Estee Lauder Inc. v. The Gap, Inc.

• Decision Date: 25 March 1997
• Docket Number: D,Nos. 797,s. 797
• Citation: 108 F.3d 1503
• Parties: ESTEE LAUDER INC., Plaintiff-Counter-Defendant-Appellee, v. THE GAP, INC. d/b/a Old Navy Clothing Company, Defendant-Counterclaimant-Appellant. ocket 96-7938.
• Court: U.S. Court of Appeals — Second Circuit

Page 1503

108 F.3d 1503

42 U.S.P.Q.2d 1228

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

Defendant-Counterclaimant-Appellant.

Nos. 797, Docket 96-7938.

United States Court of Appeals,

Second Circuit.

Argued Jan. 24, 1997.

Decided March 25, 1997.

Arthur J. Greenbaum, New York City (Joshua Paul, Robert W. Clarida, Cowan, Liebowitz & Latman, New York City, on the brief), for Plaintiff-Counter-Defendant-Appellee.

Jerome B. Falk, Jr., San Francisco, CA (Annette L. Hurst, Howard, Rice, Nemerovski, Canady, Falk & Rabkin, San Francisco, CA, Peter Jakab, Fein & Jakab, New York City, Julie Henderson Kanberg, San Francisco, CA, on the brief), for Defendant-Counterclaimant-Appellant.

Before: OAKES, KEARSE, and JACOBS, Circuit Judges.

KEARSE, Circuit Judge:

Defendant The Gap, Inc. d/b/a Old Navy Clothing Company ("Gap"), appeals from a final judgment of the United States District Court for the Southern District of New York, Lewis A. Kaplan, Judge, permanently enjoining Gap from using the term "100%" alone or with other terms as a trademark in connection with the manufacture, promotion, or distribution of its personal care products and bathroom furnishings and implements. The district court found that Gap's use of terms such as "100% BODY CARE" on its products was likely to cause consumers to confuse Gap's products with a moisturizer product manufactured by plaintiff Estee Lauder Inc. ("Lauder") and marketed under Lauder's trademark "100%." On appeal, Gap contends principally that the district court erred in finding Lauder's "100%" mark protectable and in finding that Gap's use of a mark that includes "100%" in conjunction with other terms would create a likelihood of consumer confusion. We agree that the district court erred in its likelihood-of-confusion analysis, and we accordingly reverse.

I. BACKGROUND

Lauder is an international cosmetics company that manufactures skin care, makeup, and fragrance products. The company distributes its products through cosmetics specialty stores and "upscale" department stores that, in its view, complement the image of In December 1994, Gap developed a line of personal care products to be distributed through Old Navy, intending to market, inter alia, shampoo, soap, and body lotion under the label "100% BODY CARE." In September 1995, Gap began a search into the availability of a trademark containing the term "100%." In the meantime, Lauder was developing a facial moisturizer, and in December 1995 it began its own investigation into the availability of the term "100%" as the trademark for its moisturizer.

quality it cultivates. Gap is an international retailer of apparel and other products. Gap owns and operates Old Navy Clothing Company ("Old Navy"), whose stores are located primarily in strip malls and shopping centers and cater to the mass middle market. All Old Navy products, and virtually no others, are distributed through Old Navy stores.

Both companies eventually learned that a third company, Les Parfums de Dana, Inc. ("Dana"), was the record owner of the trademark "100% HUNDRED PER CENT," but that Dana had abandoned use of its trademark. Lauder obtained an assignment of the "100%" trademark and registration from Dana, and in December 1995 Lauder filed an intent-to-use ("ITU") application with the United States Patent and Trademark Office seeking to register "100%" as a trademark. In January 1996, Gap filed a similar application to register "100%" alone; it also filed applications to register "100% BODY CARE" and "100% BODY CARE AND DESIGN." Thereafter, it filed numerous additional applications to register "100%" in combination with other terms such as "100% SPORT," "100% BODY CARE FOR KIDS," and "100% HOME SCENT."

In March 1996, Gap contacted Lauder to discuss the two companies' conflicting ITU applications. In light of Lauder's intent to use "100%" as the mark for its moisturizer, Gap offered assurance that for Gap's own products it would not use the term "100%" alone, and it abandoned its ITU application for the mark "100%" alone. Gap subsequently modified its planned "100% BODY CARE" mark to increase emphasis on the words "BODY CARE" and to decrease emphasis on the number "100." The parties failed to reach agreement.

