Estee Lauder Inc., Plaintiff-Counter-Defendant-Appellee v. The Gap, Inc. D/B/A Old Navy Clothing Company, Defendant-Counterclaimant-Appellant
Docket: 797
Court: Court of Appeals for the Second Circuit; March 24, 1997; Federal Appellate Court
The United States Court of Appeals, Second Circuit, reviewed the case of Estee Lauder Inc. vs. The Gap, Inc., concerning trademark disputes over the term '100.' The appeal arose after the Southern District of New York issued a permanent injunction against Gap, preventing it from using '100' as a trademark for its personal care products, due to the likelihood of consumer confusion with Lauder’s moisturizer branded as '100.' Gap contended that the district court incorrectly determined the protectability of Lauder's mark and misjudged the potential for consumer confusion arising from Gap's use of '100' in conjunction with other terms.
The court noted that Lauder is an established cosmetics company, while Gap, operating Old Navy, targets the mass market. In December 1994, Gap began developing a personal care line under the label '100% BODY CARE,' while Lauder was concurrently working on a moisturizer. Both companies discovered a prior trademark '100% HUNDRED PER CENT' owned by Dana, which was abandoned. Lauder subsequently acquired the trademark and applied to register '100,' while Gap sought to register '100' and variations of it. Following discussions in March 1996 about their conflicting applications, Gap assured Lauder that it would not use '100' alone and abandoned its application for that mark, although it later modified its branding strategy. The appellate court found that the district court erred in its analysis regarding consumer confusion and thus reversed the injunction.
Lauder launched its moisturizer in April 1996, packaged in a 1.7-ounce aquamarine glass bottle with a retail price of $32.50. The bottle prominently features Lauder's 'EL' logo and 'ESTEE LAUDER' house mark, along with the product description '100% Time Release Moisturizer with BioMineral Water.' In contrast, Gap's '100% BODY CARE' line, set to launch in August 1996, utilizes plastic bottles with large, generic designations for the products and an oversized logo at the bottom. Gap's products are priced significantly lower than Lauder's.
In June 1996, Lauder initiated legal action seeking injunctions against Gap's use of '100' in its branding, claiming it would mislead consumers into believing a connection with Lauder, violating the Lanham Act. Gap countered with claims against Lauder's interference with its trademark registration efforts. Following expedited discovery, the district court held a two-day bench trial in July 1996.
On July 22, 1996, the court ruled in favor of Lauder, granting a permanent injunction against Gap's use of '100' in its trademarks. The court determined Lauder's '100' mark was suggestive and thus protectable, noting that the term '100' lacks specific meaning related to the moisturizer and suggests quality to consumers. The court identified multiple interpretations of the phrase '100% Time Release Moisturizer,' concluding that the average consumer would understand it in a suggestive context, thereby affirming Lauder's trademark protection.
Lauder conceded that its mark lacked secondary meaning, prompting the court to evaluate the likelihood of consumer confusion using the Polaroid factors. The court determined that Lauder's mark held 'moderate strength' due to its inherent distinctiveness. The prominent use of '100' by both parties favored Lauder, as both utilized the term in connection with similar personal care products. However, the court noted significant differences between Lauder's high-end facial moisturizer, priced at $32.50 for 1.7 ounces, and Gap's larger, more affordably priced body lotion and other personal care items. Despite these differences, the products were deemed closely related as they all serve personal care purposes.
The court highlighted the stark contrast in distribution channels; Gap's products were limited to Old Navy stores, which offered a casual shopping environment, while Lauder's products were sold in upscale retail outlets. The ambiance differences were substantial, with Lauder's products found in polished settings, unlike the informal and industrial feel of Old Navy stores. Nonetheless, the court concluded that not all consumers are knowledgeable, and even informed customers could mistakenly associate Lauder with Gap's '100% BODY CARE' products. This could lead to consumer disappointment regarding quality, potentially harming Lauder's reputation.
The court determined that, despite Lauder's lack of plans to enter the mass middle market and the absence of evidence indicating actual consumer confusion, Gap's use of the term '100' in its branding would likely lead to consumer confusion regarding the affiliation between Lauder's products and Gap's '100% BODY CARE' line. Lauder's mark possesses a middling strength that is expected to strengthen over time, and the visual similarities of the marks, alongside their product proximity, could mislead consumers into associating Gap's products with Lauder's. The risk of confusion is heightened in post-sale scenarios, where consumers may misidentify products after leaving the retail setting. Consequently, a final judgment was made to dismiss Gap's counterclaim and permanently enjoin it from using '100' in connection with personal care products.
