Kendall-Jackson Winery v. E. & J. Gallo Winery, 150 F.3d 1042, 47 U.S.P.Q.2d (BNA) 1332 (9th Cir. 1998).

Kendall-Jackson Winery sued E. & J. Gallo Winery for featuring on its wine labels a multicolored grape leaf design that allegedly resembles a similarly colored leaf design that Kendall-Jackson uses on its wine labels (the trademark claim) and for using wine bottles that mimic the overall appearance of Kendall-Jackson's wine bottles (the trade dress claim). Kendall- Jackson claimed that Gallo's conduct violated the Lanham Trademark Act of 1946, as well as California's unfair competition laws. Kendall-Jackson lost the trademark claim on summary adjudication and the trade dress claim after a jury trial. Bound by the jury's factual findings, the district court entered judgment for Gallo on the state unfair-competition claims. Kendall-Jackson now appeals. We affirm.

Kendall-Jackson is a California winery that has a reputation for producing high quality, mid- priced varietal wines. Since its inception in 1983, Kendall-Jackson has sold over ten million cases of its Vintner's Reserve line of premium wines. By 1994, Kendall-Jackson was selling over $100 million worth of Vintner's Reserve wine a year, and its chardonnay was the number one selling chardonnay in the United States.

During this time, Kendall-Jackson featured on its Vintner's Reserve wine labels a downward- pointing, stylized grape leaf design using various shades of green, yellow, orange, red, and brown. The leaf design was always coupled with a banner that intersected the leaf and that read "KENDALL-JACKSON." In addition to using the leaf design, Kendall-Jackson tried to distinguish its Vintner's Reserve wine by packaging the wine in recognizable bottles. The Vintner's Reserve bottles, which came in one of two shapes ("burgundy-style" [featuring a gradual, tapered neck] or "bordeaux-style" [featuring a shorter, three-inch bottle neck sitting on rounded shoulders of the bottle]), had a rounded flange [around the lip at the bottle neck], a visible cork with printed leaves on it, a brown or burgundy neck label with gold lines on the top and bottom that form an oval in the back, and an off-white label featuring the multicolored leaf design.

Gallo is also a successful California winery. In fact, Gallo is the largest wine-producer in the world. But unlike Kendall-Jackson, Gallo has a reputation for producing lower-priced, non- premium wines. During the time that Kendall-Jackson was establishing itself as a leader in the premium wine market, the market for non-premium wine was rapidly declining.

In 1992, Gallo considered entering the premium wine market. For three years, Gallo conducted extensive market research to determine how best to enter the market. Much of this research was directed at the success of the market leader--Kendall-Jackson Vintner's Reserve. Through its market research, Gallo determined that consumers associate the name "Gallo" with "jug wine" rather than premium wine and that a colorful grape-leaf design attracts consumers.

In accordance with these results, Gallo introduced in the fall of 1995 a line of premium wine that did not use the Gallo name and that featured the consumer-preferred leaf motif. Gallo called this wine "Turning Leaf." Like Kendall-Jackson's Vintner's Reserve wines, Gallo's Turning Leaf wines came in either a burgundy-style bottle or a bordeaux-style bottle and featured a rounded flange, a visible cork with printed leaves on it, a brown or burgundy neck label with gold lines on the top and bottom that form an oval in the back, and an off-white label with a prominent, downward-pointing, stylized grape leaf design in various shades of green, yellow, orange, red, and brown.

Six months after Gallo introduced its Turning Leaf line, Kendall-Jackson sued Gallo in the United States District Court for the Northern District of California. Kendall-Jackson asserted claims under the Lanham Actfor trademark infringement, trade dress infringement, trademark dilution, and trade dress dilution. Kendall-Jackson also invoked the California and common-law counterparts to the Lanham Act and asserted various unfair competition claims: trademark and trade dress dilution; false advertising; unfair competition; common law trademark infringement; common law trade dress infringement; and palming off.

Gallo moved for summary adjudication of Kendall-Jackson's claims of trademark and trade dress infringement. The district court granted Gallo's motion on the trademark claim but denied the motion on the trade dress claim. The trade dress claim went to a jury, and the jury decided that Gallo's trade dress did not infringe Kendall-Jackson's trade dress. Bound by the factual findings of the jury, the district court resolved the remaining claims in favor of Gallo. Accordingly, the district court entered judgment for Gallo on all claims. Kendall-Jackson appeals that judgment.


