(7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

NOTE

WILL TRAFFIX “FIX” THE SPLINTERED FUNCTIONALITY DOCTRINE?: TRAFFIX DEVICES, INC. V. MARKETING DISPLAYS, INC.

TABLE OF CONTENTS

I. INTRODUCTION ...... 542

II. CASE RECITATION ...... 543 A. Facts...... 543 B. The District Court Opinion...... 544 C. The Sixth Circuit Opinion ...... 546 D. The Supreme Court Opinion...... 547

III. DEVELOPMENT OF THE FUNCTIONALITY DOCTRINE ...... 549 A. Law 101 ...... 549 B. Purpose of the Functionality Doctrine ...... 551 C. Historical Development of the Functionality Doctrine...... 552

IV. ANALYSIS ...... 558 A. Courts of Appeals Split Over the Effect of Expired Utility ...... 558 1. Pre-TrafFix Status of the Law...... 558 2. An Issue Resolved: Prior Patents Not a Per Se Bar...... 560 B. Courts of Appeals Split Over Functionality Test...... 562 1. Pre-TrafFix Status of the Law...... 562 2. An Issue Resolved: Order of Decision ...... 566 3. An Issue Resolved: Aesthetic Functionality and the Competitive Need Test ...... 567

541 (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

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4. Issues Unresolved: How to Determine “Essential to the Use or Purpose” and “Affects the Cost or Quality” ...... 569 C. Post-TrafFix: The Confusion Continues ...... 570 D. A Proposal: How to Reduce the Confusion...... 574

V. CONCLUSION...... 575

I. INTRODUCTION What is the proper role of functionality in law? Does a current or expired utility bar trade dress protection? What is the proper test for functionality? The courts of appeals have long been divided over these questions,1 with little guidance from the occasional U.S. Supreme Court decisions that have addressed the issue.2 The Supreme Court’s recent decision in TrafFix Devices, Inc. v. Marketing Displays, Inc.3 answers some of these questions, but leaves some important questions unanswered.4 TrafFix holds that product features claimed in an expired utility patent are not functional per se.5 However, the Court holds that an expired utility patent is “strong evidence that the features therein claimed are functional.”6 TrafFix calls for a return to the Inwood standard for utilitarian functionality,7 but fails to clarify that test, which will result in different applications of the functionality doctrine by the lower courts.

1. See WILLIAM E. LEVIN, TRADE DRESS PROTECTION § 17:2, at 17-2.1 (2001) (“The circuit courts of appeal have diverged widely as to the proper test to determine the functionality of trade dress.”). 2. Refer to notes 98–132 infra and accompanying text (discussing Qualitex Co. v. Jacobson Products Co., 514 U.S. 159 (1995), Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763 (1992), Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844 (1982), and the contribution those decisions made to the functionality doctrine). 3. 532 U.S. 23 (2001). 4. See William T. Fryer, III, Trademark Product Appearance Features, United States and Foreign Protection Evolution: A Need for Clarification and Harmonization, 34 J. MARSHALL L. REV. 947, 957 (2001) (instructing that while the TrafFix Court made it clear that “trademark law should not protect utility patent subject matter or non-patented primarily functional features,” it “left open the question of whether the functionality test is sufficient to clearly define the interface between utility patents and ”). 5. 532 U.S. at 29 (concluding that a utility patent is only strong evidence of functionality). 6. Id. 7. Id. at 33 (referring to the Inwood formulation of functionality as the “traditional rule”). (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

2003] TRAFFIX DEVICES V. MARKETING DISPLAYS 543

This Note argues that TrafFix is not likely to provide lower courts with enough guidance to resolve the courts of appeals split over the proper legal standard for functionality. Part II of this Note reviews the facts and holdings of the TrafFix decision. Part III examines the historical development of the functionality doctrine in Supreme Court decisions. Part IV provides examples of the varying applications of the functionality doctrine in the courts of appeals, and identifies which principles have been endorsed or rejected by the TrafFix decision. This Note then examines lower court decisions made since TrafFix that have attempted to apply the new and improved functionality doctrine. The cases published after TrafFix have had varying results based on very similar facts and very selective readings of the TrafFix functionality test. The inability of the lower courts to interpret and apply Inwood, and now TrafFix, in a uniform manner calls into doubt the effectiveness of the current state of the functionality doctrine. Finally, this Note proposes that the Second Circuit has identified a structure that would provide enough guidance for courts to properly and uniformly apply the Inwood standard for functionality.

II. CASE RECITATION

A. Facts Marketing Displays, Inc. (MDI) manufactures and sells temporary mobile traffic signs with warnings like “Road Work Ahead” to the highway construction industry.8 In 1968, MDI president Robert Sarkisian developed and patented a sign stand designed to resist strong winds.9 An important feature disclosed in the utility patent applications was the sign stand’s dual-spring mechanism, which prevents the sign from twisting and breaking under adverse wind conditions.10 To support its application to the U.S. Patent Office, MDI argued that “the sign’s dual spring design had benefit over the prior art.”11 In 1978, MDI succeeded in enjoining a competitor from copying the dual-spring design by claiming that a competitor had infringed MDI’s patents.12 MDI

8. Id. at 25. 9. Id. Although Mr. Sarkisian was the inventor and original patent holder, MDI was assigned the patents until their expiration. Id. 10. Id. 11. Mktg. Displays, Inc. v. TrafFix Devices, Inc., 971 F. Supp. 262, 264 (E.D. Mich. 1997), aff’d in part, rev’d in part, 200 F.3d 929 (6th Cir. 1999), rev’d, 532 U.S. 23 (2001). 12. Id. In arguing its patent infringement claim, MDI specifically referred to the utility of the dual-spring design. Id. (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