To succeed in a trademark infringement claim under the Lanham Act, the plaintiff must demonstrate ownership of a valid mark and that the defendant's use likely infringes upon it. The classification of the mark influences its protectability, categorizing it as generic, descriptive, suggestive, or fanciful/arbitrary. In this case, Lauder's mark is neither generic nor fanciful, and it has not acquired secondary meaning. Gap argued that the district court incorrectly classified Lauder's mark as suggestive rather than descriptive, and contended that there was no likelihood of confusion without secondary meaning, with the court agreeing on the latter point.
A mark is deemed descriptive if it conveys information about a product's qualities or characteristics and can only be protected if it has acquired secondary meaning, which occurs when the public associates the term with a specific source. A suggestive mark requires imagination to connect it with the product and is protected without proving secondary meaning. Terms that are self-laudatory, like "plus" or "super," are typically suggestive rather than descriptive. The classification of a mark depends on its contextual use rather than its abstract meaning, and a court's determination will not be overturned unless clearly erroneous. In this instance, the district court correctly classified Lauder's '100' mark as suggestive, as it does not directly describe product qualities but implies high quality and requires additional context for consumer understanding.
The term "100% Time Release Moisturizer" is primarily descriptive through its components "Time Release" and "Moisturizer," with "100%" being more suggestive than descriptive. Interpretations of this phrase can imply purity, continuous effect, or suggest that the product consists solely of time-release moisturizer. The court found that the term "100," whether used alone or as part of the full phrase, is suggestive, granting Lauder’s mark protection despite lacking secondary meaning. However, Lauder must demonstrate a likelihood of confusion to obtain relief.
Likelihood of confusion assesses whether ordinary consumers could be misled regarding the product's source due to the defendant's mark. Confusion must have a probability of occurrence, not just possibility. The court evaluates this using eight factors from Polaroid Corp. v. Polarad Electronics Corp.: 1) strength of the plaintiff's mark; 2) similarity of marks; 3) competitive proximity; 4) likelihood of the plaintiff bridging the gap; 5) actual confusion; 6) good faith of the defendant; 7) quality of the defendant's product; and 8) buyer sophistication.
The strength of a mark indicates its ability to signify the source of goods; the more distinctive the mark, the more likely consumers will associate it with the prior user. No single Polaroid factor is decisive, and the evaluation of these factors is not mechanical. A trial court's findings on individual factors are factual and subject to a clearly erroneous standard, while the overall assessment of the factors is reviewed de novo.
The district court's decision regarding the likelihood of confusion due to Gap's use of '100' in its marks relied on three main Polaroid factors: the strength of Lauder's mark, the similarity of the marks, and the competitive proximity of the products. The appellate analysis identifies errors primarily in the court's evaluation of the first factor—the strength of Lauder's mark—and its assessment of the third factor in relation to others. The court classified Lauder's mark as moderately strong, based on its inherent distinctiveness. However, this conclusion lacked supporting evidence of consumer association with the term '100' or the phrase '100% Time Release Moisturizer.' Lauder conceded that its mark had not acquired secondary meaning, contradicting the court's findings. The evidence showed over 70 existing trademarks incorporating '100,' suggesting that Lauder's use was not original, undermining the distinctiveness claim. Consequently, the appellate court deemed the finding of moderate strength clearly erroneous.
Additionally, the court's assessment of product similarity was flawed. It acknowledged that the products would be sold in distinct retail environments, yet suggested that confusion might still occur among some customers, including those who are not knowledgeable. The correct standard is whether confusion is likely among a significant number of ordinarily prudent consumers. Given that consumers do not associate '100' with Lauder and that products are clearly labeled by their respective companies, the appellate court found no basis for concluding that a substantial number of careful consumers would confuse Lauder's high-priced product with Gap's lower-cost offerings available at Old Navy.
The district court concluded that Gap's use of '100' could likely cause confusion with Lauder's moisturizer due to the "closely related products" sold by both companies. This conclusion was supported by several factors, including the similarity of the products and the proximity in which they are marketed. However, upon review, it was determined that the differences in the appearance and graphic design of the packaging, the explicit identification of the product purveyors, the lack of originality in the use of '100', the significant price disparity (with Gap's products being substantially cheaper), and the absence of Lauder's plans to enter Gap's market outweighed the district court's concerns. Additionally, it was noted that knowledgeable consumers are unlikely to confuse the two brands. Consequently, the court concluded that Gap's use of '100' would not create a likelihood of confusion among consumers. The judgment of the district court was reversed, and the case was remanded for an amended judgment dismissing the complaint.
