Children's Factory, Inc. v. Benee's Toys, Inc.

• Decision Date: 17 November 1998
• Docket Number: 98-1180,Nos. 98-1179,s. 98-1179
• Citation: 160 F.3d 489
• Parties: CHILDREN'S FACTORY, INC., Appellant/Cross-Appellee, v. BENEE'S TOYS, INC., Appellee/Cross-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 489

160 F.3d 489

48 U.S.P.Q.2d 1826

CHILDREN'S FACTORY, INC., Appellant/Cross-Appellee, v. BENEE'S TOYS, INC., Appellee/Cross-Appellant.

Nos. 98-1179, 98-1180.

United States Court of Appeals Eighth Circuit.

Submitted Sept. 21, 1998.

Decided Nov. 17, 1998.

David B. B. Helfrey, St. Louis, MO, argued, for Appellant.

David H. Chervitz, St. Louis, MO, argued, for Appellee.

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 court ¹ erred in holding that its toys were not protected under the Act. Benee cross-appeals, arguing the district court erred when it 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 ("p 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 confused with Benee's products. ³ The district court then concluded that the products found in paragraph 10 of its opinion ("p 10 products") were not inherently distinctive or nonfunctional and, therefore, were not protected. ⁴

Children's Factory appealed both findings. First, with respect to the p 8 products, Children's Factory argues that they were likely to be confused with Benee's products. Second, with respect to the p 10 products, Children's Factory contends that they were inherently distinctive and nonfunctional. Benee cross appealed as to the p 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

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, 519 U.S. 1151, 117 S.Ct. 1085, 137 L.Ed.2d 219 (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 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, 112 S.Ct. 2753).

III. DISCUSSION

Paragraph 8 Products

As mentioned earlier, the district court found the p 8 products to be inherently distinctive and nonfunctional. The district court found, however, that the p 8 products 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 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 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...