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TWO PESOS, INC. v. TACO CABANA, INC.Certiorari to the united states court of appeals for the fifth circuit

No. 91971. Argued April 21, 1992Decided June 26, 1992

Summary: TACO CABANA the operator of a chain of Mexican restaurants, sued petitioner, a

similar chain, for trade dress infringement under 43(a) of the Trademark Act of 1946

(Lanham Act). The District Court said that respondents trade dress was protected if it either

was inherently distinctive or had acquired a secondary meaning. The District Court entered

judgment that respondents trade dress is inherently distinctive but has not acquired a

secondary meaning. CA held that Taco Cabanas inherently distinctive trade dress was

entitled to protection despite a finding of no secondary meaning and rejected petitioners

argument that a finding of no secondary meaning contradicted a finding of inherent

distinctiveness. Decision of CA affirmed on Certiorari.

Facts:

Taco Cabana, Inc., operates a chain of fast food restaurants in Texas serving Mexicanfood. The first Taco Cabana restaurant was opened in San Antonio in September

1978, and five more restaurants had been opened in San Antonio by 1985.

Taco Cabana describes its Mexican trade dress* asa festive eating atmosphere having interior dining and patio areas

decorated with artifacts, bright colors, paintings and murals. The patio

includes interior and exterior areas with the interior patio capable of being

sealed off from the outside patio by overhead garage doors. The stepped

exterior of the building is a festive and vivid color scheme using top border

paint and neon stripes. Bright awnings and umbrellas continue the theme.

In December 1985, a Two Pesos, Inc., restaurant was opened in Houston adopting amotif very similar to the foregoing description of Taco Cabanas trade dress.

In 1987, Taco Cabana sued Two Pesos in the United States District Court for theSouthern District of Texas for trade dress infringement

District Court held that Taco Cabana has a trade dress awarding it damages;o taken as a whole, the trade dress is nonfunctional; the trade dress is

inherently distinctive; the trade dress has not acquired a secondary meaning

in the Texas market; and the alleged infringement creates a likelihood of

confusion on the part of ordinary customers as to the source or association

of the restaurants goods or services.o Taco Cabanas trade dress was protected if it either was inherently

distinctive or had acquired a secondary meaning

Court of Appeals held that Taco Cabanas inherently distinctive trade dress wasentitled to protection despite a finding of no secondary meaning**

*Trade dress is the total image of the business. Taco Cabanas trade dress may include the shape and general

appearance of the exterior of the restaurant, the identifying sign, the interior kitchen floor plan, the decor, the

menu, the equipment used to serve food, the servers uniforms and other features reflecting on the total image

of the restaurant.

**Secondary meaning is used generally to indicate that a mark or dress has come through use to be uniquely

associated with a specific source. To establish secondary meaning, a manufacturer must show that, in the

minds of the public, the primary significance of a product feature or term is to identify the source of the productrather than the product itself.

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Issue: Whether or not the trade dresses may be protected without proof that the trade

dress has secondary meaning.

Held: The court noted that trademark law requires a demonstration of secondary meaning

only when the claimed trademark is not sufficiently distinctive of itself to identify the

producer; the court held that the same principles should apply to protection of tradedresses.

Marks which are merely descriptive of a product are not inherently distinctive. When used

to describe a product, they do not inherently identify a particular source, and hence cannot

be protected. However, descriptive marks may acquire the distinctiveness which will allow

them to be protected under the Act. Section 2 of the Lanham Act provides that a descriptive

mark that otherwise could not be registered under the Act may be registered if it has

become distinctive of the applicants goods in commerce. This acquired distinctiveness is

generally called secondary meaning.

The general rule regarding distinctiveness is clear: An identifying mark is distinctive andcapable of being protected if it either (1) is inherently distinctive or (2) has acquired

distinctiveness through secondary meaning.

Two Pesos argumentjurys finding that the trade dress has not acquired a secondary

meaning shows conclusively that the trade dress is not inherently distinctive.

2 of the Lanham Act requires secondary meaning only as a condition to registering

descriptive marks, there are plainly marks that are registrable without showing secondary

meaning. These same marks, even if not registered, remain inherently capable of

distinguishing the goods of the users of these marks.

Hence, if an unregistered mark is deemed merely descriptive, which the verbal mark before

the court proved to be, proof of secondary meaning is required; however, suggestive marks

are eligible for protection without any proof of secondary meaning, since the connection

between the mark and the source is presumed.

Engrafting a secondary meaning requirement onto 43(a) also would make more difficult

the identification of a producer with its product and thereby undermine the Lanham Acts

purposes of securing to a marks owner the goodwill of his business and protecting

consumers ability to distinguish among competing producers. Moreover, it could have

anticompetitive effects by creating burdens on the startup of small businesses.