Kendall-Jackson Winery, Ltd. v. E. & J. Gallo Winery

• Citation: 150 F.3d 1042,47 USPQ2d 1332
• Decision Date: 08 July 1998
• Docket Number: KENDALL-JACKSON,No. 97-16185,97-16185
• Parties: , 98 Cal. Daily Op. Serv. 5357, 98 Daily Journal D.A.R. 7540 WINERY, LIMITED, Plaintiff-Appellant, v. E. & J. GALLO WINERY, a California corporation, dba Turning Leaf Vineyards, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1042

150 F.3d 1042

47 U.S.P.Q.2d 1332, 98 Cal. Daily Op. Serv. 5357,

98 Daily Journal D.A.R. 7540

KENDALL-JACKSON WINERY, LIMITED, Plaintiff-Appellant, v. E. & J. GALLO WINERY, a California corporation, dba Turning

Leaf Vineyards, Defendant-Appellee.

No. 97-16185.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 12, 1998.

Decided July 8, 1998.

Frederick P. Furth (argument) and Bruce J. Wecker (brief), Furth, Fahrner & Mason, San Francisco, California, for the plaintiff-appellant.

G. Kip Edwards, Palo Alto, California, for the defendant-appellee.

Appeal from the United States District Court for the Northern District of California; Vaughn R. Walker, District Judge, Presiding. D.C. No. CV-96-01198-VRW.

Before: CHOY, PREGERSON, and BOOCHEVER, Circuit Judges.

PREGERSON, Circuit Judge:

Kendall-Jackson Winery sued E. & J. Gallo Winery for featuring on its wine labels a multicolored grape leaf design that allegedly resembles a similarly colored leaf design that Kendall-Jackson uses on its wine labels (the trademark claim) ¹ and for using wine bottles that mimic the overall appearance of Kendall-Jackson's wine bottles (the trade dress claim). ² Kendall-Jackson claimed that

                Gallo's conduct violated the Lanham Trademark Act of 1946, 15 U.S.C. §§ 1051 et seq., as well as California's unfair competition laws, Cal.  Bus. & Prof.Code §§ 17200 et seq.;  id. §§ 17500 et seq.   Kendall-Jackson lost the trademark claim on summary adjudication and the trade dress claim after a jury trial.  Bound by the jury's factual findings, the district court entered judgment for Gallo on the state unfair-competition claims.  Kendall-Jackson now appeals.  We affirm
                

FACTS AND PRIOR PROCEEDINGS

Kendall-Jackson is a California winery that has a reputation for producing high quality, mid-priced varietal wines. ³ Since its inception in 1983, Kendall-Jackson has sold over ten million cases of its Vintner's Reserve line of premium wines. By 1994, Kendall-Jackson was selling over $100 million worth of Vintner's Reserve wine a year, and its chardonnay was the number one selling chardonnay in the United States.

During this time, Kendall-Jackson featured on its Vintner's Reserve wine labels a downward-pointing, stylized grape leaf design using various shades of green, yellow, orange, red, and brown. The leaf design was always coupled with a banner that intersected the leaf and that read "KENDALL-JACKSON." See photographs laid out in Appendix I. In addition to using the leaf design, Kendall-Jackson tried to distinguish its Vintner's Reserve wine by packaging the wine in recognizable bottles. The Vintner's Reserve bottles, which came in one of two shapes ("burgundy-style" or "bordeaux-style"), ⁴ had a rounded flange, ⁵ a visible cork with printed leaves on it, a brown or burgundy neck label with gold lines on the top and bottom that form an oval in the back, and an off-white label featuring the multicolored leaf design.

Gallo is also a successful California winery. In fact, Gallo is the largest wine-producer in the world. But unlike Kendall-Jackson, Gallo has a reputation for producing lower-priced, non-premium wines. During the time that Kendall-Jackson was establishing itself as a leader in the premium wine market, the market for non-premium wine was rapidly declining.

In 1992, Gallo considered entering the premium wine market. For three years, Gallo conducted extensive market research to determine how best to enter the market. Much of this research was directed at the success of the market leader--Kendall-Jackson Vintner's Reserve. Through its market research, Gallo determined that consumers associate the name "Gallo" with "jug wine" rather than premium wine and that a colorful grape-leaf design attracts consumers.

In accordance with these results, Gallo introduced in the fall of 1995 a line of premium wine that did not use the Gallo name and that featured the consumer-preferred leaf motif. See photograph laid out in Appendix II. Gallo called this wine "Turning Leaf." Like Kendall-Jackson's Vintner's Reserve wines, Gallo's Turning Leaf wines came in either a burgundy-style bottle or a bordeaux-style bottle and featured a rounded flange, a visible cork with printed leaves on it, a brown or burgundy neck label with gold lines on the top and bottom that form an oval in the back, and an off-white label with a prominent, downward-pointing, stylized grape leaf design in various shades of green, yellow, orange, red, and brown.

