Children's Factory v. Benee's Toys ( 1998 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
Nos. 98-1179/1180
___________
Children's Factory, Inc., *
*
Appellant/Cross-Appellee, *
* Appeals from the United States
v. * District Court for the Eastern
* District of Missouri.
Benee's Toys, Inc., *
*
Appellee/Cross-Appellant. *
___________
Submitted: September 21, 1998
Filed: November 17, 1998
___________
Before LOKEN, LAY and HANSEN, Circuit Judges.
___________
LAY, Circuit Judge.
Children’s Factory, Inc. (“Children’s Factory”) appeals from a final judgment
in favor of the Defendant, Benee’s Toys, Inc. (“Benee”), in a trade dress infringement
case brought under Section 43(a) of the Lanham Act (“Act”), 15 U.S.C. § 1125(a).
Children’s Factory argues the district court1 erred in holding that its toys were not
protected under the Act. Benee cross-appeals, arguing the district court erred when it
1
The Honorable Jean C. Hamilton, United States District Judge for the Eastern
District of Missouri.
held that certain Children’s Factory products were inherently distinctive and
nonfunctional, even though these toys were ultimately found to be unprotected. For the
reasons set forth below, we affirm the district court.
I. FACTS
Children’s Factory manufactures and sells vinyl-covered indoor, soft-play
products for children. Children’s Factory, which has been in existence for over twelve
years, sells its products primarily through distributors. Benee manufactures similar
products, but sells to consumers directly. The parties stipulate that they compete in the
same market and their products are comparably priced. At issue is an entire line of
soft-play products which Benee allegedly copied from Children’s Factory. Children’s
Factory brought suit for trade dress infringement under section 43(a) of the Lanham
Act, 15 U.S.C. § 1125(a), and for unfair competition under Missouri common law.2 A
bench trial was conducted in September 1997 and the trial court entered a judgment for
Benee on both counts finding that none of Children’s Factory’s products were entitled
to protection under the Lanham Act.
The district court divided Children’s Factory’s products into two groups and
found both groups unprotected under the Act. The district court concluded that certain
products found in paragraph 8 of its opinion (“¶ 8 products”) had an inherently
distinctive trade dress and were nonfunctional. The court ultimately determined,
however, that these products were not protected because they were not likely to be
2
Because the Missouri common law action utilizes the same elements as an
action under the Lanham Act, Swisher Mower & Mach. Co., Inc. v. Haban Mfg. Inc.,
931 F. Supp. 645, 648 (W.D. Mo. 1996),we need discuss only the alleged Lanham Act
violation.
-2-
confused with Benee’s products.3 The district court then concluded that the products
3
The following chart lists the products in ¶ 8 which were found to be inherently
distinctive and nonfunctional, but not likely to confuse:
Exhibit Name of Children’s Factory Product Number
Number Product
14a Toddler Pyramid Play Center CF321-035
14g Gym Play Corner CF352-125
14j Soft Builder Blocks - Set A CF321-615
14k Soft Builder Blocks - Set B CF 321-620
14m Pleasure Island US321-235
14p ABC Soft Mini Corner CF321-037
14q Basic Skills Pentagon CF332-129
14y Sunshine Scrambler EN800-058
14z Kaleidoscape EN800-057
14ab Kaplan Kids Korner-Primary and KP1G30233, 234
Pastel
14ac Kreative Korner-Primary and Pastel KP1G30235
14ae Circle Center-Primary and Pastel CF321-061, 061P
14af Multi-Image Mirror Pentagon CF332-130
15b Gyro Puffs Bright EN800-320
15c Supersoft Adventure Village ZB25
15d Climb and Slide Play Center CF421-014
15h Coral Reef EN145-076
-3-
found in paragraph 10 of its opinion (“¶ 10 products”) were not inherently distinctive
or nonfunctional and, therefore, were not protected.4
4
The following chart lists the products in ¶ 10 which the district court found
