DTO Law Scores Major Supreme Court Win in Trademark Infringement Suit

On June 20, 2023, DTO Law obtained a significant victory in the U.S. Supreme Court in the case of Diece-Lisa Industries Inc. v. Disney Store USA LLC et al.

The case, which originated as two separate lawsuits filed over a decade ago in Texas by DTO’s co-counsel, Whitaker Chalk, and transferred to California in 2019, alleges Disney infringed DLI’s trademarked line of “Lots of Hugs” stuffed toy bears through Disney’s use of Lots-O’-Huggin’ bear — a character in the blockbuster animated film “Toy Story 3.” From 1997 to 2007, DLI sold “Lots of Hugs” bears and later licensed the mark to various companies. In 2010, Disney released the wildly popular “Toy Story 3,” which featured a stuffed bear named Lots-O’-Huggin’ as its antagonist and generated more than $1 billion in worldwide ticket sales. DLI filed a reverse trademark infringement suit based on the fact that the notoriety of Lots-O’-Huggin’ bear damaged DLI’s property rights in the “Lots of Hugs” trademark.

In July 2021, a California judge granted summary judgment to Disney, holding Disney’s use of the “Lots-O’-Huggin’” mark was protected by the First Amendment, in reliance on Rogers v. Grimaldi—a case originating in the Second Circuit and later adopted and expanded upon by the Ninth Circuit. DLI then appealed to the Ninth Circuit, arguing that the Rogers test had gone too far and also did not apply in a case of reverse trademark infringement. The Ninth Circuit affirmed the summary judgment ruling. DTO filed a petition for a writ of certiorari to the U.S. Supreme Court in 2022.

While the writ was pending, the Supreme Court issued a decision regarding the application of the Rogers test in a case involving a dog toy resembling Jack Daniel’s famous whiskey bottle. In that case, Jack Daniel’s Properties, Inc. v. VIP Products LLC, the Ninth Circuit applied the Rogers test and reversed the trial court’s finding of trademark infringement, holding the First Amendment protected VIP’s use of Jack Daniel’s trademark. On June 8, the Supreme Court overruled the Ninth Circuit in a 9-0 decision, holding the Ninth Circuit had misapplied (and overly expanded) the Rogers test.

This week, in DLI v. Disney, the Supreme Court reversed the Ninth Circuit’s decision in favor of Disney, remanding in light of its Jack Daniel’s decision. DTO commented: “Our client is extremely grateful we can return to the Ninth Circuit and, once again, argue that U.S. intellectual property laws protect all trademark owners—no matter their size—against infringement of their marks.”

The DTO team consists of partners William Delgado, Megan O’Neill, and Lauren Hudecki and associate Erik Mortensen.

For more information, click below to read coverage in Law360.

Justices Remand ‘Toy Story 3’ TM Fight To 9th Circ.