Opposition Brief — Hallmark Cards, Inc. v. Hartford House, Ltd.

IN THE

Supreme Court of the United States

OcToBer TERM, 1988

HALLMARK CARDS, INCORPORATED and

HALLMARK MARKETING CORPORATION,

Petitioners,

VS.

HARTFORD HOUSE, LTD.,

d/b/a BLUE MOUNTAIN ARTS,

SUSAN POLIS SCHUTZ,

and STEPHEN SCHUTZ,

Respondents.

ON PETITION FOR WRIT OF CERTIORARI

T° THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

BRIEF IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

HARRY G. MELKONIAN* JOHN A. PURVIS

JAMES B. HICKS BUCHANAN, GRAY,

RHEA CARAS PURVIS & SCHUETZE

WHITE & CASE

333 South Hope Street 1050 Walnut Street

Suite 3400 Suite 501

Los Angeles, California 90071 Boulder, Colorado 80302

(213) 620-7700 (303) 442-3366

* Counsel of Record

Attorneys for Respondents

Lawyers Brief Service / Legal Publishers / (213) 383-4457 / (714) 720-1510

ia a ll

QUESTIONS PRESENTED

Hallmark seeks review of a preliminary injunction even

though the trial is littke more than three months from now (a

fact not disclosed by Hallmark’s Petition). “In reviewing such

interlocutory relief, this Court may only consider whether

issuance of the injunction constituted an abuse of discretion.”

Brown v. Chote, 411 U.S. 452, 457 (1973). Hallmark’s

“Questions Presented” address the merits of the case, but

consideration of such ultimate questions has been specifically

disapproved by this Court on review of interlocutory orders.

Id. at 456.

Pursuant to Supreme Court Rule 34.2, respondents Hartford

House, Ltd., d/b/a Blue Mountain Arts, Susan Polis Schutz,

and Stephen Schutz (collectively, “Blue Mountain”) therefore

amend Hallmark’s “Questions Presented” as follows:

1. Did the District Court abuse its discretion by

preliminarily enjoining 83 greeting cards which Hallmark

concedes deliberately imitate Blue Mountain’s cards?

2. In affirming that Hallmark’s imitative cards infringe

Blue Mountain’s rights, did the Court of Appeals make an

obvious mistake of law?

* Hallmark distributes 11,000 different greeting cards. Petition

Appendix at p. 33a. The lower courts prohibited Hallmark from

distributing only the 83 cards identified in the preliminary injunc-

tion, and did not restrict Hallmark with regard to the rest of its

11,000 cards. /d. at p. 34a.

RULE 28.1 STATEMENT

Blue Mountain adopts Hallmark’s Statement of the Parties to

the Proceedings in the Court Below at page ii of the Petition,

and further states that it has no subsidiary or parent com-

panies.

- iii -

TABLE OF CONTENTS

Page

a 6 yy > i

ee ” ; ir ii

pp EE Eg e.g | > ara vi

DePepeeeenee GOe BRO CAGE... ce eect eee ace 1

EET eee eee eee ee 4

A. Blue Mountain’s Success in the Greeting

RS og Ay akg 4 a 4 ab 8 a 6 464.8% Os 4

B. Hallmark’s Decision to Copy Blue

mommnees © Coveetins Cards. .. 0... cee eee 6

C. The Preliminary Injunction Hearing and

ee eee gg cg hip ak be eae 8 8 10

THE PETITION SHOULD BE DENIED...:......... 12

A. CERTIORARI SHOULD BE DENIED

SINCE THE PRELIMINARY INJUNC-

TION WAS NOT AN ABUSE OF DIS-

ECS ree ae 12

= §¥ «

B. THE COURT OF APPEALS’ COR-

RECTLY AFFIRMED THE PRELIMI-

NARY INJUNCTION

l.

The Court of Appeals Properly

Affirmed that the Patent/Copyright

Clause of the Constitution Does Not

Preempt Federal Trade Dress Law.

(Hallmark’s First Question Presented). . .

The Preliminary Injunction Does Not

Grant Blue Mountain “Exclusive

Rights to Use an Idea or a Style of

Art,” But Instead Narrowly and

Specifically Enjoins Particular

Infringing Hallmark Greeting Cards.

(Hallmark’s Second Question

PENS Gras ae a ok ec aso ee sc

The Court of Appeals Correctly

Affirmed the District Court’s Factual

Finding that Hallmark’s Imitative

Cards Infringe Blue Mountain’s

Greeting Cards. (Hallmark’s Third

Question Presented) ................

Page

Page

a. The Court of Appeals Properly

Affirmed the District Court’s

Factual Finding that the Blue

Mountain Trade Dress is Not

Functional, in Part Because There

are Many Ways to Create Emo-

tional Poetry Cards Without

Copying the Blue Mountain

EO 6. Oi:d eek nko etbeneeebeetens 23

b. The Court of Appeals Properly

Affirmed the District Court’s

Factual Finding that the Elements

of the Blue Mountain Trade Dress

are Primarily Not Functional. ......... 26

‘ei ae Bi.) Pre wr rrr rhe rrr ie coe 27

- Vi -

TABLE OF AUTHORITIES

Page(s)

Cases

Ambrit, Inc. v. Kraft, Inc.,

812 F.2d 1531 (11th Cir. 1986) ................ 22

American Greetings Corp. v. Dan-Dee Imports, Inc.,

807 F.2d 1136 (3d Cir. 1986) .................. 15

Beer Nuts, Inc. v. Clover Club Foods Co.,

805 F.2d 920 (10th Cir. 1986)... ................ 9

Berenyi v. INS,

ee ee ee 6 kia 6 Ce ee 3

Boston Professional Hockey Ass'n v. Dallas

Cap & Emblem Mfg., Inc.,

510 F.2d 1004 (Sth Cir.), cert. denied,

ee | en ee ee 17

Brown v. Chote,

Gib U.S, 432 (UBT)... cc cccncccnccccees i, 12, 14

CPG Prods. Corp. v. Pegasus Luggage, Inc.,

776 F.2d 1007 (Fed. Cir. 1985)............... 3, 20

Cannon v. University of Chicago,

GOE U.S. CTF CUBTD) oc ce cccccccnccheccec, 19

Compco Corp. v. Day-Brite Lighting, Inc.,

376 U.S. 234 (1964)... ee. 18

- Vii -

Page(s)

Dallas Cowboys Cheerleaders, Inc. v.

Pussycat Cinema, Ltd.,

ee ED oo cb nas bcccecdeaads 18

Doran v. Salem Inn, Inc.,

i ree wre re 2,14

Dowell v. United States,

- oa 8 Tk BPP Pera TrrTTe 22

Frederick Warne & Co. v. Book Sales Inc.,

461 F.Suse. 1191 G.DIN.Y. 1979) . 0.2 cc ccccces 17

Hallmark Cards, Inc. v. Hallmark Dodge, Inc.,

634 F.Supp. 990 (W.D. Mo. 1986) .............. 19

Herman & MacLean v. Huddleston,

— «RA ee 19

Inwood Labs., Inc. v. Ives Labs., Inc.,

og re 16, 19, 22, 25

John H. Harland Co. v. Clarke Checks, Inc.,

jibe . (3) (s 4). ia aS Sire 22, 24

Keene Corp. v. Paraflex Indus.,

653 F.2d 822 (3d Cir. 1981) ...................24

Kellogg Co. v. National Biscuit Co.,

CS a cs ea os ss oes 6 eee ee ees 25

LeSportsac, Inc. v. K-Mart Corp.,

poke gf: 9 ere 14

- Vill -

Page(s)

Magnum Import Co. v. Coty,

3 ee Pree 27

Mishawaka Rubber & Woolen Mfg. Co. v.