neither inherently distinctive or nonfunctional:
Exhibit Name of Children’s Factory Product Number
Number Product
14d Toddler Hollow CF331-008
14e Tiny Tot Seating Group CF321-230
14f Parlor Seating Group CF321-231
14h Infant Toddler Duck CF331-005
14i Infant Toddler Elephant CF331-006
14l Toddler Baby Blocks CF362-516
14o Baby Changer-Primary and Pastel KP1A17619, CF321-
290P
14r Dolphin Lounger CF321-199
14s Toddler Tumble n’ Roll KP1R09038, CF321-301
14t Infant Toddler Whale CF331-025
14u Friendly Camel CF331-029
14v Big Duck CF331-027
14w Soft Lounger CF349-005, 006, 007,
008
14x Square Play Yard KP1R17624
14ad Kaplan Soft Starter Slide-Primary KP1G30224, 225
and Pastel
15a Living Room Suite Primary CF321-150
-4-
Children’s Factory appealed both findings. First, with respect to the ¶ 8
products, Children’s Factory argues that they were likely to be confused with Benee’s
products. Second, with respect to the ¶ 10 products, Children’s Factory contends that
they were inherently distinctive and nonfunctional. Benee cross appealed as to the ¶ 8
products claiming that the products were not inherently distinctive or nonfunctional.
II. APPLICABLE LAW
Standard of Review
While acknowledging that the individual factors of the trade dress test are
findings of fact and therefore reviewable under a clearly erroneous standard, Children’s
Factory asserts that the likelihood of confusion prong of the test should be reviewed de
novo. Although some circuits have chosen to review the likelihood of confusion prong
de novo,5 the Eighth Circuit has consistently rejected this approach and reviews the
district court’s finding under the clearly erroneous standard. Aromatique, Inc. v. Gold
Seal, Inc., 28 F.3d 863, 868 (8th Cir. 1994); Prufrock Ltd., Inc. v. Lasater, 781 F.2d
129, 132-33 (8th Cir. 1986); WSM, Inc. v. Hilton, 724 F.2d 1320, 1326 (8th Cir. 1984).
The Lanham Act
15g Soft Balance Beam CF321-303
5
Nikon Inc. v. Ikon Corp., 987 F.2d 91, 94 (2d Cir. 1993); Braun Inc. v.
Dynamics Corp. of Am., 975 F.2d 815, 825 (Fed. Cir. 1992); Esercizio v. Roberts, 944
F.2d 1235, 1242 (6th Cir. 1991).
-5-
Section 43(a) of the Lanham Act, 15 U.S.C. §1125(a), creates a federal cause of
action for trade dress infringement.6 All products have a trade dress which is defined
as the “total image of a product, the overall impression created, not the individual
features.” Insty*Bit, Inc. v. Poly-Tech Industries, Inc., 95 F.3d 663, 667 (8th Cir.
1996), cert. denied, 117 S. Ct. 1085 (1997) (citation omitted). Not every trade dress,
however, is protected under the Lanham Act. In order for a trade dress to be protected
under the Act it must satisfy a three part test: “(1) it is inherently distinctive or has
6
Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1), provides in pertinent
part:
(1) Any person who, on or in connection with any goods or services, or
any container for goods, uses in commerce any word, term, name,
symbol, or device, or any combination thereof, . . . which -
(A) is likely to cause confusion, or to cause mistake, or to deceive
as to the affiliation, connection, or association of such person with
another person, or as to the origin, . . . of his or her goods,
services, or commercial activities by another person, or
(B) in commercial advertising or promotion, misrepresents
the . . . geographic origin of his or her or another person’s
goods, services, or commercial activities,
shall be liable in a civil action by any person who believes that he or she
is or is likely to be damaged by such act.
Id.
The Supreme Court has held that there is no textual basis for applying different
analyses to the protection of trademarks and trade dress under section 43(a) of the
Lanham Act. Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 767-68 (1992).
See also Aromatique, 28 F.3d at 868 (stating that “[t]he difference between trade dress
and trademark is no longer of importance in determining whether trade dress is
protected by federal law.”).