544 HOUSTON LAW REVIEW [40:2 also granted patent licenses allowing other companies to use its dual-spring design in exchange for royalty payments.13 MDI sells its sign stands under the trade name “WindMaster.”14 The WindMaster line has been a commercial success, earning MDI over twenty million dollars in revenue since its introduction.15 TrafFix Devices, Inc. (TrafFix) also manufactures and sells road signs to the highway construction industry.16 After MDI’s last utility patent expired in 1989, TrafFix sent an MDI sign stand to Korea to be reverse engineered.17 In 1995, TrafFix began marketing its copy of MDI’s sign stand under the trade name “WindBuster.”18 The WindBuster sign stand incorporates the same dual-spring design used in the WindMaster stands.19 When MDI realized that TrafFix had copied its dual-spring design and trade name, MDI filed suit against TrafFix for trademark and trade dress infringement, and for unfair competition.20 TrafFix filed a counterclaim based on antitrust theories.21

B. The District Court Opinion The United States District Court for the Eastern District of Michigan issued two separate opinions in an attempt to resolve the case.22 In its first opinion, the district court granted MDI summary judgment on its claim and denied TrafFix’s antitrust counterclaim.23 The district court’s

13. Id. 14. Mktg. Displays, Inc. v. TrafFix Devices, Inc., 967 F. Supp. 953, 955–56 (E.D. Mich. 1997), aff’d, 200 F.3d 929 (6th Cir. 1999), rev’d, 532 U.S. 23 (2001). MDI registered “WindMaster” as a federal trademark in 1977. Id. at 956. 15. 971 F. Supp. at 264. 16. Mktg. Displays, Inc. v. TrafFix Devices, Inc., 200 F.3d 929, 932 (6th Cir. 1999), rev’d, 532 U.S. 23 (2001). 17. Id. 18. Id. Before using the “WindBuster” name, TrafFix hired a patent attorney to do a trademark search. Id. The attorney advised TrafFix that industry customers would not likely confuse the name with “WindMaster.” Id. TrafFix properly registered “WindBuster” as a federal trademark in 1996. Id. at 932–33. 19. TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 26 (2001) (commenting that the TrafFix spring mechanism looked like the MDI mechanism because it had been reverse engineered from the MDI design). 20. Id. The trademark infringement claim was based on the similar names, and the trade dress infringement claim was based on the copied dual-spring design. Id. 21. Id. 22. See Mktg. Displays, Inc. v. TrafFix Devices, Inc., 971 F. Supp. 262, 264–65 (E.D. Mich. 1997), aff’d in part, rev’d in part, 200 F.3d 929 (6th Cir. 1999), rev’d, 532 U.S. 23 (2001). 23. Mktg. Displays, Inc. v. TrafFix Devices, Inc., 967 F. Supp. 953, 962, 965 (E.D. Mich. 1997), aff’d, 200 F.3d 929 (6th Cir. 1999), rev’d in part, 532 U.S. 23 (2001) (finding that a Frisch analysis shows a likelihood of confusion between the two names such that a (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

2003] TRAFFIX DEVICES V. MARKETING DISPLAYS 545 second opinion addressed MDI’s claim that TrafFix infringed upon MDI’s product configuration trade dress.24 The district court first determined that MDI’s dual-spring design had not acquired secondary meaning.25 The court found that even if the dual-spring design had acquired secondary meaning, the design’s functionality precluded granting trade dress protection.26 The district court explained that MDI had the burden of proving non-functionality27 and stated: In general terms, a product feature is functional, and cannot serve as a trademark, if it is essential to the use or purpose of the article or if it affects the cost or quality of the article, that is, if exclusive use of the feature would put competitors at a significant non-reputation-related disadvantage.28 The court further found that the existence of a utility patent “disclosing the utilitarian advantages of the configuration in question is very strong . . . evidence of [the configuration’s] functionality.”29 The court held that MDI did not offer sufficient

consumer would probably assume that “WindBuster” was affiliated with “WindMaster,” and holding that the mere assertion of trademark rights is not evidence of antitrust activity). Likelihood of confusion is determined by a multi-factor test that varies somewhat from circuit to circuit. 3 J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 23:19, at 23-66 to 23-69 (4th ed. Supp. 2002). The Sixth Circuit typically employs the test laid out in Frisch’s Restaurants, Inc. v. Elby’s Big Boy of Steubenville, Inc., 670 F.2d 642 (6th Cir. 1982), which evaluates the following eight factors in determining likelihood of confusion: “1. strength of the plaintiff’s mark; 2. relatedness of the goods; 3. similarity of the marks; 4. evidence of actual confusion; 5. marketing channels used; 6. likely degree of purchaser care; 7. defendant’s intent in selecting the mark; 8. likelihood of expansion of the product lines.” Id. at 648. 24. See TrafFix, 971 F. Supp. at 264–65. 25. Id. at 269. The court applied a Sassafras analysis, finding that “the primary significance of the appearance and configuration of MDI’s dual spring design in the minds of consumers [was] not to identify it with its source.” Id. If a trade dress is not inherently distinctive, it is only protectible if it has acquired secondary meaning. Refer to note 76 infra and accompanying text (setting forth the elements of a trade dress infringement claim). The district court used the factors set forth by the district court in Sassafras Enterprises, Inc. v. Roshco, Inc., 915 F. Supp. 1 (N.D. Ill. 1996), to determine whether a trade dress has acquired secondary meaning. See TrafFix, 971 F. Supp. at 267–69. These factors include direct evidence in the form of: “(1) direct consumer testimony; (2) consumer surveys; (3) exclusivity, length, and manner of use; (4) amount and manner of advertising; (5) amount of sales and number of customers; (6) established place in the market; and (7) proof of intentional copying.” Id. at 267. 26. 971 F. Supp. at 269–70. Applying the Frisch test, the court found that there would be a likelihood of confusion, but that confusion was not an issue due to the design’s functionality. Id. at 276. 27. Id. at 272. 28. Id. (quotation marks omitted) (quoting Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 165 (1995)). 29. Id. (quoting 1 J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 7:89 (4th ed. 1996)). (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

546 HOUSTON LAW REVIEW [40:2 evidence to show that the dual-spring design was non-functional.30 The court found it significant that MDI had initially represented the dual-spring design as having function in both its patent application and its patent infringement litigation, but later asserted protectible trade dress rights based upon the design’s appearance.31 Because there were only a limited number of alternative designs, which were not equal in quality to MDI’s design, and because MDI advertised the functional aspects of the design rather than its appearance, the court held that the design was functional as a matter of law and thus not entitled to trade dress protection.32

