Stormy Clime Ltd. v. ProGroup, Inc.

• Decision Date: 23 January 1987
• Docket Number: No. 246,D,246
• Citation: 1 USPQ2d 2026,809 F.2d 971
• Parties: STORMY CLIME LTD., Plaintiff-Appellee, v. PROGROUP, INC., Defendant-Appellant. ocket 86-7576.
• Court: U.S. Court of Appeals — Second Circuit

Page 971

809 F.2d 971

1 U.S.P.Q.2d 2026

STORMY CLIME LTD., Plaintiff-Appellee, v. PROGROUP, INC., Defendant-Appellant.

No. 246, Docket 86-7576.

United States Court of Appeals Second Circuit.

Argued Oct. 23, 1986.

Decided Jan. 23, 1987.

Richard H. Evans, Cincinnati, Ohio (Wood Herron & Evans, Cincinnati, Ohio; Thomas G. Gallatin, Mudge Rose Guthrie Alexander & Ferdon, New York City, on the brief), for defendant-appellant.

James M. Rhodes, Jr., New York City (Hopgood, Calimafde, Kalil, Blaustein & Judlowe, New York City, on the brief), for plaintiff-appellee.

Before KAUFMAN, NEWMAN, and PRATT, Circuit Judges.

JON O. NEWMAN, Circuit Judge:

This appeal concerns the application of the functionality defense in a trade dress infringement suit under section 43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a) (1982), in which a manufacturer alleges that a competitor improperly copied the overall design of its product. The issue arises on an appeal by defendant-appellant ProGroup, Inc. from an order of the District Court for the Southern District of New York (Louis L. Stanton, Judge), entered at the request of plaintiff-appellee Stormy Clime Ltd., which preliminarily enjoined ProGroup from marketing a rainjacket. Because the appropriate legal standard concerning the functionality defense was incompletely applied, we vacate the preliminary injunction and remand for further proceedings.

Background

Stormy Clime, a New York corporation, designs and sells sportswear. Its products are sold primarily in country club proshops. Stormy Clime began operations in 1982 with the introduction of a waterproof rainjacket which it has sold under its "COOL IT" trademark. The rainjacket is made of a high-sheen, waterproof fabric. Its distinctive feature is the employment of three shingles or vents--horizontal slots covered by a flap--designed to facilitate release of perspiration and body heat while keeping the wearer protected from rain and wind. Stormy Clime's COOL IT rainjacket is normally sold as part of a rainsuit comprising a jacket and matching pants. Revenue from sales of the COOL IT line of sportswear has grown from $400,000 in 1982 to approximately $2.1 million in 1985.

ProGroup markets its line of rainsuits under the trademark "DUCKSTER". After considering Stormy Clime's COOL IT rainjacket, as well as those of several other manufacturers, ProGroup developed its latest DUCKSTER rainjacket, which features two horizontal shingles/vents, a high-sheen fabric, and a hood. In designing its jacket, ProGroup was careful not to infringe Stormy Clime's United States Patent No. 4,408,356 for tacking the shingles so as to prevent them from being lifted by the wind. The use of ventilation shingles on rainjackets was the subject of U.S. Patent Nos. 1,562,767 and 2,259,460, both of which have long since expired.

At a Professional Golf Association trade show on January 23, 1986, ProGroup introduced its latest DUCKSTER line of rainsuits. Because of their shingled design, high-sheen fabric, and colors, these DUCKSTER rainjackets closely resembled Stormy Clime's COOL IT rainjackets.

On January 24, 1986, the day after ProGroup introduced its DUCKSTER rainjackets, Stormy Clime filed suit against ProGroup in the Southern District of New York, alleging trademark infringement and unfair competition under the Lanham Act, 15 U.S.C. Secs. 1114, 1125(a) (1982). On April 28, 1986, following initial discovery, Stormy Clime moved for a preliminary injunction.

The exhibits and documentary evidence introduced in the trial court indicate that both the Stormy Clime and ProGroup rainjackets feature horizontal shingles/vents (three in the COOL IT rainjacket, two in the DUCKSTER rainjacket), a high-sheen fabric, and a hood. The COOL IT rainjacket comes in fourteen colors; the DUCKSTER rainjacket comes in six of these colors. The shoulders of the COOL IT rainjacket are constructed from five pieces of fabric attached by seams; the DUCKSTER rainjacket features a seamless shoulder construction. The COOL IT rainjacket has top-entry, patch pockets; the DUCKSTER rainjacket uses slant-entry, integral pockets. The COOL IT rainjacket has a stand-up collar with snaps; the DUCKSTER rainjacket has a laydown collar without snaps. The COOL IT rainjacket, regardless of fabric color, has a white front zipper, a white drawstring at the waist, and a white zipper on the collar which closes a pocket housing its hood. The DUCKSTER rainjacket has a front zipper matching the color of the jacket fabric and does not have a drawstring. Although the initial version of the DUCKSTER rainjacket featured a white zipper on the collar of lighter-colored jackets and a black zipper on the collar of darker-colored jackets, the current version has a detachable hood and no zipper on the collar. The COOL IT rainjacket does not have any external label. The DUCKSTER rainjacket has a small metal insignia attached to the sliding element of its front zipper. Both rainjackets have labels clearly displaying their respective trademarks sewn just below the inside of the collar.