S.S. Kresge Co.,

oe re 24

In re Morton-Norwich Prods., Inc.,

671 F.2d 1332 (Cust. & Pat. App. 1982).......... 24

Pagliero v. Wallace China Co.,

196 F.24 339 (Sth Cir. 1952)... 2.2... cc ccccccnce 24

Park 'n Fly, Inc. v. Dollar Park and Fly, Inc.,

Ns Ss ovo ob cd cadences dscbcas 16

Prufrock Ltd. v. Lasater,

781 F.2d 129 (8th Cir. 1986)....... Peta es 22, 27

San Francisco Arts & Athletics, Inc. v. United

States Olympic Committee,

eee IT I 5 nn 6 os 6 0.6.0 v'a'd aback. ne 16

Sears, Roebuck & Co. v. Stiffel Co.,

oe ee eee 15, 18

Sicilia di R. Biebow & Co. v. Fox,

732 F.2d 417 (Sth Cir. 1984).............. 24, 25

Steele v. Bulova Watch Co

off & fe 19

fe sre ee

- ix -

Page(s)

Stormy Clime Ltd. v. Progroup, Inc.,

809 F.2d 971 (2d Cir. 1987) ......-.6 50 ee eee 26, 27

Truck Equipment Serv. Co. v. Fruehauf Corp.,

536 F.2d 1210 (8th Cir.), cert. denied,

- 2 8 Fo.) rer rrr re re 17

University of Texas v. Camenisch,

OG TE, Be NED oo bc cence ce srccsccncoens 13

Vuitton et Fils S.A. v. J. Young Enters.,

644 F.2d 769 (9th Cir. 1981). ........-05 000 ee. 25

Statutes and Rules

Lanham Act §43(a),

DECREE EEE, paccadssescceessdus 10, 17, 19

Lanham Act §45,

URE OEE. ove. cies ceeedbsedcsesoewsnsés 19

Securities Exchange Act §10(b),

gb Ve rrr rrr rer eer reer eee 19

Title 1X of the Educational Amendments

of 1972, §901(a), 20 U.S.C. §1681(a)............ 19

Pe RD, FEED cnccccccvcekssressvcvesescdenre 4

Rule 10b-5, 17 C.F.R. §240.10b-5..........--- cee eee. 19

Pe

Page(s)

Article and Legislative History

S.Rep. No.1333, 79th Cong., 2d Sess. (1946) ........ 16, 17

Diamond, “Properly Used, Trademarks are Forever,”

68 ABA Journal 1575 (1982) .................. 18

No. 88-313

In The

SUPREME COURT OF THE UNITED STATES

October Term, 1988

HALLMARK CARDS, INCORPORATED and

HALLMARK MARKETING CORPORATION,

Petitioners,

vs.

HARTFORD HOUSE, LTD.,

d/b/a BLUE MOUNTAIN ARTS,

SUSAN POLIS SCHUTZ,

and STEPHEN SCHUTZ,

Respondents.

BRIEF IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

STATEMENT OF THE CASE

This case involves an attempt by the unquestioned giant of

the greeting card industry —- Hallmark — to misappropriate

the goodwill of a tiny competitor by copying its cards.

Significantly, Hallmark does not challenge the lower courts’

finding that “Hallmark copied Blue Mountain’s cards for the

purpose of benefitting from and ‘cashing in’ on Blue Moun-

tain’s already established reputation and goodwill, [which] is

being diluted by Hallmark’s intentional copying.” Petition

Appendix at pp. 29a-30a. As Hallmark’s counsel of record

frankly admitted to the Tenth Circuit during oral argument,

Hallmark “imitated” Blue Mountain’s cards.

2.

All that is involved in this Petition is the preliminary

injunction of 83 greeting cards which copy Blue Mountain

cards (id. at p. 34a); the preliminary injunction does not

restrict Hallmark in the distribution of its other 11,000

existing greeting cards or in its production of new cards.

With regard to the 83 cards at issue, the District Court

found after an all-day evidentiary hearing that Blue Mountain

demonstrated a substantial likelihood of success on the

merits; that the balance of equities lay overwhelmingly in

Blue Mountain’s favor; that Blue Mountain would suffer

irreparable injury absent a preliminary injunction (indeed,

that it would be “ruined”) while Hallmark would not sustain

any significant damage; and that a preliminary injunction

was in the public interest. /d. at pp. 33a-34a. It then en-

joined Hallmark from further distribution of the 83 cards.

After a hearing, an injunction bond was set and posted. The

appellate panel unanimously affirmed these proceedings.

Hallmark challenges only one of the lower courts’ find-

ings warranting the preliminary injunction, namely, whether

Blue Mountain will succeed at trial some three months from

now. Under such circumstances, this Court has held that it

will not review the merits of the case, but will only address

the question “whether the issuance of the injunction, in the

light of the applicable standard, constituted an abuse of

discretion.” Doran v. Salem Inn, Inc., 422 U.S. 922, 932

(1975).

Hallmark's Petition does not address this required show-

ing of an abuse of discretion, nor does it dispute the District

Court’s express finding that it stole Blue Mountain's

proprietary trade dress (Petition Appendix at p. 30a) —

which conduct plainly violates the Lanham Act. Instead,

Hallmark reargues its “evidence” and ignores the lower

courts’ factual findings. ! But this Court does not ordinarily

1 For example, citing its own witnesses’ testimony in the Hearing

Transcript, Hallmark claims that its cards are different from Blue

(continued)

5

sit “to review concurrent findings of fact by two courts

below.” Berenyi v. INS, 385 U.S. 630, 635 (1967).”

Hallmark also falsely claims that the preliminary injunc-

tion protects a Blue Mountain “art style.” But as stated by

the Tenth Circuit:

“Contrary to Hallmark’s position and numer-

ous assertions, the Blue Mountain ‘look’ does

not merely refer to Blue Mountain’s artwork,

one of the many features comprising the

overall appearance of Blue Mountain’s cards,

or to some artistic style. Rather, the protected

‘look’ referred to by the district court is the

overall appearance of the cards, i.e., the trade

dress.”

Petition Appendix at p. 12a n.4. Hallmark’s assertions to the

contrary are disingenuous since both courts specifically use

“the word ‘look’ to mean the cards’ overall uniform ap-

pearance, comgenee of some or all of the features listed by

the court.” /d.

Hallmark’s arguments cannot outweigh the District

Court’s discretion in entering the preliminary injunction,

which was unanimously affirmed below. Certiorari should

(ftn. continued)

Mountain's. Petition at p. 7. But the District Court specifically found that

Hallmark's cards are “so similar to Blue Mountain’s that it is nearly

impossible to differentiate between the respective card lines.” Petition

Appendix at p. 24a.

2 Accord, CPG Prods. Corp. v. Pegasus Luggage, Inc., 776 F.2d 1007,

1014 (Fed. Cir. 1985) (refusing to look at “the injunction against unfair

competition in a vacuum, i.e., as though there had never been a trial in

which the district court heard witnesses, evaluated credibility, and

compared in their entireties the respective [product] lines before making its

findings, reaching its conclusions, and issuing its injunction. We have no

such authority”; affirming injunction against specific infringing goods).