C. The Sixth Circuit Opinion

The Sixth Circuit Court of Appeals reversed,33 holding that MDI “established a genuine issue of material fact as to secondary meaning, and [that] the district court ruling was legally erroneous on the functionality question.”34 The Sixth Circuit evaluated the district court’s three findings that: (1) MDI was estopped from arguing non-functionality because its utility patent disclosed the dual-spring design as functional; (2) the design had been advertised as functional rather than aesthetic; and (3) protecting the design as trade dress would affect the cost and quality of alternative designs, putting competitors at a non-reputation-related disadvantage.35 On the district court’s first finding, the circuit court would not endorse a per se rule that a utility patent disclosure forecloses trade dress protection.36 The court of appeals explained that it is possible to protect a design’s appearance without protecting the actual design.37 The Sixth Circuit suggested that TrafFix could employ a three or four spring mechanism, or even hide the dual-spring design.38

30. Id. at 276. 31. Id. at 273–74. 32. Id. at 276 (granting TrafFix summary judgment on the trade dress protection issue). 33. Mktg. Displays, Inc. v. TrafFix Devices, Inc., 200 F.3d 929, 942 (6th Cir. 1999), rev’d, 532 U.S. 23 (2001). The Sixth Circuit reversed on the trade dress infringement issue, but affirmed summary judgment for MDI on both its trademark infringement claim and on TrafFix’s antitrust claim. Id. 34. Id. 35. Id. at 939. 36. Id. (“‘[S]tatements in a patent may provide evidence that the asserted trade dress is functional . . . . But the fact that a patent has been acquired does not convert what otherwise would have been protected trade dress into nonprotected matter.’” (first alteration in original) (quoting Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 1356, 1362 (Fed. Cir. 1999))). 37. Id. 38. Id. at 940. (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

2003] TRAFFIX DEVICES V. MARKETING DISPLAYS 547

Regarding the district court’s second finding, the circuit court accepted MDI’s argument that it did not advertise its dual-spring’s appearance because MDI asserted trade dress in the entire sign stand’s appearance.39 The circuit court reasoned that the combination of all the sign stand’s elements could confuse the public and that, if a competitor wanted to copy MDI’s dual-spring design, it would “have to find some other way to set its sign apart.”40 Finally, the Sixth Circuit addressed the district court’s finding that the cost or quality of TrafFix’s product would be affected if TrafFix were denied the right to copy MDI’s dual- spring design.41 The circuit court stated that trade dress protection should not be denied merely because it would affect the cost or quality of a competitor’s product.42 Rather, the court held that “[t]he appropriate question is whether the particular product configuration is a competitive necessity.”43 The court explained that a product feature is only a competitive necessity if, without that feature, the competitor would be “at a significant non-reputation-related disadvantage.”44 The Sixth Circuit found that the dual-spring design was not a competitive necessity because TrafFix could employ an alternative design.45 The court emphasized that trade dress law should protect competition, not the interests of a particular competitor.46

D. The Supreme Court Opinion The U.S. Supreme Court granted certiorari to resolve a split in the courts of appeals over the effect of a prior patent in a trade dress infringement case.47 In doing so, the Court addressed the application of the functionality doctrine in general, and clarified its earlier statements of the law in Qualitex Co. v. Jacobsen Products Co. and Inwood Laboratories, Inc. v. Ives Laboratories, Inc.48

39. Id. 40. Id. 41. Id. 42. Id. (suggesting that merely “[h]aving any effect on cost or quality is not enough”). 43. Id. 44. Id. (quotation marks omitted) (citing Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 165 (1995)). 45. Id. (explaining that, even though TrafFix was precluded from copying a competitor’s patented designs, it could come up with its own design, license a competitor’s design, or use the dual-spring design in a non-infringing manner). 46. Id. 47. TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 28 (2001) (noting a split in the courts of appeals over whether “an expired utility patent forecloses the possibility of . . . trade dress protection in the product’s design”). 48. Id. at 32–33 (discussing 514 U.S. 159 (1995) and 456 U.S. 844 (1982), (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

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First, the TrafFix Court rejected a per se rule that a prior utility patent forecloses trade dress protection.49 However, the Court found that a prior patent has “vital significance in resolving [a] trade dress claim.”50 The Court reasoned that “[a] utility patent is strong evidence that the features therein claimed are functional.”51 The Court also noted that the party asserting trade dress protection bears the burden of proving non- functionality, and that the burden is much heavier when the expired patent claimed the product configuration at issue.52 The Court held that this rule alone barred MDI’s trade dress protection because the dual-spring design claimed in the utility patents was the essential feature of MDI’s asserted trade dress.53 The Court found that MDI could not overcome the “strong evidentiary inference of functionality” created by disclosing the dual-spring design in its patents.54 The TrafFix Court then clarified its statement of the law in its Qualitex decision.55 The Qualitex Court had stated: In general terms, a product feature is functional, and cannot serve as a trademark, if it is essential to the use or purpose of the article or if it affects the cost or quality of the article, that is, if exclusive use of the feature would put competitors at a significant non-reputation-related disadvantage.56 This modified the Court’s earlier statement in Inwood that “[i]n general terms, a product feature is functional if it is essential to the use or purpose of the article or if it affects the cost or quality of the article.”57 The TrafFix Court explained that the Sixth Circuit misinterpreted the phrase “the exclusive use of [which] would put competitors at a significant non-reputation- respectively). Refer to notes 56–58 infra and accompanying text (discussing the Court’s clarification of Qualitex and Inwood). 49. TrafFix, 532 U.S. at 29–30 (explaining in dicta that trade dress protection would be available where a manufacturer could prove that product features disclosed in a patent claim were arbitrary, incidental, or ornamental). 50. Id. at 29. 51. Id. 52. Id. at 29–30 (noting the statutory presumption that features are functional unless “proved otherwise by the party seeking trade dress protection”). 53. Id. at 30 (characterizing the dual-spring design as the “central advance claimed in the expired utility patents”). 54. Id. The Court also concluded that MDI’s arguments in an earlier infringement claim against another competitor, Winn-Proof Corporation, showed that its utility patents covered the dual-spring design. Id. at 30–31. 55. Id. at 33. 56. Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 165 (1995) (quotation marks omitted) (referencing Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 850 n.10 (1982)). 57. Inwood, 456 U.S. at 850 n.10. (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

