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David CAN Beat Goliath ~ But Only If David Is Prepared…

For small businesses, one of the most difficult problems in enforcing its intellectual property rights is the inequity with larger businesses in ability to pay for complex, Federal litigation. Recently, however, a landmark verdict of $8.5 Million came out of the Central District of California that proves this is not always the case.
Mixed Chicks LLC, a relatively small company with 15 employees, sued large, mega-retailer Sally Beauty Supply (SACV11-00452 AG (FMOx) (C.D.C.A. 2012)). Mixed Chicks LLC manufactures a unique line of hair care products for multiracial women called “Mixed Chicks.” After Mixed Chicks declined to sell their products through Sally Beauty Supply, Sally Beauty Supply introduced a competing product, “Mixed Silk.” Worse, the Mixed Silk product was packaged in bottles that highly resembled Mixed Chicks’ unique translucent bottles, including a similar prominent orange lettering. But it did not stop there. Everything from the product sell sheets to the color and texture of the liquid product itself was similar. Even searching on Sally’s website for ‘Mixed Chicks’ resulted in displaying its Mixed Silk product.
Mixed Chicks was awarded a jury verdict of $7.3 million in punitive damages and $840,000 in actual damages on its claims for trademark infringement, trade dress infringement and Federal unfair competition. Post-verdict, Sally Beauty Supply offered $8.5 million, an amount higher than the awarded amount, in effort to avoid paying attorneys fees and costs.
The following lessons can be learned from this case:
1) Always apply for a Federal trademark registration.
Federal registrations entitle the owner to certain legal presumptions on ownership and priority. Further registrations confer the possibility of receiving statutory damages and attorneys’ fees. In the Mixed Chicks case, the registration, coupled with its success in proving liability, conferred a likelihood that attorneys fees would have been awarded, which ultimately drove Sally Beauty Supply to offer a settlement amount higher than the amount the jury awarded
2) Remember to assess and apply for protection for trade dress and product configuration assets, in addition to traditional trademarks. Trade dress protects the overall look and feel of a product – for example, the unique shape of the packaging or the unique color or font in which the product name is written. Such aspects of a product must be shown to have acquired secondary meaning, which is a connection in the mind of the consuming public between various unique feature(s) of the product and the company that manufactures it. Companies should explore this aspect of their business with Intellectual Property counsel.

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Natalie Remien
Natalie Remien
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Chicago IP Attorney