Kendall-Jackson argues that the district court improperly handled both the trademark claim and the trade dress claim. With respect to the trademark claim, Kendall-Jackson argues that the district court should have denied Gallo's motion for summary adjudication. With respect to the trade dress claim, Kendall-Jackson argues that the district court should have granted Kendall- Jackson's motion for judgment as a matter of law on the first two elements of the claim, given the jury more instructions on the third element, and refused to instruct the jury on any of Gallo's affirmative defenses. As explained below, we find each of Kendall-Jackson's arguments unavailing.

We review de novo grants of summary adjudication motions and denials of motions for judgment as a matter of law after trial. We review for abuse of discretion a district court's formulation of jury instructions.

Section 43(a) of the Lanham Act makes actionable the deceptive and misleading use in commerce of "any word, term, name, symbol, or device" on any goods or in connection with any goods. For a number of years after this section was enacted, courts construed it narrowly to include only two kinds of wrongs: false advertising and the common-law tort of "passing off" one's goods as those of another. But over time, §43(a) has been expanded " 'to create, in essence, a federal law of unfair competition.' " Section 43(a) now protects both trademarks and trade dress from infringement. To state an infringement claim under §43(a)--whether it be a trademark claim or a trade dress claim--a plaintiff must meet three basic elements: (1) distinctiveness, (2) nonfunctionality, and (3) likelihood of confusion.

The distinctiveness element comes from §2 of the Lanham Act, which sets forth the requirements for registering a trademark [but registration is not a prerequisite for protection under §43(a)]. To be protected under §2, a mark must be capable of distinguishing the applicant's goods from the goods of others. In other words, the mark must be distinctive. "An identifying mark is distinctive and is capable of being protected if it either (1) is inherently distinctive or (2) has acquired distinctiveness through secondary meaning."

But distinctiveness is only the first of three elements for liability under §43(a). A plaintiff trying to establish liability under §43(a) must also prove nonfunctionality and likelihood of confusion.

A product feature is functional and cannot serve as a trademark " 'if [the product feature] is essential to the use or purpose of the article or if it affects the cost or quality of the article,' that is, if exclusive use of the feature would put competitors at a significant, non-reputation-related disadvantage." This doctrine "prevents trademark law, which seeks to promote competition by protecting a firm's reputation, from instead inhibiting legitimate competition by allowing a producer to control a useful product feature." Under the functionality doctrine, competitors can reasonably replicate important non-reputation-related product features.

The last element--likelihood of confusion--is the most important element of all. Likelihood of confusion exists when "customers viewing the mark would probably assume that the product or service it represents is associated with the source of a different product or service identified by a similar mark." "Evidence of actual confusion is persuasive proof that future confusion is likely." So is evidence that the defendant intentionally copied the plaintiff's mark: "[Such evidence] is ... entitled to great weight because a defendant is presumed able to accomplish this purpose."

If a plaintiff has used a mark to identify its goods and if the plaintiff satisfies the three elements discussed above, then the plaintiff has stated a prima facie claim for infringement under §43(a) of the Lanham Act.

Kendall-Jackson believes that it has presented sufficient evidence to meet these elements for both its trademark and trade dress claims. In fact, with respect to its trade dress claim, Kendall- Jackson believes that it has met the distinctiveness and nonfunctionality elements as a matter of law. Kendall-Jackson therefore argues that the district court erred when it summarily adjudicated the trademark claim in favor of Gallo and when it allowed the jury to address all three elements of the trade dress claim. Kendall-Jackson also challenges the instructions that the court gave (or failed to give) to the jury. We address these arguments in turn below.

Summary Adjudication of the Trademark Claim

The district court summarily adjudicated Kendall-Jackson's trademark claim because "no reasonable jury could conclude from the evidence submitted by Kendall-Jackson that consumers view the Colored Leaf Mark as a symbol of Kendall-Jackson apart from its name and crest." Kendall-Jackson disagrees with the district court's ruling. It argues that a reasonable jury could have found that consumers associate the colored-grape-leaf design with Kendall-Jackson and that, in any event, Kendall-Jackson did not need to prove secondary meaning--i.e., consumer-association between the leaf design and Kendall-Jackson--because the design is inherently distinctive.

