Case(s): Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 112 S. Ct. 2753 (1992)
Taco Cabana, Inc., operates a chain of fast food restaurants in Texas. The restaurants serve Mexican food. 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 as “a 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.”
Beginning in December 1985, Two Pesos adopted a motif very similar to the description of Taco Cabana’s trade dress, and opened restaurants in Texas. In 1986, it entered the Houston and Austin markets and expanded into other Texas cities, including Dallas and El Paso where Two Pesos was also doing business. In 1987, Taco Cabana sued Two Pesos in the U.S. District Court for the Southern District of Texas for trade dress infringement under section 43(a) of the Lanham Act, and for theft of trade secrets under Texas common law.
District Court Decision
The District Court instructed the jury, inter alia, that Taco Cabana’s trade dress was protected if it either was inherently distinctive (i.e., was not merely descriptive) or had acquired a secondary meaning (i.e., had come through use to be uniquely associated with a specific source). The court entered judgment for Taco Cabana after the jury found, among other things, that its trade dress is inherently distinctive but had not acquired a secondary meaning.
Fifth Circuit Appeal
Affirming the district court’s finding, the Court of Appeals for the Fifth Circuit, following its prior decision in Chevron Chemical Co. v. Voluntary Purchasing Groups, Inc., held that Taco Cabana’s inherently distinctive trade dress was entitled to protection despite the lack of proof of secondary meaning, and thus, rejected Two Pesos’s argument that a finding of no secondary meaning was at odds with a finding of inherent distinctiveness. In Chevron, the Fifth Circuit held that trademark law requires a demonstration of secondary meaning only when the claimed trademark is not sufficiently distinctive of itself to identify the producer; here, the court determined that the same principles should apply to protection of trade dresses.
The panel of judges for the Fifth Circuit also ruled that the jury instructions adequately stated the applicable law, and the evidence supported the jury’s findings.
The Supreme Court Decision
The Supreme Court granted certiorari “to resolve the conflict among the Courts of Appeals on the question whether trade dress which is inherently distinctive is protectable under section 43(a) without a showing that it has acquired secondary meaning.” The court held in June 1992, “We find that it is, and we therefore affirm.”
In affirming the Fifth Circuit’s finding, the Supreme Court held that the appellate court correctly rejected Two Pesos’s claim that a finding of no secondary meaning contradicts a finding of inherent distinctiveness. SCOTUS held that proof of secondary meaning is not required to prevail on a claim, where the trade dress at issue was inherently distinctive. Specifically, the court stated that “there is no persuasive reason to apply to trade dress a general requirement of secondary meaning which is at odds with the principles generally applicable to infringement suits under section 43(a).”
From a policy perspective, SCOTUS held that “adding a secondary meaning requirement could have anticompetitive effects, creating particular burdens on the start up of small companies. It would present special difficulties for a business, such as [Taco Cabana], that seeks to start a new product in a limited area and then expand into new markets. Denying protection for inherently distinctive nonfunctional trade dress until after secondary meaning has been established would allow a competitor, which has not adopted a distinctive trade dress of its own, to appropriate the originator’s dress in other markets and to deter the originator from expanding into and competing in these areas.”