-6-
acquired distinctiveness through secondary meaning;7 (2) it is primarily nonfunctional;8
and (3) its imitation would result in a likelihood of confusion in consumers’ minds as
to the source of the product.” Id. at 667 (citing Two Pesos, 505 U.S. at 769).
III. DISCUSSION
Paragraph 8 Products
As mentioned earlier, the district court found the ¶ 8 products to be inherently
distinctive and nonfunctional. The district court found, however, that the ¶ 8 products
7
In order to be inherently distinctive, a trade dress must be arbitrary, fanciful or
suggestive. Insty*Bit, 95 F.3d at 672-73. It meets this test if its “intrinsic nature serves
to identify a particular source of a product.” Two Pesos, 505 U.S. at 768. A trade
dress is not inherently distinctive if “the design . . . of the trade dress is dictated by the
nature of the product.” Stuart Hall Co., Inc. v. Ampad Corp., 51 F.3d 780, 786 (8th
Cir. 1995). The second basic test for inherent distinctiveness, set forth in Seabrook
Foods, Inc. v. Bar-Well Foods Ltd., 568 F.2d 1342 (C.C.P.A. 1977), is whether the
product was a “common basic shape or design . . . whether it was a mere refinement
of a commonly-adopted and well-known form of ornamentation for a particular class
of goods viewed by the public as a dress or ornamentation for the goods.” Seabrook
Foods, 568 F.2d at 1344. The Seabrook test focuses not on arbitrariness, but on the
uniqueness of the product in the field. Stuart Hall Co., 51 F.3d at 786-87.
If the trade dress is not inherently distinctive, the party claiming protection must
alternatively show that it has acquired secondary meaning. Duluth News-Tribune, a
Div. of Northwest Publications, Inc. v. Mesabi Publ’g Co., 84 F.3d 1093, 1096 (8th
Cir. 1996).
8
A trade dress “is nonfunctional if it is an arbitrary embellishment primarily
adopted for purposes of identification and individuality.” Prufrock Ltd., Inc., v.
Lasater, 781 F.2d 129, 133 (8th Cir. 1986). If a trade dress is nonfunctional, a
competitor can effectively compete without copying the product’s trade dress. Id. On
the other hand, “[i]f the particular feature is an important ingredient in the commercial
success of the product, the interests in free competition permits [sic] its imitation in the
absence of a patent or copyright.” Id. (citing Truck Equip. Serv. Co. (“TESCO”) v.
Fruehauf Corp., 536 F.2d 1210, 1217-18 (8th Cir. 1976)).
-7-
were not ultimately protected because there was no likelihood of confusion with
Benee’s products. In view of the district court’s holding, we initially review the
likelihood of confusion finding because Children’s Factory’s claim of trade dress
infringement cannot succeed without proof that a likelihood of confusion with other
products existed.
In order to find a likelihood of confusion, this court has stated that “[t]here must
be a substantial likelihood that the public will be confused.” WSM, Inc. v. Hilton, 724
F.2d 1320, 1329 (8th Cir. 1984). Actual confusion is not essential to a finding of
infringement. Contour Chair Lounge Co., Inc. v. True-Fit Chair, Inc., 648 F. Supp.
704, 714 (E.D. Mo. 1986). The mere possibility of confusion, however, is not enough.
Id. Six factors are used to determine whether the likelihood of confusion exists:
(1) the strength of the owner’s [trade dress]; (2) the similarity between the
owner’s [trade dress] and the alleged infringer’s [trade dress]; (3) the
degree to which the products compete with each other; (4) the alleged
infringer’s intent to “pass off” its goods as those of the [trade dress]
owner; (5) incidents of actual confusion; and (6) the type of product, its
costs and conditions of purchase.
Co-Rect Prod., Inc. v. Marvy! Adver. Photography, Inc., 780 F.2d 1324, 1330 (8th Cir.
1985).
Children’s Factory contends that the court erred by determining the last three
factors in favor of Benee and by balancing the factors ultimately in Benee’s favor. We
disagree.
