NEW YORK — In their war over the color red, both Christian Louboutin and Yves Saint Laurent are claiming major victories.

This story first appeared in the September 6, 2012 issue of WWD. Subscribe Today.

A New York federal appeals court backed the validity of Louboutin’s red-sole trademark Wednesday, but said the French shoemaker would only be able to protect its mark when it comes to red-soled shoes with contrasting uppers.

That caveat gives YSL the right to continue selling its monochrome pump — the shoe that spawned a lawsuit from Louboutin in April 2011 — and it also arguably gives YSL a slight advantage as the case moves back to New York federal court, which will now evaluate YSL’s counterclaims.

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In short, Louboutin keeps his trademark, albeit under more restrictive terms, and YSL can keep selling all-red shoes.

YSL attorney David Bernstein called it a “stunning victory” for his client and said the court has “conclusively ruled that YSL’s monochromatic red shoes do not infringe any trademark rights of Louboutin, which guarantees that YSL can continue to make monochromatic shoes in a wide variety of colors, including red.”

In the initial suit, Louboutin alleged YSL violated its 2008 red-sole trademark by selling an all-red pump. Presiding federal court Judge Victor Marrero disagreed, denying Louboutin’s request and instead questioning the validity of the brand’s famous mark altogether. Lawyers for Louboutin appealed that decision just over a year ago.

Although Wednesday’s decision lifts the proverbial monopoly that Louboutin had on all-red shoes, the case also touches on a larger question — namely whether designers can use color as a trademark in fashion.

Brands such as Tiffany & Co. with its signature blue box; Hermès with its orange designs, and Cartier with its red packaging might have come under fire if the court cancelled Louboutin’s mark.

“The two key elements we sought answered were that color can be a trademark in the fashion industry and that our trademark is valid and enforceable — thank God,” said Harley Lewin, lawyer for Christian Louboutin, of the ruling.

That sentiment was shared by designer Diane von Furstenberg. Although she was not speaking on behalf of the Council of Fashion Designers of America, of which she serves as president, von Furstenberg lauded what she referred to as “great news” for Louboutin.

“All I can say is that it makes me have faith in the system,” she offered.

The legal community was a bit more even-handed on the verdict, dubbing the ruling a victory for both sides.

Lawyers pointed to the fact that the court upheld Judge Marrero’s denial of a preliminary injunction to stop the sale of the all-red pump, while simultaneously questioning his reading of how color is used as a trademark in fashion.

Judge Marrero had argued that no one should have a “monopoly” on a color, instead of examining whether the public associates red soles with Louboutin. That association, called “secondary meaning,” is vital in trademark cases, and the appeals court noted that the judge overlooked that tenant.

“Judge Marrero went way off the reservation with the last opinion,” said Susan Scafidi, director of Fordham University’s Fashion Law Institute, who underscored that Wednesday’s verdict provides a guideline for Marrero to view the rest of the case. “This decision is the equivalent of sending him a checklist. The legal community and fashion lawyers may have thought he had been getting bigger than his robe. This decision may have trimmed it back down to size.”

Setting that aside, Scafidi said the two parties would likely settle the matter out of court before proceeding further. Still, there is a chance that Louboutin and YSL will face off in court, as the case gets kicked back to Judge Marrero, who will now evaluate YSL’s counterclaims. In those claims, YSL seeks cancelation of Louboutin’s mark on the grounds that the Trademark and Patent Office awarded the trademark fraudulently. Proving that will be “extremely tough,” said Gibney Anthony & Flaherty partner Brian Brokate, who is an expert in intellectual property law.

“Still, I definitely think YSL has the advantage,” he said, remarking that YSL is now essentially the plaintiff, as the counterclaims are all that’s left to settle. “I’ve seen this before where one party bites off more than it can chew.”

Brokate was quick to point out that the appeals court did put in a unique provision in its order that would allow it to take over the case following any concerns over Marrero’s decision. Normally, this would require another long appeals process.

“I’ve never seen anything like this before,” Brokate said. “Clearly, the Court of Appeals is very interested in this issue and they want to see if something occurs outside the scope their opinion. But at the end of the day, I don’t think today’s verdict changes anything. It certainly confirms most of what we already knew, which is that a color can function as a trademark.”