Appendix — Kayser-Roth Corp. v. Sara Lee Corp.
Supreme Court brief1996
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No.
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Cin Gy he
Supreme Court of the Cited States
October Term 1995
KAYSER-ROTH CORPORATION,
Petitioner,
Vv.
SARA LEE CORPORATION,
Respondent.
ON PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
Appendix to Petition for Writ of Certiorari
Alan W. Duncan
Counsel of Record
Jonathan A. Berkelhammer
Matthew W. Sawchak
SMITH HELMS MULLISS & MOORE, L.L.P.
300 North Greene Street
Suite 1400
Post Office Box 21927
Greensboro, North Carolina 27420
(910) 378-5200
Counsel for Petitioner
THE LEX GROUP @ 1205 East Main Street @ Suite 2 East ¢ Richmond, VA 23219
(804) 644-4419 @ (800) 856-4419 @ Fax: (804) 644-3256
TABLE OF CONTENTS
APPENDIX TO PETITION
Appendix Page
Opinion,
United States Court of Appeals
for the Fourth Circuit,
entered April 17, 1996 ... 2.0000. A-1
Memorandum Opinion,
United States District Court
for the Middle District of North Carolina
Winston-Salem Division
entered October 13, 1995 ........ A-34
Order,
Denying Petition for Rehearing
and Suggestion for Rehearing In Banc
United States Court of Appeals
for the Fourth Circuit
entered May 24, 1996 ......... A-155
Statutes Involved:
ERE es or rer ere hie A-156
OY Ae ener en A-160
WSs 4 Ses a sna Lo ee A-162
UR cao cuas eos eer A-164
Go eee See y ates A-167
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
SARA LEE CORPORATION,
Plaintiff-Appell
Vv.
KAYSER-ROTH CORPORATION,
Defendant-Appellee.
No. 94-2562
Appeal from the United States District Court
for the Middle District of North Carolina, at Winston-Salem.
Frank W. Bullock Jr., Chief District Judge.
(CA-92-460-6)
Argued: May 4, 1995
Decided: April 17, 1996
Entered: April 17, 1996
Before WIDENER, HALL, and WILKINS, Circuit Judges.
Reversed and remanded with instructions by published
opinion. Judge Hall wrote the majority opinion, in which
Judge Wilkins concurred. Judge Widener wrote a separate
dissenting opinion.
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COUNSEL
ARGUED: George Lester Little, Jr., Rodrick John Enns,
PETREESTOCKTON, L.L.P., Winston-Salem, North
“Carolina, for Appellant. Alan William Duncan, SMITH,
HELMS, MULLISS & MOORE, L.L.P., Greensboro, North
Carolina, for Appellee. ON BRIEF: Daniel R. Taylor, Jr., J.
David Mayberry, PETREE STOCKTON, L.LP.,
Winston-Salem, North Carolina, for Appellant. Jonathan A.
Berkelhammer, SMITH, HELMS, MULLISS & MOOKLE,
L.L.P., Greensboro, North Carolina, for Appellee.
OPINION
HALL, Circuit Judge:
Sara Lee Corporation appeals the district court's entry
of judgment for Kayser-Roth Corporation in Sara Lee's action
for trademark infringement. The district court found that
Kayser-Roth's use of the mark Leg Looks® on a line of its No
nonsense® hosiery products sold in food, drug, and mass
merchandising outlets did not infringe on Sara Lee's L'eggs®
trademark. Because the court's finding was clearly erroneous,
we reverse its judgment and remand the case with directions to
enter judgment for Sara Lee. We further instruct the district
court to grant Sara Lee's request that Kayser-Roth be
permanently enjoined from using its Leg Looks® trademark
in a manner that infringes on the L'eggs® mark.
I.
Sara Lee manufactures pantyhose and other hosiery
products for retail sale under the Hanes® and L'eggs®
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trademarks. Until L'eggs® penetrated the "FDM market"! in
the early 1970s, women's hosiery was sold only in department
stores. Sara Lee's most popular L'eggs® product is its Sheer
Energy® line of light support pantyhose, made from nylon and
spandex. Sara Lee also manufactures nylon-only products, but
its nylon-and-spandex brands account for the largest share of
its profits from hosiery sales. Sara Lee dominates the nylon-
and-spandex pantyhose market; about three of every four pairs
sold are Sheer Energy® products.
Kayser-Roth is Sara Lee's only nationwide competitor.
It followed Sara Lee into the FDM market in 1973, when it
introduced its No nonsense® line of pantyhose. In contrast to
Sara Lee's, Kayser-Roth's sales of nylon-only products far
exceed those of its nylon-and-spandex lines.
Over the last twenty-odd years, Kayser-Roth and Sara
Lee have spent hundreds of millions of dollars in advertising
their hosiery products. As a result, the companies have reaped
billions in sales, and both No nonsense® and L'eggs® have
become household names.
Sara Lee and Kayser-Roth are intense rivals and
frequent court opponents. In early 1992, Kayser-Roth learned
of Sara Lee's plan to introduce L'eggs Everyday®, a new line
of nylon-only hosiery. Kayser-Roth decided to respond by
simultaneously introducing its own new line of
nylon-and-spandex hosiery, designed to be priced lower than
Sheer Energy®.
The new line required a name. Kayser-Roth had,
during the previous summer, applied to the United States
Patent and Trademark Office to register the designations
"Sheer Vigor" and "Sheer Invigoration." Sara Lee learned of
the applications, and it filed the instant suit for declaratory and
injunctive relief on July 22, 1992, alleging that Kayser-Roth
The FDM market is comprised of food, drug, and mass
merchandising (Wal-Mart, K-mart, etc.) outlets.
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had violated Sections 32 and 43(a) of the Lanham Act, 15
U.S.C. § 1051 et seq”
, See 15 U.S.C. §§ 1114 and 1125(a). Section 1114 provides that
the holder of a registered trademark can pursue certain civil remedies in the
district court against
(1) Any person who shall, without the consent
of the registrant--
(a) use in commerce any reproduction, counterfeit, copy,
or colorable imitation of a registered mark in connection
with the sale, offering for sale, distribution, or
advertising of any goods or services on or in connection
with which such use is likely to cause confusion, or to
cause mistake, or to deceive; or
(b) reproduce, counterfeit, copy, or colorably imitate a
registered mark and apply such . . . to labels, signs,
prints, packages, wrappers, receptacles or advertisements
intended to be used in commerce upon or in connection
with the sale, offering for sale, distribution, or
advertising of goods or services on or in connection with
which such use is likely to cause confusion, or to cause
mistake, or to deceive.. . .
Akin to § 1114's protection of trademarks, § 1125(a) proscribes
encroachments on a product's “trade dress," which is, at the very least, "the
total look of a product and its packaging. .. ." 1 J. Thomas McCarthy,
McCarthy on Trademarks and Unfair Competition,§ 8.01[2] (3d ed. 1995).
The statute permits “any person who believes that he or she is likely to be
damaged" to file suit against
(1) Any person who, on or in connection with any goods
or services, or any container for goods, uses in
commerce any word, term, name, symbol, or device, or
any combination thereof, or any false designation of
origin, false or misleading description of fact, or false or
misleading representation of fact,which--
(A) is likely to cause confusion, or to cause
mistake, or to deceive as to the affiliation, connection, or
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ee
Kayser-Roth instead marketed its new product as "Leg
Looks®," a trademark that it already owned. Undaunted, Sara
Lee amended its complaint on September 9, 1992, to assert
that the name Leg Looks® infringed on its L'eggs® mark, and
that the product's packaging was confusingly similar to the
trade dress of its Sheer Energy® line. See note 2, supra. Sara
Lee also amended its prayer for relief to request money
damages. Kayser-Roth counterclaimed, alleging that Sara Lee
had engaged in numerous antitrust violations and in false
advertising.
The case was assigned to a magistrate, who
recommended that Kayser-Roth be preliminarily enjoined
from continuing to sell Leg Looks® as packaged. The district
court adopted the magistrate's recommendation; Kayser-Roth
thereafter recalled its Leg Looks® products and changed the
packaging.’ Kayser-Roth nevertheless continued to affix the
Leg Looks® mark to its new nylon-and-spandex product.
association of such person with another person, or as to
the origin, sponsorship, or approval of his or her goods,
services, or commercial activities by another person, or
(B) in commercial advertising or promotion,
misrepresents the nature, characteristics, qualities, or
geographic origin or his or her or another person's goods,
services, or commercial activities . .. .
Sara Lee's initial complaint, as well as the amended version it later filed,
See text infra, also alleged that Kayser-Roth's actions violated state laws
regarding unfair competition, deceptive trade practices, and trademark
dilution.
y The Leg Looks® packaging used during the latter portion of 1992
indeed bore a close resemblance to that of the Sheer Energy® line. The
foreground and background colors and the size, slant, and font of the
primary lettering were very similar. In addition, both packages were styled
with thin, slanted, widely spaced lines, giving an appearance reminiscent of
sunlight peeking through Venetian blinds that are not quite closed.
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On January 11, 1993, Sara Lee moved to supplement
its amended complaint to reassert all of its federal and state
claims as to the repackaged Leg Looks® product; in March, it
once again moved for a preliminary injunction. The magistrate
conducted a ten-day hearing on the motion in August 1993. At
the conclusion of the hearing, the parties and the district court
agreed, inter alia, that (1) Sara Lee would waive all claims for
money damages, (2) Sara Lee's remaining claims for equitable
relief would be bifurcated from Kayser-Roth's counterclaims,
and (3) the just-concluded hearing would be treated as a trial
on the merits of Sara Lee's equitable claims, with the matter
referred to the magistrate for decision, subject to de novo
review by the district court.”
On November 30, 1993, the magistrate issued a report
and recommendation; he advised the district court to enter
judgment for Sara Lee on all claims. The magistrate
recommended that Kayser-Roth be permanently enjoined from
using its Leg Looks® trademark in the FDM market.”
Kayser-Roth objected to the magistrate's report and
recommendation. The district court examined the record anew,
The redesigned packages, introduced in early 1993, have
eliminated the lettering and styling similarities. A white, shimmering
silhouette of a leg in the kneeling position, dissolving just above the knee,
has been emplaced against a black, rectangular field, which is itself
centered on a brightly colored background (it appears to be an industry
practice that the dominant package color varies within the line itself,
depending on the particular product). The No nonsense® trademark and
the words "invigorating pantyhose" appear more prominently on the new
packaging.
. Sara Lee's initial claims regarding Kayser-Roth's attempted
registration of the Sheer Vigor and Sheer Invigoration trademarks were
dismissed without prejudice by the consent of the parties on July 14, 1993.
; The magistrate recommended against enjoining Kayser-Roth from
using its Leg Looks® mark in department store outlets where it had been
used prior to June 1, 1992. See Section III-A, infra.
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EES ae LOI ee CPR RT EET eee ee ame
and, on October 13, 1994, filed an opinion that adopted many
of the magistrate's underlying findings, yet disagreed with his
conclusions.
The court found, as an initial matter, that Sara Lee's
federal trademark claim was foreclosed by the doctrines of
laches and acquiescence; it further determined that, even if
Sara Lee's trademark claim were not equitably barred,
Kayser-Roth's use of the Leg Looks® mark did not violate the
Lanham Act. The court likewise saw no merit in Sara Lee's
claim that Kayser-Roth's marketing of Leg Looks® in the
redesigned package infringed on the trade dress of Sara Lee's
Sheer Energy® products.° Consequently, the district court
entered judgment for Kayser-Roth on all of Sara Lee's claims.
Sara Lee appeals.
II.
Although trademark law is imbued with numerous
idiosyncracies, the standard governing our review of the
district court's findings of fact in a trademark case is familiar.
Generally speaking, we may set aside such findings only if
they are clearly erroneous, “ed. R. Civ. P. 52(a); Pizzeria Uno
Corp. v. Temple, 747 F.2d 1522, 1526 (4th Cir.1984).
However, we owe no deference to the district court's findings
if they are derived as a result of the court's misapplication of
the law. Pizzeria Uno at 1526.
. The district court concluded that its findings in favor of
Kayser-Roth on the federal trademark and trade dress claims were
dispositive of Sara Lee's unfair competition and deceptive trade practice
etims under state law. Lastly, the court held that North Carolina did rot
recognize the tort of trademark dilution.
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Il.
We must address at the threshold the district court's
findings that Sara Lee slept on its rights or, alternatively, that it
acquiesced to Kayser-Roth's current use of the Leg Looks®
mark.
A.
During the 1980s, Kayser-Roth used the Leg Looks®
mark on a line of "fashion" nylon-only hosiery products in
competition with Sara Lee's Hanes® line; after peaking in
1985, sales of Leg Looks® dropped precipitously throughout
the remainder of the decade. In their original incarnation, Leg
Looks® products were available only in upscale department
stores. No L'eggs® products have ever been sold in such
outlets.
From the outset, the Hanes® division kept its
corporate master fully apprised of Kayser-Roth's marketing of
Leg Looks®; nonetheless, Sara Lee has not challenged
Kayser-Roth's use of the Leg Looks® mark until now. The
question before us is whether, as Kayser-Roth asserts, "now"
is too late.
In a trademark case, courts may apply the doctrine of
estoppel by laches to deny relief to a plaintiff who, though
having knowledge of an infringement, has, to the detriment of
the defendant, unreasonably delayed in seeking redress. See 4
J.. Thomas McCarthy, McCarthy on Trademarks and Unfair
Competition, § 31.02 (3d ed. 1995) [hereinafter McCarthy]
("Estoppel by laches [is] defined as that type of delay in filing
suit which causes prejudice to defendant and when weighed
with all other relevant equitable factors, results in a bar to
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relief, either injunctive or monetary, or both.") (citation and
internal quotation marks omitted).
However, the doctrine is sparingly applied where, as
here, a plaintiff seeks only equitable relief. See id. at§
31.03[3][b] (reviewing cases);®
Int'l, Inc., 674 F.2d 209, 212 (4th Cir.) ("While the availability
of laches as a defense to claims for injunctive relief may be
’
In determining whether laches may operate as a defense to an
infringement claim, a court should ordinarily consider (1) whether the
owner of the trademark knew of the infringing use, (2) whether the owner's
delay in challenging the infringement of the mark was inexcusable or
unreasonable, and (3) whether the infringing user has been unduly
rejudiced by the owner's delay. Brittingham_v, Jenkins, 914 F.2d 447, 456
(4th Cir. 1990).
According to Professor McCarthy, cases involving the denial of
injunctive relief usually present one or more aggravating factors, causing
the balance of the equities (which has, at that point, favored the defendant
by virtue of the delay-and-prejudice analysis) to shift even further to the
defendant's advantage. These factors include (1) delay during which the
mark passed into usage as a generic name, (2) a grossly long period of
delay, (3) dubious proof of likelihood of confusion, (4) doubt as to the
plaintiff's title to the mark, (5) prior business dealings between the parties
that result in the plaintiff impliedly consenting to the defendant's
infringement, and (6) the defendant's good-faith development of a specific
territorial area.
We encountered the fifth of the above factors in Ambrosia
165 F.2d 693 (4th Cir.
1947), cert. denied, 333 U.S. 882 (1948). In Ambrosia, the chocolate
company's sales representative tried to sell the bakery certain ingredients to
be used in the manufacture of the latter's cakes. Afterward, the chocolatier’s
vice-president sent a letter to the bakery, urging that the two companies
transact business and noting “that the name ‘Ambrosia’ of your company
was the same as ours increased our interest, you may be sure." Jd. at 694.
Eight years later, the chocolate company finally became interested enough
to file suit seeking to enjoin the bakery from further use of the "Ambrosia"
trademark. The district court dismissed the complaint, and we affirmed,
holding, inter alia, that the suit was barred by “laches, acquiescence, and
estoppel. . . ." Id.
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limited . . . laches will bar a claim for damages for bad faith
infringement.") (citations omitted), cert. denied, 459 U.S. 969
(1982). Moreover, in consideration of the public interest,
estoppel by laches may not be invoked to deny injunctive
relief if it is apparent that the infringing use is likely to cause
confusion. 4 McCarthy at § 31.04[1]; see University of
Pittsburgh v. Champion Products, Inc., 686 F.2d 1040, 1044
(3d Cir.) ("Because laches is an equitable doctrine, its
application is inextricably bound up with the nature and
quality of the plaintiff's claim on the merits relevant to a
prospective injunction."), cert. denied, 459 U.S. 1087 (1982).
In finding that Sara Lee was estopped by laches from
asserting its infringement claim, the district court failed to
consider the relative unavailability of that defense to preclude
injunctive relief. In addition, the court did not consider the
public interest in avoiding confusion between the L'eggs® and
Leg Looks® trademarks, undoubtedly because, as discussed in
Section IV, infra, it miscalculated the likelihood of that
confusion. Because the district court either overlooked or
misapplied the law governing estoppel by laches, we are
constrained to set aside its finding that the doctrine operates to
bar the instant suit. See Section II, supra.
We also note that the district court considered, but
failed to fully appreciate, the conundrum with which Sara Lee
was presented when Kayser-Roth expanded the use of its Leg
Looks® mark to the FDM market. Because L'eggs® hosiery
was, then as now, sold exclusively in FDM outlets, it is
doubtful that Sara Lee could have proved that its product
would likely be confused with Kayser-Roth's. Of course, the
likelihood of confusion is the "keystone of infringement." 3
McCarthy § 23.01; see 15 U.S.C. §§ 1114(1), 1125(a)(1), note
2 supra. Indeed, to the extent that a plaintiff's prior knowledge
may give rise to the defense of estoppel by laches, such
knowledge must be of a pre-existing, infringing use of a mark.
See note 7, supra (Brittingham analysis assumes the existence
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2 eal, ea ie elt ec Re a a Sa ie
of an infringement for an extended period prior to the
commencement of litigation).
The estoppel-by-laches defense arises only where the
plaintiff has unreasonably delayed its pursuit of a remedy. See
Brittingham, 914 F.2d at 456, and note 7, supra. From the time
that Kayser-Roth first introduced its Leg Looks® products,
Sara Lee has been on the horns of a dilemma:
If [the trademark owner] waits for substantial
injury and evidence of actual confusion, it may
be faced with a laches defense. If it rushes
immediately into litigation, it may have little or
no evidence of actual confusion and real
commercial damage, may appear at a
psychological disadvantage as "shooting from
the hip" and may even face a counterclaim for
overly aggressive use of litigation.