2003] TRAFFIX DEVICES V. MARKETING DISPLAYS 549 related disadvantage” to mean that competitive necessity is a required test for functionality.58 The TrafFix Court further clarified that courts should only examine whether there is a “significant non-reputation-related disadvantage” in cases of aesthetic functionality.59 The Court elucidated that where the Inwood test dictates a finding of functionality, there is no need to consider whether a product feature is a competitive necessity.60 The Court held that MDI’s dual-spring design was essential to the use or purpose of its sign stands because the dual-spring design provided a “unique and useful mechanism to resist the force of the wind.”61 The TrafFix Court directed that courts should not evaluate whether secondary meaning has been established until the product configuration in question has been found to be non- functional.62 The Court further directed that once functionality is established under the Inwood test, courts should not consider the availability of alternative designs.63 “The dual-spring design . . . is the reason the device works”; therefore, “[o]ther designs need not be attempted.”64

III. DEVELOPMENT OF THE FUNCTIONALITY DOCTRINE

A. Trademark Law 101 A trademark is a word, name, symbol, or device, or any combination of those, used by a manufacturer or seller of goods or services to identify the goods or services and distinguish them from those made or sold by others.65 Trade dress also serves to distinguish the source of goods and services and, in contrast to trademarks, refers to “the total image of a product and may include features such as size, shape, color or color combinations, texture, graphics, or even particular sales techniques.”66 A

58. 532 U.S. at 32–33 (alteration in original) (stating that competitive need is “incorrect as a comprehensive definition” of functionality). 59. Id. at 33. 60. Id. 61. Id. 62. See id. (“Functionality having been established, whether [a] design has acquired secondary meaning need not be considered.”). 63. Id. at 33–34. 64. Id. at 34. 65. 1 MCCARTHY, supra note 23, § 3:1, at 3-2 (stating that marks for services are specifically called “service marks”). 66. John H. Harland Co. v. Clarke Checks, Inc., 711 F.2d 966, 980 (11th Cir. 1983); see also LEVIN, supra note 1, § 2:1, at 2-1 to 2-2 (commenting that the Harland definition is the leading definition of trade dress). (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

550 HOUSTON LAW REVIEW [40:2 product may have more than one trade dress.67 Trade dress may be asserted in a product’s packaging, its configuration, or in its total image.68 Protection of trademarks and trade dress serves two valuable purposes. First, it allows a business to protect its investment in goodwill.69 Second, once a consumer has developed a preference for a particular product or service, she can more easily find that product when it has marks or features that serve to distinguish it from other products or services.70 This benefit is commonly referred to as reduced “search costs.”71 Trademark protection is governed by state trademark and unfair competition laws72 and their federal counterpart, the Trademark Act of 1946 (“the Lanham Act”).73 The Lanham Act was created to codify the common law of unfair competition and trademark protection.74 It protects both registered and unregistered trademarks, service marks, and trade dress by providing a civil cause of action for one who believes another’s use of the mark or trade dress will cause that person harm.75 To

67. LEVIN, supra note 1, § 2:1, at 2-6. 68. Id. 69. Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 164 (1995) (“[Trademark] law helps assure a producer that it (and not an imitating competitor) will reap the financial, reputation-related rewards associated with a desirable product.”); 1 MCCARTHY, supra note 23, § 3:2, at 3-3. 70. Qualitex, 514 U.S. at 163–64 (noting that a source-identifying mark reduces a customer’s cost of making purchasing decisions by communicating that the marked product is “made by the same producer as other similarly marked items that he or she liked (or disliked) in the past”). 71. David W. Opderbeck, An Economic Perspective on Product Configuration Trade Dress, 24 SETON HALL LEGIS. J. 327, 360–61 (2000) (“A principal economic function of trademarks and trade dress is to lower search costs by associating consistent price and quality with a particular name or package design.”). For an in-depth discussion of the economic implications of trademark law, see William M. Landes & Richard A. Posner, Trademark Law: An Economic Perspective, 30 J.L. & ECON. 265 (1987). 72. See PETER B. MAGGS & ROGER E. SCHECHTER, TRADEMARK AND UNFAIR COMPETITION LAW: CASES AND COMMENTS 26–27 (West 2002) (discussing the “dual” system of federal and state trademark law); 1 MCCARTHY, supra note 23, § 1:8, at 1-15 n.1 (instructing that unfair competition is a tort governed by state law). 73. 15 U.S.C. §§ 1051–1072, 1091–1096, 1111–1127, 1141a–1141n (2002). This Note primarily addresses the Lanham Act and its judicial interpretations. 74. Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 861 n.2 (1982) (White, J., concurring in the result). 75. See 15 U.S.C. §§ 1114, 1125. An owner of a registered mark may claim infringement under § 1114, and an owner of an unregistered mark may claim false designation of origin under § 1125. Id. Although trade dress may be registered as a federal trademark, most trade dress claims are brought under § 1125. LEVIN, supra note 1, § 8:1, at 8-1 (“The primary vehicle for the protection of trade dress under federal law is . . . § 1125(a)(1), which encompasses unregistered marks.”). The benefits of federal registration include prima facie validity in an infringement action, id. § 1115(a), and the ability to recover monetary damages in an infringement action, Id. § 1117. (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

2003] TRAFFIX DEVICES V. MARKETING DISPLAYS 551 prevail in a trade dress claim, a party must prove both (1) ownership of legally protectible trade dress, and (2) a likelihood that the other party’s use of the trade dress will confuse prospective consumers.76 A popular and effective defense to a trade dress claim is functionality.77 Functional trade dress is not registrable,78 and unregistered functional trade dress is not protectible.79