Stormy Clime alleged that the design of the DUCKSTER rainjacket infringed the "trade dress" of its COOL IT rainjacket. In addition to disputing that the jackets were confusingly similar, ProGroup defended on the ground that the design was functional and hence not protectable under trade dress law. ProGroup emphasized the need for horizontal shingles, a high-sheen waterproof fabric, and a hood in any high-quality, low-cost, waterproof jacket suitable for use by golfers. ProGroup also noted the several differences between the COOL IT and DUCKSTER rainjackets.

On July 2, 1986, Judge Stanton issued a preliminary injunction barring ProGroup from making, marketing, or selling its shingled rainjacket and ordering ProGroup to inform its distributors and customers of the terms of the injunction. Stormy Clime posted a $50,000 bond. ProGroup appeals the preliminary injunction on the sole ground that Judge Stanton applied an incorrect legal standard in analyzing ProGroup's functionality defense.

Discussion

It is well established in this Circuit that a party seeking a preliminary injunction must establish

both possible irreparable injury and either (1) a likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make a fair ground for litigation and a balance of hardships tipping decidedly in the movant's favor.

LeSportsac, Inc. v. K Mart Corp., 754 F.2d 71, 74 (2d Cir.1985). We must affirm the issuance of the preliminary injunction unless we find, in light of applicable legal standards, that Judge Stanton's decision constituted an abuse of discretion. See id. at 74; Doran v. Salem Inn, Inc., 422 U.S. 922, 931-32, 95 S.Ct. 2561, 2567-68, 45 L.Ed.2d 648 (1975). A failure to consider relevant factors or to apply the proper legal standard constitutes such an abuse. See Parents' Ass'n of P.S. 16 v. Quinones, 803 F.2d 1235, 1239 (2d Cir.1986); Coca-Cola Co. v. Tropicana Products, Inc., 690 F.2d 312, 315 (2d Cir.1982); see generally 7 Moore's Federal Practice p 65.04 at 65-48-49, p 65.21 at 65-154-57 (2d ed. 1986 & Supp.1986-87).

Though recited frequently in the reported decisions, including our own, this formulation of an incorrect application of a legal standard as constituting an "abuse of discretion" is not entirely satisfactory. Judicial discretion normally implies the authority in a decision-maker to decide a disputed matter either way, or, in some circumstances, to varying degrees, as where a continuance may be granted for any one of several appropriate intervals. Discretion is said to be "abused" ("exceeded" would be both a more felicitous and correct term) when the decision reached is not within the range of decision-making authority a reviewing court determines is acceptable for a given set of facts. This determination that the range of acceptable decision-making has been exceeded in a particular case is assuredly one of law, but it is analytically distinct from a determination that a legal standard applicable to a generality of fact situations has been ignored, incorrectly applied, or inadequately applied in a particular case. That sort of error of law, if of significance to an outcome, can always be the basis for appellate revision of trial court decisions. In such cases, it would be clearer to say directly that the decision is revised because of an error of law, rather than call such an error an abuse of discretion. See Friendly, Indiscretion About Discretion, 31 Emory L.Rev. 747, 773-78 (1982).

Section 43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a), which prohibits the marketing of a product conveying a "false designation of origin," has been interpreted to entitle the first manufacturer of a product to an unregistered trademark in the "trade dress" of its product. See LeSportsac, supra, 754 F.2d at 75; Warner Bros., Inc. v. Gay Toys, Inc., 658 F.2d 76, 77-78 (2d Cir.1981) (Warner I ). The trade dress of a product "involves the total image of a product and may include features such as size, shape, color or color combinations, texture, [or] graphics." John H. Harland Co. v. Clarke Checks, Inc., 711 F.2d 966, 980 (11th Cir.1983). Although "trade dress" has traditionally referred to the packaging or labeling of a product, see id. at 980; LeSportsac, supra, 754 F.2d at 75, this Circuit has recognized that the design of a product may function as its "packaging," thereby entitling the manufacturer to trade dress protection for the appearance of the product. See id.; Warner I, supra, 658 F.2d at 78; Harlequin Enterprises Ltd. v. Gulf & Western Corp., 644 F.2d 946, 949 (2d Cir.1981).

The typical case in which a first manufacturer seeks to prevent the copying of the appearance of its product under section 43(a) of the Lanham Act involves two stages of inquiry. In the first stage, the plaintiff must show that the trade dress of its product has acquired secondary meaning in the marketplace and...