3 Hallmark's primary arguments on this issue below were made in a

purported amicus brief ostensibly filed by a third party, which the Tenth

Circuit discarded because it was in fact secretly written and paid for by

Hallmark.

a

be denied so the parties can address the merits at the January

2, 1989 trial.

Statement of Facts

The following facts were found by the District Court after

its all-day evidentiary hearing, and incorporated in its

detailed opinion. Petition Appendix at p. 16a (“This memo-

randum constitutes my preliminary findings of fact and

conclusions of law as required by Rule 52(a), Fed.

R.Civ.P.”).

A. Blue Mountain’s Success in the Greeting

Card Market.

Blue Mountain is a prime example of a company which

has achieved success because of consumer recognition. Blue

Mountain’s principals Susan Polis Schutz and Stephen

Schutz began by selling posters from the back of a pickup

truck, with Susan composing the posters’ poetry and Stephen

doing the graphic design. Since Blue Mountain branched

into greeting cards in the early 1970’s, it has sold ap-

proximately 100 million cards. Petition Appendix at p. 16a.

Accord, Hallmark’s Petition at p. 5 (Blue Mountain’s cards

proved “enormously popular” and “quickly achieved national

commercial success”).

Blue Mountain’s major card lines are “AireBrush Feel-

ings” and “Watercolor Feelings.” Petition Appendix at p.

16a. Both of these card lines “have an inherently distinctive

and highly uniform ‘look’ that is recognizable and _at-

tributable to Blue Mountain.” /d. at p. 21a. “The following

elements comprise that look or trade dress:

“1. A two-fold card containing poetry on

the first page and the third page.

“2. Unprinted surfaces on the inside three

panels.

hice a2 i

<a

“3. A deckle edge on the right-side of the

first page.

“4. A rough stripe of color, or wide stripe,

on the outside of the deckle edge of the first

page.

“5. A high quality, uncoated and textured

art paper for the cards.

“6 Florescent ink for some of the colors

printed on ithe cards.

“7. Lengthy poetry, written in free verse,

typically with a personal message.

“8. Appearance of hand-lettered calligraphy

on the first and third page with the first letter

of the words often enlarged.

“9. An illustration that wraps around the

card and is spread over three pages, including

the back of the card.

“10. The look of the cards primarily

characterized by backgrounds of soft colors

done with air brush blends or light watercolor

strokes, usually depicting simple contrasting

foreground scenes superimposed in_ the

background.”

Id. at pp. 4a, 21a-22a. This look has remained substantially

the same since the two lines came out in the early 1980's.

Id. at p. 29a (“The AireBrush and Watercolor Feelings ‘look’

has been in existence for several years.”’).

The District Court found that the “look” resulting from

these ten elements is “easily recognizable and attributable to

a source that has generated a loyal customer following.”

Petition Appendix at p. 27a. Hallmark itself admits that Blue

Mountain’s cards have a “distinctive,” “consistent,” and

“recognizable look” (id. at pp. 26a-27a) and its expert was

“struck by the sense of uniformity to the Blue Mountain

i.

cards.” Transcript at p. 158. As Hallmark’s counsel con-

ceded at the hearing, “[c]ertainly its cards have a look.”

Transcript at p. 17.

Indeed, Blue Mountain’s “competitive Strength” is that its

“cards have an inherently distinctive and recognizable look

attributable to their source, Blue Mountain” (Petition

Appendix at p. 26a) (emphasis added), a fact admitted by

Hallmark. /d.; Transcript at p. 125.

Because of its distinctive look, “Blue Mountain has been

an enormously successful leader in the phase of the greeting

card industry aimed at expressing very personal, strong

emotions, and it has been said that Susan Polis Schutz is the

‘reigning star’ in this aspect of the grecting card business.”

Petition Appendix at pp. 16a-17a.

B. Hallmark’s Decision to Copy Blue

Mountain’s Greeting Cards.

Industry giant Hallmark quickly developed “concern about

plaintiffs’ commercial success.” Hallmark’s Brief on

Appeal, dated April 27, 1987, at p. 9 n.5. Hallmark first

tried to eliminate Blue Mountain in 1977 with the “first

generation” of Hallmark’s “Personal Touch” greeting cards.

4 Hallmark's attempt to restrict Blue Mountain’s look to an “art style” is

simply not supported by its cited transcript references. Indeed, Hallmark's

own expert witness testified that a greeting card's art style cannot be

divorced from the format and layout of the card. Transcript at pp. 162-63

(“It has sides and it could be folded and can be turned over, all that needs

to be taken into consideration, I think.”). See also Petition Appendix at p.

12a n.4.

As Stephen Schutz testified, “We wanted to maintain a consistent look

over a long period of time so that customers would identify that look with

our company [because] it’s very important for these customers to recognize

our look so that they are attracted to our cards if they like our poetry and

buy the cards.” Transcript at p. 58. Blue Mountain's look is “vital to us.

You can’t survive without that.” Jd. This testimony was undisputed by

Hallmark.

» =

Petition Appendix at p. 16a. A Hallmark document reviewed

by the District Court bluntly states that “Personal Touch was

created with the intent of ‘displacing Blue Mountain.’ ” /d.

at p. 17a. But Hallmark’s original Personal Touch cards

were a “commercial failure.” /d. at p. 28a.

Hallmark concluded that its “Personal Touch cards posed

little threat to Blue Mountain” — according to another

Hallmark memo reviewed by the District Court — because of

Blue Mountain’s “design styling and brand name recogni-

tion.” Jd. at p. 17a. Accord, id. at p. 26a (citing memo by

Personal Touch product manager that Blue Mountain is “a

formidable competitor, because of their recognizable look

established through 10 years of retail exposure” and its

“loyal, established base of retailers and customers”).

Hallmark decided to step up its campaign to “displace” what

it called one of its “strongest competitive threats.” /d.

Hallmark first tried to buy Blue Mountain. In 1985,

Hallmark’s chief executive officer David Hughes told Blue

Mountain’s principals, the Schutzes, “that Hallmark was

interested in buying Blue Mountain or pursuing joint ven-

tures.” Jd. at p. 28a. Although Hallmark’s attempt to ac-

quire Blue Mountain was unsuccessful, “(djuring the course

of his visit, Hughes told the Schutzes ‘they were lucky’

because Blue Mountain had its own ‘look’ and style.” /d.

Failure to acquire Blue Mountain’s “look” by legitimate

means did “ot stop Hallmark. Hallmark polled its card

dealers on the question, “How do you feel about Hallmark

copying Recycled Paper, Blue Mountain Art, and California

Dreamers.” /d. As a Hallmark internal memorandum put it,

“Hallmark can either steal ideas from the other alternative

greeting card companies or be innovative.” /d. at pp.

17a-18a. The memo quickly recommended the option to

“steal”:

“Hallmark missed the mark on their attempt at

alternative greeting cards .... [Some of the

offerings are good, but they will not displace

YP

Blue Mountain. ... Hallmark should copy the

alternative greeting cards offered by com-

petitors....”

Id. at p. 17a (emphasis added). As found below, Hallmark

“chose to imitate instead of innovate.” /d. at p. 18a.