The first factor that Children’s Factory challenges is whether the alleged infringer
has the intent to pass off the goods as those of the owner. The district court found that
Benee did not intend to pass off its goods as Children’s Factory’s goods
-8-
because Benee sells directly to the consumer. Children’s Factory contends that this was
error.
Children’s Factory first argues that Benee intended to pass Children’s Factory’s
trade dress off as their own because Benee blatantly copied their toys. Children’s
Factory points out that Benee’s president admits that Benee used pictures from the
Children’s Factory catalog to prepare Benee’s catalogs. R. at 265. Children’s Factory
relies on Truck Equip. Serv. Co. (“TESCO”) v. Fruehauf Corp., 536 F.2d 1210 (8th
Cir. 1976), to support its contention that this deliberate imitation resulted in confusion
to consumers and should, therefore, result in a violation of the Lanham Act. In TESCO,
Fruehauf Corporation, a manufacturer of trailers, deliberately copied TESCO’s trailer
design. TESCO, 536 F.2d at 1213. Fruehauf then advertised its version of the trailer
with a photo of the TESCO model. The trial court concluded that
the exterior design of the [trailer] was unique, that portions of the design
were nonfunctional, that the unique design had acquired a secondary
meaning in the market place, that the actions of Fruehauf tended to cause
confusion over the origin of the trailers and that Fruehauf had copied the
exterior design of the [trailer] in order to trade upon the customer
acceptance of the TESCO trailer.
Id. at 1214 (footnote omitted). This court agreed with the district court’s finding that
there existed a likelihood of confusion, rejecting the argument that consumers could not
be confused because the defendant labeled its products as its own. Id. at 1220-21. The
court noted that such a marketing practice may tend to promote rather than ensure
against confusion because one may conclude that the similarity exists because the
defendant purchased the plaintiff. Id. Likewise, in this case, Children’s Factory points
out that distributors and one consumer testified that they thought Children’s Factory was
operating under a different name. R. at 51, 298; J.A. at 168-71, 225-28, 272-77, 315-
16. Children’s Factory also mentions several occasions where Benee sent out
-9-
invoices and the names of the products were the same as Children’s Factory names. R.
at 209-17.
We hold that there is sufficient evidence to support the district court’s
determination that Benee is not trying to pass its goods off as those of Children’s
Factory. Although we agree with the district court’s determination that Benee
deliberately copied Children’s Factory toys, we also agree with the district court’s
finding that Benee clearly represents to the ultimate consumer that Benee manufactures
its own products. Benee engages in person-to-person selling techniques. R. at 258-60.
Benee informs its customers that they will get better service and better quality at a
cheaper price by dealing directly with the manufacturer. The catalogs used by Benee
also make the source of its product clear.
Furthermore, we are not convinced that the TESCO rationale applies in this case.
In TESCO, customers were “continually asking to determine what, if any, differences
distinguished the products of the two companies.” TESCO, 536 F.2d at 1220. In this
situation, besides the testimony of the distributors which is second-hand at best, there
was only one consumer who testified that she thought Children’s Factory was operating
under a different name. The district court properly discounted her testimony because
she was a regular customer of Children’s Factory and was aware that Children’s Factory
products are sold through distributors without bearing the Children’s Factory name.
Children’s Factory is also challenging the district court’s finding on actual
confusion. At trial and on appeal, Children’s Factory pointed to only a few incidents
of confusion. One consumer stated that she saw Benee’s vinyl, soft-play product line
at a trade show and thought Benee was distributing Children’s Factory’s products. R.
at 298. Children’s Factory argues that the distributors were also confused. J.A. at 168-
71, 225-28, 272-77, 315-16. Children’s Factory also points out that Benee received
several warranty calls from owners of Children’s Factory products and twice Benee
-10-
employees typed the wrong name on invoices. R. at 209-17, 240-45; Plaintiff’s Exhibit
21a-b.
The district court was not clearly erroneous in its findings on actual confusion.