B. Purpose of the Functionality Doctrine

The functionality doctrine fosters competition by allowing competitors to copy useful product features.80 The benefits of allowing useful product features to be copied are two-fold. First, providing an exclusive right to an invention would grant the owner a monopoly, which would result in higher prices and an inefficient use of resources.81 Second, it has been shown that the copying and reverse engineering of an invention often result in an improvement on the original design.82 The protection of useful product features is the proper domain of patent law, which

76. LEVIN, supra note 1, § 6:1, at 6-1. Trade dress is legally protectible if it is inherently distinctive, or if not, if it has acquired secondary meaning such that consumers identify it with a particular source, even if that source is not known. See 15 U.S.C. § 1127 (defining trademark as “any word, name, symbol, or device, or any combination thereof” that is used by a person “to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods, even if that source is unknown); Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768–69 (1992) (noting that descriptive marks must acquire distinctiveness through secondary meaning in order to be protected as a trademark under the Act). A likelihood of confusion is established by analysis of several factors, which differ somewhat between circuits. MAGGS & SCHECHTER, supra note 72, at 279–80 (noting that “each of the federal circuits has developed its own list” of factors for evaluating the likelihood of confusion test for infringement). 77. LEVIN, supra note 1, § 17:1, at 17-2. Functionality also precludes federal registration under the Lanham Act. 15 U.S.C. § 1052(e)(5). 78. 15 U.S.C. § 1052(e)(5). 79. See id. § 1125(a)(3) (“In a civil action for trade dress infringement under this chapter for trade dress not registered on the principal register, the person who asserts trade dress protection has the burden of proving that the matter sought to be protected is not functional.”). 80. See Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 164 (1995) (“The functionality doctrine prevents trademark law, which seeks to promote competition by protecting a firm’s reputation, from instead inhibiting legitimate competition by allowing a producer to control a useful product feature.”). 81. See Opderbeck, supra note 71, at 330–31 (explaining that under monopolistic conditions, supply will always be lower than demand, resulting in higher prices and lower output, which is the price society pays for the benefits of patent law); see also Landes & Posner, supra note 71, at 274 (describing how the costs of two companies creating competing trademarks are passed to consumers without providing any benefit). 82. See Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 160 (1989) (“Reverse engineering of chemical and mechanical articles in the often leads to significant advances in technology.”). (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

552 HOUSTON LAW REVIEW [40:2 promotes innovation “by granting inventors a monopoly over new product designs or functions for a limited time.”83 Because trademark rights can be renewed in perpetuity, granting those rights for a functional product feature would extend the monopolistic control over that product indefinitely.84

C. Historical Development of the Functionality Doctrine

To avoid extending perpetual protection to useful product features, the common law developed the functionality doctrine.85 Early functionality cases dealt primarily with expired patents and addressed functionality as a means to protect the patent clause.86 The Supreme Court first addressed the issue of functionality in the 1896 case of Singer Manufacturing Co. v. June Manufacturing Co.87 Singer Manufacturing Co. sought to enjoin another company from copying the “exact size, shape, ornamentation, and general external appearance” of its sewing , which were the subject of expired utility patents.88 The Singer Court held that a product configuration previously covered by a utility patent was not protectible trade dress.89 In 1938, the Restatement (First) of Torts provided that a product feature is functional when it “affects [the product’s] purpose, action or performance, or the facility or economy of processing, handling or using [the product].”90

83. Qualitex, 514 U.S. at 164. The current term of a patent is twenty years from the date the patent was filed. 35 U.S.C. § 154(a)(2) (2000). 84. Qualitex, 514 U.S. at 164–65. 85. See 1 MCCARTHY, supra note 23, § 7:63, at 7-140 (instructing that utility patent law is the only “legal source of exclusive rights in utilitarian features”). 86. Theodore H. Davis, Jr., Copying in the Shadow of the Constitution: The Rational Limits of Trade Dress Protection, 80 MINN. L. REV. 595, 608–09, 609 n.57 (1996); see also In re Deister Concentrator Co., 289 F.2d 496, 501 (C.C.P.A. 1961) (commenting that the need to encourage competition by limiting the term of patent protection as laid down in Article I, Section 8, of the Constitution further supports the reason for giving the public the right to copy a patent after it has expired). 87. 163 U.S. 169 (1896). 88. Id. at 170. 89. See id. at 185 (“It is self-evident that on the expiration of a patent the monopoly created by it ceases to exist, and the right to make the thing formerly covered by the patent becomes public .”). 90. RESTATEMENT (FIRST) OF TORTS § 742 (1938). Interestingly, this definition of functionality is equivalent in meaning to the Inwood-TrafFix definition: “affects [the] purpose, action or performance” parallels “essential to the use or purpose,” and “affects . . . the facility or economy of processing, handling or using” parallels “affects the cost or quality.” Compare id., with TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 32 (2001). The functionality doctrine seems to have come full circle. (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

2003] TRAFFIX DEVICES V. MARKETING DISPLAYS 553

The Supreme Court addressed functionality for the second time in Kellogg Co. v. National Biscuit Co.91 Once again, the case involved expired patents.92 National Biscuit sought to enjoin Kellogg from producing a shredded wheat breakfast food in a pillow shape identical to the shape used by National Biscuit.93 The Court held that National Biscuit did not have the exclusive right to produce the pillow shape.94 The Court also found that the pillow shape was functional because “the cost of the biscuit would be increased and its high quality lessened if some other form were substituted for the pillow-shape.”95 Because these early functionality cases almost exclusively involved expired patents, one commentator characterized the origins of functionality primarily as a boundary between patent and trademark law.96 The two Supreme Court cases that formed the modern functionality doctrine both addressed the question of whether color is protectible trade dress.97 In the first case, the plaintiff, Ives Laboratories, Inc., held an expired utility patent on the drug CYCLOSPASMOL.98 Ives produced the drug in a blue 200 mg capsule labeled “Ives 4124” and a red and blue 400 mg capsule labeled “Ives 4148.”99 When Ives’s patent expired, Inwood Laboratories, Inc. and other pharmaceutical manufacturers began marketing a generic version of the drug, using the same colored capsules previously selected by Ives.100 Ives sued the generic drug manufacturers for contributory infringement, claiming that the identical colors caused pharmacists to mislabel