4 McCarthy § 31.06[2][c]. We agree with Professor McCarthy
that the owner “has no obligation to sue until ‘the likelihood of
confusion looms large."" Id, at § 31.06[2]}[a] (quoting Johanna
Farms, Inc. v. Citrus Bowl, Inc., 468 F. Supp. 866, 881
(E.D.N.Y. 1978)). Sara Lee, by waiting for Kayser-Roth to
expand its use of the Leg Looks® mark to the FDM market,
chose to delay its pursuit of a remedy until its right to
protection had clearly ripened. Under the circumstances, we
adjudge its actions to have been entirely reasonable; the
district court clearly erred in finding otherwise.
B.
Likewise, the district court's finding that Sara Lee
acquiesced in Kayser-Roth's use of the Leg Looks® mark in
the FDM market is clearly erroneous. The basis for the court's
decision was a written agreement between the parties executed
on April 30, 1991, in settlement of a dispute over Sara Lee's
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application with the U.S. Patent and Trademark Office to
register "Lingerie Looks" as a trademark for pantyhose. In the
document's preface, the parties acknowledged _ that
Kayser-Roth already owned the registered trademarks Leg
Looks®, Career Looks®, Designer Looks®, and Silky
Looks®; the substance of the agreement addressed how Sara
Lee's Lingerie Looks products would be packaged and
advertised to minimize any infringement on Kayser-Roth's
rights.
An infringement action may be barred by the doctrine
of estoppel by acquiescence where the owner of the trademark,
by conveying to the defendant through affirmative word or
deed, expressly or impliedly consents to the infringement. See
4 McCarthy § 31.14[1]; Sweetheart Plastics, Inc. v. Detroit
Forming, Inc. , 743 F.2d 1039, 1046 (4th Cir. 1984). Although
the doctrines of acquiescence and laches, in the context of
trademark law, both connote consent by the owner to an
infringing use of his mark, acquiescence implies active
consent, while laches implies a merely passive consent. 4
McCarthy at § 31.14[1]; see Sweetheart Plastics at 1046.”
Sara Lee's entry into the 1991 settlement agreement
with Kavser-Roth was, no doubt, an affirmative act. However,
just as a preexisting infringement is a prerequisite to the
estoppel-by-laches defense, see Section III-A, supra, estoppel
by acquiescence requires that the trademark owner knowingly
consent -- albeit actively -- to the defendant's infringing use of
the mark. As we discussed in the preceding section, it was by
no means clear until 1992 that Sara Lee could adduce
persuasive evidence of a likelihood of confusion between its
L'eggs® trademark and Kayser-Roth's Leg Looks® mark.
9
Thus, as we implied in Sweetheart Plastics at 1046, our decision
in Ambrosia, see note 8, supra, is most accurately classified as an
illustration of the estoppel by acquiescence doctrine, even though the
Ambrosia court invoked the doctrine of estoppel by laches as an alternative
ground for its holding.
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In any event, it is obvious that the 1991 agreement was
intended only to govern Sara Lee's future actions in marketing
its Lingerie Looks brand; there is nothing in the agreement
that can reasonably be construed to immunize Kayser-Roth
from liability for all future uses -- especially infringing uses --
of any of its own marks. Moreover, even if Kayser-Roth's
estoppel-by-acquiescence defense were valid, public policy
dictates that -- like the doctrine of estoppel by laches -- it not
be rigidly applied in cases like this one, where the likelihood
of confusion is apparent. See Section III-A, supra; 4 McCarthy
§ 31.14[1] ("The defense of laches is trumped by a strong
showing of likely confusion of the public. Similarly, a strong
showing of a likelihood of confusion can trump even a proven
case of acquiescence by the senior user to the junior user's
usage... .").
Accordingly, we reject Kayser-Roth's equitable
defenses to the instant suit, and we move on to address the
merits of Sara Lee's claims.
IV.
We may grant injunctive relief to the owner of a
registered trademark whose rights to the mark have been
infringed on by another's use of a copy or colorable imitation
that is "likely to cause confusion, or to cause mistake, or to
deceive." 15 U.S.C.§ 1114(1); Pizzeria Uno, 747 F.2d at 1527:
see also Perini Corp. v. Perini Constr., Inc., 915 F.2d 121, 127
(4th Cir. 1990) ("The ultimate question, for purposes of
determining liability in trademark infringement actions, is
whether there exists a likelihood that an appreciable number of
ordinarily prudent purchasers will be misled, or indeed simply
confused, as to the source of the goods in question.") (citations
and internal quotation marks omitted). The test is likelihood
of confusion; evidence of actual confusion is unnecessary.
Pizzeria Uno at 1527.
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To ascertain the likelihood of confusion between two
trademarks, we consider a number of factors. These factors
include:
(1) the distinctiveness of the senior mark;
(2) the similarity of the two marks;
(3) the similarity of the goods or services
that the marks identify;
(4) the similarity of the facilities employed
by the parties to transact their business;
(5) the similarity of the advertising used by
the parties;
(6) the defendant's intent in adopting the
same or similar mark; and
(7) actual confusion.
Pizzeria Uno at 1527. Certain factors may not be
germane to every situation; moreover, though several factors
are simultaneously present, some factors may, depending on
the case, be more important than others. Id; see
Anheuser-Busch, Inc. v. L & L Wings, Inc., 962 F.2d 316, 320
(4th Cir.) (the Pizzeria Uno factors are not meant to be a rigid
formula for infringement; they are "only a guide -- a catalog of
various considerations that may be relevant in determining the
ultimate statutory question of likelihood of confusion."), cert.
denied, 113 S. Ct. 206 (1992). Indeed, we have distilled other
factors that may be considered relevant to analyzing the
likelihood of confusion, such as (8) the quality of the
defendant's product, Perini at 127, and (9) the sophistication of
the consuming public. Id. ; see Dayton Progress Corp. v. Lane
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Punch Corp., 917 F.2d 836, 839-40 (4th Cir. 1990). We will
consider each factor in turn.
A. The Distinct ‘the Senior Mar
1. Legal Background
The protection accorded trademarks is directly related
to the mark's distinctiveness. "Fanciful," "arbitrary," and
"suggestive" marks are inherently distinctive, and thus receive
the greatest protection against infringement. 1 McCarthy §
11.01[{1]. Fanciful marks are, in essence, made-up words
expressly coined for serving as a trademark. Some examples
of fanciful marks are Clorox®, Kodak®, Polaroid®, and
Exxon® . Id, at § 11.03[4].
Arbitrary marks are comprised of words in common
usage, but, because they do not suggest or describe any
quality, ingredient, or characteristic of the goods they serve,
are said to have been arbitrarily assigned. Examples include
Tea Rose® flour, Camel® cigarettes, and Apple® computers.
Id. at§ 11.04[3]. Though tea rose, camel, and apple are --
unlike Clorox® and Kodak® -- words denoting "real" things,
they are similar to fanciful marks in that they neither suggest
any mental image of the associated product nor describe it in
any way.
Suggestive marks connote, without describing, some
quality, ingredient, or characteristic of the product.
Coppertone®, Orange Crush®, and Playboy® are good
examples of suggestive marks because they conjure images of
the associated products. Id. at § 11.23. These marks are
nevertheless not descriptive; although they are meant to
project a favorable or idealistic image with which a
prospective user might identify, a person without actual
knowledge would have difficulty in ascertaining the nature of
the products that the marks represent.
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In contrast to fanciful, arbitrary, or suggestive marks,
there are marks that are not inherently distinctive. For instance,
certain marks merely describe a function, use, characteristic,
size, or intended purpose of the product. Examples of such
"descriptive" marks include After Tan post-tanning lotion, 5
Minute glue, King Size men's clothing, and the Yellow Pages
telephone directory. Id. at § 11.08. Marks that are merely
descriptive are accorded protection only if they have acquired
a "secondary meaning, "that is, if" in the minds of the public,
the primary significance of a product feature or term is to
identify source of the product rather than the product itself."
Dayton Progress at 839 (quoting Inwood Laboratories v. Ives
Laboratories, 456 U.S. 844, 851 n.11 (1982)). Coca-Cola® is
probably the paradigm of a descriptive mark that has acquired
a secondary meaning.
"Generic" terms are the common name of a product or
service itself, and can never be trademarks. Perini at 124."°
Examples of brand names held to be generic terms are
Convenient Store retail stores, Dry Ice solid carbon dioxide,
Light Beer ale-type beverages, and, in a case where a
once-fanciful mark had, over time, been assimilated into the
language, Thermos vacuum-insulated bottles. 2 McCarthy §
12.03 (citation omitted).
2. The L'eggs® mark
6: A mark is generic if it "denominate[s] a type, kind, genus or
subcategory of goods." Dayton Progress at 839 (quoting G. Heileman
Brewing Co. v. Anheuser-Busch, Inc., 873 F.2d 985, 997 (7th Cir. 1989)).
In other words, a generic term “identifies the general nature of an article."
Dayton Progress at 839 (citation and internal quotation marks omitted).
A term may also be generic if it names a "distinctive characteristic
of that genus of products." 2 McCarthy § 12.02[5]. For example, the term
"Matchbox" was held to be generic because that genus of toy vehicles were
sold in matchbox-sized boxes.
A-16
|
The L'eggs® mark was conceived in the midst of Sara
Lee's endeavor to discover new ways to manufacture, package,
and market women's hosiery. The company's efforts have paid
off; by developing a line of nylon-and-spandex hosiery,
packaging its products in the now-famous egg-shaped
containers,'' and cultivating a new market in which to sell its
goods, Sara Lee has amassed handsome profits.
But what, exactly, does L'eggs® mean? The district
court decided that L'eggs® was a contraction for "leg eggs." It
then focused on what it considered to be the "weaker" element
of the mark (leg), which, of course, is also an intrinsic part of
Kayser-Roth's Leg Looks® mark, and almost certainly the
source of any confusion between the two.
Citing the rule that a term may be generic if it names a
distinctive characteristic of the genus to which the product
belongs, see note 10, supra, the court concluded that, because
all pantyhose have legs, the word "leg" is generic insofar as it
pertains to pantyhose. The court alternatively found that "leg"
is generic because it is an abbreviation of "legwear" or
"leggings," terms that refer to the genus of apparel to which
pantyhose belong. According to the district court, because the
word "leg" is generic, it may legally be used as part of an
otherwise non-infringing pantyhose trademark.
We disagree. The district court failed to appreciate that
the mark at issue is neither "leg eggs" nor "legs," but L'eggs®,
a word that represents a singular concept associated with -- but
very different from -- pantyhose. Although the mark may not
be wholly fanciful (because it is phonetically identical to a
common word) or arbitrary (because it is not actually a "real"
word), it is unquestionably suggestive, and therefore a strong,
distinctive mark. L'eggs® conjures favorable images of
. Since 1991, Sara Lee has curtailed its packaging of L'eggs®
products in plastic eggs in favor of more “environmentally friendly"
cardboard boxes. Nonetheless, the new packaging retains the egg
silhouette.
attractive legs or legginess, and, by subtly reminding
consumers of its famous egg packaging design, reinforces the
association between the product and its source -- a sure sign of
a mark entitled to protection.’
? See, ¢.g., Metro Publishing, Ltd. v. San Jose Mercury News, 987
F.2d 637, 640 (9th Cir. 1993) (a likelihood of confusion exists when
consumers “are likely to assume that a product or service is associated with
a source other than its actual source because of similarities between the two
sources’ marks or marketing techniques.") (citations and internal quotation
marks omitted). It stands to reason that a mark which elucidates, to an
unusual degree, the source of a product serves the public interest and
should be preserved. That is precisely why merely descriptive marks are
accorded trademark protection upon acquiring a secondary meaning. See
discussion in Section IV-A(1), supra.
As for the district court's alternative finding, we note simply that
L'eggs® does not denominate a type or genus of goods, nor does it name a
distinctive characteristic of pantyhose in general. See note 10, supra. A
different case would be presented if the mark at issue were "Pantyhose" or
"Stockings" (type or genus), or "Nylons" (characteristic).
Our conclusion that the L'eggs® mark is distinctive is further
bolstered by the Patent and Trademark Office's registration of the L'eggs®
trademark without requiring any proof of the mark's having acquired a
secondary meaning. See Pizzeria Uno at 1529:
The significance of registration without proof of
secondary meaning .. . is that the Patent and Trademark
Office has “concluded” that the mark or figure was not
merely descriptive but suggestive[,] and this essential
fact . . . must be considered prima facie correct by a
court in considering the validity of a trademark. . .[.]
[R]egistration . . . constitutes not only a determination. . .
that the term or word is suggestive but also operates to
provide prima facie evidence of the registrant's right to
use the mark, endowing it with a strong presumption of
validity. (citations and internal quotation marks omitted).
Of course, if L'eggs® were indeed a generic term, it could not
legally be registered as a trademark. The inescapable conclusion is that
either the Patent and Trademark Office or the district court has made a
mistake; we are convinced that it was the latter.
A-18
Om An lide IO
Pie ho aR ay SR PERN be IG MIO CL i me ome 5 ten ting!
Meh ttiha DAMA nlc Id tice BPR RO BA ery OT se 0
istic sin senininistairaneivecinaion
B. The "Similarity" Factors
We now consider briefly the similarity of the two
marks, of the goods the marks identify, of the facilities
employed to transact the parties’ business,’*? and of the
advertising used by the parties.
L'eggs® and Leg Looks® , although not identical, are
perceived similarly by the eye and ear. Whether being written
or spoken, L'eggs® and the first syllable of Leg Looks® are
quite similar. Moreover, Leg Looks'® first syllable stands
alone, emphasizing its similarity to L'eggs®.
There can be little argument as to the similarity of the
goods that the two marks represent (both are associated with
women's hosiery), the facilities that the parties employ to
transact business (both L'eggs® and Leg Looks® are
distributed in the FDM market, often side-by-side), or the
advertising used by Sara Lee and Kayser-Roth (both employ
similar media and target the same consumers). Regarding
these three factors, there is no substantial difference between
the parties that would serve to ameliorate any confusion of
their marks.
C. The Defendant's Intent
As we stated in Pizzeria Uno:
The intent of the defendant is sometimes a
major factor in infringement cases. If there is
intent to confuse the buying public, this is
strong evidence establishing likelihood of
confusion, since one intending to profit from
another's reputation generally attempts to make
. This factor has also been expressed as the "proximity" of the
products. Perini at 127.
A-19
his signs, advertisements, etc., to resemble the
other's so as deliberately to induce confusion.
Id. at 1535. In other words, we presume that the person who
sets out to infringe on ancther's trademark has more brains
than scruples, and will likely succeed. Cf. Osem Food Indus.
Lid. v. Sherwood Foods, Inc., 917 F.2d 161, 165 (4th Cir.
1990):
When a newcomer to the market copies a
competitor's trade dress, its intent must be to
benefit from the goodwill of the competitor's
customers by getting them to believe that the
new product is either the same, or originates
from the same source as the product whose
trade dress was copied. Logic requires . . . that
from such intentional copying arises a
presumption that the newcomer is successful
and that there is a likelihood of confusion.
In his memorandum opinion, the magistrate concluded
that Kayser-Roth intended to infringe on Sara Lee's trademark,
pointing to considerable circumstantial evidence in the record
supporting a strong inference that, when Kayser-Roth
resuscitated its Leg Looks® line, it expressly intended to take
advantage of the mark's similarity to L'eggs® to siphon sales
of Sara Lee's products.’ The district court, however, found
i The magistrate cited testimony that one of Kayser-Roth's
vice-presidents directed the company's New Products Group to design
packaging for its new line that differed from its other No nonsense®
products. The resultant trade dress was so close to that of Sheer Energy®
products that the magistrate -- with the approval of the district court --
enjoined its use. See Section I, supra. The same vice-president rejected the
Group's recommendation that the new line be called “Active Sensations,”
insisting instead on the Leg Looks® name. The magistrate also noted that
Kayser-Roth initially spent relatively little money to promote Leg Looks®.
A-20
that Kayser-Roth had acted in good faith -- a finding that we
may disturb only if it is clearly erroneous. Because we would
reach the same result in this case regardless of Kayser-Roth's
intent, reviewing the district court's disposition of this complex
issue would serve no purpose; we thus decline to do so.
D. Actual Confusion
The record is replete with anecdotal evidence of
consumers throughout the nation confusing the L'eggs® and
Leg Looks® marks. Six women -- most of whom usually
bought L'eggs® pantyhose -- testified that they had purchased
(or, in one case, nearly purchased) a Leg Looks® product
under the mistaken impression that it was instead a L'eggs®
product. Sara Lee's service merchandisers told the magistrate
of many occasions where consumers had approached them in
stores, uncertain of the origin of Leg Looks®.
The service merchandisers also told of massive
confusion by store personnel. Included in the record are
photographs of in-store advertisements and _ circulars
promoting, variously, "L'eggs Looks," "Legg Looks," and
"L'eggs Look" pantyhose.
The anecdotal evidence, standing alone, is nearly
overwhelming; indeed, we can but wonder how often the
experiences related by the trial witnesses have been repeated --
but not reported -- in stores across the country. Nevertheless,
Sara Lee produced additional evidence in the form of surveys
that it had conducted, indicating that approximately thirty to
forty percent of the consuming public was confused by the
similarity of the L'eggs® and Leg Looks® marks. The district
In addition, Kayser-Roth evidently accelerated its marketing of
Leg Looks® to coincide with Sara Lee's introduction of L'eggs®
Everyday. Perhaps most tellingly, there is evidence in the record suggesting
that certain Kayser-Roth employees may have purged computer files
relating to the development of the Leg Looks® repackaging.
A-21
Ce
court discounted the survey evidence on the ground that its
reliability may have been in question, but even if the true
figure were only half of the survey estimate, actual confusion
would, in our view, nevertheless exist to a significant degree.”
E. The Quality of the Defendant's Product & _ the
Sophistication of the C ng Publi
The two remaining factors, announced in Perini,
probably apply with less frequency than the previous seven.