The district court properly concluded that these incidents of actual confusion were
insufficient because the incidents only occurred during Benee’s inaugural year. With
respect to the mistyped invoices, the district court correctly noted that while the
mistakes may prove that Benee’s agents typed product names incorrectly due to the
imitation of Children’s Factory products, the mistakes do not prove that customers were
confused. Furthermore, the warranty calls can be dismissed because as this court has
held, “vague evidence of misdirected phone calls and mail is hearsay of a particularly
unreliable nature given the lack of an opportunity for cross-examination of the caller or
sender regarding the reason for the ‘confusion.’” Duluth News-Tribune, 84 F.3d at
1098.
The final factor that Children’s Factory is appealing is the costs and conditions
of purchase of the particular type of product involved. The district court weighed this
factor in favor of Benee stating that consumers are more concerned with the cost and
durability of the product than the source of the product or its trade dress. R. at 314-17.
Children’s Factory argues that even if consumers are more interested in price, the
parties stipulated that the prices were comparable. Children’s Factory, however, has
missed the point; even if the products are comparably priced, they are expensive enough
that consumers are going to be more apt to concentrate on the representations of quality
and price, rather than on source.
The district court weighed and evaluated the evidence presented concerning
consumer confusion and concluded that there was no likelihood of confusion by the
consuming public. On the record before us, we cannot say that the district court’s
finding is clearly erroneous. As the district court stated,
-11-
[t]hrough its direct sales, Benee is competing with Children’s Factory and
attempting to convince customers that Benee manufactures the superior
product. This sales technique enhances the consumers’ ability to
distinguish between vinyl, soft-play products, and is, indeed, the type of
conduct the Lanham Act intended to foster rather than prohibit.
Children’s Factory v. Benee’s Toys, No. 4:96CV1221JCH, slip op. at 21 (E.D. Mo.
Nov. 26, 1997) (hereinafter “slip op.”). Furthermore, the district court’s finding on the
likelihood of confusion was consistent with the position taken in the Restatement of
Torts § 728, comment a, and adopted by this court in WSM:
The ultimate test of whether or not there is a confusing similarity between
a designation and a trade [dress] . . . which it is alleged to infringe is the
effect in the market in which they are used. . . . In any event, the issue is
whether an appreciable number of prospective purchasers of the goods or
services in connection with which the designation and the trade [dress] .
. . are used are likely to regard them as indicating the same source. That
a few particularly undiscerning prospective purchasers might be so misled
is not enough.
WSM, 724 F.2d at 1330. The finding of no likelihood of confusion by the district court
is adequately supported by the evidence, is not clearly erroneous, and must be affirmed.9
Paragraph 10 Products
9
Under these circumstances, we need not pass on the district court’s findings of
inherent distinctiveness and non-functionality of the ¶ 8 products. Thus, we do not
decide Benee’s cross-appeal. Accordingly, the cross-appeal is dismissed without
prejudice.
-12-
In paragraph 10, the district court designated those products whose trade dresses
were neither inherently distinctive nor nonfunctional. The court concluded that each ¶
10 product is “neither arbitrary or fanciful,” but merely “dictated by the nature of the
product.” Slip op. at 11 (citing Stuart Hall Co., 51 F.3d at 785-86). The court further
reasoned that these products had not acquired secondary meaning. Once again, we find
that the district court did not commit clear error in so holding.
Children’s Factory argues that the ¶ 10 products were, in fact, inherently
distinctive and, in the alternative, had acquired secondary meaning. Children’s Factory
claims that these products were inherently distinctive because they utilized arbitrary and
fanciful designs elements such as stylized, soft-edged abstracted shapes and the use of
bright or pastel colors. Children’s Factory further argues that because there are infinite
design possibilities for soft-play products, its products are not dictated by the nature of
the product itself and competitors can compete without copying.
Children’s Factory criticizes the court for not attributing sufficient weight to
certain testimony. In so doing, Children’s Factory relies on the testimony of its
president and the president of a competitor who both stated that Children’s Factory’s
soft-play products were distinctive and readily identifiable by customers. R. at 156-59,
J.A. at 312-13. Children’s Factory also points to the testimony of distributors who
testified that Children’s Factory’s products were unique and recognizable. J.A. at 210-
11, 216-21, 269-74.