We need not address these arguments, however, because even if Kendall-Jackson is correct, Gallo is still entitled to judgment as a matter of law. Grape-leaf designs have become generic emblems for wine. Thus, they are not protectable as trademarks.

The use of a grape leaf as a mark for wine would normally be inherently distinctive because it suggests, rather than describes, the product. One has to go through two or three steps to associate the leaf with the product--i.e., a grape leaf comes from a grapevine, which has grapes from which wine is produced. Under the standard [imagination] test, a grape leaf could be suggestive and thus inherently distinctive.

The difference in the present case is that because wine bottlers other than Kendall- Jackson have long used grape leaves to decorate their labels, that emblem has become generic. By itself, a grape leaf cannot differentiate one brand from another because precisely the same reasoning links the same emblem to the product in each case: A grape leaf suggests a grapevine, which suggests a grape, which suggests wine. Because the grape leaf is used widely in the industry, it has lost the power to differentiate brands. See McCarthy on Trademarks, §7:36, at 7-62 (4th ed. 1997) ("A pictorial representation on a label may be so commonplace as to be incapable of creating a separate commercial impression in a buyer's mind. For example, a picture of a chef and a salad bowl on a food label...."). Thus, there is nothing inherently distinctive in the use of a grape leaf as a mark for wine.

A producer's depiction of a grape leaf, may, however, be so distinctive as to warrant protection from copying. If a particular rendering of a grape leaf has the power to distinguish one brand from another, it is the rendering that should be evaluated for its distinctiveness. A photo-realistic rendering would be merely descriptive, whereas a stylized rendering could be inherently distinctive.

There is no jury question on the copying of any of the distinctive characteristics of Kendall-Jackson's leaf. The most distinctive feature of the Kendall-Jackson grape leaf is that it is separated by a space in the middle where the name of the winery is printed. Less distinctive features are the leaf's downward pointing orientation, and the arguably unusual coloration. Gallo did not, however, depict a bifurcated leaf with its brand name printed in a space between the segments. Gallo's leaf is folded and turns at an angle rather than pointing straight down. Also, the intensity of the coloration is markedly different from that of the original Kendall-Jackson leaf. When viewed in its entirety, we do not see how any distinctive feature of the Kendall-Jackson mark has been duplicated so as to present a jury issue of trademark infringement.

Jury Trial on the Trade Dress Claim

Kendall-Jackson next attacks the judgment on its trade dress claim. Kendall-Jackson has two major criticisms of the way that the district court handled this claim: the district court should have granted Kendall-Jackson's motion for judgment as a matter of law on two elements of the trade dress claim and the district court should have instructed the jury differently. Neither of these criticisms has merit.

As Kendall-Jackson points out, a new trial should be granted when a district court erroneously submits to a jury an issue that should have been decided as a matter of law and the basis of the jury's general verdict is unknown. Kendall-Jackson failed to establish that its trade dress, as a matter of law, was nonfunctional and distinctive.

Although Kendall-Jackson presented evidence that could support a jury's finding that the trade dress was nonfunctional and distinctive, that evidence did not compel such a conclusion. Gallo presented contrary evidence that a jury could reasonably believe.

Kendall-Jackson disagrees. It argues that Gallo's evidence, at most, showed that a flanged bottle is functional and that some wineries use leaf designs on their bottles. But, Kendall-Jackson argues, Gallo never showed that Kendall-Jackson's trade dress as a whole was either functional or nondistinctive.

Kendall-Jackson is correct about the law; the proper inquiry is not whether individual features of a product are functional or nondistinctive but whether the whole collection of features taken together are functional or nondistinctive. But Kendall-Jackson is wrong about Gallo's evidence. Gallo's evidence was not directed solely at the functionality of a flanged bottle or at the pervasive use of leaf designs on wine bottles. Gallo's evidence also showed that the combination of an exposed cork, a rounded flange, and a neck label create the "California look," which consumers come to expect from a California wine.

A reasonable jury could conclude from this evidence that Kendall-Jackson's trade dress as a whole is functional and nondistinctive. For instance, a reasonable jury could conclude that these features--an exposed cork, a rounded flange, and a neck label-- constitute a significant part of Kendall-Jackson's trade dress and that granting Kendall- Jackson exclusive use of this combination of features would put competitors at a significant non-reputation-related disadvantage. Such conclusions would support a finding that the trade dress as a whole is functional.