Lauder began to distribute its moisturizer in April 1996, packaged in a 1.7-ounce aquamarine glass bottle, as part of its "blue line" of products that are typically marketed in aquamarine packaging. Lauder's moisturizer has a suggested retail price of $32.50. As the packaging is shown in Appendix A to this opinion, Lauder's "EL" logo is prominently displayed at the top of the bottle, and the company's "ESTEE LAUDER" house mark appears immediately below that. Near the bottom, the following lines appear:

100%

Time Release

Moisturizer

with BioMineral

Water

The back of the bottle contains the notation: "(C) ESTEE LAUDER, DIST."

Gap's "100% BODY CARE" products are packaged principally in plastic bottles that range in size from .15 to 33 fluid ounces. At the top of each bottle appears a generic designation of its contents (e.g., "bubble bath," "shampoo," "body lotion") in large, lower case letters. The suggestion of a fragrance for each product (e.g., "Groovy Grapefruit," "Some Are Pink," "Positively Purple") is printed in an elongated oval just above the center of the bottle. The bottles themselves are translucent, presenting the various colors of their respective contents. The logo

100%

BODY CARE

appears towards the bottom of the bottle. As illustrated in Appendix B, the "%" sign is oversized, approximately three times the height of "100." The back of the bottle contains the Old Navy house mark, followed by the notation, "A division of Gap, Inc." Gap planned to release this line of products on a test basis in August 1996. The planned prices for each type and quantity of these products were small fractions of the suggested retail price of Lauder's product.

In June 1996, Lauder commenced the present action seeking preliminary and permanent injunctions against the use of "100%" as part of Gap's marks, alleging principally that such use would lead consumers to believe that Gap's products were associated with Lauder and would thereby violate Lauder's rights under § 43(a) of the Lanham Act (the "Act"), 15 U.S.C. § 1125(a) (1994). Gap disputed Lauder's assertions and counterclaimed for declaratory and injunctive relief against interference by Lauder with Gap's efforts to register various marks incorporating the term "100%." The district court ordered expedited discovery and conducted a two-day bench trial in July 1996.

In a posttrial Opinion dated July 22, 1996, reported at 932 F.Supp. 595, the court ruled that Lauder was entitled to a permanent injunction prohibiting Gap from including the term "100%" in trademarks on Gap's personal care and other products. The court found that Lauder's "100%" mark was suggestive and, therefore, protectable. The court reasoned:

The product here is a skin moisturizer. The designation "100%" has no particular meaning with respect to such a product and certainly does not convey specific product attributes. Indeed, Gap's own personal care products manager admitted at his deposition that "100% on its own is meaningless.".... Rather, "100%" suggests the idea of quality to consumers whose imaginations and thought processes are provoked.

932 F.Supp. at 608. The court also found that Lauder's mark was suggestive even if it were viewed not as "100%" standing alone but as "100% Time Release Moisturizer":

[T]he phrase, particularly given the manner in which it is displayed in Lauder's labelling, packaging, advertising, and promotion, is susceptible of three interpretations: (1) this bottle contains nothing but time release moisturizer, (2) this product moisturizes 100% of the time, and (3) this is 100% (the brand) time release moisturizer.... The third of these interpretations, Gap concedes, is suggestive.

Id. at 609. Finding that "the average prudent consumer would understand the phrase '100% time release moisturizer' in the suggestive sense referred to above," the district court held that Lauder's mark was protectable. Id. at 611.

Having noted Lauder's concession that its mark had not acquired secondary meaning, see, e.g., id. at 606, the court proceeded to address the factors set forth in Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492, 495 (2d Cir.), cert. denied, 368 U.S. 820, 82 S.Ct. 36, 7 L.Ed.2d 25 (1961), in order to determine whether there was a likelihood of consumer confusion. First the court found that Lauder's mark was of "moderate strength" because it was "inherent[ly] distinctive[ ]," 932 F.Supp. at 612, and that the "prominent use of '100%' by both parties--particularly in view of the fact that each of the parties uses '100%' to convey the same idea in conjunction with closely related personal care products--makes the similarity factor weigh in Lauder's favor," id. at 613.

The court saw some obvious differences between Lauder's product and those of Gap:

Lauder's product is a high technology facial moisturizer sold in tiny elegant bottles containing 1.7 fluid ounces of product. Its suggested retail price is $32.50 per bottle. Gap's line includes a body lotion as well as other personal care products. It typically will be sold in much larger bottles at much lower prices. A consumer who had made an informed decision to buy either product would be unlikely to purchase the other by mistake.

Id. But the court found these differences to be outweighed by the fact that the products are closely related, i.e., that they are "all used for personal care," id. The court also found that, although there was some overlap in clientele, the two companies' products were sold through markedly different channels of distribution:

The difference between the Lauder and Gap products is nowhere greater than with respect to the channels through which they are...