91. 305 U.S. 111 (1938). 92. Id. at 117–19. The patents in question covered both the form of the shredded wheat biscuits (covered by a design patent) and the machinery for producing them (covered by a utility patent). Id. 93. Id. at 113. 94. Id. at 119. The Court’s first reason for denying trade dress protection was that an expired design patent covered the pillow shape. Id. at 119–20. 95. Id. at 122. 96. Davis, supra note 86, at 608–09. Davis believes that courts were hesitant to apply the functionality bar to cases not involving patents until 1964, when the Supreme Court established the Sears-Compco doctrine. Id. In those cases, the Supreme Court held that states could not prohibit copying of even unpatented product configurations because to do so would grant protection in conflict with federal patent law. Id. at 610–11 (discussing Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. 234 (1964), and Sears, Roebuck & Co. v. Stiffel, 376 U.S. 225 (1964)). 97. Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 160–61 (1995); Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 853 (1982). 98. Inwood, 456 U.S. at 846. CYCLOSPASMOL was the brand name Ives used for the drug cyclandelate, a vasodilator used in the long-term treatment of vascular disease. Id. 99. Id. at 846–47. 100. Id. at 847. Inwood initially did not imprint any mark on its capsules, but after the suit commenced, it began marking the capsules “Inwood 258.” Id. at 847 n.3. (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

554 HOUSTON LAW REVIEW [40:2 the generic versions with the CYCLOSPASMOL mark and to fill orders for CYCLOSPASMOL with its generic counterparts.101 The district court held that the capsule colors were not protectible under § 1125 of the Lanham Act because they were functional.102 The district court found that use of the same colors for brand name drugs and their generic counterparts helps those who dispense the drugs to differentiate them from other drugs and helps to identify the drugs in emergency situations.103 The court also stated that colors help the patients who take the drugs to differentiate them from their other medications, and that patients associate therapeutic effect with certain colors.104 The district court further held that Ives had not established a § 1114 violation because the defendants had not met the requirements for contributory infringement.105 Because the court of appeals did not address the § 1125 claim, the U.S. Supreme Court did not include it in its analysis.106 The Supreme Court noted that “[i]n general terms, a product feature is functional if it is essential to the use or purpose of the article or if it affects the cost or quality of the article.”107 The Court held that the court of appeals erred in reversing the district court’s judgment on Ives’s § 1114 claim without finding it clearly erroneous.108 However, the Court did not seem to take the position that functionality precluded a § 1114 infringement claim. It stated that, “[w]hile the doctrine of functionality is most directly related to the question of whether a defendant has violated [§ 1125(a)], a finding of functionality may also be relevant to an action involving [§ 1114].”109 Although the Court found functionality relevant because the functionality established a legitimate reason for the defendants to copy the capsule colors, the Court did not find that functionality would bar a § 1114 claim.110 Justice White responded to this deficit in his

101. Id. at 850. 102. Id. at 853. The district court also supported this holding by finding that the colors had not acquired secondary meaning. Id. Section 1125 provides a civil cause of action against a person who uses false designations of origin. 15 U.S.C. § 1125 (2000). 103. Inwood, 456 U.S. at 853. 104. Id. 105. Id. at 852–53. Section 1114 provides a civil cause of action for trademark or trade dress infringement. 15 U.S.C. § 1114. 106. Inwood, 456 U.S. at 854. 107. Id. at 850 n.10. 108. Id. at 857 n.20, 857–58. 109. Id. at 857 n.20 (citation omitted). 110. Id. Some commentators have referred to the Inwood definition of functionality as dictum, presumably because the Inwood Court referred to functionality as merely relevant and not dispositive in an infringement claim, and because the Court did not have (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

2003] TRAFFIX DEVICES V. MARKETING DISPLAYS 555 concurring opinion.111 He stated, “[i]t is my view that a finding of functionality offers a complete affirmative defense to [an] infringement claim predicated solely on the reproduction of a functional attribute of the product.”112 The Supreme Court subsequently took a definitive stance on the effect of functionality in an infringement claim.113 In Qualitex Co. v. Jacobson Products Co., Qualitex Co. produced dry cleaning press pads for the dry cleaning industry in the same green-gold color for over thirty years when its competitor, Jacobson Products, began to use the same color on its press pads.114 The Supreme Court granted certiorari to address whether color alone could meet the requirements for trademark registration and protection.115 The Court held that a color could meet the basic requirements for trademark protection if it served to identify a product’s source (developed secondary meaning) and did not serve any other function.116 The Qualitex Court unequivocally recognized functionality as a bar to trade dress protection.117 The Court instructed that the original producer’s right to protect source-identifying features is outweighed by the harm that monopolistic practices cause the public.118 The Court cited the Inwood definition of functionality and added an explanatory phrase.119 Specifically, the Court stated: the opportunity to rule on functionality in a false designation of origin claim. See, e.g., Ralph S. Brown, Design Protection: An Overview, 34 UCLA L. REV. 1341, 1362 (1987) (referring to the Inwood functionality definition as “dictum” and as “one of several competing views of the meaning of functionality”); James W. Dabney, Unfair Competition After Bonito Boats, CA15 A.L.I.-A.B.A. 351, 370 (1995) (referring to the Inwood functionality definition as dictum). 111. Inwood, 456 U.S. at 862 (White, J., concurring in the result) (“[A]lthough the Court states that a ‘finding of functionality may also be relevant to an action involving [§ 1114],’ it does not explicate the relationship of functionality in a [§ 1114] case.”). 112. Id. at 862–63 (White, J., concurring in the result). 113. Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 164–65 (1995). 114. Id. at 161. 115. Id. at 161–62. Before Qualitex, the courts of appeals had been split on this issue—some held that there was a per se bar against protection of color alone, while others held that color was protectible. Id. 116. Id. at 163–66. The Court also dismissed Jacobson’s other arguments against protecting color as a trademark. Id. at 166–74. 117. See id. at 164–65 (instructing that the “important” functionality doctrine prevents monopolization of useful product features). 118. Id. The Court used a hypothetical to illustrate the functionality bar’s benefits: If a company patented and produced a light bulb with a special illumination-enhancing shape, the public might come to associate that shape with a particular manufacturer. Id. at 165. Even though that shape had acquired secondary meaning, it should not be afforded trade dress protection because to do so would impede competition. Id. Denying other companies the opportunity to produce an equivalent illumination-enhancing bulb would grant the original producer a perpetual monopoly. Id. 119. Id. In fact, the TrafFix Court later characterized Qualitex’s addition to the (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