Consideration of the quality of the defendant's product is most
appropriate in situations involving the production of cheap
copies or knockoffs of a competitor's trademark-protected
goods. If a defendant markets a product under a mark similar
to that affixed by a competitor to a commodity of like nature
but superior manufacture, that the defendant's product is
markedly inferior is likely to be highly probative of its reliance
on the similarity of the two marks to generate undeserved
sales.
Barring an unusual case, buyer sophistication will only
be a key factor when the relevant market is not the public
at-large. If the typical consumer in the relevant market is
sophisticated in the use of -- or possesses an expertise
regarding -- a particular product, such sophistication or
expertise may be pertinent in determining the likelihood of
if
We may infer from the case law that survey evidence clearly
favors the defendant when it demonstrates a level of confusion much below
ten percent. See Henri's Food Products Co.. Inc. v. Kraft. Inc., 717 F.2d
352, 358 (7th Cir. 1983). In that case, the court of appeals cited several
cases holding that survey evidence indicating ten to twelve percent
confusion was sufficient to demonstrate actual confusion. The court,
however, concluded that the 7.6% confusion level before it “weighs against
infringement.” See also Mutual of Omaha Ins. Co, v, Novak, 836 F.2d 397,
400 (8th Cir. 1987) (survey evidence showing confusion level of between
ten and eleven percent sufficient to demonstrate actual confusion), cert.
denied, 488 U.S. 933 (1988).
A-22
confusion. Perini at 127-28. The relative sophistication of the
market may trump the presence or absence of any other factor.
See id, at 128:
The plaintiff claims that lack of consideration
of consumer sophistication does not preclude a
finding of infringement when every other
factor indicates a likelihood of confusion. Yet,
we hold that in a market with extremely
sophisticated buyers, the likelihood of
consumer confusion cannot be presumed on the
basis of the similarity in trade name alone ....
We need not here concern ourselves, however, with
either of the two "Perini factors." There is no assertion in the
instant proceeding that Kayser-Roth's product is substantially
inferior to Sara Lee's, or that persons who buy pantyhose are
any more sophisticated about that product than those who
comprise the market for other ordinary retail goods.
We have previously acknowledged that the
distinctiveness of the senior user's mark is "the first and
paramount factor" in determining the likelihood of confusion.
Pizzeria Uno at 1527. If the strength of the senior mark is the
alpha of infringement analysis, then evidence of actual
confusion is surely the omega; where the defendant in an
infringement case has elected to use a mark similar to that of a
competitor's distinctive mark, and, as a result, has actually
confused the public, our inquiry ends almost as soon as it
begins.
Even if most of the other factors did not indicate-- as
they do in this case -- a strong likelihood of confusion, the
strength of the L'eggs® mark in conjunction with the solid
evidence of actual confusion compels us to conclude that
A-23
Sg ee a ee OL
Kayser-Roth's current use of its Leg Looks® mark is an
infringing one.'® Upon reviewing the district court's finding to
the contrary, we cannot help but be left with a "definite and
firm conviction that a mistake has been made." Pizzeria Uno at
1526. The court's finding is clearly erroneous; we are thus
constrained to overturn it.
V.
The judgment of the district court is reversed, and the
case is remanded for it to enter judgment for Sara Lee. We
further instruct the district court to enter an order permanently
enjoining Kayser-Roth from affixing the Leg Looks®
trademark to any of its products placed in the same channels of
distribution as those in which Sara Lee's L'eggs® products are
currently sold.
REVERSED AND REMANDED WITH INSTRUCTIONS
= Sara Lee has suggested that the use of an infringing mark on
product packaging, standing alone, also constitutes a trade dress violation.
We have scrutinized Professor McCarthy's treatise as it pertains to trade
dress, see note 2, supra, and can find no support for this argument. The
magistrate cited M. Kramer Mfg. Co.. Inc. v. Andrews, 783 F.2d 421, 427
(4th Cir 1986), as holding that "the brand name is part of the trade dress,"
Magis. Op. at 119, but we read the cited portion of that case to say only that
the plaintiff alleged that the defendant's copying of the brand name violated
Section 1 125(a).
In any event, because Sara Lee's trade dress claim remains alive
only insofar as it might serve as an alternative basis for enjoining
Kayser-Roth's further infringing use of the Leg Looks® mark, our grant of
injunctive relief on the ground of trademark infringement effectively moots
the trade dress issue. Moreover, our holding in Sara Lee's favor on its
primary federal claim renders it unnecessary for us to address its
supplemental state law claims; even were Sara Lee to also prevail on its
other theories, it would not be entitled to any further relief.
A-24
WIDENER, Circuit Judge, dissenting:
I respectfully dissent.
The district court denied Sara Lee's request to enjoin
Kayser-Roth from using the trademark LEG LOOKS
pantyhose in the food, drug, and mass merchandise market.
The judgment of the district court was supported by many
findings of fact, one of which was based on a contract of
settlement between Sara Lee and Kayser-Roth in 1991.
Because of that finding of fact, but also otherwise supported,
the district court found that Sara Lee had acquiesced in
Kayser-Roth's use of the LEG LOOKS mark.
The majority concludes that this finding is clearly
erroneous because "the 1991 agreement was intended only to
govern Sara Lee's future actions in marketing its LINGERIE
LOOKS brand." Slip op. at 11.
The agreement in question appears at A.2871 and grew
out of Sara Lee's attempt to register the trademark LINGERIE
LOOKS in International Class 25. Kayser-Roth objected on
the basis that that mark infringed on its registered mark LEG
LOOKS and other marks such as Career Looks, Designer
Looks and Silky Looks. Sara Lee agreed to comply with
specific marketing and advertising practices, in particular that
its LINGERIE LOOKS mark would always be used with and
have added to it the L'EGGS trademark so that L'EGGS
LINGERIE LOOKS would be the dominant trademark usage
of Sara Lee. The agreement contained no market restrictions.
The district court found that each party remained free to use its
respective mark, LEG LOOKS by Kayser-Roth, and L'EGGS
LINGERIE LOOKS, by Sara Lee. It found that in the
agreement Sara Lee expressly acknowledged Kayser-Roth's
ownership of the registration for the LEG LOOKS mark and
that such acknowledgement "supports the inference that [Sara
Lee] recognized and consented to Defendant's [Kayser-Roth's]
entitlement to the whole range of rights legally afforded by
A-25
such ownership.” The district court found that Sara Lee would
not have agreed to L'eggs LINGERIE LOOKS by Sara Lee if
it thought it would be confused with LEG LOOKS, despite the
sharing of the word leg.
The district court found the relevant market to be the
national retail pantyhose market and that food, drug, and mass
merchandise stores are some of the many outlets used by both
parties to distribute pantyhose products in the national market.
Sara Lee registered the L'eggs trademark in 1973 for use on
ladies’ hosiery and pantyhose in International Class 25.
Kayser-Roth registered the LEG LOOKS trademark in 1983
for use on ladies’ hosiery and pantyhose in International Class
25. The district court reviewed Kayser-Roth's registration of
LEG LOOKS and found no limitation to a particular
composition or style. It further found that registration of a
trademark bestows upon its owner a presumption that the
"goods or services will move through all channels of trade
suitable for goods or services of that type, and that they reach
all purchasers and potential purchasers of them," quoting
RE/MAX of America, Inc, v. Realty Mart, Inc. , 207 U.S.P.Q.
960, 965 (T.T.A.B. 1980). The district court concluded that
Kayser-Roth's registration of LEG LOOKS, which had
become incontestible to the extent provided by 15 U.S.C. §
1065, established the presumption that it could distribute
pantyhose under the LEG LOOKS mark through all channels
suitable for the registered classification. It then found that
department stores, mass merchandising stores, off-price
outlets, food stores, and drug stores were all such suitable
outlets and that both parties had marketed pantyhose in the
national pantyhose market, including the food, drug, and mass
merchandise market, since the 1970's.
The majority, by confining its reasoning to the food,
drug, and mass merchandising market, has not taken into
account many or even most of the findings of fact I have just
related. Especially, it has not taken into account the district
court's finding of fact that:
A-26
|
Given the functional interchangeability of
pantyhose, Plaintiff's successful marketing of
L'eggs pantyhose through FDM stores rather
than department stores, and defendant's current
success with its pricing strategy, it would be
unrealistic and flatly incorrect to find that
low-cost pantyhose and high-priced pantyhose
do not compete in the same market. Cf. Brown
Shoe Co., 370 U.S. at 326 (refusal to divide
theshoe market according to "price/quality"
distinctions). The court, therefore, finds that the
relevant market in this case is, and has always
been, the national retail pantyhose market.
That error, and the incorrect finding as clearly
erroneous of the district court's finding of acquiescence, are
two essential weaknesses in the majority opinion.
I am of opinion that the district court's findings of fact
are plausible and supported by the evidence. "If the district
court's account of the evidence is plausible in light of the
record viewed in its entirety, the court of appeals may not
reverse it even though convinced that had it been sitting as the
trier of fact, it would have weighed the evidence differently.
Where there are two permissible views of the evidence, the
factfinder's choice between them cannot be clearly erroneous."
Anderson v. Bessemer City, 470 U.S. 564, 573-74 (1985).
I would affirm the district court's finding that Sara Lee
had acquiesced in the defendant's use of the mark LEG
LOOKS.
I would also affirm its finding of relevant market.
II
I also do not agree with the majority's view that
anecdotal evidence of confusion and likelihood of confusion in
this case is "massive" and "nearly overwhelming" and its
A-27
conclusion that the district court did not consider, or
miscalculated the likelihood of, consumer confusion
Confusion or likelihood of confusion is a question of fact no’
to be disturbed unless clearly erroneous. 3 J. Thomas
McCarthy, Trademarks and Unfair Competition § 23.22
(1995). The district court discussed the relevant evidence in
detail and gave specific reasons for crediting or discrediting
anecdotal evidence, market studies, and expert testimony
offered by both parties. This discussion, in fact, occupies 20
pages of the appendix (A.5331-5351).
The district court divided its discussion of the
likelihood of confusion into five categories and its conclusion.
The categories were (1) strength of the SHEER ENERGY
trade dress; (2) similarity of the packages; (3) defendant's
intent; (4) similarity of the goods, sales facilities, and
advertising; and (5) evidence of actual confusion. The majority
opinion takes little or no issue with any of the district court's
discussion or fact finding except that with respect to actual
confusion, as is illustrated on page 18-19 of the slip opinion, in
the part labeled "D. Actual Confusion." on which its holding is
based.
The district court, in its consideration of evidence of
actual confusion, listed as sub-categories: A. Consumers, B.
Store Personnel, C. Misshelving and Misspelling, and D. Mail
Intercept Surveys. The majority opinion discusses little or no
evidence relevant to these categories and considered by the
district court in detail, but bases its decision on the fact that it
disagrees with the district court on the weight to be given the
survey evidence and the effect to be given the anecdotal
evidence. Slip op. at 18-19.
For example, included in the evidence considered by
the district court, but not by the majority, is the following:
As of the August 1993 hearing, Kayser-Roth
had sold over 3.5 million 1993 packages, yet
only four consumers testified at the hearing to
A-28
|
having bought the 1993 package, believing it
contained L'eggs pantyhose, and only one of
those believed it contained SHEER ENERGY
pantyhose.
ate pesca
The largest proportion of anecdotal evidence of
confusion came from plaintiffs’ sales
merchandisers rather than store personnel, and
even with that, plaintiffs employees gave
evidence of only 25 encounters with store
personnel who asked plaintiffs’ employees
about the 1993 package.
+ anagem Fs bi
| Between the introduction of the 1993 package
is and the August 1993 hearing, Sara Lee's sales
| merchandisers had made at least 800,000 store
visits. Even if only 1/4 of those 800,000 visits
had coincided with a display of the 1993
package, those 25 encounters would have
occurred on barely more than 1/100 of 1% of
the visits.
The evidence about misshelving or misspelling
came from Sara Lee's employees and included
no explanation from those responsible for the
) errors. Since Kayser-Roth's pantyhose were
almost always shelved near Sara Lee's, the
district court did not consider a few clerical
errors by unidentified store personnel or
outside advertisers demonstrative of actual
. confusion.
With respect to the survey evidence of Sara
Lee, the district court did not "accord the
proffered results much weight" because of "the
selection of an inappropriate controller by Sara
A-29
Lee." The district court also discounted Sara
Lee's surveys because "they insufficiently
emulated market conditions." Rather than take
issue with that district court finding as to the
weight of the evidence, the majority merely cut
the result in half and used that arbitrary
half-figure in coming to its conclusion.
The majority opinion does not take into account that
the district court accorded more weight to Kayser-Roth's
survey evidence than it did to Sara Lee's because it had come
closer to emulating market conditions and controlling for the
effect of color on packages.
The district court in this case, for some 20 pages,
analyzed in detail the evidence of likelihood of confusion. The
majority dismisses that analysis in one page with little analysis
of the same evidence. Slip op. at 18-19. In my opinion, the
majority opinion does not state a sufficient basis for its
conclusion that the district court's findings were clearly
erroneous. Inwood Labs., Inc. v, Ives Labs., Inc., 456 U.S.
844, 857-58 (1982), stated that "[aJn appellate court cannot
substitute its interpretation of the evidence for that of the tal
court simply because the reviewing court might give the facts
another construction, resolve the ambiguities differently, and
find a more sinister cast to actions which the District Court
apparently deemed innocent." (Internal quotation omitted.)
Yet, I suggest that is just what the majority has done in this
case.
Il
Whether or not the findings of fact of the district court
I have referred to above are clearly erroneous, and even if the
findings of fact of the majority are not clearly erroneous, in my
opinion the majority erred when it sequestered the use of the
word "leg" in connection with the sale and advertising of
A-30
pantyhose in the food, drug, and mass merchandise market and
gave that exclusive use to Sara Lee.
On page 15 of the slip opinion, the holding of the
majority is disclosed.
According to the district court, because the
word"leg" is generic, it may legally be used as
part of an otherwise non-infringing pantyhose
trademark.
We disagree. The district court failed to
appreciate that the mark at issue is neither "leg
eggs" nor "legs" but L'eggs®, a word that
represents a singular concept associated
with--but very different from--pantyhose.
Although the mark may not be wholly fanciful
(because it is phonetically identical to a
common word) or arbitrary (because it is not
actually a "real" word), it is unquestionably
suggestive, and therefore a strong, distinctive
mark. L'eggs® conjures favorable images of
attractive legs or legginess, and, by subtly
reminding consumers of its famous egg
packaging design, reinforces the association
between the product and its source--a sure sign
of a mark entitled to protection. (Italics added.)
Thus the majority holds that the word "leg" may not
legally be used as part of an otherwise non-infringing
pantyhose trademark in connection with the advertising or sale
of pantyhose. I suggest that it is simply not possible to
advertise or sell pantyhose without the use of the word "leg"
and that the decision of the majority, that the use of the word
"leg" in connection with the advertising and sale of pantyhose,
is the exclusive right of Sara Lee, is error.
A-31
In remarkably similar circumstances, the Third Circuit
held, in A.J. Canfield Co. v. Honickman, 808 F.2d 291 (3d
Cir. 1986), that "chocolate fudge," as used in the name of a
drink called "Diet Chocolate Fudge Soda," was generic and
was "available to all potential competitors." 808 F.2d at 308.
The court reasoned that ". . . if a term is necessary to describe a
product characteristic that a competitor has a right to copy, a
producer may not effectively preempt competition by claiming
that term as its own." 808 F.2d at 305.
Along the same line, the Seventh Circuit, in Miller
Brewing Co, v. G. Heileman Brewing Co., 561 F.2d 75 (7th
Cir.1977), cert. denied, 434 U.S. 1025 (1978), decided that
"Light" is a generic or common descriptive term when used
with beer. 561 F.2d at 80. In that case, Miller had the
registered mark of "LITE" and had sued Heileman, which had
incorporated the word "light" in its sales and advertising. Of
course, Miller's suit failed. And the court stated that "[a]
generic or common descriptive term is one which is
commonly used as the name or description of a kind of goods.
It canriot become a trademark under any circumstances." 561
F.2d at 79. The Heileman case was followed in Miller
Brewing Co, v. Falstaff Brewing Corp., 655 F.2d 5 (ist Cir.
1981), which held that Miller was estopped by Heileman from
prosecuting the same kind of a suit against Falstaff. The court
relied on the reasoning of Judge Friendly in two cases for the
rule which, in my opinion, should be followed here and is as
follows:
"No matter how much money and effort the
user of a generic term has poured into
promoting the sale of its merchandise and what
success it has achieved in securing public
identification, it cannot deprive competing
manufacturers of the product of the right to call
an article by its name." Abercrombie & Fitch
Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d
A-32
OI
Cir. 1976). "The reason is plain enough. To
allow trademark protection for generic terms,
i.e. terms which describe the genus of goods
being sold, even when these have been
identified with a first user, would grant the
owner of the mark a monopoly since a
competitor could not describe his goods as
what they are." ishi
Regis Publications, Inc., 531 F.2d 11, 13 (2d
Cir.1975).
655 F.2d at 8.
I would conclude that the word "leg" is no less generic
than the words "chocolate fudge," as used in connection with
diet soda, or the word "light," as used with beer. I suggest
again that this holding of the majority is error, regardless of
whether or not the facts as found by the district court are
clearly erroneous. Advertising and selling pantyhose without
using the word "leg" just seems to me to be impossible.
IV
In sum, I am of opinion that the majority erred when it
decided, either implicitly or expressly, that the holdings of the
district court were clearly erroneous with respect to
acquiescence, relevant market, and confusion. Absent the fact
findings of the majority, which were contrary to those of the
district court, the decision of the majority can not stand.
Even considering for argument, however, that the fact
findings of the majority were correct, its holding that the word
"leg" is not a generic term is erroneous, | think, and also for
that reason, the decision of the majority can not stand.
I would affirm.
A-33
SARA LEE CORPORATION,
Plaintiff,
V.
KAYSER-ROTH CORPORATION,
Defendant.
