## Facts

- Taco Cabana operated Mexican-style fast-food restaurants in Texas beginning in 1978 and claimed a distinctive restaurant “trade dress” consisting of a particular combination of décor, colors, murals, artifacts, patio configuration, and building exterior elements.
- Two Pesos opened a competing restaurant in Houston in 1985 using a restaurant motif the jury and courts found closely similar in overall look and feel to Taco Cabana’s asserted trade dress, and Two Pesos expanded into additional Texas markets.
- Taco Cabana entered Houston and other overlapping Texas markets in 1986 and later competed directly with Two Pesos.
- Taco Cabana sued under Lanham Act § 43(a) for trade dress infringement and under Texas law for misappropriation of trade secrets concerning architectural plans and kitchen layout.
- A jury found: (1) Taco Cabana had a trade dress; (2) the trade dress, taken as a whole, was nonfunctional; (3) it was inherently distinctive; (4) it had not acquired secondary meaning in the Texas market; and (5) Two Pesos’ use created a likelihood of confusion.
- The trial court entered judgment for Taco Cabana, including a finding that Two Pesos’ infringement was intentional and deliberate, and also entered judgment for Taco Cabana on the trade secret claim.

## Issues

1. Whether Taco Cabana’s restaurant trade dress was protectable under Lanham Act § 43(a) as nonfunctional and distinctive, and whether the evidence supported a likelihood of confusion.
2. Whether inherently distinctive trade dress must also have acquired secondary meaning to be protected under § 43(a).
3. Whether Taco Cabana forfeited or surrendered trade dress rights through a cross-licensing arrangement using the same trade dress with different restaurant names.
4. Whether the evidence supported liability for misappropriation of trade secrets under Texas law.

## Decision

- The Fifth Circuit affirmed judgment for Taco Cabana on trade dress infringement and trade secret misappropriation.
- The Fifth Circuit held the jury could find Taco Cabana’s trade dress nonfunctional and inherently distinctive, and that likelihood of confusion was supported by the record.
- The Fifth Circuit rejected the claim that Taco Cabana’s asserted “Mexican motif” was categorically unprotectable, emphasizing the protectable overall combination of elements.
- The Fifth Circuit rejected the argument that cross-licensing, on these facts, amounted to abandonment or surrender of trade dress rights.
- The U.S. Supreme Court affirmed on the Lanham Act question presented, holding that inherently distinctive trade dress is protectable under § 43(a) without proof of secondary meaning.

## Legal Principles

- Trade dress is actionable under Lanham Act § 43(a) when it is (1) nonfunctional, (2) distinctive (including inherently distinctive), and (3) likely to cause consumer confusion as to source or affiliation.
- Inherently distinctive trade dress does not require proof of secondary meaning to obtain protection under § 43(a); secondary meaning is required only for trade dress that is merely descriptive.
- Functionality bars trade dress protection; nonfunctionality is assessed by whether the asserted features, taken as a whole, are essential to use or purpose or affect cost or quality in a functional sense.
- A protectable trade dress may consist of the overall look and feel created by a particular combination and arrangement of elements, rather than a general theme in the abstract.
- Controlled licensing or use of similar trade dress with different names does not, without more, eliminate protectability or constitute abandonment.

## Conclusion

The courts upheld liability for copying a restaurant’s nonfunctional, inherently distinctive trade dress where the imitation was likely to confuse consumers, and the Supreme Court confirmed that such trade dress is protected under Lanham Act § 43(a) without any requirement to prove secondary meaning.


Taco Cabana Int’l, Inc. v. Two Pesos, Inc., 932 F.2d 1113 (5th Cir. 1991), aff’d, 505 U.S. 763 (1992)