American Greetings Corp. v. Dan-Dee Imports, Inc.

• Decision Date: 02 December 1986
• Docket Number: Nos. 86-5018,86-5035,DAN-DEE,s. 86-5018
• Citation: 1 USPQ2d 1001,807 F.2d 1136
• Parties: AMERICAN GREETINGS CORPORATION and CPG Products, Inc. v.IMPORTS, INC., Daniel Ranzman and Lee Capozzi (Two Cases). Appeal ofIMPORTS, INC., Daniel Ranzman and Lee Capozzi. Appeal of AMERICAN GREETINGS CORPORATION and CPG Products Corp.
• Court: U.S. Court of Appeals — Third Circuit

Page 1136

807 F.2d 1136

1 U.S.P.Q.2d 1001

AMERICAN GREETINGS CORPORATION and CPG Products, Inc. v. DAN-DEE IMPORTS, INC., Daniel Ranzman and Lee Capozzi (Two Cases).

Appeal of DAN-DEE IMPORTS, INC., Daniel Ranzman and Lee Capozzi.

Appeal of AMERICAN GREETINGS CORPORATION and CPG Products Corp.

Nos. 86-5018, 86-5035.

United States Court of Appeals, Third Circuit.

Argued Sept. 19, 1986.

Decided Dec. 2, 1986.

Carol F. Simkin, (argued), Cowan, Liebowitz & Latman, New York City, Ronald Gould, Shanley & Fisher, Morristown, N.J., for plaintiffs-appellees-cross-appellant.

Jesse Rothstein, (argued), Joel E. Lutzker, Amster, Rothstein & Ebenstein, New York City, Robert Alvin Adler, Simon & Allen, Newark, N.J., for defendants-appellants-cross-appellee.

Before ADAMS and STAPLETON, Circuit Judges, and VAN DUSEN, Senior Circuit Judge.

OPINION OF THE COURT

STAPLETON, Circuit Judge:

I.

American Greetings Corporation (American) and CPG Products Corporation (CPG) are co-venturers in the enormously successful Care Bears line of plush stuffed animals. The Care Bears themselves are pastel-colored plush teddy bears marked by pictorial designs on their white stomachs, i.e., "tummy graphics." American and CPG filed suit against Dan-Dee Imports, Inc. (Dan-Dee), a toy producer, alleging that Dan-Dee's distribution of various pastel-colored plush teddy bears also bearing tummy graphics infringed plaintiffs' rights in their Care Bears. The complaint asserted that Dan-Dee's conduct constituted copyright infringement, a false designation of origin under section 43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a), and unfair competition under common law.

A preliminary injunction issued on November 29, 1983, ordering Dan-Dee to stop selling "stuffed toy teddy bears" between 6 and 24 inches in height, having "a body and head of a pastel color, with a generally white chest and stomach region," and having "an applied decoration on the chest and/or stomach in the form of a graphic design consisting of one or more of a rainbow, a moon, a star, a cloud, a flower, a sun, a birthday cake, a heart, a clover or any other graphic designs likely to be confused therewith." This foreclosed Dan-Dee from continuing to market its "Goodtime Gang" line of teddy bears.

On August 15, 1984, American and CPG moved to hold Dan-Dee in contempt of the injunction for the distribution of various stuffed animals, including non-bear animals identified by Dan-Dee as the "New Goodtime Gang" line, and to amend the injunction to cover such toys. In a consent order filed September 14, 1984, Dan-Dee agreed not to distribute such toys until a hearing was held on plaintiffs' motion. On November 19, 1984, Dan-Dee moved to vacate or narrow the November 29, 1983 injunction.

Starting in December 1984, the district court held six days of hearings on the parties' motions. To establish a right to protection for their teddy bear under the Lanham Act, American and CPG asserted that "Care Bears have the following distinctive elements: 1. pastel coloration; 2. an inverted triangular 'jowly' shaped head; 3. heart-shaped paw pads; 4. a pear-shaped body; 5. an oval-domed shaped abdominal area; 6. a heart-shaped nose; 7. a tuft of hair atop the head; 8. a white plush abdominal area; and 9. tummy graphics." American Greetings Corp. v. Dan-Dee Imports, 619 F.Supp. 1204, 1209 (D.N.J.1985). To support their claim that Care Bears had acquired secondary meaning, American and CPG introduced extensive evidence regarding their promotion of the Care Bears concept. They further contended that Dan-Dee was violating the Lanham Act by distributing products incorporating some of the above-described distinctive features in a manner likely to cause consumer confusion as to source. Dan-Dee, on the other hand, pointed to various differences between the competing products as suggesting a likely lack of confusion, id. at 1214-15, and further asserted that all the features common to the two lines of products were functional and thus copyable.

In its Opinion of October 2, 1985, the district court found that "[t]he most prominent of [the Care Bears'] distinctive features is the tummy graphic," which is "affixed not only to identify the animal as a Care Bear, but to connote the particular personality and/or emotion associated with each Care Bear character." Id. at 1209. Emphasizing that tummy graphics were designed "to convey an emotional message," the district court agreed with Dan-Dee's position that tummy graphics were functional and thus unprotected. Id. at 1219. The court further found that the particular symbols used by plaintiffs as tummy graphics and the placement of the tummy graphic against a white background on the stuffed animal's stomach were functional. Id.

