Zazu Designs v. L’Oreal, S.A.

Brief Fact Summary.

L’Oreal, S.A. (Defendant) was sued under the Lanham Act for using a mark for its hair products that was already in use.

Synopsis of Rule of Law.

Only with active use are consumers allowed to associate a mark with specific goods and notify other firms that the mark is so associated.

Facts.

A licensee of L’Oreal, S.A. (Defendant) in the United States developed a line of hair cosmetics in electric hair colors in 1985.  When researching the availability of “ZAZU†as trademark, a state service mark registration using that word was found to belong to Zazu Hair Designs in Hinsdale, Illinois, (ZHD) (Plaintiff).  Plaintiff had registered the ZAZU mark with Illinois in 1980 as a trade name for its beauty salon.  L’Oreal (Defendant) called to find out if ZHD (Plaintiff) was selling its own products and was informed that it was not at that time but that it might later on.  Defendant paid the sole holder of a federal registration, an apparel manufacturer, for a covenant not to sue if L’Oreal (Defendant) used the mark on cosmetics.  Defendant then began shipping hair cosmetics under the ZAZU name and also applied for federal registration.  At that time, ZHD (Plaintiff) was selling small amounts of shampoo in bottles labeled with the ZAZU name.  Plaintiff sued Defendant for trademark infringement.  After a bench trial, the district court held that ZHD’s (Plaintiff) sales gave it an exclusive right to use the ZAZU name nationally for hair products, enjoined Defendant from using the mark, and award Plaintiff damages for lost profits and punitive damages.  L’Oreal (Defendant) appealed.

Issue.

Are consumers allowed to associate a mark with specific goods and notify other firms that the mark is so associated with active use only?

Held.

(Easterbrook, J.)  Yes.  Only active use allows consumers to associate a mark with specific goods and notifies other firms that the mark is so associated.  ZHD’s (Plaintiff) sales of hair are products were not sufficient as a matter of law to establish national trademark rights at the time L’Oreal (Defendant) put its electric hair colors on the market.  Plaintiff applied for registration of ZAZU after Defendant had applied to register the mark and had also put its product on the market nationwide.  Intent to use a mark, like a naked registration, does not establish any rights whatsoever. Whether Defendant may have had any knowledge of Plaintiff’s plans is irrelevant because the mark was not registered for use in conjunction with hair products.  The district court erred in equating a use sufficient to support registration with a use sufficient to generate nationwide rights in the absence of registration.  Reversed and remanded.

Dissent.

(Cudahy, C.J.)  Even if ZHD (Plaintiff) did fail to demonstrate more than a de minimis market penetration nationally, at the very least it successfully established exclusive rights within its primary area of operation.  Plaintiff has achieved market penetration and exclusive rights to the ZAZU mark, at the very least in the Chicago area.  L’Oreal (Defendant) did not act in good faith since it had prior knowledge of ZHD’s (Plaintiff) use of the mark.

Discussion.

The Lanham Act defined a trademark and codified common law protection for trademarks. Congress made several important changes in trademark law in 1989 before this case was decided.  Prior to 1989, actual use in commerce before registration was a requirement of registration.  The Trademark Law Revision Act of 1989 adopted an “intent to use†registration under § 1 of the Lanham Act.