Meanwhile “Hallmark purchased 200 of the Blue Moun-

tain cards and began to analyze the Blue Mountain look.”

Petition Appendix at p. 28a. It concluded that Blue Moun-

tain cards were “vulnerable to imitation” because of their

“one design/editorial style.” Jd. at p. 26a. Hallmark’s

greeting card design manager showed Blue Mountain cards to

his artists, who then designed new Personal Touch cards.

Transcript at p. 223 (testimony by Hallmark executive). On

April 1, 1986, Hallmark replaced its unsuccessful “first

generation” Personal Touch line with a “second generation”

series of Personal Touch cards. Petition Appendix at p. 18a.

The District Court found the new Hallmark cards “so

similar to Blue Mountain’s that it is nearly impossible to

differentiate between the respective card lines.” Petition

Appendix at p. 24a. See also id. at p. 29a (portions of

Hallmark and Blue Mountain cards are “virtually identical;

so nearly identical as to preclude a finding of coincidence”).

The card-buying public also cannot tell Hallmark’s

imitative cards from their Blue Mountain prototypes.

Consumer research — found by the District Court to be

“convincing consumer survey evidence” (id. at p. 30a) —

showed that 70-80% of the relevant consumer group mistook

Hallmark’s imitative cards for Blue Mountain cards. /d. On

this basis the District Court found that “the average con-

sumer cannot detect differences in minute stylistic details

among or between the competing card lines here involved.”

so

Id. at p. 27a.°

Even greeting card experts are fooled by Hallmark’s

copies. Hallmark’s own expert conceded that “some cards, I

felt, were particularly close.” Transcript at p. 159. More

striking yet, “Susan Polis Schutz testified that, while visiting

a California card shop, even she was confused and deceived

into believing a Hallmark card was her own.” Petition

Appendix at p. 32a.’

Hallmark’s imitative cards immediately diverted Blue

Mountain sales. A Hallmark June 16, 1986 performance

report stated, “A dealer who complained that we were wrong

to ‘copy Blue Mountain Art’ apologized and is excited about

sales results.” Jd. at p. 28a.

Based on the above evidence (almost all of which was

undisputed by Hallmark at the hearing), the District Court

specifically found that “Hallmark copied Blue Mountain’s

cards for the purpose of benefitting from and ‘cashing in’ on

6 Although Hallmark claims its cards say “Hallmark” on the back

(Petition at p. 7), customers do not look at the backs of cards. Petition

Appendix at p. 32a. Anyway, such a label “is not enough to eliminate the

likelihood of confusion in this case where the products and their marks are

similar because consumers typically do not engage in side by side compari-

son of the products.” Beer Nuts, Inc. v. Clover Club Foods Co., 805 F.2d

920, 926 (10th Cir. 1986) (enjoining similar product).

7 As Susan Polis Schutz testified:

“A. The first time I saw it, I was in a Hallmark store out in

California, and I usually will go into a store and see if our

cards are there, and if they are I sort of make them look pretty.

And I was in the store and I thought I saw a couple of our

cards. And I went to pick them up and I was going to put them:

in with the rest of our cards, but I couldn’t find the rest of our

cards. So I tumed them over to see what the code was, or

something, and it said Personal Touch Hallmark. I absolutely

thought it was our cards.

“Q. And after you saw that the card was a Hallmark card,

what did you do?

“A. Exactly?

“Q. Yes.

“A. I ran out of the store crying.”

Transcript at p. 90.

-10-

Blue Mountain's already established reputation and good-

will.” Jd. at p. 29a.

C. The Preliminary Injunction Hearing

and Appeal.

Three weeks after Hallmark’s memo celebrating the

success of its strategy to “copy Blue Movntain Art.” Blue

Mountain filed this action on July 8, 1986 for, inter alia,

trade dress infringement under §43(a) of the Lanham Act, 15

U.S.C. §1125(a). On October 24, 1986 the District Court

held an all-day hearing on Blue Mountain’s preliminary

injunction motion. Petition Appendix at pp. 15a-16a. Judge

Carrigan heard over six hours of testimony. /d. at p. 16a.

The District Court's opinion (which occupies twenty

pages in the Appendix) notes that a preliminary injunction is

appropriate when 1) there is a substantial likelihood that the

movant will eventually prevail on the merits; 2) the movant

will suffer irreparable injury if the injunction does not issue;

3) the threatened injury to the movant Outweighs whatever

damage the injunction may cause the Opposing party; and 4)

the injunction would not be adverse to the public interest.

Id. at pp. 32a-33a. Three of these four issues are undisputed

by Hallmark's Petition.

Hallmark does not challenge the District Court's finding

that “the Hallmark Personal Touch cards are so substantially

Similar to the plaintiffs’ trade dress, that there exists a

likelihood of confusion in the minds of the consuming

public” (id. at p. 32a), which finding “establishes . . . the risk

of irreparable harm.” /d. at p. 33a.

Hallmark similarly does not dispute that “[t}he threatened

injury to Blue Mountain greatly Outweighs any damage the

injunction may cause Hallmark.” /d. As the District Court

noted, “[t}he approximately 90 Hallmark Personal Touch

cards in issue comprise a small portion of the 11,000 cards

..- distributed by Hallmark,” while “[i]f Hallmark is allowed

—————

©

to further dilute the Blue Mountain look prior to a trial on

the merits, Blue Mountain will be ruined and any success it

might gain through trial would be a pyrrhic victory.” /d. at

p. 33a.

Nor does Hallmark challenge the court's finding that “it is

in the public interest to enforce the policies of the Lanham

Act [and] to prevent the likelihood of public confusion from

becoming an actuality.” /d. at pp. 33a-34a.

The only aspect of the District Court’s opinion challenged

by Hallmark is its finding that “plaintiffs have demonstrated

a substantial likelihood of success on the merits of their

Lanham Act claim.” /d. at p. 33a. The first element of this

claim, that Blue Mountain’s “AireBrush and Watercolor

Feelings cards possess an established and secondary meaning

that is being diluted by Hallmark's intentional copying” (id.

at p. 30a), is net disputed by Hallmark. Nor does Hallmark

disagree with the court’s finding on the second element that

“the Hallmark Personal Touch cards are so substantially

similar to the plaintiffs’ trade dress, that there exists a

likelihood of confusion in the minds of the consuming

public.” /d. at p. 32a.

Instead, Hallmark challenges only the third and last

element of this fourth aspect of the District Court’s opinion,

the technical question of functionality. In a lengthy discus-

sion of this issue (pages 19a through 26a of the Petition

Appendix), the District Court reviewed the evidence before it

and found as a fact that “the AireBrush and Watercolor

Feelings features are primarily non-functional.” Id. at p.

26a.

Based on these findings, the District Court preliminarily

enjoined Hallmark from distributing 83 specific cards which

infringe Blue Mountain’s cards /d. at p. 34a. Hallmark

appealed, but the Tenth Circuit found that “{njone of

Hallmark’s arguments on appeal suggest that the district

court erred or abused its discretion in granting the prelimi-

~ 12

nary injunction” (id. at p. 12a), in a ruling occupying four-

teen pages in the Appendix. .

THE PETITION SHOULD BE DENIED

Far from presenting novel or important questions for

review, Hallmark reargues its evidence, ignores settled law,

and fails to show any conflict with controlling authority.