CIVIL NO. 6:92CV00460
UNITED STATES DiSTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
WINSTON - SALEM DIVISION
October 13, 1994, Decided
October 13, 1994, FILED,
October 13, 1994, ENTERED
MEMORANDUM OPINION
BULLOCK, District Judge
I. INTRODUCTION
II. FINDINGS OF FACT
A. History of the Case
l. The Parties, the Trademarks, the
Market
a. The Parties and the
Trademarks
b. The Market
y The Original Complaint
The Amended Complaint
4. The 1992 Preliminary Injunction
Ww
A-34
5. The 1993 Supplemental Complaint -
6. The 1993 Preliminary Injunction
Hearing and Recommendation
B. History of the Marks and Original Packaging
l. Plaintiffs L'eggs® SHEER
ENERGY® Line of Pantyhose
a. The Marks L'eggs® and
SHEER ENERGY®
b. Packaging and Marketing the
SHEER ENERGY® Line
i Defendant's No nonsense® Lines of
Pantyhose
8
H
3
r .
. C
H .
.
p " "
l. Packaging and Marketing the LEG
LOOKS® Lines
2. Other "Leg" Marks
E. New Products for a Changing Market
l. Plaintiff's New Products
2. Defendant's Plans
a. Background: No nonsense®
Market Status in 1992
b. Pans to Redesign the No
nonsense® Line
| c. Plans to Introduce a New
Product
3. Defendant's New Product: LEG
LOOKS® INVIGORATING
PANTYHOSE and the 1992 Package
a. Choosing the Name
b. Designing the Package
(1) Ideas and Decisions
(2) The Box
(3) The Colors
ae See Ma 0.
.
A-35
(4) The Logo, Graphics,
and Size Designators
F. The 1993 LEG LOOKS® Package
l. Elements Retained: Name, Box,
Colors
2. Elements Changed: Font, Slant,
Graphics
3. Marketing the 1993 Package
G. Consumer Perceptions: Anecdotal Evidence
l. Consumer Testimony
a. About the 1992 Package
b. About the 1993 Package
2. Plaintiff's Employees’ Testimony
3. Defendant's Employees’ Testimony
H. Consumer Perceptions: Survey Evidence
4 Plaintiff's Survey Evidence
a. Designing the Surveys
b. Study #1
2. Study #2
2. Defendant's Survey Evidence
I, Expert wuness Testimony
l. Opinions of the Surveys
2. Opinions of the Likelihood of
Confusion
3. Opinions of Defendant's Intent
Il. DISCUSSION
A. The Issues Before the Court
l Jurisdiction and Venue
2. Issues Now Moot
3. Issues Remaining
B. Federal Trademark Claims
l. Threshold Defenses
a. Incontestability of the Mark
LEG LOOKS®
A-36
(3)
Limited
Incontestability
Plaintiff's Previously
Aquired State Law
Rights
Defendant's
Presumptive Rights
b. Equitable Defenses
(1) Estoppel by
Acquiescence
(2) Estoppel by Laches
(3) Defendant's Good Faith
2. Challenging the Mark LEG LOOKS®
a. Grounds for a Challenge
b. Likelihood of Confusion
(1) Strength of the Mark
L'eggs®
(2) Similarity of the Marks
(3) Similarity of the Goods
(4) Similarity of the Sales
Facilities and
Advertising
(5) Evidence of Actual
Confusion
(6) Defendant's Intent
(7) Conclusion
Federal Trade Dress Claim
l. The SHEER ENERGY® Trade Dress
and its Secondary Meaning
2. Unprotectable Features
3. Likelihood of Confusion
a. Defendant's Burden
b. Analysis
(1) Strength of the SHEER
ENERGY® Trade
Dress
A-37
(2) Similarity of the
Packages
(3) Defendant's Intent
(4) Similarity of the
Goods, Sales Facilities,
and Advertising
(5) Evidence of Actual
Confusion
(a) Consumers
(b) Store Personnel
(c) Misshelving or
Misspelling
(d) Mall-Intercept
Surveys
(6) Conclusion
D. = State Law Claims
1. Unfair Competition and Unfair Trade
Practices
2. Trademark Dilution
IV. CONCLUSIONS OF LAW
V. APPENDIX
I. INTRODUCTION
The recommendation of the United States Magistrate
Judge ganting injunctive elief to the Plaintiff in this complex
trademark/trade dress case following_a ten-day evidentiary
hearing is before the court for review pursuant to 28 U.S.C. §
636 and through agreement of the parties. Also before the
court are Defendant's comprehensive objections to the
recommendation. The objections merit thorough
consideration because it is the court's duty to make a de novo
determination of those portions of the recommendation to
which objection is made. 28 U.S.C. § 636(b)(1). Such
A-38
we
determination includes a discussion of the factual and legal
bases for the court's action with regard to the
recommendation. Cf. Camby v. Davis, 718 F.2d 198 (4th
Cir. 1983) (absent objection, no explanation is necessary for
adoption of a magistrate's recommendation).
Both the magistrate judge and Plaintiff put great
emphasis on the findings recommended and the order entered
on December 1, 1992, regarding Defendant's LEG LOOKS®
INVIGORATING PANTYHOSE By No nonsense® package
on the market at that time ("1992 Package"). The sole issue
then before the court was whether a preliminary injunction
should be entered against that package. While the court was
satisfied that it should, the entry of the preliminary injunction
cannot be equated with a final finding of success. The court
issued an order "in accord with the overall substance" of the
magistrate judge's recommended findings of fact and
conclusions of law but considered those findings and
| conclusions for purposes of that order only. (Order and
Prelim. Inj., filed Dec.1, 1992.) They were not binding on the
| parties whose rights the injunction merely preserved pending
1 a final determination. See Wetzel v. Edwards, 635 F.2d 283,
| 286 (4th Cir. 1980); Meiselman v. Paramount Film Distrib.
Corp., 180 F.2d 94, 97 (4th Cir. 1950); Poe v. Charlotte
Memorial Hosp., Inc., 374 F. Supp. 1302, 1312 (W.D.N.C.
1974). Neither are those findings and conclusions binding on
the court as it decides Plaintiff's claims on their merits. See
University of Texas v. Camenisch, 451 U.S. 390, 394-95, 68
L. Ed. 2d 175, 101 S. Ct. 1830 (1980).
The court has painstakingly reviewed all of the
materials in the record, including thousands of pages of
testimony, dozens of packages, and hundreds of documents.
' Having made an independent assessment of the material
Oe ee oe ee
It is now apparent to the court that a final determination of the
issues in this case would have been reached more quickly had the matter
proceeded to a full trial before a district judge.
A-39
facts and legal arguments in this case, the court will issue its
own findings rather than setting forth with commentary the
various portions of the magistrate judge's recommendation.
Il. FINDINGS OF FACT
A. History of the Case
l. The Parties, the Trademarks, the Market
a. The rarties and the Trademarks
l. A major manfacturer of pantyhose
sold to consumers, Plaintiff’ is a Maryland corporation with
a principal place of business in Winston-Salem, North
Carolina.
2. Plaintiff owns federal trademark
registration No. 891,626, issued in 1970, for the trademark
L'EGGS for use on ladies’ hosiery and pantyhose. .
Hereafter, the mark will be referred to in the form in which it
appears on Plaintiff's products, with an upper-case "L" and
lower-case "e-g-g-s," i.e., "L'eggs®." See Fig. 1(a).
. "Plaintiff is used herein to refer collectively to Sara Lee
Corporation as well as its predecessors in interest with respect to the
L'eggs® line of products, which include Hanes Corporation.
: The use of a trademark as a house mark or a trade name does
not render inaccurate its designation as a trademark. Whether a registered
mark is used as a trademark, house mark, or trade name, the same
fundamental principles of law protect against its appropriation. See | J.
Thomas McCarthy, McCarthy on Trademarks and Unfair Competition §
9.01[1] (3d ed. 1992). The court will refer to a name or a phrase listed on
the Principal Register of the United States Patent and Trademark Office
as a “mark.”
A-40
reat!
etait Baked shel NAD Aint csc ON Aten A
. iat ad
3. Plaintiff also owns federal registration
No. 978,180, issued in 1974, for the trademark SHEER
ENERGY for use on ladies' hosiery and pantyhose.
Hereinafter, the mark will be referred to in the form in which
it appears on Plaintiff's products, with upper-case letters, i.e.,
"SHEER ENERGY®." See Fig. 4.
4. Both marks have become
incontestable to the extent provided by 15 U.S.C. § 1065, are
well recognized by consumers, and are substantially
associated with one source.
5. A major manufacturer of pantyhose
sold to consumers, Defendant* is a Delaware corporation
with a principal place of business in Greensboro, North
Carolina.
6. Defendant owns federal registration
No. 974,045, issued in 1973, for the trademark NO
NONSENSE for use on ladies’ hosiery and pantyhose.
Fiereafter, the mark will be referred to in the form in which it
aopears on Defendant's products, with an upper-case initial
"N” and lower-case letters thereafter, i.e., "No nonsense®."
See Figs. 5(a) & 5(b).
7 Defendant also owns federal
registration No. 1,247,116 for the trademark LEG LOOKS,
for use on hosiery and pantyhose, issued in 1983, with a
recorded first use of the mark in commerce in August 1977.
Hereafter, the mark will be referred to in the form in which it
appears on Defendant's products, with all upper-case letters,
i.e., "LEG LOOKS®." See Figs. 2(a) & 2(b).
8. Both marks have become incontestible
to the extent provided by 15 U.S.C. § 1065. The mark No
’ "Defendant" is used herein to refer collectively to Kayser-Roth
Corporation as well as its predecessors in interest with respect to its
pantyhose products, which include Burlington Hosiery, Inc.
A-41
nonsense® is well recognized by consumers and
substantially associated with one source.
b. The Market
9. Plaintiff and Defendant both make and
sell pantyhose nationally to members of the general
consuming public.
10. Pantyhose cover the legs with sheer
knitted fabric. They may be made of nylon or a combination
of nylon and spandex, but, regardless of their composition,
pantyhose are functionally interchangeable, competitive
products.
11. Both Plaintiff and Defendant advertise
their pantyhose nationally through a wide variety of media
including newspapers, magazines, radio, and television.
12. _ Both Plaintiff and Defendant distribute
pantyhose through a wide variety of retail outlets including
department stores, mass merchandising __ stores,
supermarkets, groceries, convenience stores, pharmacies and
drug chains.
13. In the hosiery and _ marketing
industries, mass merchandising stores, supermarkets,
groceries, convenience stores, pharmacies and drug chains
are sometimes referred to collectively as "food, drug, and
5
In the pleadings, pantyhose having 100 per cent nylon legs
have been referred to as "nylon" pantyhose, and pantyhose having some
percentage of spandex in the leg have been referred to as "spandex"
pantyhose. The legs of the so-called "spandex" pantyhose at the focus of
this case are actually seventy-nine, eighty, or eighty-one per cent nylon.
5 Stores commonly considered to be “mass merchandising stores"
are those large establishments selling a wide variety of goods at low
prices, for example, Wal-Mart.
A-42
mass merchandising"("FDM") outlets or colloquially as "the
FDM market."
14. FDM stores are, however, simply
some of the many outlets used to distribute goods in the
national retail pantyhose market, in which Plaintiff and
Defendant are major competitors.
2. The Original Complaint
15. In July 1992, Plaintiff filed a
complaint challenging Defendant's application for trademark
registration of the names "SHEER INVIGORATION" and
“SHEER VIGOR." That claim has been dismissed.
3. The Amended Complaint
16. In September 1992, Plaintiff amended
its complaint to include claims of trademark infringement,
false designation of origin and false description, unfair
competition, and unfair trade practices based on allegations
that the mark LEG LOOKS® affixed to women's hosiery
sold "to the same classes of consumers through the same
channels of trade" as L'eggs® pantyhose were also sold--i.e.,
FDM stores--infringed on the mark L'eggs®, and that
Defendant's 1992 Package infringed on Plaintiff's SHEER
ENERGY® trade dress. (Pl.'s Am. Compl. at 20, filed Sept.
9, 1992).
17. Plaintiff asked the court, inter alia, to
enjoin Defendant from "any and all further imitation and use
of the L'EGGS SHEER ENERGY trade dress or the
designation 'Leg Looks' as herein alleged." (Id. at 25).
4. The 1992 Preliminary Injunction
18. In October 1992 Plaintiff sought a
preliminary injunction against the 1992 Package but did not
A-43
bring the use of the mark LEG LOOKS® per se before the
court during the 1992 preliminary injunction proceedings.’
19. After hearings were held and a
recommendation made by the magistrate judge, the court
entered an order preliminarily enjoining Defendant from
marketing its LEG LOOKS® pantyhose in the 1992 package
or "in a package which would likely confuse consumers" as
to the origin of the product and from using specified
packaging elements "in a combination confusingly similar"
to Plaintiffs SHEER ENERGY® packaging. (Order and
Prelim. Inj., filed Dec. 1, 1992).
20. The order did not, however, prevent
Defendant "from using the name 'Leg Looks', or boxes of the
same size, weight and shape as the current ‘Leg Looks'
packaging, or the colors blue, green, and orange to denote the
style of pantyhose . . . , provided the packaging as a whole
[was] differentiated in general appearance from Plaintiff's
[SHEER ENERGY®] packaging and from [the 1992
Package]." (Id.).
> The 1993 Supplemental Complaint
21. Without conceding that the 1992
Package could properly be permanently enjoined, Defendant
withdrew the 1992 Packages from the market. Defendant has
informed the court that it will not use the 1992 Package
again under any circumstances.
22. After the withdrawal of the 1992
Package, which cost Defendant approximately $ 2.5 million,
Defendant reintroduced its pantyhose in a new package
("1993 Package").
?
Exhibits presented during the 1992 preliminary injunction
proceedings will be identified as exhibits from "Prelim. Inj. I."
Aas
23. In January 1993, Plaintiff moved to
supplement its complaint to assert that the 1993 Package,
featuring the mark LEG LOOKS®, infringes on the
trademark L'eggs®, imitates the SHEER ENERGY® trade
dress, and constitutes false designation of origin and false
description, and that Defendant's marketing of the package
constitutes unfair competition, unfair trade practices,
and trademark dilution.
24. In_ its supplemental complaint,
Plaintiff continued to seek an injunction against any further
use of the mark LEG LOOKS® and any further imitation
and use of the SHEER ENERGY® trade dress, damages, and
attorneys’ fees.
6. The 1993 Preliminary Injunction Hearing and
Recommendation
25. In March 1993, Plaintiff moved for a
preliminary injunction against the marketing in FDM stores
of any hosiery product under the name LEG LOOKS®, the
marketing of hosiery products in the 1993 Package, or any
other use of the name LEG LOOKS® or any LEG LOOKS®
package in a manner that would create a likelihood of
customer confusion with L'eggs® products.
26. In August 1993, the magistrate judge
conducted a ten-day hearing on the motion.*
27. At the conclusion of the hearing, the
parties agreed, and the court concurred, to the waiver of
Plaintiffs damage claims, the bifurcation of Plaintiff's
remaining equitable claims from Defendant's counterclaims,
the conversion of the hearing into a trial on the merits of all
Plaintiff's equitable claims, and the referral of the claims to
. Exhibits presented during the 1993 preliminary injunction
proceedings will be identified as exhibits from "Prelim. Inj. II."
A-45
the magistrate judge for a recommendation, with de novo
review by the court.”
28. On November 30, 1993, the magistrate
judge issued his recommendation that Plaintiff's request for a
permanent injunction be granted.
BO r the Marks and Original Packagi
l. Plaintiff's L'eggs® SHEER ENERGY® Line of
Pantyhose
a. The Marks L'eggs® and SHEER ENERGY®
29. On Plaintiffs SHEER ENERGY®
pantyhose packages the product name reads as "L'eggs®
SHEER ENERGY® Pantyhose."
30. The mark L'eggs® combines the
words "leg" and "egg."
31. ‘Plaintiffs promotion of the mark
L'eggs® has always emphasized the egg. The most recent
incarnation of the mark includes an egg outline rising above
the mark. See Fig. 1(c).
32. Definitions of the word "leg" include
"1: a limb of an animal used esp. for supporting the body and
for walking . . . 3a: the part of an article of clothing that
: The parties dispute whether Plaintiff's waiver of its claims for
damages included a waiver of its claim for attorney fees. Under the
Lanham Act, only the prevailing party in an "exceptional case[ }" may be
awarded attorney fees. 15 U.S.C. § 1117(a). Exceptional cases include
those in which an infringer's actions were “‘malicious, fraudulent,
deliberate and willful.‘ Scotch Whisky Ass'n v. Majestic Distilling Co.,
958 F.2d 594, 599 (4th Cir. 1992) (quoting S. Rep. No. 1400, 93rd
Cong., 2d Sess., reprinted in 1974 U.S.C.C.A.N. 7132, 7136). As
Plaintiff is not the prevailing party and this is not am exceptional case, the
court does not reach the issue of waiver.
A-46
covers the leg." Webster's Ninth New Collegiate Dictionary
682 (1989).
33. The word "leg," therefore, identifies
both the most significant parts of a pair of nantyhose and the
place where pantyhose are worn by all but a fraction of
pantyhose purchasers. °
34. The word "leg" is also the root of the
generic term "legwear," the class of apparel to which
pantyhose belong.
b. Packaging and Marketing the SHEER
ENERGY® Line
}. In the early 1970's, Plaintiff started
selling pantyhose under the mark L'eggs® in FDM stores.
According to Plaintiff, they were the first "high quality
branded" pantyhose to be sold in those stores rather than in
department stores. (Prelim. Inj. I Tr. Vol. I at 49, filed Nov.
5, 1992).
36. Plaintiff obtained national distribution
of L'eggs® pantyhose in 1974 and has since continued to
distribute L'eggs® pantyhose throughout each state in the
United States.
37. Plaintiff has affixed the mark L'eggs®
to pantyhose of a variety of colors, compositions, and
constructions or styles."
- Pantyhose purchasers who rob banks or undergo certain hair
treatments may wear their pantyhose on their heads, but the court is
confident that such purchasers are relatively rare and almost certainly
brand indifferent.
" The term "composition" as used here refers to the combination
of nylon or spandex in the yarn from which the pantyhose are made. The
terms “constructions” or "styles" as used here refers to the method of
reinforced weaving of a particular style of pantyhose, for example, in
Plaintiff's terminology, “all sheer,” “reinforced toe,” or “control top."
