Two Pesos, Inc. v. Taco Cabana, Inc.

1992-06-26

Headline: Court allows inherently distinctive restaurant trade dress protection without proving secondary meaning, upholding a ruling that shields an original restaurant's image from copycat competitors and aids market expansion.

Holding:

Real World Impact:

Allows owners of inherently distinctive trade dress to stop imitators without proving secondary meaning.
Supports businesses expanding into new markets by protecting their unique restaurant image from copycats.
Clarifies circuit split and gives national protection to nonfunctional trade dress.

Topics: trade dress, trademark law, restaurant design, unfair competition, intellectual property

Summary

Background

Taco Cabana is a Texas fast-food chain that created a distinctive Mexican-themed dining image with bright colors, murals, patio areas, and a stepped exterior. Two Pesos opened restaurants using a very similar motif in other Texas cities. Taco Cabana sued Two Pesos for copying its trade dress. A jury found Taco Cabana's trade dress nonfunctional, inherently distinctive, lacking secondary meaning, and that Two Pesos' conduct was likely to confuse customers; the trial court awarded damages.

Reasoning

The legal question was whether an inherently distinctive trade dress needs proof of secondary meaning to get protection under § 43(a) of the Lanham Act. The Supreme Court concluded it does not. The Court explained that inherently distinctive marks and trade dress serve to identify a source and so are protectible without showing consumer association called secondary meaning. The Court said there is no textual basis in § 43(a) to treat inherently distinctive trade dress differently from other marks and warned that requiring secondary meaning could harm competition and startups. The Court affirmed the Fifth Circuit and rejected the view that trade dress must always show secondary meaning.

Real world impact

This ruling lets owners of nonfunctional, inherently distinctive trade dress stop imitators without waiting to prove secondary meaning. It protects businesses that build a unique image from losing that image when they expand into new markets. The Court did not revisit the jury's finding on functionality, and the opinion notes the Lanham Act had been amended after this suit was filed. The ruling also resolves a split among federal appeals courts on this question.

Dissents or concurrances

Three Justices wrote separate concurring opinions. Justice Stevens emphasized the courts' development of § 43(a) and Congress's later endorsement; Justice Thomas relied on the provision's language and common-law roots; Justice Scalia joined Thomas.