H«ilmark’s imitation of Blue Mountain’s cards, and the ruin

facing Blue Mountain because of ‘hat infringement, amply

justify the preliminary injunction. If only because of the

January 2 trial — at which time the preliminary injunction

will either be vacated or modified into a permanent injunc-

tion — Hallmark’s Petition should be denied.

A.

CERTIORARI SHOULD BE DENIED :

SINCE THE PRELIMINARY INJUNC-

TION WAS NOT AN ABUSE OF

DISCRETION

Hallmark’s Petition does not address the only real ques-

tion before the Court, which is “whether issuance of the

injunction constituted an abuse of discretion.” Brown, supra,

411 U.S. at 457. This limited standard of review is espe-

cially applicable here because a full trial on the merits is

scheduled for January 2, 1989, some three months from now.

Given the incomplete factual record before the Court, the

imminent trial date, and the fully bonded preliminary injunc-

tion, it is simply inappropriate to grant certiorari.

This Court has explained why the “abuse of discretion”

standard of review is particularly appropriate on review of a

preliminary injunction. Unlike a permanent injunction —

which is granted after a full trial and upon a complete factual

record — “[t]he purpose of a preliminary injunction is

a o

» 13

merely to preserve the relative positions of the parties until a

trial on the merits can be held”:

“Given this limited purpose, and given the

haste that is often necessary if those positions

are to be preserved, ... where a federal

district court has granted a preliminary

injunction, the parties generally will have had

the benefit neither of a full opportunity to

present their cases nor of a final judicial

decision based on the actual merits of the

controversy.... Until such a trial has taken

place, it would be inappropriate for this Court

to intimate any view on the merits of the

lawsuit.”

University of Texas v. Camenisch, 451 U.S. 390, 395-98

(1981) (emphasis added). For these reasons, the only issue

before the Court is “whether the District Court had abused its

discretion in issuing a preliminary injunction.” /d. at 393.

As noted above, the District Court applied the Tenth

Circuit’s four-factor standard for preliminary injunctive

relief. See Petition Appendix at pp. 5a, 32a-33a. This

standard is identical to the preliminary injunction standard

approved by this Court in University of Texas, supra, 451

U.S. at 392, and, as in that case, “[t}he District Court and the

Court of Appeals both properly based their decisions not on

the ultimate merits of [plaintiffs’] case but rather on the

balance of the[{se] factors.” /d. at 398.

Hallmark does not address the lower courts’ balance of

these factors, but instead asks this Court to rule on the merits

of the case. Hallmark’s refusal to look at the applicable

preliminary injunction standards is improper, first “because

it improperly equates ‘likelihood of success’ with ‘success,’

and what is more important, because it ignores the significant

procedural differences between preliminary and permanent

injunctions.” /d. at 394.

seinen

-14-

Hallmark would have this Court ignore the emergency

situation before the District Court in 1986, that “[i]f

Hallmark is allowed to further dilute the Blue Mountain look

prior to 2 trial on the merits, Blue Mountain will be ruined

and any success it might gain through trial would be a

pyrrhic victory.” Petition Appendix at p. 33a (emphasis

added). Hallmark also ignores the District Court’s findings

that “(t]he threatened injury to Blue Mountain greatly

Outweighs any damage the injunction may cause Hallmark”

(id.), and that the preliminary injunction “is in the public

interest.” /d. at pp. 33a-34a. None of these three factors is

challenged by Hallmark. See Petition Appendix at p. Sa.

By addressing the fourth factor in isolation, the merits of

Blue Mountain’s claim, Hallmark ignores the lower courts’

balance of the applicable factors as a group. But that balance

is the proper focus of inquiry:

“As the District Court opinion clearly

evidences, issuance of the injunction reflected

the balance which that court reached in

weighing these [preliminary injunction]

factors .... In reviewing such interlocutory

relief, this Court may only consider whether

issuance of the injunction constituted an abuse

of discretion.” |

Brown, supra, 411 U.S. at 456-57 (affirming emergency

preliminary injunction without addressing merits of case).

Accord, Doran, supra, 422 U.S. at 933 (affirming prelimi-

nary injunction despite questionable legal conclusions by

lower courts).

8 Also, as the Tenth Circuit noted, since Hallmark does not dispute that

“the other three requirements for a preliminary injunction are satisfied, ‘it

will ordinarily be enough that the plaintiff has raised questions going to the

merits so serious, substantial, difficult and doubtful, as to make them a fair

ground for litigation and thus for more deliberate investigation.’ Petition

Appendix at p. 5a n.2 (emphasis added). Accord, LeSportsac, Inc. v.

K-Mart Corp., 754 F.2d 71, 78 (2d Cir. 1985) (affirming Lanham Act

preliminary injunction; that plaintiff “raised serious questions going to the

(continued)

lak - ec an IA aa MG Si i a, Pa a A A ea Nath Maribeth AP a ee Dine Re

. e

There was no abuse of discretion below, since the courts’

findings of Hallmark’s predatory intent are firmly anchored

by Hallmark admissions that it planned to “steal” and “copy”

Blue Mountain’s look. Petition Appendix at pp. 17a-18a.

Certiorari should be denied so the parties can go to trial and

develop a full record for appellate review.

THE COURT OF APPEALS CORRECTLY

AFFIRMED THE PRELIMINARY _IN-

JUNCTION

Even if the Court were to address the merits of the case,

Hallmark’s “Questions Presented” do not present issues

worthy of review by this Court:

First, Hallmark's claim that trade dress law is unconstitu-

tional is refuted by the very case it cites, which holds that

courts may “protect businesses in the use of their... distinc-

tive dress in the packaging of goods so as to prevent others,

by imitating such markings, from misleading purchasers as to

the source of the goods.” Sears, Roebuck & Co. v. Stiffel

Co., 376 U.S. 225, 232 (1964);

Second, Hallmark’s argument that no one can have a

monopoly to “an idea or a style of art” is an irrelevant

platitude. Hallmark is preliminarily enjoined only from

marketing 83 specific greeting cards which both lower courts

found infringe Blue Mountain’s cards; and

Third, Hallmark seeks to overturn the District Court’s

factual findings on functionality — which were based on this

Court’s precedents —— and instead substitute a wide-ranging

(ftn. continued) :

merits ... is sufficient at this stage of the litigation”); American Greetings

Corp. v. Dan-Dee Imports, Inc., 807 F.2d 1136, 1140 (3d Cir. 1986)

(Lanham Act preliminary injunction should be reversed only for an

“obvious error in applying the law”).

ai.

definition of functionality which has been universally

rejected by the federal courts.

At bottom, Hallmark argues that it may counterfeit the

appearance of competitive products with impunity. But the

Court has specifically rejected Hallmark’s claim that con-

sumer confusion is necessary for free competition. Instead

“‘t}his Court has recognized that ... trademarks foster

competition and the maintenance of quality by securing to

the producer the benefits of good reputation.” San Francisco

Arts & Athletics, Inc. v. United States Olympic Committee,

107 S.Ct. 2971, 2978 (1987) (emphasis added).?

Hallmark’s window-dressing about free competition is

nonsense. Free competition demands protection of the

trademark owner and punishment of the infringer, not the

other way around.

1. The Court of Appeals Properly Af-

firmed that the Patent/Copyright Clause

of the Constitution Does Not Preempt

Federal Trade Dress Law.