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“[i]n general terms, a product feature is functional,” and cannot serve as a trademark, “if it is essential to the use or purpose of the article or if it affects the cost or quality of the article,” that is, if exclusive use of the feature would put competitors at a significant non-reputation-related disadvantage.120 Using this standard, the Court held that Qualitex’s green- gold color was not functional, and because it had acquired secondary meaning, the color was protected by trademark law.121 In making this determination, the Court considered it probative that the district court found “no competitive need in the press pad industry for the green-gold color, since other colors are equally usable.”122 Jacobson argued that because colors are in limited supply, allowing them to be trademarked would cause competitors to be unable to find usable colors, putting those competitors at a significant disadvantage.123 The Court responded that the functionality doctrine would prevent such consequences because it operates to protect a competitor’s ability to reasonably “replicate important non-reputation-related product features.”124 “[I]f a design’s ‘aesthetic value’ lies in its ability to ‘confe[r] a significant benefit that cannot practically be duplicated by the use of alternative designs,’ then the design is ‘functional.’”125 “The ‘ultimate test of aesthetic functionality’ . . . ‘is whether the recognition of trademark rights would significantly hinder competition.’”126 Qualitex thus affirmed the Inwood functionality

functionality formulation as “[e]xpanding upon the meaning of this phrase.” TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 32 (2001). 120. Qualitex, 514 U.S. at 165 (alteration in original) (quoting Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 850 n.10 (1995)). The Court’s use of the Inwood functionality definition would seem to dispel any notion that Inwood’s definition was merely dicta. Refer to note 110 supra (discussing some commentators’ opposite belief). 121. Qualitex, 514 U.S. at 166. 122. Id. (quotation marks omitted). 123. Id. at 168. 124. Id. at 169. The Court cited specific decisions that found colors to be functional in circumstances where they served a non-source identifying function, including Inwood, 456 U.S. at 853 (holding that colors of medication capsules served to differentiate them from other drugs); Brunswick Corp. v. British Seagull Ltd., 35 F.3d 1527, 1532 (Fed. Cir. 1994) (holding that the color black functions to decrease the apparent size of outboard motors and ensures compatibility with different boat colors); Nor-Am Chem. v. O.M. Scott & Sons Co., No. CIV.A. 86-3810, 1987 WL 13742, at *4 (E.D. Pa. July 14, 1987) (holding that the color blue served to indicate the presence of nitrogen in fertilizer). See Qualitex, 514 U.S. at 169–70. 125. Id. at 170 (second alteration in original) (quoting RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 17 cmt. c (1993)). 126. Id. (quoting RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 17 cmt. c (1993)). A product feature is aesthetically functional if it contributes to the value of a product even though it serves no utilitarian function. See LEVIN, supra note 1, § 17:3, at 17-4. (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

2003] TRAFFIX DEVICES V. MARKETING DISPLAYS 557 standard and modified the standard to include consideration of competitive disadvantage and availability of alternative designs.127 In 1992, in Two Pesos, Inc. v. Taco Cabana, Inc.,128 the Supreme Court addressed the issue of whether inherently distinctive trade dress required a showing of secondary meaning to be protectible.129 In so doing, the Court briefly addressed functionality when it responded to an argument that protecting trade dress as inherently distinctive would inhibit competition.130 The Two Pesos Court determined that competition would not be stifled because “[o]nly nonfunctional, distinctive trade dress is protected under [§ 1125(a)].”131 “The Fifth Circuit holds that a design is legally functional, and thus unprotectible, if it is one of a limited number of equally efficient options available to competitors and free competition would be unduly hindered by according the design trademark protection.”132 This statement is congruent with the language in Qualitex discussed above. In 1998, Congress amended the Lanham Act to make functionality a statutory bar to federal registration,133 an affirmative defense to infringement of even an incontestable mark,134 and a statutory ground for cancellation of even an incontestable mark.135 However, Congress failed to provide any kind of definition or standard for functionality. Thus, the Supreme Court and Congress have clearly provided that functionality bars federal trade dress protection.136 However, until TrafFix, the courts of appeals were left to their

127. Qualitex, 514 U.S. at 170. 128. 505 U.S. 763 (1992). 129. Id. at 776. The Court held that inherently distinctive trade dress does not require proof of secondary meaning to be protected under the Lanham Act. Id. Two Pesos was later distinguished by the Supreme Court in Wal-Mart Stores, Inc. v. Samara Brothers, Inc., 529 U.S. 205 (2000), which held that unregistered product design trade dress (as opposed to packaging trade dress) could not be inherently distinctive and required a showing of secondary meaning to be accorded federal trade dress protection. Id. at 216. 130. Two Pesos, 505 U.S. at 774–75. 131. Id. at 775. 132. Id. (citing Sicilia Di R. Biebow & Co. v. Cox, 732 F.2d 417, 426 (5th Cir. 1984)). One scholar has commented that the Two Pesos Court “arguably adopted the Fifth Circuit’s test.” LEVIN, supra note 1, § 17:2, at 17-2.1 to 17-3. 133. Trademark Law Treaty Implementation Act, Pub. L. No. 105-330, § 201(a)(2)(A)(ii), 112 Stat. 3069 (1998) (codified as amended at 15 U.S.C. § 1052(e)(5) (2000)). 134. Id. § 201(a)(9), 112 Stat. 3070 (codified as amended at 15 U.S.C. § 1115(b)(8)). 135. Id. § 201(a)(4), 112 Stat. 3070 (codified as amended at 15 U.S.C. § 1064(3)). 136. Most commentators agree that the Supreme Court’s Sears-Compco doctrine forbids states to grant trade dress protection to functional product features. Refer to note 96 supra. (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

