If you thought Joe Biden and Mitch McConnell had a tough time negotiating the Senate's deal on the fiscal cliff -- when all that was at stake was the entire U.S. economy -- I'd like to tell you a little story about months of bickering between the fashion houses Christian Louboutin and Yves Saint Laurent. And no, I'm not talking about their fight over the all-red high heels designed by YSL, which Louboutin accused of infringing his trademark on Chinese red-lacquered soles. The 2nd Circuit Court of Appeals resolved both sides' claims in September, when it ruled that Louboutin can indeed trademark red soles but YSL's all-red high heel shoes don't infringe the mark. After the appellate ruling, both sides declared victory but neither went home.

Instead, according to letters released Wednesday by U.S. District Judge Victor Marrero of Manhattan, YSL's lawyers at Debevoise & Plimpton and Louboutin's counsel at McCarter & English spent the next three months sniping back and forth over the language of a stipulation to dismiss Louboutin's injunction case and YSL's counterclaims that the red-sole trademark is invalid. Marrero finally entered the hard-fought dismissal order on Dec. 27, but if the judge thought he'd scraped the dispute from the bottom of his presumably low-heeled shoes, he may have to think again: Lawyers on both sides told me that the order doesn't preclude future litigation between YSL and Louboutin -- and on the same issues already decided by the 2nd Circuit.

In case you've forgotten the backstory or somehow overlooked the case that transfixed the fashion IP bar last year, Louboutin demanded an injunction against YSL's sale of all-red heels, claiming they infringed his world-famous trademark. Marrero not only denied the injunction but ruled that Louboutin should not have been awarded the mark because fashion designers are artists entitled to make use of the entire rainbow of colors. Appellate consideration of whether fashion houses can trademark colors attracted considerable amicus attention, not to mention an audience not typically seen at the 2nd Circuit. More seriously, Louboutin faced a flood of red-soled counterfeits and knockoffs as the appeals court deliberated the validity of his mark.

The ruling last September preserved the right of fashion designers to trademarks based on colors, but only under particular circumstances. In particular, the court said that Louboutin's mark relies on the contrast between red soles and the color of the rest of the shoe. And because the supposedly offending YSL shoe is all red, the appeals court ruled, it didn't infringe Louboutin's trademark.

The 2nd Circuit remanded the case to Marrero, and YSL moved to dismiss its counterclaims. But over the next three months, despite several volleys of letters and at least two conferences with the judge, the fashion houses could not agree on how broadly the 2nd Circuit's opinion applies to YSL's monochrome shoes and Louboutin's trademark protection. In a Dec. 13 letter, for instance, YSL argued that the appeals court decision bars any future Louboutin claim against any all-red shoe YSL might someday produce. Louboutin responded in a Dec. 14 letter that the 2nd Circuit had deliberately left open "a possible future claim based on new facts, new evidence and/or a new registration, There is no point in having the dispute about what the 2nd Circuit decision means with respect to a future, undefined controversy."

Marrero called the whole controversy "angels dancing on the head of a pin." (Perhaps he should have said on the tip of a stiletto heel.) The judge's dismissal order says simply that "Louboutin acknowledges that based on the 2nd Circuit's decision, (it) has no further claims in this case or otherwise arising from the trademark of Louboutin as modified by the Court of Appeals against YSL over red monochrome shoes."

Lawyers for YSL and Louboutin offered different interpretations Wednesday of that order, though. Louboutin counsel Lee Bromberg of McCarter told me that although his client is not eager to entangle himself in more litigation over an all-red YSL shoe, "if appropriate circumstances arise, such a claim could be brought." (Such a claim would presumably rely on exactly how the Patent and Trademark Office redefines Louboutin's mark, as instructed by the 2nd Circuit.) YSL lawyer David Bernstein of Debevoise, on the other hand, said there's no room in the order for a future Louboutin claim over an all-red YSL shoe, and if Louboutin tries to bring one, he'll bring a contempt action before Marrero. Meanwhile, he said Marrero's order preserved YSL's right to challenge Louboutin's trademark, since it dismissed those counterclaims without prejudice. But Bromberg said the 2nd Circuit would look unkindly on any such suit by YSL, considering that it's already ruled on Louboutin's mark. "We do have some law on the subject!" he said.

More angels dancing? At least they'll be wearing good shoes.

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