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Business Place With Distinctive Appearance May Be Protected by Trademark Law

June 26, 1992

WASHINGTON (AP) _ A business place with a distinctive appearance may be protected by federal trademark law even if the public doesn’t automatically identify the decor with any particular business or owner, the Supreme Court ruled today.

The court unanimously upheld a nearly $3 million award Taco Cabana International, a chain of Mexican fast-food restaurants, won in Texas against its competitor, Two Pesos Inc.

The justices said a federal jury could conclude that Two Pesos illegally copied the style and decor of Taco Cabana’s restaurants.

Justice Byron R. White, writing for the court, said federal law is intended to protect a product’s or a business’s distinctive appearance, referred to as ″trade dress″ in trademark parlance.

It is not necessary for a trademark holder to prove the public automatically identifies the appearance with that business, White said.

Today’s ruling furthers the twin goals of the federal law in assuring businesses they can maintain the goodwill of their customers and in protecting consumers’ ability to distinguish among competing brands, White said.

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

Their 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 expanded into Houston and Dallas, 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 after they sued Two Pesos.

Also, the Two Pesos chain was ordered to make some changes in its restaurant designs.

In upholding the ruling against Two Pesos, the 5th U.S. Circuit Court of Appeals rejected the argument that no trademark infringement occurred because there was no evidence that consumers automatically associated the Taco Cabana design with that particular restaurant chain.

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

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