As the Tenth Circuit held, “The district court properly

relied on the law dealing with trade dress infringement... .

This protection does not extend the protection available

under trademark law and does not conflict with the policy of

copyright law.” Petition Appendix at p. 12a.

9 Accord, S.Rep. No. 1333, 79th Cong., 2d Sess. at p. 1275 (1946)

(“Trade-marks, indeed, are the essence of competition, because they make

possible a choice between competing articles by enabling the buyer to

distinguish one from the other.”); Park 'n Fly, Inc. v. Dollar Park and Fly,

Inc., 469 U.S. 189, 193 (1985) (“Because trademarks desirably promote

competition and the maintenance of product quality, Congress determined

that ‘a sound public policy requires that trademarks should receive

nationally the greatest protection that can be given them. ”); Inwood Labs.,

Inc. v. Ives Labs., Inc., 456 U.S. 844, 854 n.14 (1982) (“trademark

infringement inhibits competition”).

oe

Hallmark disagrees, claiming that copyright and patent

law somehow preempt the field of intellectual property.

Petition at p. 17. Hallmark’s argument — apart from

demolishing trademark law at one stroke — seriously

misconstrues the interplay among patent, copyright and

trademark law. As Congress recognized in the legislative

history of the Lanham Act, “Trade-marks are not monopo-

listic grants like patents and copyrights”:

“A trade-mark only gives the right to prohibit

the use of it so far as to protect the owner’s

good will against the sale of another’s product

as his.”

S.Rep. No.1333, 79th Cong., 2d Sess. at p. 1275 (1946).'°

There is nothing wrong, or even novel, about the idea that

trade dress, copyright and patent law may all protect the

same product in different ways. That an individual Blue

Mountain card is copyrighted, or even “that a copyrightable

character or design has fallen into the public domain, should

not preclude protection under the trademark laws so long as

it is shown to have acquired independent trademark sig-

nificance, identifying in some way the source or sponsorship

of the goods.” Frederick Warne & Co. v. Book Sales Inc.,

481 F.Supp. 1191, 1196 (S.D.N.Y. 1979) (applying Lanham

Act §43(a) to uncopyrightable items).!!

10 Accord, Truck Equipment Serv. Co. v. Fruehauf Corp., 536 F.2d 1210,

1215 (8th Cir.), cert. denied, 429 U.S. 861 (1976) (“The protection

accorded by the law of trademark ... is greater than that accorded by the

law of patents because each is directed at a different purpose”); Boston

Professional Hockey Ass'n v. Dallas Cap & Emblem Mfg., Inc., 510 F.2d

1004, 1014 (Sth Cir.), cert. denied, 423 U.S. 868 (1975) (“A trademark ...

differs substantially from a copyright, in both its legal genesis and its scope

of federal protection.”).

11 Hallmark's protest against “perpetual” trade dress rights similarly

lacks any basis. Trade dress protection is acquired through use and the

development of “secondary meaning,” the association of a product with its

manufacturer in the public mind. This protection continues so long as the

use and secondary meaning also continue; otherwise, old trademarks ——

(continued)

<1.

Although Hallmark relies heavily on Sears-Compco in

arguing that the patent/copyright clause precludes trademark

protection, those cases deal only with federal pone of

State law under the Constitution’s Supremacy Clause. ” The

federal Lanham Act applies here, and as Hallmark admits,

“The Copyright Act does not, of course, preempt rights or

remedies under other federal statutes.” Petition at p. 19 n.14.

Moreover, Sears itself recognized that patent/copyright

law does not preempt laws which “protect businesses in the

use of their . . . distinctive dress in the packaging of goods so

as tO prevent others, by imitating such markings, from

misleading purchasers as to the source of the goods.” 376

U.S. at 232. Although Illinois law, which governed in Sears,

did not protect trade dress (id.), Blue Mountain’s claim is

under the Lanham Act, which does.!

Hallmark also argues that the term “trade dress” does not

appear in the Lanham Act, and that the Court should at one

blow reverse decades of precedent since supposedly “the

lower federal courts have over the last forty years built up an

entire federal common law of unfair competition never

contemplated in 1946.” Petition at p. 12. Hallmark is just

wrong, since the Lanham Act “protect[s] persons engaged in

(ftn. continued)

including the “Hallmark” name itself —- would lapse into the public

domain merely by reason of old age. By contrast, the passage of former

trademarks like “escalator” and “kerosene” into the public domain

demonstrates that trademark rights are not “perpetual” but instead must be

maintained. See Diamond, “Properly Used, Trademarks are Forever,” 68

ABA Journal 1575 (1982).

12 Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. 234, 234 (1964)

(“the question here is whether the use of a state unfair competition law...

conflicts with the federal patent laws”); Sears, supra, 376 U.S. at 231 (“a

State cannot encroach upon the federal patent laws”).

13 Accord, Dallas Cowboys Cheerleaders, Inc. v. Pussycat Cinema, Ltd.,

604 F.2d 200, 204 (2d Cir. 1979) (“it is clear that Sears-Compco did not

redefine the permissible scope of the law of trademarks insofar as it applies

to origin and sponsorship”; affirming preliminary injunction of infringing

trade dress).

snitieeeaeii

_ P

[interstate] commerce against unfair competition” (Lanham

Act §45, 15 U.S.C. §1127), as this Court recognized early on.

Steele v. Bulova Watch Co., 344 U.S. 280, 283 (1952).

But even if the Lanham Act did not specifically prohibit

unfair competition, “This Court has frequently accepted a

history of federal-court recognition of a cause of action as

indicative of the propriety of its implication.” Cannon v.

University of Chicago, 441 U.S. 677, 706 n.40 (1979)

(recognizing private right of action for sex discrimination

under Title IX). For instance, asked to rule that there is no

private right of action for securities fraud under the

Securities Exchange Act of 1934, the Court held:

“Most significantly for present purposes, a

private right of action under §10(b) of the

1934 Act and Rule 10b-5 has been consis-

tently recognized for more than 35 years. The

existence of this implied remedy is simply

beyond peradventure.”

Herman & MacLean v. Huddleston, 459 U.S. 375, 380

(1983).

Hallmark cannot ask this Court to undo forty years of

precedent, especially since the Court has already recognized

trade dress claims under the Lanham Act. Inwood Labs.,

supra, 456 U.S. at 857 n.20 (remanding trade _— claim to

appellate court for consideration under §43(a)).!4

Hallmark’s argument that trade dress law is unconstitu-

tional lacks any basis. It cannot justify a grant of certiorari.

14 Hallmark itself has brought unfair competition claims under §43(a) of

the Lanham Act. E.g., Hallmark Cards, Inc. v. Hallmark Dodge, Inc., 634

F.Supp. 990, 997 (W.D. Mo. 1986). It surely does not lie in Hallmark's

mouth to deny the existence of this cause of action, having itself success-

fully asserted it in the past.

i

2. The Preliminary Injunction Does Not

Grant Blue Mountain “Exclusive Rights

to Use an Idea or a Style of Art,” But

Instead Narrowly and_ Specifically

Enjoins Particular Infringing Hallmark

Greeting Cards.

Hallmark complains that the courts “effectively” enjoined

Hallmark “from using the general idea or ‘look’ of a seem-

ingly handmade, emotionally expressive greeting card.”