Six months after Gallo introduced its Turning Leaf line, Kendall-Jackson sued Gallo in the United States District Court for the Northern District of California. Kendall-Jackson asserted claims under the Lanham Act, 15 U.S.C. §§ 1501 et seq., for trademark infringement, trade dress infringement, trademark dilution, and trade dress dilution. Kendall-Jackson also invoked the California and common-law counterparts to the Lanham Act and asserted various unfair competition claims: trademark and trade dress dilution, Cal. Bus. & Prof.Code § 14330; false advertising, Cal. Bus. & Prof.Code § 17500; unfair Gallo moved for summary adjudication of Kendall-Jackson's claims of trademark and trade dress infringement. The district court granted Gallo's motion on the trademark claim but denied the motion on the trade dress claim. The trade dress claim went to a jury, and the jury decided that Gallo's trade dress did not infringe Kendall-Jackson's trade dress. Bound by the factual findings of the jury, the district court resolved the remaining claims in favor of Gallo. Accordingly, the district court entered judgment for Gallo on all claims. Kendall-Jackson appeals that judgment.

competition, Cal. Bus. & Prof.Code § 7200; common law trademark infringement; common law trade dress infringement; and palming off.

DISCUSSION

Kendall-Jackson argues that the district court improperly handled both the trademark claim and the trade dress claim. With respect to the trademark claim, Kendall-Jackson argues that the district court should have denied Gallo's motion for summary adjudication. With respect to the trade dress claim, Kendall-Jackson argues that the district court should have granted Kendall-Jackson's motion for judgment as a matter of law on the first two elements of the claim, given the jury more instructions on the third element, and refused to instruct the jury on any of Gallo's affirmative defenses. As explained below, we find each of Kendall-Jackson's arguments unavailing.

I. Standards of Review

We review de novo grants of summary adjudication motions, Amdahl Corp. v. Profit Freight Systems, Inc., 65 F.3d 144, 145 (9th Cir.1995), and denials of motions for judgment as a matter of law after trial, U.S. ex rel. Hopper v. Anton, 91 F.3d 1261, 1268 (9th Cir.1996), cert. denied, --- U.S. ----, 117 S.Ct. 958, 136 L.Ed.2d 844 (1997). We review for abuse of discretion a district court's formulation of jury instructions. McClaran v. Plastic Indus., Inc., 97 F.3d 347, 354 (9th Cir.1996).

II. General Principles

Section 43(a) of the Lanham Act makes actionable the deceptive and misleading use in commerce of "any word, term, name, symbol, or device" on any goods or in connection with any goods. § 43(a) (codified as amended at 15 U.S.C. § 1125(a)). ⁶ For a number of years after this section was enacted, courts construed it narrowly to include only two kinds of wrongs: false advertising and the common-law tort of "passing off" one's goods as those of another. Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 778, 112 S.Ct. 2753, 120 L.Ed.2d 615 (1992) (Stevens, J., concurring).

But over time, § 43(a) has been expanded " 'to create, in essence, a federal law of unfair competition.' " Id. at 780, 112 S.Ct. 2753 (Stevens, J., concurring) (quoting the United States Trademark Association Trademark Review Commission Report and Recommendations to USTA President and Board of Directors, 77 Trademark Rep. 375, 426 (1987)). Section 43(a) now protects both trademarks and trade dress from infringement. See id. at 773, 112 S.Ct. 2753 (stating that "the protection of trademarks and trade dress under § 43(a) serves the same statutory purpose of preventing deception and unfair competition" and that "[t]here is no persuasive reason to apply different analysis to the two"). To state an infringement claim under § 43(a)--whether it be a trademark The distinctiveness element comes from § 2 of the Lanham Act, which sets forth the requirements for registering a trademark. § 2 (codified as amended at 15 U.S.C. § 1052). ⁷ To be protected under § 2, a mark must be capable of distinguishing the applicant's goods from the goods of others. Id. In other words, the mark must be distinctive.

claim or a trade dress claim--a plaintiff must meet three basic elements: (1) distinctiveness, (2) nonfunctionality, and (3) likelihood of confusion.

Marks are often classified in one of five categories of increasing distinctiveness: (1) generic, (2) descriptive, (3) suggestive, (4) arbitrary, or (5) fanciful. ⁸ "The latter three categories of marks, because their intrinsic nature serves to identify a particular source of a product, are deemed inherently distinctive." Two Pesos, 505 U.S. at 768, 112 S.Ct. 2753. These three categories of marks therefore meet the distinctiveness element automatically. At the other end of the spectrum are generic marks, which can never meet the distinctiveness element. ⁹

Marks that are descriptive fall in the middle of these two extremes. Descriptive marks are not inherently distinctive and hence do not initially satisfy the distinctiveness element. But descriptive marks can acquire distinctiveness if the public comes to associate the mark with a specific source. Such acquired distinctiveness, which is referred to as "secondary meaning," allows § 43 to protect descriptive marks that otherwise could not qualify for protection as trademarks. Id. at 769, 112 S.Ct. 2753.

Thus, "[a]n identifying mark is distinctive and is...