Two Pesos, Inc. v. Taco Cabana, Inc. (U.S.)

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Facts.  Since 1975, Taco Cabana, Inc., (Taco Cabana), operated a chain of fast-food
Mexican restaurants in Texas. Its restaurants provide a festive eating atmosphere of
interior dining and patio areas decorated with artifacts, bright colors, paintings, and
murals. The exterior of its buildings has a vivid color scheme using top border paint and
neon stripes. Bright awnings and umbrellas continue the theme.
        Beginning in 1985, Two Pesos, Inc., (Two Pesos), opened a chain of competing
Mexican fast-food restaurants in Texas. When Two Pesos adopted a motif similar to Taco
Cabana's, Taco Cabana sued Two Pesos, alleging trade dress infringement in violation of
the Lanham Trademark Act. Two Pesos argued that Taco Cabana's trade dress should not
be protected because it had not yet acquired a secondary meaning. The court found that
although Taco Cabana's trade dress had not yet acquired a secondary meaning, it was
nonetheless distinctive and therefore protected. The court of appeals affirmed. Two
Pesos appealed to the U.S. Supreme Court.

Issue.
Is distinctive trade dress protectable under the Lanham Trademark Act without a showing
that it has acquired a secondary meaning?

Opinion. White, Justice.  Trade dress is the total image of the business. Taco Cabana's
trade dress may include the shape and general appearance of the exterior restaurant, the
identifying sign, the interior kitchen floor plan, the decor, the menu, the equipment used
to serve food, the servers' uniforms and other features reflecting on the total image of the
restaurant. The trade dress of a product is essentially its total image and overall
appearance.
        Taco Cabana's trade dress was protected if it either was inherently distinctive or
had acquired a secondary meaning. Trademark law requires a demonstration of secondary
meaning only when the claimed trademark is not sufficiently distinctive of itself to
identify the producer. The legal recognition of an inherently distinctive trademark or trade
dress acknowledges the owner's legitimate proprietary interest in its unique and valuable
informational device, regardless of whether substantial consumer association yet bestows
the additional empirical protection of secondary meaning. The user of such a trade dress
should be able to maintain what competitive position it has and continue to seek wider
identification among potential customers.
        We see no basis for requiring secondary meaning for inherently distinctive trade
dress protection. Adding a secondary meaning requirement could have anticompetitive
effects, creating particular burdens on the start-up of small companies. It would present
special difficulties for a business, such as Taco Cabana, that seeks to start a new product
in a limited area and then expand into new markets. Denying protection for inherently
distinctive trade dress until after secondary meaning has been established would allow a
competitor, which has not adopted a distinctive trade dress of its own, to appropriate the
originator's dress in other markets and to deter the originator from expanding into and


competing in these areas.
Holding.  The Supreme Court held that distinctive trade dress is protectable under the
Lanham Trademark Act without proof that it has acquired a secondary meaning.

Case Questions
Ethics
.  Did Two Pesos act ethically in copying Taco Cabana's trade dress?
Policy.  Should trade dress be protected under the Lanham Trademark Act? Why or why
not?
Business Implication.  Does this decision have a pro- or anticompetitive effect on
business? Explain.




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