Petition at pp. 20-21. This argument is an outrageous

mischaracterization of the preliminary injunction. Hallmark

is prohibited only from selling 83 specific cards which both

lower courts found confusingly similar to Blue Mountain’s

cards in format, presentation, and construction. Petition

Appendix at pp. 14a, 24a.

Nor does this case involve “ideas” or “artistic styles.” As

the Tenth Circuit responded to Hallmark’s argument on

appeal, “the Blue Mountain ‘look’ does not merely refer to

. some artistic style. Rather, the protected ‘look’

mean{[s] the cards’ overall uniform appearance comprised of

some or all of the features listed by the court.” Petition

Appendix at p. 12a n.4.}5

Contrary to Hallmark’s assertion, Hallmark does not need

to copy Blue Mountain’s cards in order to compete. “In fact

others are competing without copying,” since “{a]n emo-

tional non-occasion greeting card can be folded, colored,

Shaped, cut, edged and designed in infinite ways and still

function to send its message.” Petition Appendix at p. 25a.

15 Accord, CPG Prods., supra, 776 F.2d at 1013-14 (affirming injunc-

tion; the defendant “remains in the luggage business and can use any color,

trim, shape of trim, or other design embellishment it chooses [and] thus

remains fully free to compete, so long as purchasers are not likely to be

deceived as to the origin of its goods”).

OAR EAS BAO CA eae

~ a.

This case involves Hallmark’s decision to fold, color, shape,

cut, edge and design its cards to duplicate Blue Mountain’s

cards out of the infinite possibilities open to “hy

Although Hallmark argues that supposedly “the hundreds

of cards in Blue Mountain’s two lines could not all look

alike” (Petition at p. 19), its argument is refuted by its own

pre-litigation admissions that Blue Mountain’s cards have a

“distinctive,” “consistent” and “recognizable look.” Petition

Appendix at pp. 26a-27a. Hallmark’s own expert witness at

the preliminary injunction hearing “testified that the plain-

tiffs’ cards were all very uniform and consistent in design.”

Id. at p. 27a. Hallmark’s counsel in fact admitted at the

hearing that “[cJertainly its cards have a look.” Transcript at

p. 17. Hallmark’s attempt to dilute this uniform look on

appeal cannot succeed.

The question is not about art styles, but instead whether

Hallmark may steal the look of Blue Mountain’s cards.

Hallmark merely tries to divert the Court from the District

Court’s unchallenged factual finding that “Hallmark copied

Blue Mountain’s cards for the purpose of benefitting from

and ‘cashing in’ on Blue Mountain’s already established

reputation and goodwill.” Petition Appendix at p. 29a. The

Petition has no relation to the facts found by the District

Court, and so cannot support a grant of certiorari.

16 Hallmark is the only competitor which has chosen to imitate the Blue

Mountain look. Transcript at p. 56 (testimony by Stephen Schutz). This

testimony was undisputed by Hallmark. As the District Court noted, “It is

easy for the business which wishes to sell its goods on their merits to select

marks, designs and packaging that will not be confused with its com-

petitors.” Petition Appendix at p. 29a.

..

3. The Court of Appeals Correctly Af-

firmed the District Court’s Factual

Finding that Hallmark’s Imitative

Cards Infringe Blue Mountain’s Greet-

ing Cards.

The courts below enjoined Hallmark’s imitative cards

because they found that Blue Mountain had satisfied all three

elements of its Lanham Act claim. Hallmark does not

dispute their findings on two of the three elements, i.e., that

Blue Mountain would likely prove both secondary meaning

and likelihood of confusion. See Petition Appendix at p. 7a.

The only element which Hallmark disputes is whether

Blue Mountain’s look is “functional.” If a trade dress is

“functional,” or utilitarian, the law generally will not protect

it. But this case involves greeting card decorations, and the

District Court’s finding that the decorations on Blue Moun-

tain’s cards are not functional is a “finding of fact subject to

the clearly erroneous standard of review.” Prufrock Ltd. v.

Lasater, 781 F.2d 129, 132 (8th Cir. 1986).!7

Moreover, Hallmark of necessity argues that Blue Moun-

tain’s “look” is entirely functional. If any aspect is not

functional, the look is legally protectible and the preliminary

injunction must be affirmed given the District Court’s

undisputed findings that Hallmark intentionally copied it.

Ambrit, Inc. v. Kraft, Inc., 812 F.2d 1531, 1538 (11th Cir.

17 Accord, Inwood Labs., supra, 456 U.S. at 857 n.20 (functionality

involves factual questions); John H. Harland Co. v. Clarke Checks, Inc.,

711 F.2d 966, 982 (11th Cir. 1983) (“the issue of functionality has been

consistently treated as a question of fact”; reviewing cases).

So far as functionality involves legal analysis, “mixed questions of fact

and law ... will not be reversed on appeal unless they are clearly er-

roneous.” Dowell v. United States, 553 F.2d 1233, 1235 (10th Cir. 1977)

(“The appellate court is not called upon to determine whether the trial court

reached the correct conclusion of law, but whether it reached a permissible

conclusion in light of the evidence”).

. -

1986) (affirming injunction of similar product made of

arguably functional components).

a. The Court of Appeals Properly Af-

firmed the District Court’s Factual

Finding that the Blue Mountain Trade

Dress is Not Functional, in Part Because

There are Many Ways to Create Emo-

tional Poetry Cards Without Copying

the Blue Mountain “Look”’.

Hallmark complains that supposedly the Tenth Circuit

relied too heavily on the District Court’s finding that there

were “many design alternatives” other than copying Blue

Mountain. Petition at p. 24. This argument merely whip-

saws the lower courts, since Hallmark complained below that

supposedly “the District Court failed to consider whether

there were feasible alternative product designs.” Hallmark

Brief on Appeal, dated April 27, 1987, at pp. 31-32.’

Having addressed Hallmark’s argument on appeal, the Tenth

Circuit is now criticized by Hallmark for doing so.

Hallmark’s argument is also specious. It wants to copy

any product feature “that may make consumers want to buy

it” (Petition at p. 23), whether or not there are alternative

appealing designs. /d. at p. 24. Such a rule would “permit a

second comer to copy the distinctive dress of a product

whenever it became successful and consumers became

accustomed to its dress. We do not doubt that such copying

18 In fact, the District Court held that “the infinite alternative designs

available” were “[f]urther evidence that the features developed by the

plaintiffs are non-functional.” Petition Appendix at p. 24a.

19 Hallmark's Petition also misquotes the Tenth Circuit. Compare

Petition at p. 24 (alternative appealing designs are “the critical factor in

determining functionality") (emphasis added), with Petition Appendix at p.

10a (“the availability of alternative appealing designs is a key factor in

determining that a trade dress is nonfunctional”) (emphasis added).

- 2h.

would enable the second comer to market his product more

effectively, but the Lanham Act does not permit that result.”

Sicilia di R. Biebow & Co. v. Fox, 732 F.2d 417, 427-28 (Sth

Cir. 1984),?°

In Felix Frankfurter’s words, “the trade-mark owner has

something of value. If another poaches upon the commercial

riagnetism of the symbol he has created, the owner can

obtain legal redress.” Mishawaka Rubber & Woolen Mfg.

Co. v. S.S. Kresge Co., 316 U.S. 203, 205 (1942). Hallmark

would allow latecomers to “poach upon the commercial

magnetism” of existing products, precisely because of the

existence of such “commercial magnetism.”

