green utilitarian dry cleaning pads that were at issue in Qualitex Co. v. Jacobson Products Co.2 or the pink insulation material that was at issue in In re Owens-Corning Fiberglas Corp.3, courts have generally permitted trademark protection for the use of a particular color applied to a product as a whole provided there is also evidence of secondary meaning. Going forward, only time will tell how other courts will interpret the Louboutin decision and permit or deny trademark protection for colors used in fashion. As the Second Circuit pointed out, “[t]he intellectual property protection of fashion design has been for years a subject of controversy” and there is no doubt that we will continue to see members of the fashion industry appear in court to fight over the use of colors on clothing, shoes and accessories. However, for now, fashion players may have more flexibility to claim color as part of their trademark assets.