Estee Lauder, Inc. v. The Gap, Inc., 96 Civ. 4130 (LAK).

• Decision Date: 22 July 1996
• Docket Number: No. 96 Civ. 4130 (LAK).,96 Civ. 4130 (LAK).
• Citation: 932 F. Supp. 595
• Parties: ESTEE LAUDER, INC., Plaintiff, v. THE GAP, INC. d/b/a Old Navy Clothing Company, Defendant.
• Court: U.S. District Court — Southern District of New York

932 F. Supp. 595

ESTEE LAUDER, INC., Plaintiff, v. THE GAP, INC. d/b/a Old Navy Clothing Company, Defendant.

No. 96 Civ. 4130 (LAK).

United States District Court, S.D. New York.

July 22, 1996.

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Arthur J. Greenbaum, Joshua Paul, Richard S. Mandel, Cowan, Liebowitz & Latman, P.C., New York City, for Plaintiff.

Jerome B. Falk, Jr., Annette L. Hurst, Howard, Rice, Nemerovski, Canady, Falk & Rabkin, San Francisco, CA, Peter Jakab, Fein & Jakab, New York City, for Defendant.

OPINION

KAPLAN, District Judge.

Estee Lauder Inc. ("Lauder") recently introduced a new skin moisturizer which, depending upon which of the parties is speaking, is called either "100%" or "100% Time Release Moisturizer." The defendant, The Gap, Inc. ("Gap"), is about to launch a line of personal care products in its Old Navy ("Old Navy") clothing stores under the umbrella name, "100% Body Care." Lauder seeks to enjoin Gap from doing so, claiming that Gap's use of "100% Body Care" infringes Lauder's trademark as applied to goods of this character. This is the Court's decision following a bench trial.

The Genesis of the Dispute

The Parties

The Estee Lauder Companies are among the leading skin care, makeup and fragrance companies in the world. They consist of Lauder, the plaintiff in this case, as well as Clinique, Prescriptives, Origins, Aramis and other entities. Their total worldwide sales in fiscal 1995 were approximately $2.9 billion, of which slightly less than half were made in the United States. (PX 1,¹ ¶ 4)

Lauder produces makeup, fragrance products, and a wide array of skin and other personal care products. It currently sells face care products, body lotions, shampoos, hair conditioner, hair spray, sun care products, eye cream, moisturizing products, antiperspirants, among other products. (Id. ¶ 5) Its total sales of skin and other personal care products in the United States last year exceeded $225 million, and it spent over $30 million on advertising and marketing support. (Id.)

Gap is an international retailer of apparel and other products. It sells through its own well-known retail stores — Gap, GapKids, Banana Republic, Old Navy and, most recently, Baby Gap. (DX EEE-HHH) Old Navy, the chain at issue in this case, was created in 1992 in consequence of marketing studies that revealed that approximately one-half of the domestic apparel market consisted of sales in a market segment in which Gap was not represented, a segment that Gap refers to as the mass middle market. (DX BBBB² ¶¶ 4-6) The segment is characterized, according to Gap, by real estate format (stores located in strip malls and so-called power centers as distinguished from free-standing metropolitan department stores and regional enclosed shopping malls), customer income in the $30,000 to $70,000 range, and retail prices. (Id. ¶¶ 5, 9-13)

The Products and Name Selections

The record reveals that the parties independently began the process that resulted in each selecting the name "100%" for its products. Once the initial decisions were made, however, their efforts to clear use of their preferred mark yielded a sketchy outline of the conflict that now has matured. As time went by, the picture became clearer, especially to Gap, but the parties continued on a collision course.

Gap's Initial Efforts

Gap began considering the introduction of personal care products in its major divisions at least as early as late 1993 and hired Gary McNatton to develop such lines in February 1994. (DX CCCC³ ¶ 1) McNatton's group began development of a personal care line for Old Navy in approximately December 1994, after first having done so for the Gap and Banana Republic stores. (Id. ¶¶ 5, 9) In August 1995, McNatton, who "had a good idea of which products he would include" in the line, began to focus on their identifier. (Id. ¶¶ 9-10) By September or October, he settled on the percentage sign ("%") as his preferred symbol and decided that he would like to use "100%" for the line. (See id. ¶¶ 11-12)

Lauder's Initial Efforts

During 1995, Lauder started planning to introduce in the spring of 1996 a new skin moisturizer product in lotion form because skin moisturizing lotions are among the most popular skin treatment products with women. The new product incorporates over 70 minerals and delivers moisture to the skin over an extended period through a trademarked moisture delivery system called "Aqua-Spheres." (PX 1, ¶¶ 6-7)

In November or December 1995, Lauder's creative group considered a number of possible trademarks for the new product. Exactly what that group decided is a matter of some dispute. According to Dianne Osborne, Lauder's vice president — skin care marketing, she decided to adopt "100%" as the trademark because it "would suggest to consumers certain attributes of" the product — its long lasting quality and the notion that it is the best such product available. (Id., ¶ 8) Gap, on the other hand, points to Lauder internal documents that refer to the product as "100% Time Release Moisturizer" to support its contention that this longer phrase, rather than "100%" standing alone, is the trademark and that Lauder so intended until it took its present position for litigation purposes. As indicated below, the question whether "100%," standing alone, is a trademark or used in a trademark sense does not depend upon Lauder's intentions, which are no more than circumstantial evidence of likely consumer perception. Accordingly, no definitive conclusion need be reached as to Lauder's intention, if indeed Lauder may be said to have had any.

