Thursday, January 26, 2017

If you don't like low-cost imitator brands, you'll love this decision

Moroccanoil, Inc. v. Zotos Int’l, Inc., 2017 WL 319309, -- F. Supp. 3d --, No. 16-7004 (C.D. Cal. filed Jan. 19, 2017)

The court granted a preliminary injunction in this trademark case, using the “serious questions going to the merits” standard, which others consider dubious after eBay.  Irreparable harm came from the potential threat to plaintiff’s high-end brand positioning if people believed it also appeared in discount stores.

Moroccanoil distributes hair and body care products in the United States featuring “argan oil to revitalize and replenish hair.” It has incontestably registered trademarks for MOROCCANOIL and for design marks for hair care products.  It also alleged, and the court found, protectable rights in a trade dress including:

(1) a distinctive turquoise blue color; (2) copper orange lettering, graphics and background design elements; (3) copper orange and white lettering, the word “MOROCCANOIL” in vertical and horizontal orientation, graphics and background design elements on a turquoise blue background; and (4) an amber bottle packaged in a rectangular blue box.

registered marks

trade dress

This combination, the court found, was nonfunctional, inherently distinctive product packaging serving “a purely aesthetic purpose comprised of specific colors, fonts and styles,” and, though suggestive marks are presumptively weak, Moroccanoil’s advertising and promotion in major media outlets had added commercial strength.  Moroccanoil positions itself as a premium product, sold on its own website as well as “premium” salons and spas, “high-end” retailers such as Saks, Neiman Marcus, Barneys, Nordstrom and Sephora, and “upscale” beauty supply stores such as Planet Beauty and Design Collection.

Zotos is a “professional beauty industry leader that manufactures and markets a range of hair care products.” Zotos began to sell hair care products featuring argan oil known as “Luxe Majestic Oil” in packaging with the term “MAJESTIC OIL” in vertical white lettering with an orange fleur-de-lis symbol in front of a blue background.

Majestic oil

Zotos’ largest client is Sally Beauty Supply, a retailer chain that sells beauty supplies at value prices. Zotos’ products appeal to consumers in the market for “a lower-priced alternative to hair care brands that are typically sold at higher price points at high-end department stores and salons.” Zotos used flyers, in-store displays and emails that stated: “Compare to Moroccanoil® and Save” and “If you like Moroccanoil® products, you’ll LOVE our new Luxe Majestic Oil line.”  (I found a saved email online using the tagline “Naturelle Pro Majestic Oil was created to compete as a low cost alternative to MoroccanOil brand”—does adding “compete” change anything?  What about the Sally Beauty webpage where there are a number of different “compare and save” options presented?)
compare to display

like/love page from Sally Beauty

like/love ad on the same page for Bed Head/BTZ

like/love ad on the same page for Biolage/Biotera

As to similarity, Zotos argued that vertical lettering was functional and common in hair care products, and that the shades of blue were clearly distinct, and that an amber bottle was functional for liquid products.  The court found that product names “Moroccanoil” and “Majestic Oil” are sufficiently distinct, and the injunction wouldn’t cover the name, but the appearance of the products was “strikingly similar”: similar white vertical lettering, similar placement of an orange symbol, and a similar blue background, even if an amber bottle by itself was functional.

There was no consumer evidence of confusion; Moroccanoil’s survey found that 41% of respondents believed that Majestic Oil products were manufactured by or associated with Moroccanoil.  The survey was flawed—it used the Squirt format, which is “most appropriate where a product with a weak mark is sold in close proximity to the alleged infringer in the marketplace,” and though it’s possible for consumers to encounter both products online, it was unclear that a significant number of consumers would encounter the marks in close proximity.  Still, the court found the survey to be “some evidence” of likely confusion.

Though the products were sold in different types of stores, the court found that the parties targeted the same general class of purchasers – female consumers of hair care products, as evidenced by Zotos’ “efforts to target and capture Moroccanoil customers” through its comparative advertising, such as “If you like Moroccanoil, you’ll LOVE Luxe Majestic Oil!”  Zotos argued that this tactic expressly distinguished its products, but Zotos products are sold on the Internet without the “comparative advertising.” Plus, the term “our” in (one) Zotos’ ad - “If you like Moroccanoil® products, you’ll LOVE our new Luxe Majestic Oil line” – “may appear ambiguous to consumers as to whether the companies are associated with each other.”

The court found Zotos’ intent neutral; it was obviously aware of Moroccanoil but there was no evidence of intent to confuse.

Overall, the factors favored Moroccanoil.

Irreparable harm: since Zotos was targeting Moroccanoil with its like/love ads, Moroccanoil argued that Zotos was interfering with Moroccanoil’s ability to maintain its image as a premium brand.   Moroccanoil’s expert report by “an independent consultant in the professional beauty industry” claimed that once the public perceives a brand is no longer “premium,” it is “difficult, if not impossible, to reinstate the premium position,” using examples of beauty brands such as Miss Clairol and Sebastian Shaper “whose ‘premium’ products declined in sales once such products entered the mass market consumer retail channel.” Given the survey evidence, the court found a risk of irreparable injury to Moroccanoil’s customer good will and reputation.

The court enjoined Zotos from distributing its Majestic Oil products in their current packaging.  It accepted Moroccanoil’s testimony that it might be possible to repackage the product.  Thus, Majestic Oil could be required to recall the product from Sally Beauty’s brick-and-mortar stores and distribution centers.

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