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Court to Consider Trademark Dispute in Texas Restaurant Case

January 27, 1992

WASHINGTON (AP) _ The Supreme Court today said it will settle a recurring trademark dispute, agreeing to hear an appeal by a Mexican fast-food restaurant chain found to have copied a competitor’s motif.

The court said it will consider throwing out a Texas court’s nearly $3 million award to Taco Cabana International against its competitor, Two Pesos Inc.

The issue is whether the Mexican-style appearance of the Taco Cabana restaurants is protected by federal trademark even if the public does not automatically associate that motif with Taco Cabana.

The 5th U.S. Circuit Court of Appeals ruled in June that the jury properly could have concluded that Two Pesos illegally copied the Taco Cabana style.

″Two Pesos may enter the upscale Mexican fast-food market,″ the appeals court said. ″But it may not copy Taco Cabana’s distinctive combination of layout and design features.″

Taco Cabana was founded in San Antonio in 1978 by two brothers, Felix and Mike Stehling. They later expanded the business with other outlets.

The restaurants feature ″a festive eating atmosphere having interior and patio areas decorated with artifacts, bright colors, paintings and murals.″

Marno McDermott and Jim Blacketer opened Two Pesos in Houston in 1985 and expanded rapidly in and out of Texas - but not into San Antonio.

Taco Cabana has since expnded into Houston and Dalls, where Two Pesos already was doing business.

Taco Cabana’s owners were awarded more than $1.8 million in damages and nearly $1 million in legal fees.

Also, Two Pesos was ordered to make some changes in its restaurant design.

The jury in the case was told that it could find Two Pesos acted illegally if it copied the ″total image″ of Taco Cabana.

In ruling against Two Pesos, the 5th Circuit court rejected the restaurant’s argument that its conduct was legal because there was no evidence that consumers automatically associated the Taco Cabana design with the restaurant chain.

The case is Two Pesos vs. Taco Cabana, 91-971.

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