Supreme Court Remands Toy Story “Lotso” Case to 9th CircuitJune 22, 2023

Following the Supreme Court’s decision earlier this month in the Jack Daniel’s dog toy trademark dispute, the Supreme Court has remanded a case against Disney to the Ninth Circuit.

Lots-o’-Huggin’ Bear (aka “Lotso”), the strawberry-scented, sadistic antagonist in Disney’s Toy Story 3, is also the alleged villain of Diece-Lisa Indus., Inc. v. Disney Store USA, LLC. In 1994, Plaintiff Diece-Lisa Industries conceived of and began producing the “Lots of Hugs” teddy bear, a wearable stuffed animal that allowed wearers to simulate a hug from a bear. Shortly after the blockbuster success of Toy Story 3, Diece-Lisa sued Disney, alleging the Lotso character infringed its trademark rights for “Lots of Hugs”. Specifically, Diece-Lisa argued a “reverse confusion theory,” alleging that Disney’s Lots-o’-Huggin’ Bear flooded the toy market and swallowed Diece-Lisa’s mark, thereby confusing consumers into thinking the “Lots of Hugs” mark came from Disney.

In 2021, a California federal judge granted summary judgment to Disney, holding Diece-Lisa’s claim was barred by the First Amendment. The Court applied the Rogers test, which protects uses of trademarks in works of artistic expression, so long as the use doesn’t intentionally mislead consumers. The Ninth Circuit affirmed the decision in 2022. Diece-Lisa promptly petitioned the Supreme Court for review, calling the Ninth Circuit’s reliance on the Rogers test a “get out of jail free card” even for willful infringers.

Meanwhile, another trademark battle was waging in the Supreme Court over a Jack Daniel’s dog toy. Similar to the Lotso case, the Jack Daniel’s case found itself in the Supreme Court following a lower court’s application of the Rogers test and a holding of noninfringement. In the Jack Daniel’s case, the Supreme Court carved out limitations of the Rogers test, holding that Rogers cannot shield expressive content when that content is being used as a trademark.

Because the holding in the Jack Daniel’s case effects the ultimate outcome of the Lotso case, the Supreme Court granted Diece-Lisa’s writ of certiorari and remanded the case back to the Ninth Circuit for further consideration.

Melissa Mitchell is an intellectual property attorney in the MVS Biotechnology and Chemical Practice Group. To learn more, visit our MVS website, or contact Melissa directly via email.

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