EFS Marketing, Inc. v. Russ Berrie & Co., Inc.

• Decision Date: 12 February 1996
• Docket Number: 422,D,Nos. 302,s. 302
• Citation: 76 F.3d 487
• Court: U.S. Court of Appeals — Second Circuit
• Parties: 1996-1 Trade Cases P 71,299, 37 U.S.P.Q.2d 1646 EFS MARKETING, INC., Plaintiff-Appellee-Cross-Appellant, v. RUSS BERRIE & COMPANY, INC., and Russell Berrie, Defendants-Appellants-Cross-Appellees. ockets 94-9119, 94-9157.

Page 487

76 F.3d 487

1996-1 Trade Cases P 71,299, 37 U.S.P.Q.2d 1646

EFS MARKETING, INC., Plaintiff-Appellee-Cross-Appellant, v. RUSS BERRIE & COMPANY, INC., and Russell Berrie Defendants-Appellants-Cross-Appellees.

Nos. 302, 422, Dockets 94-9119, 94-9157.

United States Court of Appeals Second Circuit.

Argued Oct. 30, 1995.

Decided Feb. 12, 1996.

Roger L. Zissu, New York City (Howard M. Rogatnick, Weiss Dawid Fross Zelnick & Lehrman, P.C., New York City, of counsel), for Defendants-Appellants-Cross-Appellees.

Robert L. Sherman, New York City (Paul, Hastings, Janofsky & Walker, New York City, of counsel), for Plaintiff-Appellee-Cross-Appellant.

Before: VAN GRAAFEILAND, JACOBS and PARKER, Circuit Judges.

VAN GRAAFEILAND, Circuit Judge:

This litigation arose out of a dispute between competing merchandisers of troll dolls. In a complaint filed in the United States District Court for the Southern District of New York on August 15, 1991, EFS Marketing, Inc. (EFS) sought monetary damages and injunctive relief from Russ Berrie & Co. and its Chief Executive Officer, Russell Berrie (collectively Berrie). The complaint contained four causes of action. The first alleged an infringement of EFS's dolls' trade dress and false designation of origin in violation of section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). The second alleged that the defendants traded on plaintiff's good will, injured its business reputation and confused the public, in violation of state common law's prohibition of unfair competition. The third alleged that the defendants affixed a false designation of copyright to troll dolls they marketed, also in violation of section 43(a). The fourth asserted that the defendants practiced trade deceptively in violation of section 349 of New York's General Business Law.

Following a bench trial, the district court (Keenan, J.) held in Berrie's favor on the trade dress infringement claim (Count I), the state unfair competition law claim (Count II), and the state section 349 claim (Count IV), and in EFS's favor on the false designation of copyright claim (Count III). In the process of so doing, the district court sua sponte invalidated troll doll copyrights held by both parties. 836 F.Supp. 128 (S.D.N.Y.1993).

The appellate process leading to the decision we now render is not a model of clarity. Both parties appealed the invalidation of their respective copyrights. EFS appealed in addition the dismissal of its first and second counts. However, EFS concludes its principal brief on appeal with the request that the dismissal of "Counts I, II and IV should be reversed." Insofar as EFS's requests are based on state law, i.e., Counts II and IV, they may be disregarded. Neither side has addressed any arguments on appeal to alleged violations of state law, and we therefore consider any such arguments to have been abandoned. See Anderson v. Branen, 27 F.3d 29, 30 (2d Cir.1994); Fed.R.App.P. 28(a)(5). Because of the obvious lack of merit in EFS's state claims, EFS suffers no "manifest injustice" in being required to abide by the rules governing appellate procedure.

For the reasons that follow, we affirm the district court's holding on Count I, reverse its holding on Count III, and vacate its sua sponte invalidation of both parties' copyrights.

BACKGROUND

EFS and Berrie market competing lines of troll dolls, those ugly but somehow endearing creatures of mythical origin. Quite popular in the 1960's, troll dolls caught market fancy again in the early 1990's. In 1991, total sales topped $200 million. EFS began its line of troll dolls called "Norfins" in 1982, long before the current fad took hold. Norfins were a modest success with over $12 million in sales in the years 1982-1991. Russ Berrie & Company, Inc., a much larger concern, introduced a competing line of troll dolls in 1990, and quickly expanded its sales to $44 million in 1991. By 1992, there were at least twenty other companies in the troll doll market.

It is undisputed that EFS's Norfins and Berrie's troll dolls look a lot alike. The district court found that

there are many similarities. Both are made of vinyl or rubber. Both lines have outstretched arms and colorful hair that often stands up straight. Each has four toes on each foot and four fingers on each hand. Their faces are characterized by large, round eyes and broad, pronounced pug noses.