Such poaching is especially improper here since “there is

room for innovation and profit in the emotional non-occasion

greeting card market without duplicating or copying an-

other’s products”:

“In fact others are competing without copying,

and they have not found it necessary to

simulate the plaintiffs’ trade dress in order to

survive and prosper.”

Petition Appendix at pp. 24a-25a. “This is not a case where

there are a limited number of designs available” (id. at p.

24a), and the “evidence consisting of competitors’

similar products, demonstrates that the same functions can be

performed by a variety of other shapes with no sacrifice of

any functional advantage. There is no necessity to copy

appellant’s trade dress ....” In re Morton-Norwich Prods.,

Inc., 671 F.2d 1332, 1342 (Cust. & Pat. App. 1982).?!

20 Accord, Keene Corp. v. Paraflex Indus., 653 F.2d 822, 825 (3d Cir.

1981) (“The more appealing the design, the less protection it would

receive.”); John H. Harland Co., supra, 711 F.2d at 983 n.27 (“even

trademarks would be functional under such a definition because they help

to sell goods by identifying the manufacturer”).

21 in contrast to these cases rejecting Hallmark's argument, Hallmark's

principal citation is to Pagliero v. Wallace China Co., 198 F.2d 339 (9th

Cir. 1952). But the Ninth Circuit has disavowed Pagliero in a case which

(continued)

1.2

In urging its proposed rule, Hallmark forgets the Court's

definition of functionality, that “a product feature is func-

tional if it is essential to the use or purpose of the article or

if it affects the cost or quality of the article.” /nwood Labs.,

supra, 456 U.S. at 850 n.10. See Kellogg Co. v. National

Biscuit Co., 305 U.S. 111, 122 (1938) (holding shredded

wheat functional; “the cost of the biscuit would be increased

and its high quality lessened if some other form were substi-

tuted for the pillow shape”).

Under the Court’s definition, Blue Mountain’s trade dress

is not functional, as held by both courts below. It is obvi-

ously not “essential to the use or purpose” of a poetry card,

since many other successful designs exist. Petition Appendix

at pp. 24a-25a. Nor is this a “cost or quality” case since

Hallmark did not copy Blue Mountain's cards either to

reduce cost or to improve quality. As the District Court

found, “Hallmark copied Blue Mountain’s cards for the

purpose of benefitting from and ‘cashing in’ on Blue Moun-

tain’s already established reputation and goodwill.” /d. at p.

29a.

In sum, Hallmark urges the Court to reverse the District

Court and Tenth Circuit, both of which followed this Court's

definition of functionality (Petition Appendix at p. 19a), and

instead adopt a rule allowing copying which has been univer-

sally rejected by modern federal cases.

ftn. continued)

allmark fails to cite. Vuitton et Fils S.A. v. J. Young Enters., 644 F.2d

769, 777 (9th Cir. 1981) (“Competition is not hindered by requiring [a

defendant] to develop its own distinctive design for use in the decoration of

its manufactured products”). Thus “{e]ven the Ninth Circuit has retreated

from the Pagliero functionality standard.” Sicilia, supra, 732 F.2d at 428

(rejecting defendant's suggestion that court adopt “commercial success”

definition of functionality.)

<*.

b. The Court of Appeals Properly Af-

firmed the District Court’s Factual

Finding that the Elements of the Blue

Mountain Trade Dress are Primarily

Not Functional.

Hallmark’s last argument mischaracterizes the District

Court’s opinion by claiming that it found the individual

features of Blue Mountain’s trade dress to be functional.

Petition at p. 9 (inserting word “[functional]” into quote from

opinion). In fact the District Court did nothing of the sort.

All it found to be functional were the basic elements of

“[plaper, verse and ink” (Petition Appendix at p. 23a); in

contrast, it specifically found that the Blue Mountain trade

dress “features are primarily non-functional.” /d. at p. 26a.

Since the District Court found both the Blue Mountain

trade dress as a whole and its individual features to be

“primarily non-functional,” Hallmark’s argument is based on

an erroneous premise. This is just not a case where the trade

dress at issue is composed solely of functional features.??

Even if the District Court had found the individual

features to be functional — which it did not — Hallmark has

failed to show any true conflict between the circuits. Look-

ing beyond Hallmark's selective quotations, one sees that its

cited cases agree with the opinions below. For instance,

Hallmark's principal case is Stormy Clime Ltd. v. Progroup,

Inc., 809 F.2d 971 (2d Cir. 1987), which dealt with similar

rainjackets. Stormy Clime held that “the arrangement of the

principal features common to both [products] appears to be

22 Hallmark further mischaracterizes the District Court's opinion by

quoting only the “[p]aper, verse and ink” phrase on page 8 of its Petition.

The court's very next sentence —— unreferenced by Hallmark — is that

“[t]he design and amalgamation of those features in a uniform fashion with

other features, however, has produced the non-functional Blue Mountain

‘look." ” Petition Appendix at p. 23a (emphasis added).

<0.

dictated by the purpose of providing a low-cost, unencumber-

ing, waterproof jacket”:

“Though the rainjackets are similar in ap-

pearance, their purely ornamental features and

labelling differ in almost every respect... .”

Id. at 976. Similarly, Hallmark's other cited authority holds

that the “elements” of a look may be protected. Prufreck,

supra, 781 F.2d at 132.

Unlike the Stormy Clime rainjackets whose “purely

ornamental features and labelling differ in almost every

respect,” Hallmark's imitative cards are “so similar to Blue

Mountain’s that it is nearly impossible to distinguish be-

tween the respective card lines.” Petition Appendix at p. 24a.

Hallmark cannot seriously argue that none of the Blue

Mountain features is “purely ornamental” — for instance, the

unprinted inside surfaces, the deckle edge, or the colored

stripe on the right hand side of the cards.

Since Hallmark copied each of these, along with every

other feature of the Blue Mountain look, under its own cited

cases Hallmark is guilty of infringement.

CONCLUSION

The apparent complexity of Hallmark's petition should

not obscure its inability to deny Judge Carrigan’s factual

finding that “Hallmark copied Blue Mountain's cards for the

purpose of benefitting from and ‘cashing in’ on Blue Moun-

tain’s already established reputation and goodwill.” Petition

Appendix at p. 29a. It would be anomalous to permit

Hallmark — who only raises technical issues and does not

argue that the District Court abused its discretion — to

escape such undisputed factual findings and its own admis-

sions of predatory practices. Certiorari jurisdiction “was not

conferred upon this Court merely to give the defeated party

in the Circuit Court of Appeals another hearing.” Magnum

Import Co. v. Coty, 262 U.S. 159, 163 (1923).

x 2

Most significantly, the January 2 trial date is some three

months away. Hallmark filed its Petition on the last possible

day to do so, in effect waiting until the eleventh hour before

trial. Any conceivable issue which this Court could review

on a preliminary injunction will receive a more complete

record at trial. Hallmark’s only possible reason for filing its

Petition at the eleventh hour is to cause delay, which games-

manship in itself warrants denial of the writ.

For this reason, and those set forth above, certiorari

should be denied.

Respectfully submitted,

HARRY G. MELKONIAN*

JAMES B. HICKS

RHEA CARAS

WHITE & CASE

JOHN A. PURVIS

BUCHANAN, GRAY, PURVIS

& SCHUETZE

Attorneys for Respondents

*Counsel of Record