A-47
38. Plaintiff first packaged L'eggs®
pantyhose in a plastic egg resting in a paperboard cylinder 3
inches in diameter. That package is one of America's most
famous.
39. In 1973, Plaintiff introduced SHEER
ENERGY® pantyhose, which have legs that are twenty per
cent spandex and come in sizes designated "A," "B," and
"0."
40. From 1973 to 1991, the only one-pair
package of SHEER ENERGY® pantyhose available at retail
was the plastic egg. The egg motif remains prominent in
Plaintiffs SHEER ENERGY® packaging. Every SHEER
ENERGY® package in evidence displays an egg in some
form.
41. Plaintiff used silver eggs with silver
cylinders and green lettering for "all sheer" SHEER
ENERGY® pantyhose, silver eggs with silver cylinders and
blue lettering for "reinforced toe" SHEER ENERGY®
pantyhose, and medium blue or "teal" eggs with teal
cylinders and white lettering for "control top" SHEER
ENERGY® pantyhose.
42. The SHEER ENERGY® logo on the
egg packages’ cylinders slants upward from left to right, as
do the thin lines that were added in the late 1980's.
43. On the bottom of the egg cylinders, a
one-size chart displays in two columns the heights and
corresponding weights for only the size of the pantyhose in
that package.
44. In 1991, Plaintiff introduced new one-
pair SHEER ENERGY® packages: paperboard boxes
approximately 3-1/2 inches high, 3 inches wide, and 2-3/8
inches deep, with elliptical or egg-shaped tops, s!anting logo,
and slanting stripes. The color-coding of styles on those
packages is the same as on the plastic egg packages.
45. According to Michael Wahl of the
Howard Marlboro Group, who has been a marketing
A-48
consultant to Plaintiff, the new one-pair packages were
designed to be more environmentally sound, to save money,
to facilitate automation, and, above all, to "make the
shopping experience easier." Michael Wahl, In_Store
Marketing 182 (1992) (Prelim. Inj. II Def.'s Ex. 96).
46. Since the late 1980's, Plaintiff has also
sold SHEER ENERGY® pantyhose in two-pair economy
boxes: rectangular paperboard boxes approximately 4 inches
high, 3 inches wide, and 3-1/2 inches deep.
47. Over the years, Plaintiff has used at
least twelve different two-pair SHEER ENERGY® economy
boxes. (Prelim. Inj. I. Pl.'s Exs. 4 & 8; Prelim. Inj. Il Pl.'s
Exs. 12-13, 15-20, 22, 24).
48. In focus in this case are two of those
twelve packages: the silver-grey and green "all sheer"
economy box (Prelim. Inj. I Pl.'s Ex. 8) and the silver-grey
and blue "reinforced toe" economy box (Prelim. Inj. I P1.'s
Ex. 4). See Fig. 4.
49. Those silver-grey economy boxes
share with the other economy boxes their name and logo,
their size, and some depiction of an egg-shaped or egg-
topped package that in turn incorporates the color silver,
slanted lettering, and thin slanting lines common to those
one-pair SHEER ENERGY® packages. On each end of
those two boxes is displayed a silhouette of an egg-shaped
package.
50. On both the silver-grey economy
boxes and the egg-topped boxes a three-size shaded grid with
multiple columns displays the height and weight
correspondences for all three sizes. This kind of three-size
shaded grid is common on pantyhose packaging.
51. According to Wahl, Plaintiff's senior
management, "the gatekeepers of the brand image that is so
strongly represented by the egg," established maximum
limits on the number of economy package facings that could
A-49
be displayed in conjunction with the "real egg" package.
Wahl, supra, at 181.
52. The photographs in evidence show
that the SHEER ENERGY® economy boxes generally
occupy space on only the top one or two shelves of Plaintiff's
racks.
53. Currently, at least in eastern states, the
plastic eggs, egg-topped boxes, and economy boxes may all
be found in stores where L'eggs® pantyhose are sold.
54. In addition to SHEER ENFRGY®,
Plaintiff sells in FDM stores a number of lines or sub-brands
of pantyhose under the mark L'eggs®. They include L'eggs®
Regular, L'eggs® Control Top, L'eggs® Sheer to Waist,
L'eggs® Knee Highs, L'eggs® CLASSICS®, L'eggs®
ACTIVE SUPPORT®, L'eggs® SheerElegance®, Sheer
Elegance® Silken Mist® Pantyhose by L'eggs®, Sheer
Elegance® Silky Support® Pantyhose by L'eggs®, Sheer
Elegance® Thigh Highs by L'eggs®, Winter L'eggs®, and
Summer L'eggs®.
55. According to Plaintiffs market
research, consumers identify the name "L'eggs" with the sub-
brand L'eggs® Regular, and consumers of SHEER
ENERGY® pantyhose usually refer to the product they buy
as “SHEER ENERGY®." (Prelim. Inj. II Def.'s Ex. 257 at
03318).
56. Plaintiff's sales of SHEER ENERGY®
pantyhose have been in excess of $2.5 billion. Over $ 100
million worth, or five per cent, of SHEER ENERGY®
pantyhose have been packaged in economy boxes.
57. Plaintiff has spent over $ 280 million
in advertising SHEER ENERGY® pantyhose. There is no
evidence, however, of any promotional expenditures
exclusively directed to or featuring any SHEER ENERGY®
economy box.
2. Defendant's No nonsense® Lines of Pantyhose
A-50
58. Defendant also began _ selling
pantyhose in FDM stores in the early 1970's, shortly after
Plaintiff, using the mark No nonsense®.
59. Defendant primarily sold products
called "No nonsense® Regular pantyhose,” ’” "No nonsense®
Sheer to waist pantyhose," and "No nonsense® Control top
pantyhose," all of which have 100% nylon legs.
60. Since the 1970's, Defendant's No
nonsense® Regular packages have been red, No nonsense®
Sheer to waist packages orange, and No nonsense® Control
top packages green. Both pouches and boxes have been
colored this way.
61. Since the 1970's, Defendant also has
sold other lines of pantyhose, including a line introduced as
"No nonsense® Comfort Stride®" and later called "No
nonsense® Light Support" that has some spandex in the legs.
62. Since the 1970's, Defendant's Comfort
Stride® or Light Support packages have been silver and
blue.
63. Defendant has always sold No
nonsense® brand pantyhose in one-pair plastic pouches 5
inches square.
64. Since 1985, two years before Plaintiff
introduced its first economy box, Defendant has also used
two-pair economy boxes approximately 4 inches high, 4-1/2
inches wide, and 2 inches deep that are colored like the
pouches.
55. Defendant has traditionally used the
size designations "petite to medium," “medium to tall," and
. "Regular" is the name Defendant uses for its nylon pantyhose
that have a waist of medium-weight construction, neither as sheer as
"Sheer to waist" nor as heavily reinforced as “Control top." The court has
before it an astounding variety of pantyhose, and will strive to refrain
from calling any “regular,” as in “common” or “usual.”
A-51
saan ite
"queen" on its No nonsense pantyhose packages and has
presented size information in a one-size, two-column chart.
Since 1990, Defendant has also sometimes used "A," "B,"
and "Q" size designations.
66. In addition to its No nonsense®
Regular, No nonsense® Control Top, No nonsense® Sheer
to waist, and No nonsense® Light Support pantyhose,
Defendant sells in FDM stores other lines or sub-brands of
pantyhose under the mark No nonsense®. Those «iher lines
or sub-brands include No nonsense® SHEER & SILKY, No
nonsense® DRESS SHEER & SILKY, No nonsense®
FASHION COLOR, and No nonsense® GREAT SHAPES
pantyhose.
67. According to Plaintiffs market
research, as it may seem to consumers that there are
"millions of eggs on a L'eggs display," the consistently
colored No nonsense® packages "really stand out in the
minds of . . . [No nonsense®] base brand buyers" and help
them find the pantyhose they are looking for. (Prelim. Inj. II
Def.'s Ex. 129 at 3.00849).
68. Defendant has spent over $ 855
million in advertising the mark No nonsense®.
C. Pantyhose Purchasing in FDM Stores
69. In FDM stores, both parties’ pantyhose
are displayed together in fixed “hosiery centers," unified
configurations of shelf or rack space. Originally designed for
Plaintiff's products, the centers are sometimes referred to in
the trade as the "L'eggs Category Management System." See
Wahl, supra, at App.
70. Nearly all of the pantyhose displayed
in any hosiery center are made by either Plaintiff or
Defendant. Of those that are not, none are as widely
distributed as Plaintiff's or Defendant's.
A-52
71. The racks have sloping shelves that
display pantyhose packages in neat lines. When a package at
the front of the rack is removed, gravity feeds the row of
packages down to fill the vacated space. Wahl, supra, at 180.
72. Signs on panels above the racks
indicate which section of the center is meant for which
brands or lines of pantyhose.
73. Both parties also deliver and display
their pantyhose packages in separate cardboard cases called
"shippers," which indicate on the front and sides whether
they contain L'eggs® or No nonsense® hosiery.
74. Both parties’ pantyhose also may be
stocked on spinners, free-standing units with two or more
sides of shelving that can be turned as customers look at the
products.
75. While some spinners are marked
exclusively for either Plaintiff's or Defendant's pantyhose, K-
Mart stores display spinners on the ends of which alternate
both "L'eggs®" and "No nonsense®." (See, e.g., Prelim. Inj.
II Def.'s Exs. 374-A-2 & 374-A-5).
76. According to sales merchandisers,
both parties’ pantyhose may properly be displayed on the
same K-Mart spinner but not on the same side of the same
spinner.
77. A consumer planning to buy
pantyhose she has bought before will go to the section of the
hosiery rack where those pantyhose are stocked, look for
packages of the color associated with her usual style of
pantyhose, and then read the color and size designators on
those packages to find the packages containing the pantyhose
she wants. Selecting a package in this way may take ten or
twenty seconds.
78. | While most pantyhose purchases are
made in this manner, many are not. Promotional sales, for
example, are often made to consumers who decide to buy
A-53
only after they catch sight of the product in a store and notice
its low cost.
79. Brand-name recognition is an
important factor in pantyhose purchasing, especially when a
new or low-cost product is introduced.
80. No matter how she chooses which
brand she will buy, when selecting pantyhose the average
pantyhose buyer must read the package to identify the style,
color, and size of the pantyhose in the package.
D. Defendant's LEG LOOKS® Lines of
" "
4 Packaging and Marketing the LEG LOOKS® Lines
81. Since at least 1980, and probably as
early as 1977, Defendant has sold pantyhose under the mark
LEG LOOKS®. Defendant has, for example, sold patterned
or textured nylon pantyhose in the lines LEG LOOKS® by
Burlington® and LEG LOOKS® Fashion. See Fig. 2(a).
Those pantyhose are sold in envelope-style packages with
three-size shaded grids.
82. Since 1983, Defendant has spent over
$ 12 million in advertising the mark LEG LOOKS®. By
1992, Defendant had sold nearly $ 75 million worth of
pantyhose in those LEG LOOKS® lines.
83. After peaking in the mid-1980's, sales
had dropped by December 1988 to a projected $ 5 to $ 6
million for that fiscal year. An internal memorandum noted
that revitalizing the brand would require a multi-million
dollar investment and would be difficult, partly because
consumer awareness of the mark was not "significant." (PI.'s
Br. Supp. Mot. for T.R.O. or Expedited Prelim. Inj. Ex. 29 at
A001753-1754, filed Oct. 5, 1992).
84. Until 1989, Defendant sold pantyhose
under the mark LEG LOOKS® only in department stores.
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That year, however, Defendant decided to withdraw them
from those stores and to sell them thereafter to a small
number of off-price or discount retailers, such as Ross Stores
and the Burlington Coat Factory.
85. Defendant considered those two
discount outlets and the FDM stores to be "very different
distribution channels." (Prelim. Inj. II Pl.'s Ex. 148).
86. In 1992, through those retailers,
Defendant was selling about $ 2 million worth of pantyhose
annually under the mark LEG LOOKS® and planned to
introduce special marketing programs in at least one area.
87. Occasionally, pantyhose sold under
the mark L'eggs® and pantyhose under the mark LEG
LOOKS® were sold by the same retailers.
88. By virtue of activities at the United
States Patent and Trademark Office and affirmative action by
Plaintiff to monitor activities in the hosiery market, Plaintiff
was well aware that Defendant sold pantyhose under the
mark LEG LOOKS®.
89. _ Until it amended its complaint in
September 1992, Plaintiff had raised no objection to
Defendant's use of the mark LEG LOOKS® on pantyhose.
90. On April 23, 1991, Plaintiff had in fact
acknowledged Defendant's ownership of Registration No.
1,247,116 of the mark LEG LOOKS® for hosiery and
pantyhose.
91. Plaintiff made this acknowledgment in
a settlement agreement after Defendant had opposed
Plaintiffs application for registration of the name
"LINGERIE LOOKS" as a new mark for pantyhose on the
grounds that LINGERIE LOOKS would be confused with,
among other marks, the mark LEG LOOKS®.
92. In that agreement, Plaintiff promised
always to use the mark L'eggs® prominently and "in direct
visual proximity to the words LINGERIE LOOKS" and only
in a particular stylized form in which the initial "L"s are in
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—
upper-case lettering and the other letters are in lower case.
(Prelim. Inj. II Def.'s Ex. 100 at P 1 & Ex. A). In other
words, Plaintiff agreed that its new mark would always
appear as "L'eggs® Lingerie Looks®." See Fig. 3.
93. For its part, Defendant agreed that
Plaintiff need not distribute L'eggs® Lingerie Looks®
pantyhose "in the egg-shaped containers now associated with
its L'EGGS brand." (Id. at P 3).
94. The conditions of use of the mark
Lingerie Looks® reflects the parties' understanding that
adding the mark L'eggs® would sufficiently indicate the
source of Lingerie Looks® pantyhose and would sufficiently
differentiate the mark Lingerie Looks® from the mark LEG
LOOKS®.
Other "Leg" Marks
95. | When the mark L'eggs® was first
registered for use on women's hosiery, it was challenged by
the owner of Mr. Leggs®, a mark used on men's trousers.
96. Plaintiff asserted that the two marks
were not likely to be confused because men's trousers and
women's pantyhose were different products sold in different
stores, the L'eggs® mark "is a contraction used in a
distinctive logo form," and the L'eggs® market theme,
packaging, and displays were "built around the egg." (Prelim.
Inj. II Def.'s Ex. 91 at 1).
97. Plaintiff pointed out that the close
relation of the "leg" portion of its mark to both "that
anatomical portion of a human being most susceptible to
both our products" and "to a pertinent characteristic of the
product itself" might make it difficult for use of the word to
be restricted. (Id. at 3).
98. _— Plaintiff also noted that the appearance
of the word "leg" in a number of other, prior trademarks in
use on clothing, particularly hosiery, gave Plaintiff "sound
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reason to believe that no possible confusion with any
registered mark was likely." (Id. at 2).
99. Over the years, Plaintiff has
challenged marks containing the word "leg" or "legs."
100. Defendant's mark LEG LOOKS® was
among over 100 registered "leg" marks interposed in defense
of Plaintiff's opposition to registration of the name "YOUR
LEGS."
101. Plaintiff admits that over forty third-
party trademarks registered for use on pantyhose contain the
word "leg" or "legs." Plaintiff has acknowledged others’
rights in or acquiesced to the use of a few of these composite
"leg" marks.
102. The registrations of at least eight of
the third-party marks include disclaimers of the exclusive
right to use "leg," "legs," or "legwear," apart from the mark
as shown." A registration owned by Plaintiff's predecessor
Hanes Corporation also contains such a disclaimer. (See
Prelim. Inj. II Def.'s Ex. 57).
103. Pantyhose bearing third-party "leg"
trademarks have been sold in FDM stores, but there is no
evidence that sales under any one of those "leg" marks
exceed one per cent of all pantyhose sales.
E. New Products for a Changing Market
a Plaintiff's New Products
104. In 1991, Plaintiff launched pantyhose
under the name "Back to Basics." They were made of nylon,
"s Disclaimers of “an unregistrable component of a mark otherwise
registrable" may be made voluntarily by an applicant or may be required
by the Commissioner of the Patent and Trademark Office. 15 U.S.C. §
1056. A mark that is “merely descriptive" is unregistrable. 15 U.S.C. §
1052(e)(1).
A-57
sold at a low price, and packaged in a plastic pouch that
could fit into No nonsense® racks. They were designed to
conform to Defendant's sizing and came in "tan," a
designation Defendant used, rather than "suntan," a
designation Plaintiff used.
105. By the fall of 1991, Plaintiff had
decided to discontinue Back to Basics and replace it with a
new line.
106. By the spring of 1992, Plaintiff had
developed L'eggs® Sheer To Waist pantyhose, intending the
nylon product to virtually replicate and directly compete with
No nonsense® Sheer to waist pantyhose. (See Prelim. Inj. II
Def.'s Ex. 131). |
107. In addition to Plaintiff's using the
common descriptive term "sheer to waist" for the first time,
the package displayed the term in a formation, typeface, and
angle below two stripes like those on Defendant's package.
Like Defendant's Sheer to waist package, Plaintiff's egg-
topped box was orange.
108. Plaintiff introduced its new product at
a significantly lower price than Defendant's and then
extended the low pricing strategy to all of Plaintiffs nylon
brands.
109. In the spring of 1992, Plaintiff
replaced Back to Basics with another nylon line, L'eggs®
Everyday®.
110. The Everyday® package was a
paperboard box approximately 4-1/2 inches wide, 4-1/2
inches high, and 1-1/2 inches deep. Plaintiff, noting it was
"shaped somewhat like the square pouch," designed it to fit
where pouches fit, i.e., on No nonsense® racks. (Prelim. Inj.
II Def.'s Ex. 149 at 3.04237). Everyday® pantyhose were
also designed to conform to No nonsense® sizing and came
in tan.
111. Plaintiffs packaging of knee-high
pantyhose in the Everyday® line also imitated an element
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Defendant had used since the 1970's for its knee-high
packaging: the color fuschia.
112. Furthermore, Plaintiff has marketed
nylon L'eggs® Knee Highs in-plastic-pouches virtually the
same size as Defendant's knee-high pouches. Although the
packages were peach-colored and not fuschia, they displayed
the phrase "Knee Highs" in a formation, typeface, and angle
below two stripes, as Defendant's packages did.
