A recent Wall Street Journal Article discussed how China appears to have started to imitate a store's decor. As stated in a prior blog, the counterfeiters of goods are getting very good, can it be any wonder that the counterfeiters of an entire store are not also very good at imitating the very last details of the "original?"
In the seminal case of Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763 (1992), the United States Supreme Court held that a restaurant's decor could be protectable trade dress. I am sure many of you have frequented a TGI Friday's, El Torito's, or Chili's restaurant in many different locations. You will undoubtedly find that they all have the same decor. That is their trade dress. Well, even retail stores like IKEA, Home Depot, or Apple have the same design (i.e. trade dress).
What is trade dress? In the Ninth Circuit, trade dress is: a product's non-functional detail and design, or its packaging, that identifies the product's source and distinguishes it from the products of others. It is the product's total image and overall appearance. For example, the shape of the Coca-Cola bottle would be trade dress. If a consumer were to see the shape of the bottle without a label, the consumer would undoubtedly identify it as a Coca-Cola product. Trade dress is essentially a trademark. I have previously provided a primer on trademarks. The same rules apply to trade dress.
In the case of stores or restaurants, it is the design and decor of the restaurant that would be its trade dress. Again, the test would be if a consumer walked into the restaurant or store without any other identifying trademarks, brands, or logos, the consumer would believe the store/restaurant to be that of the owner.
Getting back to the Chinese counterfeiters, according to the WSJ article, the counterfeiters may sell authentic products. They identify themselves as the genuine store without the company's permission, including using similar logos and selling similar products. For example, Subway copycats will sell sandwiches in the same formats that the real Subway does. The fake Subway even accepts coupons for the real Subway. Another example is a string of Disney Stores that sprung up in China despite Disney not opening any stores in that country.
Interestingly, these fake stores can increase brand awareness in China or they could dilute the brand. Ironically, the counterfeiters can be both a boon or a bust to the trademark owners based in part on whether the counterfeiters sell authentic or counterfeit products. So, what is a trademark owner to do? Well, what any trademark owner would do. Conduct a cost-benefit analysis. Keep in mind that China's intellectual property protection is not as stringent as the protection in the United States. It may be a good idea to do your homework and determine whether the goods being sold by these fake stores are authentic and whether they are being purchased from you or your affiliates. If you are still receiving the benefit of a sale and there appears to be no dilution of your trade dress, it may that you will want to work out a deal with the counterfeiters--make it a business "win-win." Or, you may decide to prosecute to the fullest extent of the Chinese law. Ultimately, it is a business decision, but you should consult with a trademark attorney to ascertain the risks and rewards of any proposed plan of attack.
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