Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—EDMich: Pizza Franchise Failed to Show That Competitor Infringed Design of Restaurants and Menus, (Jan 29, 2013)

By Thomas Long, J.D.

A pizza restaurant franchise (“Happy’s”) that accused a competing restaurant (“Papa’s”) of copying the design of Happy’s restaurants and using its expansive menu failed to establish, as a matter of law, that Papa’s engaged in trade dress infringement and unfair competition, the federal district court in Detroit has determined (Happy’s Pizza Franchise, LLC v. Papa’s Pizza, Inc., January 25, 2013, Battani, M.).

Happy’s failed to show that its trade dress was entitled to protection under the Lanham Act or that consumers were likely to be confused by the alleged copying. Therefore, Happy’s motion for summary judgment was denied.

Both businesses described themselves as “fast food type pizza restaurants” with an expansive menu, including chicken, seafood, ribs, and pasta. The first Happy’s restaurant was opened on April 4, 1996; the Happy’s Pizza franchise was organized on August 28, 2006. Papa’s incorporated on August 24, 2005 and had since opened a number of locations that Happy’s asserted were in “close proximity” to Happy’s restaurants.

Asserted Trade Dress

Happy’s claimed that it owned numerous intellectual property rights, which it sublicensed to each individually owned restaurant via franchise agreement. These asserted rights included its “Unique Décor Protocols,” which Happy’s alleged Papa’s copied in successive restaurants. These “Unique Décor Protocols” included: (1) granite countertops and tabletops; (2) ceramic tiled walls and faux-Venetian plaster finished walls; (3) extensive neon lighting; (4) ceramic floors; (5) large back-lit menu with faux-Venetian plaster walls; (6) large, black industrial-style rugs; (7) back-lit pictures of menu items; (8) stainless steel shelving units behind the service counter; and (9) stacks of pre-folded pizza boxes and large coin-operated candy and bubble gum dispensers. According to Happy’s, these elements created a “uniform look and feel” that consumers associated with Happy’s restaurants.

Papa’s also used most, if not all, of these design elements in at least one location. Papa’s asserted that those items were purchased from the location’s prior owner, without intent to resemble Happy’s.

Happy’s also alleged that its menu was part of its effort to “create a distinctive, commercial impression unique to Happy’s Restaurants.” Papa’s allegedly copied the menu, offered the same food items, and used the same recipes as Happy’s. Papa’s contended that it used its own proprietary recipes for its food. Although the respective menus were stylistically similar and contained nearly the same items in the same combinations, each item was described generically, the court noted.

Happy’s filed suit against Papa’s, alleging trade dress infringement and unfair competition in violation of Sec. 43(a) of the Lanham Act, as well as common-law claims of trade dress infringement and unfair competition. Happy’s moved for partial summary judgment on its Lanham Act Sec. 43(a) claims.

Distinctiveness

Happy’s contended that its trade dress was inherently distinctive, based on its arbitrary use of each element constituting the décor. However, the court said, Happy’s failed to provide evidence that each Happy’s restaurant used the specific uniform theme it described, that other fast food restaurants do not use the same elements, that customers exclusively associated the elements and menu items with Happy’s, that other restaurants did not offer similar food combinations, and that all of Papa’s restaurants used the asserted trade dress. Papa’s correctly asserted that many other fast food chains use elements similar to those found in Happy’s restaurants, the court said. There was no evidence that Happy’s combination of the design elements was original.

Happy’s had used generic elements to create a fast food restaurant setting that was otherwise indistinguishable from any others, in the court’s view. Without the use of Happy’s name and logo within the trade dress, there was nothing that would alert the average consumer that he or she was in a Happy’s restaurant. Accordingly, the court held, Happy’s asserted trade dress was generic and not protectable.

Functionality

Happy’s also was required to show that its trade dress was primarily nonfunctional, in order to receive protection under the Lanham Act. According to the court, Happy’s failed to make this showing. There was no evidence that its menu and restaurant décor were not commonly used in the fast food industry, that there were alternative design elements for Papa’s to use in conducting its business, or that affording trade dress protection to Happy’s menu and restaurant décor would not hinder competition. Considering the elements as a whole, the total package was common to fast food restaurants and was not protectable as trade dress, the court concluded.

Customer Confusion

Happy’s also failed to provide sufficient evidence of consumer confusion that would entitle it to summary judgment on that element of its infringement claims. An affidavit of a manager of a Happy’s restaurant was insufficient to satisfy Happy’s burden, the court said. The affidavit merely stated that “[c]ustomers have frequently expressed confusion over the phone and in person to me … between [Happy’s] and a Papa’s Pizza Restaurant [in close proximity] to [Happy’s].” No customer statements or particular details regarding the alleged confusion were provided. The affidavit did not state that the customers were confused as a result of the similarity between the décor or menus of the restaurants. In addition, the mere fact that two competing restaurants in the same geographic area used the same marketing channels and employed the same companies to market their product was insufficient to show consumer confusion, the court said.

The case is No. 10-15174.

Attorneys: Jessica Dopierala Hite (Asker Perlmuter PLC) for Happy’s Pizza Franchise, LLC. Cyril C. Hall (Law Offices of Cyril C. Hall, P.C.) for Papa’s Pizza, Inc.

Companies: Happy’s Pizza Franchise, LLC; Papa’s Pizza, Inc.

Cases: FranchisingDistribution MichiganNews