836 F.Supp. at 130.

These similarities are not by accident. Both lines of troll dolls, as well as those of other manufacturers, follow to a greater or lesser degree a design by Thomas Dam. Dam, a Danish woodcarver, made the first troll doll in the late 1950's or early 1960's as a gift for his daughter. His doll was sold in the United States in the 1960's and received United States copyright protection. However, the copyright later was declared invalid, leaving Dam's design in the public domain for copyright purposes. See Scandia House Although Dam's troll doll was the substantial prototype for both EFS's and Berrie's dolls, Berrie asserts that it made several alterations in its design to produce a more human, and presumably more loveable, doll. The alterations alleged are

Enters. v. Dam Things Establishment, 243 F.Supp. 450 (D.D.C.1965).

the chin coming after [the] smile line; rounded ears; brown [e]ye color; eyes closer together; head disproportionate in size to body; no blush on cheeks; flatter shorter chest length; scalloped round digits on hand; softly rounded eyelids; short space between nose and mouth; width of hairline longer; rounded bottom; longer legs in proportion to body; and no gradation in toes' size.

836 F.Supp. at 131.

EFS's Norfin troll dolls, which are manufactured by Dam Things from Denmark, also known as Dam Things, Denmark, the manufacturer of the original Dam troll, are faithful to the original design. Inspired by the success of Smurfs, a popular line of dolls, EFS decided to market Norfins as a collection of differently dressed troll dolls, including characters such as a bride, a sailor, a girl in exercise clothes, etc. This marketing technique was designed to encourage repeat purchases by customers. By the time of trial, there were over 150 trolls in the Norfin collection.

Berrie also developed a collection of costumed troll dolls. Although Berrie developed its collection after EFS, the district court found that Berrie did not copy the idea from EFS. Id. at 132. Berrie had a long-term relationship with troll dolls--Russell Berrie, the company's chief executive officer, was a sales representative for Dam trolls in the 1960's, and the company sold troll dolls under its own name in the 1970's. Moreover, Berrie was successful in dressing other types of dolls in costumes and selling them as a collection. These facts, plus Berrie's testing of the troll market in the late 1980's with troll pencil toppers, convinced the district court that Berrie's family of costumed troll dolls was not based on EFS's Norfins.

Since 1988, Berrie has placed a copyright notice reading " CRRUSS" in small print on the bottom of the left foot of each troll doll.

TRADE DRESS INFRINGEMENT

Trade dresses are protectable under section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A), which provides a private cause of action against any person who

in connection with any goods ... or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof ... which ... is likely to cause confusion, or to cause mistake, or to deceive ... as to the origin, sponsorship, or approval of his or her goods ... by another person.

This Circuit's interpretation of the law of trade dress infringement, as it existed when the judgment below was entered in 1993, was patterned on the Supreme Court's decision in Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 112 S.Ct. 2753, 120 L.Ed.2d 615 (1992). There, the Court held that in order to maintain an action for trade dress infringement under section 43(a) of the Lanham Act, a plaintiff must demonstrate that (1) its trade dress is inherently distinctive or has acquired distinctiveness through secondary meaning, and (2) there is a likelihood of confusion with defendant's trade dress. Id. at 769-70, 112 S.Ct. at 2758.

EFS does not contend that its troll dolls had acquired distinctiveness through secondary meaning. This would have required a showing that the purchasing public had come to associate the trade dress of EFS's dolls with EFS, as a single producer or source. See LeSportsac, Inc. v. K Mart Corp., 754 F.2d 71, 78 (2d Cir.1985) (citing Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 851 n. 11, 102 S.Ct. 2182, 2187 n. 11, 72 L.Ed.2d 606 (1982)). In view of the district court's finding that "both parties' dolls [are] virtually indistinguishable from the 1961 public domain doll," 836 F.Supp. at 133, it is most unlikely that consumers would look to EFS as the sole producer of the troll dolls at issue. The district court therefore limited its consideration to whether EFS's troll dolls were inherently distinctive.

After setting forth the trademark categories of increasing distinctiveness ranging from a low of generic to a high of arbitrary or fanciful, 836 F.Supp. at 135, the district court, quoting Two Pesos, 505 U.S. at 767, 112 S.Ct. at 2757, said that "[t]o be inherently distinctive, a trade dress must be either suggestive, arbitrary, or fanciful, such that its 'intrinsic nature serves to identify a particular source of a product.' " 836 F.Supp. at 135. Continuing, the district court said that "generic marks are never protectable under the Lanham Act and descriptive marks must have acquired secondary meaning to become distinctive," id., thus eliminating these two categories as possible bases for a finding of inherent distinctiveness in EFS's dolls. The district court then pointed out that most of the features claimed by EFS to identify its dolls have been elements of the public domain for many years and that the addition of...