By Pamela C. Maloney, J.D.
In a trademark and false advertising dispute between competing makers of Mexican-style ice cream bars called "paletas," the U.S. Court of Appeals in Washington, D.C. affirmed the district court’s finding that that the "La Michoacana" mark used by both companies was not sufficiently distinctive to merit trademark protection because the mark captured the geographical association of paletas with the state of Michaocan, in Mexico, similar to Philly cheese steak or Chicago-style pizza. However, use of the complaining U.S. company’s incontestable registered "Indian Girl" image marks by the defending Mexican company in the Northern California and metropolitan Houston markets constituted infringement as a matter of law (Paleteria La Michoacana, Inc. v. Productos Lacteos Tocumbo S.A. de C.V., August 10, 2018, Pillard, C.).
Both Productos Lacteos Tocumbo (Prolacto)—a Mexico-based company—and Paleteria La Michoacana (PLM)—a U.S.-based company—sold paletas, a frozen, fruit-based Mexican-style dessert, using variations of the same mark "La Michoacana" and an image of a girl in traditional dress holding a paleta or ice cream cone (the "Indian Girl" logo) in the United States. However, the parties’ sales overlapped only in two areas of the country. The first area was Northern California, where PLM’s use of the disputed name and logo predated Prolacto’s use by at least a decade. The second overlapping market was Houston, Texas, where Prolacto was the first to enter the market through a license issued in 2002, and was first to use the disputed phrase "La Michoacana" in that market. Prolacto did not begin to use the Indian Girl mark in its Houston-area paleta sales until some undetermined time after 2005, when PLM entered the Houston market. Immediately upon entering the Houston market, PLM used both the disputed name and Indian Girl mark. Both companies disputed whether Prolacto or PLM, if either, owned the contested phrase and image and which company, if either, unfairly competed or otherwise infringed the other’s trademark rights.
In May, 2016, the federal district court in Washington, D.C., affirmed the Trademark Trial and Appeal Board’s cancellation of PLM’s LA INDITA MICHOACANA mark, with design, and found that Prolacto had infringed two of the PLM’s "Indian Girl" marks. Prolacto appealed, challenging the district court’s adverse findings on three of its claims arising under the Lanham Act: (1) false association; (2) false advertising; and (3) trademark infringement.
False association. As an initial matter, Prolacto contended that the district court erred in failing to hold PLM liable for false association, also known as unfair competition or trademark infringement, based on the latter’s use of the words "La Michoacana" to sell paletas in the Houston market. The appellate court explained that Prolacto could succeed on its false association claim only if it could show that: (1) "La Michoacana" was a sufficiently distinctive mark to merit trademark protection and (2) Prolacto had established priority in use of that mark. However, Prolacto failed on both counts.
In support of its argument that the "La Michoacana" mark was sufficiently distinctive to merit trademark protection, Prolacto contended that PLM would not have adopted "La Michoacana" "but for" its value as a "marker" of Prolacto’s brand. However, the value of "La Michoacana" as a mark could arise only if it was distinctive to Prolacto as a source of paletas. Although it was somewhat unclear what category of mark the parties believed the disputed phrase fell into, Prolacto argued that it was an arbitrary rather than a descriptive mark. The district court had rejected that argument and the appellate court agreed, finding that use of "La Michoacana" as a name for a paleta company captured the association of paletas with the state of Michaocan, in Mexico, much like the names Philly cheese steak or Chicago-style pizza evoked a type of product generally linked to the named locale. Similarly, PLM’s alleged appropriation of the phrase was not, by itself, evidence of the phrase’s distinctiveness as the term could signify a genre without signifying a brand.
In addition, there was no proof that "La Michoacana" had acquired secondary meaning such that consumers identified the phrase with Prolacto itself. Although Prolacto identified a few instances of consumer confusion between the products sold by the two companies, it failed to offer any testimony or other evidence to show that it was the words "La Michoacana" and not the image on the packaging that caused the confusion. In addition, Prolacto failed to submit other evidence—such as survey evidence, evidence of the length and manner of its use of the name, the nature and extent of advertising and promotion of the name, and the volume of sales—to prove that the term had acquired secondary meaning.
Turning to the second element of Prolacto’s false association claim, the appellate court agreed with the district court’s finding that Prolacto failed to establish its "priority of use" for the "La Michoacana" mark in most U.S. markets. Prolacto had conceded that PLM was the prior user of all of the contested marks in the relevant U.S. markets, with the exception of the Houston-area market. According to Prolacto, it had trademark rights in the United States based on its own undisputed prior use in Mexico and that PLM’s deceptive use of the mark in U.S. commerce injured Prolacto by trading on the latter’s goodwill, which had been accrued in Mexico, and by usurping some of Prolacto’s business. However, Prolacto failed to offer evidence that it sustained any injuries to its commercial sales or prospects, nor did it offer any evidence of consumer confusion in Mexico or of a crossover of the parties’ customers between the United States and Mexico.
False advertising. Prolacto’s false advertising claim was premised on a statement used in PLM’s advertising, which described the company’s long history and advised consumers to "Distinguish us by our logo." The companies did not dispute that the statements made were false or misleading. However, Prolacto failed to prove injury and materiality, both of which are necessary elements of a false advertising claim. There was no evidence that consumers even saw the allegedly false advertisements, let alone that those statements factored into their decisions to purchase PLM’s products. Evidence proffered by Prolacto’s expert revealed that although he had read the false statements, he could not recall what was said in the advertisements. In addition, a consumer survey conducted by the expert did not test the materiality of the statement on consumer’s decision-making processes, nor did it attempt to replicate the environment of the marketplace to determine whether consumers actually took the time to study the packaging and to read PLM’s purported history before deciding to make a purchase.
Similarly, there was no evidence that PLM’s use of other images and phrases in its advertising had an injurious effect on Prolacto. The name "La Michoacana" lacked distinctiveness and PLM’s use of images of sand beaches was common in advertising.
Having determined that there was a lack of credible evidence of any injury, the appellate court found it unnecessary to consider Prolacto’s arguments regarding materiality, affirming the district court’s conclusion that Prolacto failed to establish the elements of its false advertising claim.
Indian Girl trademark. Finally, Prolacto appealed the district court’s holding that it had infringed PLM’s trademark rights in the Indian Girl marks. PLM’s two Indian Girl marks had been registered with the U.S. Patent & Trademark Office since 2005. According to the appellate court, the fact of registration was itself prima facie evidence of the validity of the registered mark, the registrant’s ownership of the mark, and the registrant’s exclusive right to use the registered mark in commerce. In light of PLM’s evidence of registration, the appellate court ruled that it need not consider the merits of Prolacto’s challenge to the "incontestability" of the marks, adding that Prolacto’s evidence failed to rebut the presumption of PLM’s ownership. Accordingly, the district court’s finding that Prolacto had infringed PLM’s registered Indian Girl marks was affirmed on appeal.
The case is No. 17-7075.
Attorneys: Laura Lindsay Chapman (Sheppard Mullin Richter & Hampton LLP) for Paleteria La Michoacana, Inc. and PLM Operations, LLC. Paul Anthony Werner, III (Sheppard Mullin Richter & Hampton LLP) for Paleteria La Michoacana [Sub], Inc. Martin Schwimmer (Leason Ellis LLP) and Lori Leigh Cooper (Leason Ellis LLP) for Productos Lacteos Tocumbo S.A. de C.V.
Companies: Paleteria La Michoacana, Inc.; PLM Operations, LLC; Paleteria La Michoacana, Inc.; Productos Lacteos Tocumbo S.A. de C.V.
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