113. Finally, Plaintiff, intending to
“emulate No Nonsense's structure," made a tabletop box
dispenser wider than but otherwise structurally identical to
Defendant's. (Prelim. Inj. II Def.'s Ex. 200).
y A Defendant's Plans
a. Background: No nonsense® Market Status in
1992
114. As 1992 began, market research
showed that due to a peaking of the rate of entry of women
into the work force and a growing tendency to wear casual
clothing, the hosiery market was stable or shrinking.
115. The research also showed _ that
consumers had greater awareness of the mark L'eggs® than
the mark No nonsense® and bought L'eggs® pantyhose
more often.
116. Considering only pantyhose sales
occurring FDM stores from 1988 to 1991, No nonsense®
lost 2-1/2 points of market share while L'eggs® gained more
than 3 points. By the end of 1991, No nonsense®'s market
share was at a five-year low.
117. According to a 1992 market research
report, pantyhose wearers consider that "(t]he most important
pantyhose attributes are comfort, fit and durability." (Pl.'s Br.
Supp. Mot. for T.R.O. or Expedited Prelim. Inj. Ex. 38 at
25.00570).
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118. In the report, which explored what
characteristics would make a new line of pantyhose
successful, Defendant analyzed the sales in FDM stores of
various types of pantyhose including "basic," "support," and
"premium." (Id.).
119. Noting that it is "extremely difficult to
convince consumers to try a new type of pantyhose," the
analysis included estimates of how many purchasers of
particular types of pantyhose would switch brands if the
price differences were irrelevant. (Id. at 25.00572).
120. Defendant's analysis showed | that,
while growth in the hosiery market as a whole was
stabilizing, since 1985 there had been growth in FDM store
sales of pantyhose made with spandex. Plaintiffs SHEER
ENERGY® had captured the largest share of this growth.
121. Of all pantyhose sold, over fifty per
cent are all nylon. Most of the pantyhose Defendant sells are
all nylon. Indeed, in 1991, over seventy-five per cent of No
nonsense® pantyhose sold were all nylon, and only twenty-
five per cent were made with spandex. The reverse was true
of L'eggs® sales.
122. The 1992 analysis recognized that the
hosiery market's stasis or contraction meant that growth in
No nonsense® sales would necessarily depend on gaining
market share from its competition, namely L'eggs® brands.
123. According to Robert Seelert,
Defendant's president and chief executive officer, Defendant
understood Plaintiff's copying of its nylon products and
package features to be a direct attempt to gain such market
share from No nonsense®.
b. Plans to Redesign the No nonsense® Line
124. Early in 1992, Defendant retained
Deskey Associates, Inc. ("Deskey"), a packaging design
consulting firm, to redesign the No nonsense® packages.
A-60
el
125. Deskey revised the No nonsense®
logo.
126. Assuming that the mark No
nonsense® would be the "primary communication," followed
by sub-brand names and generic descriptors, Deskey also
suggested many possible names for different sub-brands and
narrowed the selection on the basis of market research. (P1.'s
Br. Supp. Mot. for T.R.O. or Expedited Prelim. Inj. Ex. 45 at
30.00034).
127. Among _ the criteria Deskey
acknowledged for sub-brand names were that they "should
be available and protectable legally." (Id.).
128. Defendant and Deskey wanted a
consistent color scheme for the No nonsense® package line.
After considering a number of different possibilities,
Defendant decided that it would be better to continue to use
its traditional colors rather than risk a loss of equity base by
trying new colors.
129. Defendant also discussed but decided
against alternatives to the pouch package.
130. The redesign of the No nonsense®
line is a long-term effort. As of the August 1993 hearing, its
results had not yet reached the market.
C. Plans to Introduce a New Product
131. As early as 1991, Defendant began to
consider developing a new line of pantyhose made with
spandex to introduce in response to Plaintiff's introduction of
new nylon pantyhose.
132. Defendant considered naming the new
line "Active Sensations."
133. By early 1992, Defendant believed
that Plaintiffs new nylon pantyhose and pricing strategy
would make Defendant's forthcoming promotion plan for the
predominantly nylon No nonsense® line "totally
A-61
uncompetitive." (Prelim. Inj. II Tr. Vol. VIII at 120, filed
Feb. 28, 1994). While continuing to address the line
redesign, Defendant decided that development of a line of
pantyhose made with spandex would be its first priority.
134. Aiming to introduce its new pantyhose
concurrently with Plaintiff's introduction of Everyday®
pantyhose, Defendant undertook to launch its new pantyhose
by September 1, 1992.
135. Defendant wanted its new pantyhose
to compete with SHEER ENERGY® pantyhose. Defendant |
considered which colors to offer in which sizes and styles |
based on the best-selling SHEER ENERGY® combinations.
136. Defendant, however, chose a pricing
strategy markedly different from that Plaintiff used for
SHEER ENERGY®. Defendant decided to sell its new
pantyhose at a "value-price," that is, at a price very close to
the product's production cost. Defendant planned to
introduce its new pantyhose at a price forty per cent below
that of SHEER ENERGY® and to sustain sales at a price
twenty-five to thirty per cent below that of SHEER
ENERGY®. (See Prelim. Inj. II Def.'s Exs. 267 at A01358 &
266 at A001788).
137. Rather than investing heavily in media
advertising, Defendant planned to promote its new pantyhose
by making a broad-scale, rapid trial of pre-priced floor
displays. (Id. at 01791, 01793).
138. According to Defendant's advertising |
agency, it is unusual not to emphasize promotional
advertising when introducing new products. On the other
hand, saving money on advertising and promotion would
enable Defendant to pursue its low-cost pricing strategy.
139. Defendant's fiscal year runs from
February to January. In the advertising agency's experience,
Defendant typically cancelled a significant amount of fourth-
quarter advertising plans to improve their reported profits at
year end.
A-62
MN SIN eee ee
140. The new pantyhose were launched in
the fall of 1992. At that time, Defendant, circulating print
advertising, spent $ 340,000.00 on advertising.
141. One factor a company must take into
consideration when introducing a new product is the extent
to which consumers will buy the new product in place of the
company's existing products. A purchase of this kind is
known as "cannibalization." If too much cannibalization
occurs, an apparently successful new product may in fact not
be profitable to the company. Cannibalization dynamics may
be clarified once actual sales are made.
142. When drawing up budgets and
estimating profits and losses from new pantyhose, both
Plaintiff and Defendant have made projections based on
estimated cannibalization rates of both fifty per cent and
thirty per cent. Plaintiff has also made such projections based
on an estimated rate of zero per cent. (See Prelim. Inj. II
Def.'s Ex. 181 at 3.00471 ["assumes no cannibalization"]).
143. In the 1991 proposal requesting
permission to proceed with the development of "Active
Sensations," a $ 7.4 million media estimate was made based
on an assumption of fifty per cent cannibalization. This
proposal was not approved.
3. Defendant's New Product: LEG LOOKS®
INVIGORATING PANTYHOSE" and the 1992
Package
a. Choosing the Name
144. One way to name a new product is to
formulate a concept of the product, and then think of many
possible names and choose the one best encapsulating the
concept.
145. According to Plaintiff's expert, this is
the "usual way" of developing names. (Prelim. Inj. II Tr. Vol.
A-63
Hil at 72, filed Jan. 31, 1994). According to Defendant's
expert, in the general practice of marketing, deviations from
this ideal are “rampant.” (Prelim. Inj. II Tr. Vol. [IX at 71,
filed Mar. 1, 1994).
146. Seelert testified that launching a new
product with a name not already trademarked would be a
risky investment.
147. According to Defendant's advertising
agency, a name's status as a registered trademark could be a
practical reason for preferring it.
148. In the early 1990's, Defendant's library
of registered marks included LEG LOOKS®, LEG
SENSE\®, SILKY LOOKS®, COMFORT STRIDE®,
SHEER LEGACY®, SHEER INDULGENCE®, and
CAMEO.
149. Defendant's initial concept of its new
pantyhose was that they would feel invigorating.
150. In 1991, when development of this
new line was first contemplated, Defendant considered
names including “Active Sensations" and “Sheer
Invigoration."
151. Defendant filed applications for
trademark registration oof the names “SHEER
INVIGORATION" and "SHEER VIGOR" with the United
States Patent and Trademark Office, which published the
marks for opposition.
152. On April 15, 1992, Plaintiff notified
Defendant that it intended to oppose the registrations.
153. Evidence presented at the 1992
preliminary injunction hearing, at which the use of the mark
LEG LOOKS® per se was not at issue, led the magistrate
judge to conclude that Defendant turned to its library of
existing trademarks, and ultimately chose LEG LOOKS®,
only after and as a direct result of being notified of Plaintiff's
intent to oppose Defendant's trademark applications.
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154. Evidence presented at the 1993
hearing, however, shows that members of Defendant's
management had given substantial consideration to calling
its new line of pantyhose "LEG LOOKS® SENSATIONS
INVIGORATING PANTYHOSE By No nonsense®" well
before April 15.
155. George Holland, head of new product
development for Defendant since September of 1991, said in
a deposition that he did not remember hearing the names
"Sheer Vigor" or "Sheer Invigoration" before July 1992.
156. At least as early as April 10, 1992,
however, Holland had been told to use "LEG LOOKS
SENSATIONS INVIGORATING PANTYHOSE By No
nonsense®" as the working name for the new line of
pantyhose and had been sent color and size recommendations
for pantyhose referred to as "Leg Looks Sensations." (See
Pl.'s Br. Supp. Mot. for T.R.O. or Expedited Prelim. Inj. Ex.
52 at 72, 108, 115, 117-20; Prelim. Inj. II. Pl.'s Ex. 143). At
some point, the word "SENSATIONS," seen as unwieldy or
redundant, was dropped from the name.
157. Both Defendant's advertising agency
and focus group research indicated that names other than
LEG LOOKS® would more accurately convey to consumers
positive ideas about the feel as well as the look of the
product. Participants in the research found the name more
appealing, however, when it was read as "LEG LOOKS®
INVIGORATING PANTYHOSE." (Prelim. Inj. I] Def.'s Ex.
240 at A002321).
158. Holland, who previously worked with
Defendant's other LEG LOOKS® lines, testified that it never
occurred to him that selling pantyhose under the mark LEG
LOOKS® in FDM stores would cause confusion with the
mark L'eggs®.
b. Designing the Package
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(1) Ideas and Decisions
159. Defendant decided to use a May 1992
sales meeting as an opportunity to ask about a retailer's
interest in the new pantyhose. To that end, Defendant's
creative department drew possible package designs.
160. Deskey also made other drawings, but
Defendant decided to retain the basic design first created in-
house.
161. On July 17, 1992, Defendant met with
inside and outside counsel to discuss the launch of the new
pantyhose. John Pardo of Deskey, who was meeting with
Thomas Kuhn, Defendant's vice-president of marketing for
the sheer hosiery division, about redesigning the No
nonsense® line, joined the meeting, but Holland was on
vacation and did not attend.
162. At that meeting, after some changes
had been made, Seelert gave final approval to the LEG
LOOKS® INVIGORATING PANTYHOSE By No
Nonsense® name and packaging.
163. Notes made by one of Defendant's
product managers and by Deskey indicate that creative
information related to the new packaging was to be purged
once it had been decided upon.
164. As the volume of sealed documents
and the frequency with which the parties’ representatives
were excluded-from the courtroom during the hearing
demonstrate, both parties consider market research and
product design materials highly confidential. It is not
uncommon for employees to move from one company to the
other.
(2) The Box
A-66
165. Defendant decided to seli the new pantyhose
in a paperboard box with a tab by which the box may be
hung on a peg.
166. Defendant had several reasons for
choosing a box: it could be displayed in more ways than a
pouch; it maintained an association with Defendant's
economy boxes but was different enough from pouches to
minimize cannibalization; and it satisfied consumers’ belief
that paperboard is more environmentally sound than plastic.
167. According to Kuhn's instructions, the
box was to be the same height and width as the SHEER
ENERGY® economy box. Defendant, who keeps samples of
ali the products that compete with its own, had samples of
SHEER ENERGY® economy boxes available while it was
designing the new LEG LOOKS® package.
168. An expert testifying for the Defendant
pointed out that the size of a package is influenced by
concerns that the package "be big enough to hold the product
and not too big to make people believe there's more in the
package than [there] really is . . . [it is] really determined by
what you put in it." (Prelim. Inj. II Tr. Vol. [IX at 30-31, Aug.
27, 1993, filed Mar. 1, 1994).
169. The one-pair LEG LOOKS® box is of
nearly the same height and depth and only slightly more than
half the width of the two-pair No nonsense® economy box.
Its dimensions are closely comparable to those of the
paperboard box that holds one pair of Sears Legtricity®
pantyhose. (See Prelim. Inj. II Def.'s Ex. 337A).
170. The box would not fit the No
nonsense® racks already existing in FDM store hosiery
centers, but would fit L'eggs® racks.
171. Defendant planned to develop fixtures
for the package according to “'standard’ industry footage
allotments." (Prelim. Inj. II Def.'s Ex. 266 at A001790).
(3) The Colors
A-67
172. In its first drawings, which consumers
never saw, Defendant used color coding similar to the coding
Plaintiff used on its SHEER ENERGY® packaging: blue on
silver-grey for regular, green on silver-grey for sheer to
waist, and white on teal for control top.
173. Color is sometimes used by market
competitors to indicate common characteristics of their
products. For example, soups often come in red and white
cans and various brands of decaffeinated coffee and tea are
packaged in green.
174. Holland believed that using the
SHEER ENERGY® color schemes would help a consumer
pick pantyhose of the type and style she sought from all
those displayed on hosiery racks.
175. Deskey's drawings experimented with,
among other elements, different color schemes, but
Defendant chose not to adopt them.
176. Those at the June 17 meeting had "a
preliminary opinion that perhaps [Defendant's initial
drawings] were infringing on a L'eggs package." (Pardo Dep.
at 192, filed Aug. 31, 1993). The preliminary color schemes
were identified as one concern.
177. Pardo suggested Defendant build on
its existing equities and use No nonsense®'s traditional
colors of orange for sheer to waist, green for control top, and
blue for spandex. He thought red should not be used for the
regular style of the new pantyhose because red was so
closely associated with Defendant's best-selling No
nonsense® Regular nylon pantyhose.
178. Defendant decided to use orange,
green, and blue and to retain the silver-grey background,
which was considered a link to the No nonsense® Comfort
Stride® or Light Support silver pouch.
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(4) The Logo, Graphics, and Size
Designators
179. In early May 1992, Kuhn asked Pardo
to work with the graphics from Defendant's initial drawings
and to enlarge the product's name on the box.
180. Deskey's drawings incorporated the
new No nonsense® logo. That logo appears on the front,
sides, and top of both the 1992 and 1993 Packages.
181. Some drawings also included a line
drawing of a leg, but the 1992 package did not incorporate
that element.
182. Those at the June 17 meeting also
expressed concern about the typeface, angles, and lines used
in Defendant's initial concept drawings.
183. Pardo suggested considering other
typefaces and eliminating the angle. Nevertheless, he
considered neither of these features to pose significant
problems because typefaces are in the public domain and
angles and lines are common to many packages.
184. Holland later spoke to Pardo about
Pardo's impressions from the June 17 meeting. Each made
notes about the typeface being changed because it was "too
close to L'eggs." (Prelim. Inj. II Pl.'s Ex. 121 at C007457; see
also Pl.'s Br. Supp. Mot. for T.R.O. or Expedited Prelim. Inj.
Ex. 66).
185. The size designators on the 1992
Package were "A," "B," and "Q." A three-size shaded grid
appeared on the back of the 1992 Package, as it had on
Defendant's LEG LOOKS® envelopes.
F. The 1993 LEG LOOKS® Package
s Elements Retained: Name, Box, Colors
A-69
186. After the magistrate judge made his
recommendation of November 3, 1992, and before the court
rendered its order of December 1, 1992, Defendant could
only speculate as to the ultimate outcome of the 1992
hearing. Defendant therefore explored several possible
package designs.
187. Defendant considered other names it
had previously trademarked, and different color schemes,
typefaces, and graphics for use in the event the court
enjoined Defendant from using either the name, colors,
typeface, or graphics that had appeared on the 1992 Package.
188. The court's order of December 1,
1992, clarified the parameters of the injunction against the
1992 Package and any subsequent packaging Defendant
might develop.
189. Believing that its right to use the name
LEG LOOKS® had been at issue during the 1992
proceedings and had been resolved in its favor by the court,
Defendant decided to continue to call its pantyhose "LEG
LOOKS® INVIGORATING PANTYHOSE By No
nonsense®.
190. Defendant also decided to continue to
use the box and colors that the court's order permitted it to
use, the "A-B-Q" sizing, and the grid.
2. Elements Changed: Font, Slant, Graphics
191. Defendant eliminated each element the
order prohibited.
192. The 1993 Package presents, on the
horizontal against a solid blue, green, or orange background,
a black shield with "LEG LOOKS® INVIGORATING
PANTYHOSE By No nonsense®" in white and the leg
design created by Deskey.
193. The name LEG LOOKS® and the
logo By No nonsense® on the front are both larger than on
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Sim Pt Mp ty © Ot mts WS
——— a
the 1992 Package. The No nonsense® logos on the front, top,
and sides of the 1993 Package are larger than there were on
the 1992 Package.
3. Marketing the 1993 Package
194. The 1992 Package reached the market
in the fall of 1992, and the 1993 Package arrived by early
1993. As of the August 1993 hearing, Defendant had sold
over 3.5 million pairs of LEG LOOKS® INVIGORATING
PANTYHOSE in the 1993 Package.
195. In 1992 and 1993, SHEER
ENERGY® pantyhose were sold for as much as $4.00 per
pair, while pantyhose in the new LEG LOOKS® line were
sold for less than $ 3.00 and sometimes less than $ 2.00 per
pair.
196. Beginning in the fall of 1992, Plaintiff
arranged for SHEER ENERGY® coupons to be printed on
the back of cash register receipts when customers bought No
nonsense® Light Support or LEG LOOKS®
INVIGORATING PANTYHOSE. Plaintiff assumed as many
as 100 million coupons would be distributed in this manner
in the fall of 1992 alone.
