In a landmark decision, the Second Circuit Court of Appeals in Louboutin S.A. v. Yves Saint Laurent America Holding, Inc., 11-3303-cv (September 5, 2012), held that a single color can function as a trademark on items of fashion. Overturning the decision of the U.S. District Court for the Southern District of New York, the Court put its best foot forward with the fashion industry, announcing that there is no per se rule excluding fashion from the standard rule that a single color can acquire secondary meaning and function as an indicator of source or origin. 

Christian Louboutin SA (“Louboutin”), owner of a U.S. trademark registration for shoes with a red-lacquered outsole, sued Yves Saint Laurent SAS (YSL) last year for trademark infringement when YSL introduced a line of entirely monochrome shoes, including red shoes with red outsoles. It was undisputed that Louboutin started selling women's high heeled shoes with a high-gloss red lacquer as early as 1992. It was also undisputed that Louboutin has invested substantial amounts of capital building a reputation and goodwill in its signature footwear, that Louboutin succeeded in promoting its shoes “to the point where, in the high-stakes commercial markets and social circles in which these things matter a great deal, the red outsole became closely associated with Louboutin.” As a result of Louboutin's marketing efforts, the District Court found, the “flash of a red sole” is “instantly recognizable” today as Louboutin's handiwork.

Nonetheless, the District Court held that Louboutin's singular red outsole was not protectable as a trademark. The single question, as the District Court saw it, was whether the Trademark Act “extends protection to a trademark composed of a single color used as an expressive and defining quality of an article of wear in the fashion industry.”  Holding that it did not, the lower court believed that, in the fashion industry, single-color marks are inherently “functional,” and therefore, not protectable as trademarks.

Louboutin appealed. Reversing, the Second Circuit explained that the lower court erred in subjecting the fashion industry to a different standard than that used for any other industry. This, said the Second Circuit, conflicted with the U.S. Supreme Court's 1995 Qualitex v. Jacobson decision, which held that “no special legal rule prevents color alone from serving as a trademark.  “Qualitex requires an individualized, fact-based inquiry into the nature of the trademark, and cannot be read to sanction an industry-based, per-se rule... The District Court created just such a rule....” Op., p. 22.

The Second Circuit explained that the lower court's misstep was in its analysis of the doctrine of “aesthetic functionality” as set forth in the Qualitex decision. Serving as an affirmative defense to invalidate a trademark, the Supreme Court defined “aesthetic functionality” as that which occurs when affording trademark protection to the design of a product “would put competitors at a significant non-reputation-related disadvantage.” While a determination of ordinary functionality involves an analysis of whether a design feature is essential to the use or purpose of a product, a determination of aesthetic functionality involves the fact-sensitive test of whether the element in question has a significant effect on competition. As an issue of first impression at the Second Circuit, the Court held that a mark is aesthetically functional, and therefore ineligible for trademark protection, only if protection of the mark significantly undermines competitors' ability to compete in the relevant market. “Courts must avoid jumping to the conclusion that an aesthetic function is functional merely because it denotes the product's desirable source.”

While the Court generally affirmed Louboutin's trademark rights in red-lacquer outsole, Louboutin’s victory was not complete. Though Louboutin had originally sought to prevent YSL from selling any red-outsoled shoes, the Court held that Louboutin’s trademarked red soles only exists when the sole contrasts with the rest of the shoe. The change to the trademark means YSL's all-red shoes do not infringe Louboutin's trademark, “because the red sole on YSL’s monochrome shoes is neither a use of, nor confusingly similar to, the red-sole mark,” the Court concluded.

The fashion industry can be head over heels with this decision, which will ensure that companies that have invested creative and marketing resources into using color as a source identifier will stay protected.