Why a pair of fashion TM disputes could ‘hamper’ brand protection

The outcome of Coach v Gap and Penn State v Vintage Brand could have ‘serious ramifications’ for brand owners and licensing, depending on their outcome. Dyan Finguerra-DuCharme and Kate Garber of Pryor Cashman explain how.

Two trademark cases currently percolating in the courts may have significant implications for brands and licensing arrangements.

In one of those cases, Penn State university sued an online retailer for selling goods bearing prior iterations of Penn State’s logos.

In the other, Tapestry—owner of New York fashion brand Coach—sued rival Gap for selling T-shirts that bear the word “Coach.”

Both cases raise issues of whether a junior user can use a brand name on commercial merchandise (that is not a traditional fair use) and avoid liability under the Lanham Act.

Penn State v Vintage Brand

Penn State asserted trademark infringement claims against Vintage Brand for selling apparel and other goods that bear vintage Penn State logos. Vintage Brand filed counterclaims challenging the validity of Penn State’s registrations, arguing that they are ornamental and not functioning as source identifiers.

The court dismissed Penn State’s counterfeit claim, having determined that a reasonable consumer would not expect or believe that a university would produce its own merchandise.

Also, the court determined that no confusion as to the apparel’s origin reasonably existed because Vintage Brand’s own brand name is placed on the packaging of the apparel and on the apparel itself.

The court’s decision seems to suggest that a “disclaimer” or “prominent use” of the junior user’s “mark” can preclude liability for counterfeiting.

At the forefront of the case is Vintage Brand’s “ornamental use” defence: whether a registered trademark merely serves as an ornamental design and not a symbol that consumers perceive as an indicia of origin or source.

Penn State argues the per se rule—that university logos on merchandise like T-shirts and hats are presumptively functioning as source identifiers.

On the other hand, Vintage Brand argues that consumers “express affinity or affiliation with Penn State…by wearing clothing decorated with Penn State’s logos”, and do not purchase such merchandise because Penn State is the source of the goods.

Both parties’ motions for summary judgment were denied. In denying Vintage Brand’s motion, the court agreed that the Penn State marks appear to be ornamental, but determined that Penn State produced enough evidence demonstrating that its marks also indicate a secondary source.

This included an expert consumer survey in which 16% to 20% of respondents identified Penn State as the sponsor of the Vintage Brand products.

In denying Penn State’s motion, the court found that Vintage Brand’s expert survey evidence may demonstrate that consumers are not confused about the origins of Vintage Brand’s merchandise because the goods display a Vintage Brand label.

The parties’ positions present several triable issues of fact:

● Do consumers purchase apparel containing college logos because they mistakenly believe the goods are endorsed or approved by the school?

● Or do consumers buy school merchandise because they want to show team spirit?

● Is there a likelihood of confusion as to the source of the goods?

Tapestry v Gap

Tapestry sued Gap, claiming that two of the T-shirts sold by Old Navy infringe Tapestry’s trademark rights in its registered COACH marks, some of which are registered in connection with their use on clothing.

Each of the two T-shirts at issue feature the word “Coach” printed boldly on the front-centre. Coach asserts that consumers are likely to mistakenly believe Old Navy T-shirts bearing the word are connected to or affiliated with the Coach brand.

The case raises complicated issues, and although some of the issues are unique to the facts, the outcome could have far-reaching effects.

Gap will likely defend its use on the grounds of functionality, which is a statutory defence that courts have applied in two variations, recognising a distinction between functionality and aesthetic functionality.

Functional and aesthetic defences

The functionality defence usually comes into play when a business attempts to trademark the design features of a product it offers, but those particular design features are ones that contribute to the utility of the product in some way.

Functional designs may be patentable, but if they are not protected by a patent, the law will not prohibit competitors from incorporating their functional elements into similar goods, potentially diminishing the quality of products made available to consumers overall.

Aesthetic functionality, on the other hand, considers whether the design of the mark is valuable to customers because it indicates the source of a product, or whether consumers view the design as valuable only for the aesthetic contribution it makes to a product.

For example, in LTTB v Redbubble, the court found that the phrase LETTUCE TURNIP THE BEET was not functioning as a trademark but rather performed an aesthetically functional purpose when printed on T-shirts.

The evidence indicated that consumers purchased these shirts from Redbubble because they liked the phrase and its design, and that they were not mistakenly relying on a belief that LTTB produced them.

Dual defence by Gap?

The Coach case may end up taking an interesting turn, as it is possible that Gap defends its use of the term “Coach” on the grounds of both functionality and aesthetic functionality.

On the basic functionality angle, it could be argued that T-shirts bearing the term “Coach” are useful products that primarily work to identify an individual as one of the coaches at a sporting event.

In response to a functionality defence, Coach could argue that the particular use is not functional, considering the context in which consumers encounter the Old Navy T-shirts.

Because it is not claiming infringement by a sporting goods store, where consumers purchase all types of functional clothing and equipment, a finding of infringement by Gap does not limit the particular design elements available to competitors; it only limits the contexts in which competitors offer those design elements.

Consumer belief

Coach might further bolster its arguments by showing that consumers are accustomed to collaborations between retailers and luxury brands, and therefore will mistakenly believe that there is a collaboration between Old Navy and Coach.

Considering aesthetic functionality, Gap could argue that, even if the shirts were never worn to identify coaches at sporting events, consumers purchasing T-shirts bearing the term “Coach” are doing so because they like the idea of announcing that they are a coach—whether literally as a sports coach, or metaphorically, for example, that as a parent they view themselves as a coach for their children.

In either case, the consumer would not be concerned with whether the T-shirt is made by Coach or by Old Navy, but rather is drawn to the message of the word. Regardless, the desired function has been accomplished.

To combat the aesthetic functionality defence, Coach may present consumer survey evidence showing that consumers believe that the display of the word “Coach” means that Coach is the source of, or affiliated with, these T-shirts.

The issue of ornamental use will also be at play in Coach. Gap will likely argue that its use of the common word “Coach” across the front of a T-shirt is ornamental and not functioning as a trademark.

Potential trademark implications of both cases

Both cases have serious ramifications for brand enforcement and the licensing industry.

Coach and Penn State have made substantial investments in developing brands that have become household names. Brand owners have a real interest in managing how their brands are perceived, and protecting licensing arrangements.

If the courts hold that the defendants’ uses are not infringing, a brand owner’s ability to control the use of their marks and license their marks may be hampered.

If Vintage Brand wins on its ornamental use defence, the door will be open for third parties to use, without authorisation, university and sports team trademarks in an ornamental manner (ie, on the front of the shirt or hat), arguing that consumers care about the association with the school or team and not the source of the actual goods.

On the other hand, does a finding of infringement mean that the word “Coach” can never be printed on a T-shirt even if the purpose of that T-shirt is to identify the coach of a team?

Each case also underscores the myriad issues surrounding whether the use of another’s trademark for merchandise constitutes infringement, unfair competition, is merely ornamental, is a functional use, or is likely to cause consumer confusion.

Dyan Finguerra-DuCharme is a partner and co-chair of Pryor Cashman’s Intellectual Property Group; and Kate Garber is an associate at Pryor Cashman.