Likewise, a jury could conclude from this evidence that the "California-look" tells consumers what the product is or at least describes a characteristic of the product, namely that it is wine from California. This conclusion would support a finding that the trade dress was generic or descriptive and therefore nondistinctive. The fact that Kendall- Jackson's grape-leaf design is distinctive does not necessarily mean that the entire trade dress is distinctive because, as Kendall-Jackson itself emphasizes, trade dress must be analyzed as a whole.

Thus, there were genuine issues of fact about whether Kendall-Jackson's trade dress was distinctive and nonfunctional. The district court therefore properly let the jury decide these issues.

Kendall-Jackson's final complaint is that the district court mishandled the jury instructions on likelihood of confusion. The district court gave the jury lengthy instructions on likelihood of confusion. In fact, the instructions are too lengthy to quote here. The instructions explained what likelihood of confusion is, what factors the jury should consider when assessing likelihood of confusion, and the definitions of "actual confusion" and "knowing adoption."

Yet Kendall-Jackson wanted more; it wanted the district court to tell the jury that proof of a defendant's intent to exploit the goodwill in a plaintiff's mark or trade dress creates a rebuttable presumption of confusion, that a second-comer has a duty to name and dress his product so as to avoid all likelihood of consumers confusing it with the product of the first-comer, and that similarities in trade dress weigh more heavily than differences. Kendall-Jackson also argues that the district court's instructions on actual confusion were wrong.

As to Kendall-Jackson's first argument--that the district court should have given more voluminous instructions--the law is clear: A district court has substantial latitude in tailoring jury instructions, and as long as the district court's instructions "fairly and adequately covered the issues presented, correctly stated the law, and were not misleading," the instructions will be upheld. Because the district court's instructions more than adequately covered the relevant issues, correctly stated the law, and were not misleading, the district court did not abuse its discretion by refusing to adopt Kendall- Jackson's jury instructions.

{Fn. 11: Besides, some of Kendall-Jackson's proposed instructions may conflict with applicable law. For example, Kendall-Jackson wanted the district court to instruct the jury that a defendant's intent to exploit the goodwill in a plaintiff's mark or trade dress creates a rebuttable presumption of confusion. But in Fuddruckers, Inc. v. Doc's B.R. Others, Inc., this court stated that proof of intent to cause confusion is entitled to great weight, not that it creates a presumption of confusion that shifts the burden of proof to the other party.}

The district court told the jury that the amount of actual confusion may be "discounted" if it is not "substantial." Because one definition of "discount" is "to leave out of account; disregard," The Random House Dictionary of the English Language, the jury may have interpreted this instruction as requiring them to disregard any evidence of actual but insubstantial confusion. This is unlikely, however, because it is apparent that the object to be "discounted" is the term "amount," or more fully, "amount of actual confusion," when read in context:

Where the term "discount" is applied to a quantity or an "amount," most of the definitions applicable to "discount" denote reducing, rather than eliminating, the original quantity or amount. In the context used by the district court, "discount" means "to make a deduction in evaluating the significance or worth of," to "view as unimportant," "minimize," "depreciate," "underrate," "disparage," "diminish," "lessen," and so forth. Webster's Third New International Dictionary of the English Language Unabridged. Although there was some risk of ambiguity in the phrasing, considered in context, we do not believe that the jury could have been misled. The jury was properly instructed on the factors for determining likelihood of confusion (only one of which is actual confusion), and Gallo presented compelling evidence on these factors. For instance, Gallo introduced a survey that showed that although some people might be confused by Gallo's Turning Leaf trade dress, a significant portion of the general public is not likely to be confused.

Thus, even if the jury had treated Kendall-Jackson's actual confusion evidence as "strong evidence," the jury would probably have thought that, overall, Gallo's likelihood- of-confusion evidence was stronger than Kendall-Jackson's opposing evidence.

Accordingly, the judgment in favor of Gallo is AFFIRMED.

Prepared by Jefferson Scher for Law 227: Trademarks & Unfair Competition, Summer 2005. Substantial portions of the original opinion have been omitted.