G. Consumer Perceptions: Anecdotal Evidence“
i4
Defendant disputes many of the magistrate judge's credibility
determinations and objects to recommended findings based on those
determinations, particularly the findings relevant to consumer confusion.
The court has reviewed each of the Defendant's objections independently
and finds them without merit. The court could, but need not, conduct a
hearing to make a de novo determination of the credibility of witnesses.
United States v. Raddatz, 447 U.S. 667, 676, 65 L. Ed. 2d 424, 100 S. Ct.
2406, reh'g denied, 448 U.S. 916, 65 L. Ed. 2d 1179, 101 S. Ct. 36
(1980). If the court had doubts about the magistrate judge's credibility
determinations such that the court might reject those determinations, the
court would conduct a hearing. See id. at 681 n.7. The determinations,
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i Consumer Testimony
a. About the 1992 Package
197. Two consumers wrote that they had
seen 1992 Packages and, due to the name, had thought that
the pantyhose "were a less expensive kind of 'L'eggs Sheer
Energy’ pantyhose," (Pl.'s Br. Supp. Mot. for T.R.O. or
Expedited Prelim. Inj. Ex. 13 Pryor Aff. P 3), or that "L'eggs
had come out with a new brand that was on sale," (PI.'s
Reply Br. Supp. Mot. for Prelim. Inj. App. Ex. 1 Pope Decl.
P 3). Both saw the packages at K-Mart; at least one saw them
on a K-Mart spinner.
198. At the hearing, another consumer
testified to buying pantyhose in the 1992 Package believing
them to be low-priced L'eggs® pantyhose. She said that the
name LEG LOOKS®, the designation "Sheer to the
Waist,"'°and "the silver color" led her to believe the 1992
Packages contained L'eggs® pantyhose. (Prelim. Inj. II Tr.
Vol. V at 145, filed Feb. 9, 1994).
b. About the 1993 Package
199. The same consumer said that, after
sending a pair of the 1992 pantyhose to Defendant for
replacement, she received a 1993 Package. She said due to
however, are based upon the direct observation of the witnesses by an
experienced magistrate judge with first-hand knowledge of the intricacies
of this dispute. See United States ex rel. Sullivan v. Cuyler, 553 F. Supp.
1236, 1238 (E.D. Pa. 1982), affd, 723 F.2d 1077 (3d Cir. 1983). The
court therefore accepts the magistrate judge's credibility determinations
while reserving its privilege to make its own determination of the weight
to be accorded any individual piece of evidence.
7 The style designations on SHEER ENERGY® packages are
“reinforced toe," "control top," and “all sheer," not "sheer to waist."
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the name she continued to believe the pantyhose were made
by Plaintiff.
200. Three other customers testified at the
hearing to having bought pantyhose in the 1993 Package
believing them to be L'eggs® pantyhose. Each said that the
name LEG LOOKS® prompted her to think the pantyhose
were L'eggs® pantyhose. Two of the consumers said they
thought that LEG LOOKS® were new pantyhose from
L'eggs®.
201. One said that, attracted by the low
price, she bought an orange 1993 Package thinking the new
pantyhose were from a new division of L'eggs® or were
"L'eggs Classic, or L'eggs Summertime Look." (Prelim. Inj.
II Tr. Vol. I at 114 & 102, filed Jan. 31, 1994). At the same
time she bought a pair of her usual pantyhose, all-sheer
SHEER ENERGY® pantyhose in the silver-and-green, egg-
topped box.
202. She opened both boxes and discarded
them. Later she mistakenly returned the pair of SHEER
ENERGY® pantyhose to Defendant and the pair of LEG
LOOKS® pantyhose to Plaintiff.
203. The other consumer who said she
thought LEG LOOKS® were new pantyhose from L'eggs®
said that she does not and cannot wear SHEER ENERGY®
or any other pantyhose made with spandex. She usually buys
all-nylon control-top pantyhose in a blue box.
204. She said she bought the green control-
top 1993 Package because she thought "that it was a new
type of pantyhose that L'eggs had come out with at a more
reasonable price." (Prelim. Inj. II Tr. Vol. II at 9, filed Jan.
31, 1994). She did not examine the package to see whether
the pantyhose inside were made with spandex.
205. She said, however, that she knew it
was not a SHEER ENERGY® package because "it did not
say Sheer Energy.” (Id. at 15).
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206. The only consumer to buy a 1993
Package believing it to be a SHEER ENERGY® package
bought a green control-top 1993 Package when she intended
to buy a silver-and-green all-sheer SHEER ENERGY® egg-
topped box.
207. Admitting she had not been wearing
her glasses at the time, she said because "all [she] saw was
the big print and the 'B’ and its says Leg Looks," she
assumed she was buying her normal product. (Prelim. Inj. II
Tr. Vol. I at 131-32, filed Jan. 31, 1994).
2. Plaintiffs Employees’ Testimony
208. Plaintiff sends approximately 840
sales merchandisers to at least 70,000 stores around the
country to handle stock and maintain displays.
209. A single sales merchandiser may visit
thirty stores a week. Between the introduction of the 1993
Package and the August hearing, Plaintiff's sales
merchandisers together therefore made over 800,000 store
visits. During that time the 1993 Package was stocked
intermittently in less than half the stores visited.
210. When they make their rounds,
Plaintiff's sales merchandisers routinely look for information
on competitors’ products and record it in a hand-held
computer. In January 1993 the computers were specifically
programmed to receive information pertaining to the new
LEG LOOKS® pantyhose. Sales merchandisers were also
provided with "LEG LOOKS FIELD INPUT" forms for
detailed reports. (See, e.g., Prelim. Inj. II Def.'s Ex. 219).
211. Sales merchandisers wear L'eggs®
name badges.
212 Three of Plaintiff's sales
merchandisers testified about witnessing consumers'
encounters with the 1993 Package and others provided
affidavits.
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ii a etn th Ei a
213. The court notes that the merchandisers
cannot know from hearing the consumers’ statements
whether they said, "It says 'Legs'" or "It says 'L'eggs.""
214. One merchandiser said that she had
encountered one consumer who said of a 1993 Package, "It is
made by L'eggs. It says 'Legs' right there." (Prelim. Inj. Tr.
Vol. I at 139, filed Jan. 31, 1994). Another consumer, when
she was told that a 1993 Package was not Plaintiff's, told the
merchandiser "it said 'Legs." (Id. at 141).
215. Another sales merchandiser testified
that a consumer said "Well, it says Legs," when she was told
that the 1993 Package she had asked about was not
Plaintiff's. (Id. at 198).
216. The third said that a customer asked
her about the 1993 Package, first indicating she thought it
contained pantyhose made by Plaintiff because L'eggs®
pantyhose "come in a box and No nonsense comes in a bag."
(Prelim. Inj. II Tr. Vol. II at 52, filed Jan. 31, 1994). When
the merchandiser and the customer then looked together at
the package, the customer said, "Legs right there; that's
yours." (Id. at 53).
217. The same sales merchandiser testified
that one store clerk asked her what she was going to do with
a LEG LOOKS® shipper and another thought the 1993
Packages on a K-Mart spinner were hers.
218. In affidavits, other employees attested
the following: a consumer who asked, "Are these L'eggs? . ..
I want L'eggs." (Pl.'s Br. Supp. Mot. for T.R.O. or Expedited
Prelim. Inj. Ex. 11 Cheatham Aff. P 3); a consumer who
asked of the 1993 Package, "Is this new?" (Id. Ex. 7 Revo
Aff. P 4); a consumer who said, while looking at a K-Mart
spinner containing 1993 Packages, "I thought this was
L'eggs." (Camplair Decl. P 3, filed Aug. 9, 1993); a
consumer who said of the 1993 Package, "The package
confuses me and it made me think that 'Leg Looks’ is made
by L'eggs." (Pl.'s Br. Supp. Mot. for T.R.O. or Expedited
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Prelim. Inj. Ex. 5 Chouinard Decl. P 5); and a store manager
who said in February 1993, "Many of my customers are
confused over who makes 'Leg Looks." (Id. Ex. 17 Thomas
Aff. P 3). It was generally the affiants' impression that the
consumers’ confusion arose from the name LEG LOOKS®.
219. The affidavits attested to
approximately two dozen encounters with store personnel
who asked Plaintiff's merchandisers to handle shippers or
excess store stock of 1993 Packages or appeared confused
about which products belonged on which shelves. Affiants
said store employees had not been confused before about
Plaintiff's and Defendant's pantyhose and had identified the
name LEG LOOKS® as the source of confusion.
220. The employee affidavits recounted a
dozen instances of LEG LOOKS® packages being shelved
on or, more often, near shelf space typically reserved for
Plaintiffs packages. Five of the incidents involved the 1992
Package and three others occurred in K-Mart.
221. There is also evidence of about a
dozen misspellings or misplacements of signs, half of which
were displayed in association with the 1993 Package.
x Defendant's Employees' Testimony
222. Defendant's sales merchandisers visit
about a third of Defendant's FDM retailers, virtually all of
whom carry Plaintiff's products.
223. There is no evidence that Defendant's
sales merchandisers wear anything identifying them as No
nonsense® representatives.
224. Three of Defendant's sales
merchandisers testified at the hearing to frequently being
asked by store personnel to service Plaintiff's display racks
or remove Plaintiff's stock from the store. Citing two
particular instances, one of Defendant's sales merchandisers
testified that she often has to explain to store personnel who
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believe that Defendant's sales merchandisers can "come out
and service ...the whole hosiery center" that Plaintiff and
Defendant are "two separate companies." (Prelim. Inj. II Tr.
Vol. VI at 195, filed Feb. 9, 1994).
225. The sales merchandisers said that they
routinely find Plaintiff's packages on K-Mart spinner shelves
meant for Defendant's products or in cartons designated for
No nonsense® returns.
226. They also said that they are constantly
mistaken for L'eggs® sales merchandisers or store personnel
and asked about a variety of products.
227. Also testifying for Defendant was
Timothy Flavin, Defendant's director of sales planning and
training, who had previously worked with L'eggs® sales for
ten years. He said that as early as 1979 he became aware of
confusion on the part of store personnel and consumers as to
which manufacturer made which pantyhose.
228. According to Flavin, as he stood at
L'eggs® racks, consumers would frequently ask him about
either Plaintiff's, Defendant's, or another manufacturer's
pantyhose. It was his impression that "they would just
assume that you were working pantyhose and that was your
product." (Prelim. Inj. II Tr. Vol. VII at 126, filed Feb. 28,
1994).
229. He, too, testified that store personnel
regularly made mistakes about Plaintiff's sales
representatives’ responsibilities. He said that while he was a
district operations manager for plaintiff store personnel
called Plaintiff so frequently to request removal of what
turned out to be Defendant's pantyhose that he had to
institute special procedures to handle the problem.
230. He also said that mistakes were often
made with regard to the shelving of pantyhose and on signs
and advertising.
231. Flavin said that his experience with
confusion and mistakes like these continued once he joined
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Defendant in 1989 and the general level of such confusion
became no greater than usual after the introduction of the
new line of LEG LOOKS® pantyhose.
232. As early as 1989, Plaintiff's consumer
relations department had devised procedures and form letters
to use for responding when a “consumer returns hosiery
product of another manufacturer." (Prelim. Inj. IT Def.'s Ex.
222 at 20.10491).
233. The department compiles year-end
reports of consumer correspondence and returns. According
to those reports, Plaintiff's L'eggs Products division received
fewer complaints about pantyhose in the primary L'eggs®
line or theL'eggs® Everyday® line in fiscal year 1993,
during which both LEG LOOKS® boxes were on sale, than
it had in fiscal year 1992, before they had been introduced.
234. According to the reports in both fiscal
year 1992 and in fiscal year 1993, of all the pairs of
pantyhose customers returned to the L'eggs Products
division, less than three-fourths of one per cent were not
made by Plaintiff. The reports do not indicate how many of
the pairs not made by Plaintiff were made by Defendant
rather than another manufacturer.
H. Consumer Perceptions: Survey Evidence
a Plaintiff's Survey Evidence
a. Designing the Surveys
235. As evidence of confusion, Plaintiff
also introduced two mall-intercept surveys and the testimony
of James Fouss of Response Analysis Corporation, a market
researcher. He conducted the surveys at the recommendation
of Virginia Miles, a marketing consultant.
236. Fouss conducted the surveys using the
silver-grey-and-green ll-sheer SHEER ENERGY®
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ia Biter. rte
economy box and the green control-top 1993 Package, as he
has been instructed to do by Plaintiff's counsel.
237. In designing the surveys, Fouss
worked with Miles. At the time, neither knew about
Defendant's historical use of colors in its No nonsense® line.
Nor did Fouss know what styles of pantyhose the silver-
grey-and-green SHEER ENERGY® box and the green 1993
Package contained.
238. In both surveys, a grey-violet control-
top "Jaclyn Smith® Silky Support" paperboard envelope was
used as a control in an effort to determine to what extent
participants’ responses were due to the characteristics of the
1993 package rather than other factors like prior familiarity
with the mark L'eggs® or the belief that the company that
makes L'eggs® also makes all other pantyhose.
239. According to Fouss, it was very
difficult to find nationally distributed pantyhose having no
relation to either party.
240. The mark Jaclyn Smith®, the name of
a well-known actress whose photograph appears on the
pantyhose package, is used on a complete line of women's
hosiery and clothing heavily advertised by its exclusive
distributor, K-Mart. Over thirty million women wear Jaclyn
Smith® clothing. The mark has high brand awareness
nationally.
241. Both J. C. Penney and Sears also
distribute pantyhose nationally and may be considered mass
merchandisers. Sears carries "Legtricity®" pantyhose, which
are packaged in a one-pair box of dimensions similar to the
1993 package. Fouss testified, however, that he avoided
selecting a control from J. C. Penney or Sears because of
their overall brand awareness.
242. Miles thought the Jaclyn Smith®
package an excellent choice of control because the package
is as unlike the silver-grey SHEER ENERGY® economy
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box as possible and because the pantyhose are distributed
nationally in a mass merchandising chain.
243. Neither of the two surveys designed
by Fouss tested consumer perceptions of the marks L'eggs®
or LEG LOOKS® per se. They only tested consumer's
impressions of green boxes featuring those marks.
244. In both surveys, participants were
instructed to look at the package as if they were considering
purchasing it and to assume the pantyhose it contained were
available in their size, color, and style. After they returned
the package and it was put out of sight, the interviewer
questioned them.
b. Study #1
245. In the first survey ("Study #1"),
pantyhose purchasers were shown either the SHEER
ENERGY® economy box and the 1993 Package or the
SHEER ENERGY® economy box and the Jaclyn Smith®
envelope. Participants were shown two boxes, one at a time,
and did not have the opportunity to compare them directly.
246. The participants were first asked
whether they thought the two brands of pantyhose were
manufactured by the same company or different companies
and then asked why. They were not, however, asked to name
the company or identify it in any other manner.
247. Once a respondent gave a reason for
thinking the products were made by the same company, an
interviewer would, according to instruction, "probe" for "any
other reasons." (P1.'s Br. Supp. Mot. for T.R.O. or Expedited
Prelim. Inj. Ex. 26 Fouss 2d Aff. Ex. 2 at App. Questionnaire
A at 1).
248. Each reason was later coded into one
of several categories. The survey results indicate what
percentage of the participants included a particular answer
among all those they gave. Because any single participant
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may have given several answers, the percentages assigned to
each category of answers do not represent discrete groups of
participants. Especially because answers recorded in one
category may have been an explanation for or embellishment
of answers recorded in another, the percentages from each
answer category cannot simply be added together to show
what percentage of participants were confused for specified
reasons.
249. Of all the participants who saw the
SHEER ENERGY® box and the 1993 Package, forty-three
per cent said that they thought the pantyhose were made by
the same company.
250. Twenty per cent attributed this, at least
in part, to similar packaging, colors, labels, or logos.'® Ten
per cent attributed it specifically to the appearance of either
"L'eggs®," "legs," or "leg" on both packages. Three percent
attributed it to the pantyhose having the same name or same
brand name.”””
ye The results Plaintiff lists in its survey report might at first glance
appear to differ from those here found. For instance, Plaintiff reports
"46%" as having said that the packages have “similar packaging, colors,
labels, [or] logos." (Pl.'s Br. Supp. Mot. for T.R.O. or Expedited Prelim.
Inj. Ex. 26 Fouss 2d Aff. Ex. 2 at 5). Caution must be taken to remember
that the figures reported by Plaintiff reflect what percentages of those
who saw both packages and said they were made by the same company
(a population of 126 consumers) then gave a specific reason for saying
so. The court's figures reflect what percentage of those who saw both (a
population of 290) then said they were made by the same company for a
specific reason. The court's figures, in other words, reflect percentages of
all those who saw both packages rather than percentages of a sub-set of
that group.
Bs At least one response coded as “same company [because] same
name" should not have been: the respor“ent actually said she thought the
pantyhose were made by the same company “because | think all
pantyhose are made by the same company." (Prelim. Inj. II Tr. Vol. II at
261; see also id. at 259-61).
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251. More than twenty other reasons were
also given for participants’ perception that the pantyhose
were made by the same company. (Id. at 5).
252. Of the participants shown the SHEER
ENERGY® box and the Jaclyn Smith® envelope, twelve per
cent said they thought those pantyhose were made by the
same company. (Id.).
253. According to Plaintiff's experts, the
results of Study #1 showed that the net percentage of
consumers surveyed who thought, for trademark or trade
relevant reasons, that the pantyhose in the 1993 Package and
the pantyhose in the SHEER ENERGY® economy box were
made by the same company was between thirty-one and
forty-three per cent. Miles said it was likely to be at the mid-
point or approximately thirty-seven per cent.
S. Study #2
254. In the second survey ("Study #2"),
pantyhose purchasers were shown only one package, either
the 1993 Package or the Jaclyn Smith® envelope.
255. After they returned the package and it
was put out of sight, they were first asked what company
they thought made that brand of pantyhose and then asked
what other brands of pantyhose they thought that company
made. They were not asked why they thought the company
they named made the pantyhose, nor were they asked why
they thought that company also made the other brands of
pantyhose they named.