Nonetheless, the district court found the Care Bears' overall appearance to be protectible. The court phrased the issue thusly:

Other, particular features of plaintiffs' product might also be separated from the whole and found to be functional. To so analyze these products would, however, ignore the problem presented by this case. For, irrespective of the functional nature of any number of the features of plaintiffs' product, their combination, in a particular form, is not functional.

Id. at 1220. The court further noted that, even if every feature of plaintiffs' product were functional, Dan-Dee would be required to take reasonable steps to distinguish its product from plaintiffs' product. Id. The court concluded that the Lanham Act proscribes "defendants' copying of plaintiffs' product in full: defendants' products could and should have been designed to minimize confusion with plaintiffs' products, by altering non-functional elements of their stuffed animals, or combining functional elements in a different manner." Id.

Further finding that the Care Bears' overall appearance had acquired significant secondary meaning, id. at 1221 & n. 2, and that, because of similar overall appearances, ¹ "defendants' products, both bears and other species, are likely to be confused with plaintiffs' pre-existing Care Bear products" by the consuming public, id. at 1224, the district court concluded that American and CPG were likely to prevail in showing that Dan-Dee's conduct violated the Lanham Act Sec. 43(a).

In an order filed December 4, 1985, the district court denied defendants' motion to vacate the injunction and granted plaintiffs' motion to amend the injunction to cover plush stuffed animals other than teddy bears. Although the district court based the grant of relief on Dan-Dee's infringement of plaintiffs' rights in their pre-existing Care Bears, the court's injunction order granted protection to the overall appearance of both the Care Bears and the subsequently introduced Care Bear Cousins, which are non-bear stuffed animals "tied to the Care Bear family by the presence of many of the same distinctive design features, including the prominent use of tummy graphics." Id. at 1213. The district court declined to find Dan-Dee in contempt of the November 29, 1983 injunction for marketing plush toy animals other than bears with tummy graphics. The district court did, however, hold Dan-Dee in contempt of that injunction for distributing a teddy bear with tummy graphics and in contempt of the September 14, 1984 consent order for marketing a plush dog with tummy graphics. This timely appeal and cross-appeal followed.

Because the preliminary injunction as amended does not give Dan-Dee adequate notice of what it is prohibited from doing and because it may, in practical effect, foreclose Dan-Dee from utilizing tummy graphics, a feature found by the district court to be functional, we vacate the preliminary injunction portion of the December 4, 1985 order. We affirm in part and reverse in part the contempt rulings set forth in that order.

II.

A district court may issue a preliminary injunction only if the movant has shown that it is likely to prevail on the merits, that it will suffer irreparable harm absent such relief, and that the balance of equities and the public interest favor injunctive relief. See SK & F, Co. v. Premo Pharmaceutical Laboratories, 625 F.2d 1055, 1066-67 (3d Cir.1980); Freixenet, S.A. v. Admiral Wine & Liquor Co., 731 F.2d 148, 150-51 (3d Cir.1984); Ciba-Geigy Corp. v. Bolar Pharmaceutical Co., 719 F.2d 56, 57 (3d Cir.1983), cert. denied, 465 U.S. 1080, 104 S.Ct. 1444, 79 L.Ed.2d 763 (1984).

The scope of appellate review of a district court's discretionary grant of a preliminary injunction is narrow. "Unless the trial court abuses [its] discretion, commits an obvious error in applying the law, or makes a serious mistake in considering the proof, the appellate court must take the judgment of the trial court as presumptively correct." A.O. Smith Corp. v. FTC, 530 F.2d 515, 525 (3d Cir.1976); accord Freixenet, 731 F.2d at 150; Ciba-Geigy, 719 F.2d at 57; Ideal Toy Corp. v. Plawner Toy Manufacturing Corp., 685 F.2d 78, 80 (3d Cir.1982); SK & F, 625 F.2d at 1066.

We review the district court's findings of contempt to determine whether there is clear and convincing evidence that the terms of the injunction were in fact violated and whether the district court committed an error of law. Quinter v. Volkswagen of America, 676 F.2d 969, 974 (3d Cir.1982). We review the district court's refusal to find Dan-Dee in further contempt to determine whether there has been an abuse of discretion. Washington-Baltimore Newspaper Guild v. Washington Post Co., 626 F.2d 1029, 1031 (D.C.Cir.1980).

III.

Section 43(a) of the Lanham Act proscribes not only trademark infringement in its narrow sense, but more generally creates a federal cause of action for unfair competition. Williams v. Curtiss-Wright Corp., 691 F.2d 168, 172 (3d Cir.1982). In particular, Sec. 43(a) provides a cause of action for unprivileged imitation, including trade dress infringement. SK & F, 625 F.2d at 1057, 1065; Ciba-Geigy Corp. v. Bolar Pharmaceutical Co., 747 F.2d 844, 849 n....