Although Children’s Factory maintains that the ¶ 10 products are inherently
distinctive, Children’s Factory argues in the alternative that the products have acquired
a secondary meaning because the trade dress serves to identify the source of the goods.
Children’s Factory admits that no direct evidence, i.e., consumer surveys, was
presented. It contends, however, that there was sufficient circumstantial evidence to
prove that the products had secondary meaning. First, Children’s Factory mentions the
testimony of a consumer who identified the trade dress with Children’s Factory.
-13-
Second, Children’s Factory relies on the distributors who testified that they highly tout
Children’s Factory products to consumers. Third, Children’s Factory points out that it
attends trade shows, “drop ships” to the consumer, and sews labels on most of its
products. R. at 22-23. Fourth, Children’s Factory spent 1.1 million dollars in
advertising over the last five years. R. at 37. Finally, Children’s Factory contends that
Benee’s deliberate copying of its products is evidence of a desire to take advantage of
the secondary meaning that Children’s Factory had established. We disagree.
We do not find the district court’s findings with respect to the ¶ 10 products
clearly erroneous. First, the district court did not commit clear error in finding that the
products in ¶ 10 were not inherently distinctive. The products were not arbitrary or
unique in the field. For example, as the district court pointed out, the Children’s
Factory’s Square Play Yard is simply a matted, square play area with a matted side
wall. The building blocks are merely building blocks.
Neither did the district court err in finding that the ¶ 10 products had not acquired
secondary meaning. The goods have not become so associated with the public mind
that the dress “serves to identify the source of the goods.” See Stuart Hall Co., 51 F.3d
at 789. The district court noted that Children’s Factory did not present a customer
survey. The district court also properly discounted the testimony of the four
distributors. We have held that letters from distributors are “at best only indirect
evidence of any connection in the minds of consumers. . . .” Aromatique, 28 F.3d at
872. The district court also properly discounted the 1.1 million dollars Children’s
Factory spent to promote its products in the past five years, because this amount
included travel expenses which are not relevant to secondary meaning. See id. (stating
that “[t]he amount spent on travel, which is dependent in part on the distance traveled
and the class of travel and accommodations, is of no relevance to a determination of
whether the promoted trade dress identifies, in the minds of the consumers, the source
of the product.”).
-14-
Although the district court was persuaded, as is this court, that Benee’s allegedly
infringing products were deliberate imitations of Children’s Factory products, this alone
cannot prove secondary meaning. This court has held that although copying a trade
dress can be evidence of secondary meaning, “[w]here there is a demand for a type of
product, capitalizing on that demand by copying that product does not necessarily
indicate that the original product has secondary meaning.” Id. at 871.
The most compelling evidence against the ¶ 10 product’s secondary meaning is
the fact that Children’s Factory sold its toys almost exclusively through distributor
catalogs wherein their name was not even mentioned. R. at 70-71; Plaintiff’s Exhibits
35a-p. As the district court correctly stated, “[w]hile Children’s Factory’s decision to
sell nearly all of its products through distributors’ catalogs may have maximized its
sales, it virtually insured that Children’s Factory’s vinyl, soft-play product line would
never be associated with a single source.” Slip op. at 12. For the foregoing reasons,
the district court’s holding that secondary meaning was not established is affirmed.
We affirm the district court’s findings that the ¶ 10 products are not inherently
distinctive nor have acquired secondary meaning and, therefore, are not entitled to
protection under the Lanham Act.10
IV. CONCLUSION
Based upon the foregoing, we hold that the district court did not clearly err in
finding that none of the Children’s Factory products were protected under the Lanham
Act, 15 U.S.C. § 1125(a). Accordingly, the judgment of the district court is affirmed.
10
In view of this holding, it is not necessary for this court to review the finding
that ¶ 10 products are functional.
-15-
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
-16-