The Trademark Searches and the Dana Contacts

In September or October 1995, McNatton's group at Gap asked Julie Kanberg, Gap's in-house trademark counsel, to determine the availability of "100%" as a trademark for personal care products to be sold in Old Navy stores. (DX CCCC ¶ 12; DX DDDD⁴ ¶ 3) Ms. Kanberg promptly discovered that the trademark "100% HUNDRED PER CENT." had been registered with the United States Patent and Trademark Office ("PTO") for toilet preparations, perfumery, and cosmetics by Les Parfums de Dana, Inc. ("Dana"). (DX DDDD ¶ 4) She then consulted outside counsel and commissioned a private investigator to determine whether Dana used the mark. (Id. ¶ 5)

While Gap was attempting to learn whether Dana had any rights in the mark 100%, Lauder started down the same path and, in fact, overtook Gap's efforts. On December 13, 1995, Lauder's legal department ordered a trademark search report and promptly discovered the Dana registration. (PX 45,⁵ ¶ 4) While still unable to determine with certainty whether Dana's mark was in use, Lauder, on December 20, 1995, filed an application with the PTO to register "100%" on an intent-to-use ("ITU") basis as a trademark for cosmetics, toiletries and fragrances.⁶ (Id. ¶¶ 5-6; PX 47) On January 11, 1996, just a few weeks later, Kanberg, who did not yet know anything of Lauder's plans or of Lauder's ITU application, filed ITU applications to register "100%," "100% BODY CARE" and "100% BODY CARE AND DESIGN."⁷ (DX DDDD ¶ 6)

Given Lauder's uncertainty as to whether Dana was using the "100% HUNDRED PER CENT." mark, Lauder opened discussions with John Jackson, Dana's general counsel, with a view to obtaining an assignment of Dana's rights. In the meantime, Gap's investigator reported back that Dana had abandoned its mark. (DX DDDD ¶ 5) Nevertheless, Kanberg, concerned that the Dana registration would block her own applications, asked her investigator to seek an assignment from Dana. (Id. ¶ 7)

Dana suddenly was confronted with an embarrassment of potential riches — two bidders for an abandoned⁸ trademark registration — and sought to take advantage of the situation. When contacted on behalf of Gap, Dana's Mr. Jackson disclosed that there was another bidder and, although it did not identify Lauder by name, reported to Gap's investigator that it "was a high-end cosmetics company" that was "on the road to production."⁹ (Kanberg Dep. 86-87) Kanberg made no effort to identify the other bidder and, thinking the figures mentioned by Jackson too high, broke off discussions with Dana. (Id. 83-90) In late February, however, Gap made one last attempt to procure the Dana registration. In the course of settling an unrelated dispute, it sought to have Dana include its registration in the deal but learned that the registration already had been assigned. An on-line search for the assignment revealed, on February 27, 1996, Lauder's December 20, 1995 ITU application. (DX DDDD ¶ 11) Thus, the Court finds that Gap, as of February 27, 1996, knew not only of Lauder's ITU application, but knew also that Lauder had acquired the Dana registration and was the "high end cosmetics company" that was "on the road to production" of a new product or products using "100%" as its trademark.

The Subsequent Applications

At this point, caution might have suggested that Gap discuss the looming conflict with Lauder. Gap, however, first sought to improve its position.

On March 7, 1996, Ms. Kanberg requested a further trademark search. (DX DDDD ¶ 12; DX RRR) Finding that Lauder had not amended its December 1995 ITU application to allege use, she filed a number of additional ITU applications on behalf of Gap on March 12, 1996. (DX DDDD ¶¶ 12, 10; DX LLL) These additional applications consisted of "100%" followed by another word or phrase, most of them being the generic name of a product, such as "100% Body Scent." (DX LLL)

Ms. Kanberg asserts that Gap had decided that it would not proceed with "100%" alone if Lauder objected and that she had no knowledge of any actual use by Lauder upon which Gap would infringe with the proposed uses in Gap's ITU applications. (DX DDDD ¶¶ 12, 15) That no doubt is so.¹⁰ Nonetheless, the Court finds that Gap, knowing that Lauder had a new "100%" product in the pipe line, embarked on a race to be the first to use a "100%" mark and that Gap's March 12, 1996...