256. As in Study #1, interviewers were
instructed to "probe" whether there were "any other" brands
the participant thought were also made by the same
company. (Pl.'s Br. Supp. Mot. for T.R.O. or Expedited
Prelim. Inj. Ex. 26 Fouss 2d Aff. Ex. 1 at App. Questionnaire
2 at 1).
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257. Of the participants shown the 1993
Package and asked what company made them, thirty-eight
per cent said No nonsense®, thirty-four per cent said
L'eggs®, four per cent said Hanes®, three per cent said
L'eggs® or Hanes® and No nonsense®, and one per cent
said SHEER ENERGY®. (Id. at 3, 5).
258. Of the participants shown the Jaclyn
Smith® package, forty per cent said they were made by
Jaclyn Smith or K-Mart, twenty-four per cent said they were
made by L'eggs®, SHEER ENERGY®, or Hanes®, three
per cent said they wer. made by No nonsense®, and one per
cent said L'eggs® or Hanes® and No nonsense®. (Id. at 3,
6).
259. Of the participants shown the 1993
Package and asked to name other brands made by the
company they had identified, nine per cent named only No
nonsense® or Burlington® products, six per cent named only
SHEER ENERGY® products, thirteen per cent named only
L'eggs® products, thirteen per cent named Hanes® or other
L'eggs® or Hanes® products, and two per cent named both
L'eggs® and No nonsense® products. (Id. at 3, 7).
260. Of the participants shown the Jaclyn
Smith® package and asked to name other brands made by
the company they identified, three or four per cent named
only Jaclyn Smith® or K-Mart products, four per cent named
only No nonsense® or Burlington® products, four per cent
named only SHEER ENERGY® products, and nineteen per
cent named only L'eggs® or Hanes® products. (Id.).
261. Combining the responses to the two
questions and eliminating double counting, of those shown
the 1993 Package, thirty-five per cent associated it only with
Plaintiff's companies and products; twenty-seven percent
associated it only with Defendant's companies and products;
and twenty-four per cent associated it with both Plaintiff's
and Defendant's companies or products. (Id. at 8).
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262. Combining the responses to the two
questions and eliminating double counting, of those shown
the Jaclyn Smith® package, twenty-five per cent associated
it only with Plaintiff's Companies and products; seven per
cent associated it with both Plaintiff's and Jaclyn Smith's
companies or product:: and five per cent associated it with
both Plaintiff's and Defendant's companies or products. (Id.
at 9).
263. Of all the participants shown the 1993
package, fifty-nine per cent made some association between
it and Plaintiff's companies or products, and fifty-one per
cent made some association between it and Defendant's
company or products (some participants made some
association between the 1993 package and both Plaintiff's
and Defendant's companies and products).
264. By comparison, of the participants
shown the Jaclyn Smith® package, thirty-seven per cent
made some association between it and Plaintiff's companies
or products, and eight per cent made some association
between it and Defendant's company or products.
265. According to Plaintiff's experts, the
results of Study #2 showed that the net percentage of
consumers surveyed who thought, for trademark or trade
dress relevant reasons, that the pantyhose in the 1993
Package were made by one cr the other of Plaintiff's
divisions was somewhere between twenty-two and fifty-nine
per cent, and most likely to be at the mid-point, or
approximately forty per cent.
266. According to Plaintiff, the responses
given by participants who saw the Jaclyn Smith® package
and associated it with L'eggs® indicate that thirty-seven per
cent of consumers are likely to think all pantyhose are made
by or affiliated with Plaintiff. Thus, according to Plaintiff,
the rate of association made between the 1993 Package and
Plaintiff's companies or products may be as much as twenty-
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Cee tetepianipndiatttacattl
two percent higher than is normal between unrelated brands
of pantyhose.
267. Plaintiff attributes this twenty-two per
cent rate of association to the name and appearance of the
1993 Package.
268. The court notes, however, that twenty-
four per cent of those making an association between the
1993 package and L'eggs® named both L'eggs® and No
nonsense® as the company of origin, named No nonsense®
products as being made by L'eggs®, or named L'eggs®
products as being made by No nonsense®. Of those who
made an association between the Jaclyn Smith® package and
L'eggs®, five per cent gave similar responses.
269. These responses would be logically
inconsistent if those who gave them knew that pantyhose
sold under the mark L'eggs® and pantyhose sold under the
mark No nonsense® are products from different sources. In
other words, the responses of as many as twenty-four per
cent of the participants shown the 1993 Package indicate that
they did not distinguish L'eggs® and No nonsense® as being
separate companies or L'eggs® and No nonsense®
pantyhose as coming from separate sources.
270. While they might realize that not all
pantyhose are made by the company that makes L'eggs®
pantyhose, as many as twenty-four per cent of consumers
may well think that both No nonsense® pantyhose and
L'eggs® pantyhose are made by the same company, whether
it be Plaintiff or Defendant.
2. Defendant's Survey Evidence
271. Defendant submitted a _ survey
conducted in December 1992 by Michael Rappeport, a
market research expert with a background in statistics, to test
consumers' perceptions of the trade dress of the 1993
Package and the SHEER ENERGY® trade dress.
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272. As requested by Defendant's counsel,
Rappeport reviewed the December 1992 court order and
conducted a survey to determine whether the new packaging
was sufficiently differentiated from Plaintiffs SHEER
ENERGY® packaging.
273. Rappeport understood the focus to be
the trade dress of the 1993 Package. He differentiated "trade
dress" from "trade words" and believes it to be appropriate in
trade dress surveys "to distinguish all the elements that aren't
words and the elements that are words." (Prelim. Inj. II Tr.
Vol. VII at 11, filed Feb. 28, 1994). Rappeport therefore
designed a survey to determine whether "the trade dress--that
is, all the elements that weren't words, had been
distinguished from the SHEER ENERGY® package." (Id.).
274. Participants in the survey were shown
one of two arrays of six different pantyhose packages.
275. Featured in the survey was a box
virtually identical to the 1993 Package, except in place of the
words "LEG LOOKS" were the words "GOOD TIMES."
Half of the participants in the study saw an array containing
an egg-topped SHEER ENERGY® box and half saw an
array containing a SHEER ENERGY® economy box. In
every array the 1993 Package and the SHEER ENERGY®
package were of a different color.
276. With the packages in view, consumers
were asked, "How many different companies or makers are
represented by these six items, or don't you know?" Those
who said either two, three, four, or five were then asked,
"Which, if any, come from the same company or maker or
don't you know?" Then the participants were asked why they
had grouped certain products together.
277. These responses to the second
question were tabulated to show the percentage of consumers
who made each of the fifteen possible pairings of products in
the array.
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278. If the pairings were made randomly,
any one pairing of two particular packages would have a five
per cent change of occurrence. According to Rappeport, one
accounts for such "noise" or irrelevant associations, by
subtracting that five per cent from the rate of occurrence
actually found by the survey.
279. Approximately sixty per cent of the
participants answered, "one," "six," or "don't know" to the
first question and were not asked to make any groupings of
packages.
280. Of those who made groupings, a
substantial portion made a number of groupings inconsistent
with the number of companies the participant had identified
as being represented in the array.
281. Of all the pairings made by the forty
per cent of participants who made package groupings, ten per
cent matched the modified 1993 Package with either the
SHEER ENERGY® egg-topped box or the SHEER
ENERGY® economy box. Adjusting for randomness or
noise thus results in a rate of occurrence of the pairing of five
per cent.
282. According to the data collected,
similarities in packaging did not account for all the pairings
of the modified 1993 Package and the SHEER ENERGY®
packages. Participants’ reasons for pairing the packages also
included thinking that "L'eggs and No nonsense are the same
company" or "No nonsense is made by L'eggs," seeing them
both sold "at the same place" or "next to each other in the
store," and associating the "best known brands" or "the only
ones I know." (Prelim. Inj. II Def.'s Ex. 356 at App. II at II-1,
I]-2).
283. Rappeport attributed pairing for
reasons such as these to the effect of the L'eggs® mark's
market dominance.
284. In the survey, over one-third of the
1993 Package and SHEER ENERGY® pairings, or four per
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cent of all the pairings made, were attributed to such "market
dominance."
285. According to Rappeport, adjusting the
initial ten per cent pairing rate for both randomness and
market dominance leaves a one per cent chance of either
SHEER ENERGY® package being paired with the modified
1993 Package for reasons related to similarities in packaging.
286. Of pairings made by participants who
saw an array that included the SHEER ENERGY® economy
box, thirteen per cent matched that box with the modified
1993 package.
287. According to Rappeport, adjusting for
randomness and market dominance leaves a four per cent
chance of the modified 1993 Package and the SHEER
ENERGY® economy box being paired together for reasons
related to similarities in packaging.
288. In comparison, pairings of two
pantyhose packages that are both made by Sears and
appeared in all the arrays--a Legtricity® box and a Nice
Touch® Silken Sheers with Lycra® paperboard envelope--
accounted for nine per cent of all the pairings made.
According to Rappeport, adjusting for randomness or other
noise leaves the pairing of the two Sears’ packages with a
four per cent chance of occurrence.
289. According to Rappeport, given the
400-participant size of the sample used in this survey, the
normal fluctuation in the results overall would be plus or
minus three per cent.
290. The normal fluctuation in the results
of a survey employing a smaller sample would be even
greater. Given that sixty per cent of the participants surveyed
were not asked to make package groupings, the statistical
difference between thirteen per cent of pairings made by
some forty per cent of the 200 who saw an array including
the SHEER ENERGY® economy box and nine per cent of
pairings made by some forty per cent of the 400 who saw
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arrays including either that box or the egg-topped box is
insignificant.
291. According to Rappeport, his survey
did not reveal any meaningful evidence of consumer
confusion between the new packaging and the SHEER
ENERGY® packaging.
292. The survey did not test for consumers'
associations arising from use of the mark LEG LOOKS®.
I. Expert Witness Testimony
a Opinions of the Surveys
293. Virginia Miles and Thomas DuPont, a
market research expert, testified as expert witnesses for
Plaintiff.
294. Both thought that the Fouss surveys
were sound and well-designed, although DuPont added that
the surveys would have been even more sound if two
controls had been used.
295. DuPont agreed that it was important to
eliminate from consideration "any errors" other than the
1993 Package itself "there might be that cause somebody to
say that Leg Looks is made by L'eggs." (Prelim. Inj. II Tr. of
Extract from Hrg. at 48-49, filed Nov. 30, 1993).
296. He noted that the results of Study #1
do not show what portion of the associations made between
the 1993 Package and the SHEER ENERGY® economy box
was due to the name LEG LOOKS® and what portion was
due to anything else. (Id. at 59-60).
297. Plaintiff's experts said that the thirty-
seven per cent rate of association made between the Jaclyn
Smith® envelope and Plaintiff's companies or products in
Study #2 was high.
298. It was DuPont's opinion that if a brand
less widely known than Jaclyn Smith® had been used the
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rate of association between it and Plaintiff's brands would
have been even higher than the association rates reported for
the Jaclyn Smith® envelope.
299. According to Plaintiffs experts,
Rappeport's survey was irrelevant because it neither tested
the actual 1993 Package nor measured the likelihood of
confusion between the marks L'eggs® and LEG LOOKS®.
300. At the hearing, Defendant called as an
expert witness Alvin Achenbaum, a marketing consultant.
301. Achenbaum characterized the Fouss
studies as "fallacious," largely because he thought they did
not sufficiently take into consideration the store
environment. (Prelim. Inj. II Tr. Vol. IX at 41, 40, filed Mar.
1, 1994). He also said that they did not sufficiently
distinguish the effects on consumer perception of various
features of the packages.
302. Plaintiffs experts testified that it is
difficult, if not impossible, to parse out consumer perceptions
of a package or to test the effect of one package feature apart
from others.
2. Opinions of the Likelihood of Confusion
303. According to Miles, "from five to ten
percent of the people would be confused about practically
anything,” but percentages higher than that would be cause
for concern. (Prelim. Inj. Tr. Vol. Ili at 79, filed Jan. 31,
1994).
304. To Miles, the Fouss surveys
demonstrated conclusively that the 1993 Package is
confusingly similar to the SHEER ENERGY® economy
box. To DuPont, they showed that there was a substantial
likelihood of confusion between the 1993 Package and any
L'eggs® package based on the word "leg."
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305. In Miles' opinion, the 1993 Package
appears to consumers "to be a value brand of L'eggs."
(Prelim. Inj. II Tr. Vol. IV at 6, 20, filed Jan. 31, 1994).
306. According to Miles, combining
several features of one package in a second package may
result in the second package being confused with the first,
even if any one feature might not cause confusion.
307. She admitted, however, that products
like health and beauty care products, condiments, soup, or
sodas may be sold in packages with "product category
established similarities." (Prelim. Inj. II Tr. Vol. III at 131,
filed Jan. 31, 1994).
308. Having noted that the mark No
nonsense® is clearly indicated on the 1993 Packages,
Achenbaum pointed out that in other product areas color
coding and same-sized boxes do not engender confusion.
309. Miles said that the dimensions and
color of the 1993 Package are "auxiliary" aids to the
confusion that is primarily caused by the name LEG
LOOKSS®. (Prelim. Inj. II Tr. Vol. IV at 66-67, filed Jan. 31,
1994). Miles and DuPont both stated their belief that if the
name on the 1993 package had been different a lawsuit
would have been far less likely.
310. Miles stated that consumers looking at
a SHEER ENERGY® package would know it not simply as
"SHEER ENERGY," but as a L'eggs® product.
311. It is Miles' firm opinion that the word
"leg" in the name LEG LOOKS®. evokes L'eggs®. Having
cited the widespread fame of the mark L'eggs®, Miles said
that "any use" of the word "leg" as a mark on pantyhose
would evoke it. (Prelim. Inj. Tr. Vol. III at 104, filed Jan. 31,
1994).
312. Scanning other "leg" marks and
imagining their use on the 1993 Package, Miles stated that
the two-word "leg" marks "that start with the free standing
word ‘leg’. . . [are] bound to cause consumer confusion by
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invoking the famous trademark L'eggs." (Prelim. Inj. Tr. Vol.
V at 92, filed Feb. 9, 1994). Those marks ending with "leg"
or “legs” would, she thought, also be problematic.
313. Miles said that consumers would not
necessarily read further than the name LEG LOOKS® to see
"By No Nonsense®" below it on the front, top, or sides of
the package.
314. In Miles’ opinion, even if a consumer
did read the No nonsense® logo, the prominence of the name
"LEG LOOKS" could lead her to misinterpret it.
315. During her testimony, Miles
acknowledged that the distinguishing feature of the L'eggs®
packaging is, and has always been, the egg. She said,
however, that the silhouette of the leg on the 1993 Package
did and was intended to invoke the "idea of L'eggs." (Prelim.
Inj. II Tr. Vol. III at 59, filed Jan. 31, 1994).
316. Miles agreed, nevertheless, that if the
No nonsense® logo were placed clearly on the package
"[but] the consumer doesn't know who they are, that's not the
fault of No Nonsense." (Id. at 142).
317. Ina similar vein, DuPont testified that
“if there are people walking around outside who just believe
that L'eggs and No Nonsense are the same company, then
any confusion by those people would be, as I said, .. .
legitimate or unavoidable confusion . . . if they exist, then
that's unavoidable." (Prelim. Inj. II Tr. of Extract from Hrg.
at 67, filed Nov. 30, 1993).
318. Defining confusion as occurring when
a customer intending to buy one brand mistakenly buys
another, and comparing the mark LEG LOOKS® with the
mark SHEER ENERGY®, Achenbaum testified that the
1993 Packages would not be confused with SHEER
ENERGY® packages and were clearly differentiated from
the 1992 Package and the SHEER ENERGY® economy box.
319. In Achenbaum's opinion, the green,
blue, and orange 1993 Packages are very different from
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a a a
L'eggs® packages. Noting that both the egg and the color
silver were absent from the 1993 Package, he said that the
particularly distinguishing features of the 1993 Package are
the Defendant's consistent color-coding, the size and
frequency of the No nonsense® logo, and the leg silhouette.
3. Opinions of Defendant's Intent
320. Miles faulted Defendant for spending
so little on advertising the new LEG LOOKS® in the fall of
1992, for choosing a name neither well-recognized by
consumers nor well-connected to the new product's emphasis
on feel, and for "imposing the Leg Looks name from above."
(Prelim. Inj. II Tr. Vol. III at 72, filed Jan. 31, 1994). She
said that "the only logical explanation for the Leg Looks
name" is that Defendant intended to confuse consumers and
trade off L'eggs® brand equity. (Id. at 71).
321. When Miles first reached this
conclusion, she had seriously misinterpreted Defendant's
financial condition. She was, and until the 1993 hearing
remained, ignorant of Defendant's historical use of colors.
Furthermore, she had relied on assumptions about the
similarities between the pantyhose themselves to draw
conclusions as to Defendant's intent with regard to the
packages.
322. At the hearing, Miles conceded that
companies constantly, and legitimately, copy each other's
products and that "if [Defendant] had used all those colors
[on its packages] for 20 years, it . . . might be a different
situation." (Prelim. Inj. II Tr. Vol. I'V at 66, filed Jan. 31,
1994).
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Il. DISCUSSION
A. The Issues Before the Court
l. Jurisdiction and Venue
This court has subject matter jurisdiction over this
case pursuant to 15 U.S.C. § 1121(a) and 28 U.S.C. §§ 1331,
1338, and 1367(a). The court has personal jurisdiction over
the parties. Venue lies in this district pursuant to 28 U.S.C.
§1391(b) and (c).
2. Issues Now Moot
Voluntary cessation of allegedly illegal conduct
makes an issue moot when the defendant can demonstrate
that there is no reasonable expectation that the wrong will be
repeated, United States v. W. T. Grant Co., 345 U.S. 629,
632-33, 97 L. Ed. 1303, 73 S. Ct. 894 (1953); see also
Virginia ex rel. Coleman v. Califano, 631 F.2d 324, 326 (4th
Cir. 1980). Defendant's withdrawal of the 1992 Package was
not voluntary, and Defendant continues to assert that its use
of the package violated no right of Plaintiff. Defendant has,
however, made substantial expenditures and investments in
reca
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