558 HOUSTON LAW REVIEW [40:2 own devices to determine: (1) the effect of prior existing utility patents on functionality analyses, and (2) the proper test for functionality.137 This resulted in a divergence of standards and a notable lack of uniformity in trademark law from circuit to circuit.138

IV. ANALYSIS

A. Courts of Appeals Split Over the Effect of Expired Utility Patents

1. Pre-TrafFix Status of the Law. In Vornado Air Circulation Systems, Inc. v. Duracraft Corp.,139 the Tenth Circuit Court of Appeals held that a utility patent operates as a per se bar to trade dress protection of features claimed in that patent.140 Vornado Air Circulation Systems, Inc. (Vornado) patented and manufactured household fans with a unique spiral shaped grill.141 Its competitor, Duracraft Corp., offered a household fan with a grill identical to Vornado’s but with other features significantly different than Vornado’s fans.142 The district court held that although Vornado included the grill in its patent claim, and advertised that the grill provided increased airflow, the spiral grill was not functional for trade dress purposes.143 The district court found that even though the grill functioned to improve airflow as compared to other grills, the improvement was not enough to make the spiral grill a competitive necessity.144 The Tenth Circuit reversed, holding that “not every nonfunctional configuration is eligible for [trade dress] protection.”145 Even though the spiral grill was not functional under the competitive need test, it was still covered by a utility patent.146 The competitive need test asks whether a competitor cannot make an equally competitive product without using the

137. See LEVIN, supra note 1, § 17:2, at 17-2.1 to 17-3 (noting the variety of functionality tests in the different courts of appeals). 138. See id. 139. 58 F.3d 1498 (10th Cir. 1995). 140. Id. at 1500. 141. Id. 142. Id. at 1500–01. 143. Id. at 1501. 144. Id. (stating the increased airflow was too low to be perceived by customers). Refer to notes 183–86 infra and accompanying text for a discussion of the competitive necessity test for functionality. 145. Vornado, 58 F.3d at 1500. 146. Id. at 1506–07. (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

2003] TRAFFIX DEVICES V. MARKETING DISPLAYS 559 product configuration in question.147 The requirements for patentability are that a product be new, useful, and non- obvious.148 The Tenth Circuit reasoned that because those requirements are not mutually exclusive, there could be overlap where a product configuration may be protectible by both patent and trademark law.149 When this overlap occurs, both cannot apply, and patent law must prevail because of the public policy that inventions must return to the public domain on the expiration of a utility patent.150 The court of appeals held that “[w]here a product configuration is a significant inventive component of an invention covered by a utility patent, so that without it the invention cannot fairly be said to be the same invention, patent policy dictates that it enter into the public domain when the utility [patent expires].”151 Other circuits disagreed with the holding in Vornado, choosing instead to apply traditional functionality analysis for product configurations claimed in a utility patent.152 For example, in Thomas & Betts Corp. v. Panduit Corp., the plaintiff held an expired utility patent for a two-piece cable tie with an oval head.153 When its competitor copied the cable tie, the plaintiff asserted trade dress rights in the oval head, which had been disclosed in the patent but was not part of the patent claim itself.154 The Seventh Circuit Court of Appeals held that “there is no per se prohibition against features disclosed in a patent receiving trademark protection after the patent has expired.”155

147. Id. at 1507. 148. Id. at 1506–07. 149. Id. at 1508. 150. Id. at 1504 (“When asked to balance the concerns of patent law against those of unfair competition law with respect to the copying of product shapes, the Supreme Court has ruled repeatedly over the years that the right to copy must prevail.”). 151. Id. at 1500. 152. See, e.g., Midwest Indus. v. Karavan Trailers, Inc., 175 F.3d 1356, 1362 (Fed. Cir. 1999) (“[T]he availability of trade dress protection does not depend on whether a patent has been obtained for the product or feature in question.”); Disc Golf Ass’n v. Champion Discs, Inc., 158 F.3d 1002, 1006 (9th Cir. 1998) (“[T]he existence of an expired utility patent is weighty evidence of functionality, although that fact alone is not dispositive.”); Thomas & Betts Corp. v. Panduit Corp., 138 F.3d 277, 284 (7th Cir. 1998) (holding that product configurations disclosed in a patent application were not per se barred from federal trade dress protection). 153. Panduit, 138 F.3d at 282. 154. Id. The oval head was mentioned in the specifications. Id. The specification is a written description of the invention, and concludes with the claims, which define the subject matter of the invention. See 35 U.S.C. § 112 (2000). However, the oval head was not claimed. Panduit, 138 F.3d at 282. 155. Id. at 288. The Seventh Circuit distinguished Vornado because it involved a product configuration that was part of the patent claim, whereas the oval head on Thomas & Betts Corp.’s cable tie was included in the patent disclosure, not the claim. Id. at 289. (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

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The Seventh Circuit explained that “[t]he safeguard against an impermissible extension of a patent monopoly by a trademark . . . is the functionality doctrine.”156 The court also noted that if “a defense of functionality is recognized, there is no conflict with federal patent law.”157 The Federal Circuit agreed with the Seventh Circuit in Midwest Industries, Inc. v. Karavan Trailers, Inc.158 Midwest Industries, Inc. manufactured boat trailers and asserted trade dress infringement against Karavan Trailers, Inc. when Karavan copied Midwest’s curved winch post design.159 Following Vornado, the district court held that Midwest was barred from asserting trade dress because the curved winch post design was claimed in Midwest’s boat trailer patent.160 The Federal Circuit reversed, holding the district court erred in concluding that the curved winch post was not protectible trade dress simply because the design was a “significant inventive aspect” of the patent.161 The court explained: “As we view the interaction between patent law and the Lanham Act, that is not a sufficient basis on which to deny . . . protection to trade dress that would otherwise qualify for such protection.”162 The Federal Circuit explained that trademark rights exist independently of patent rights, and the termination of one has no legal effect on the continuance of the other.163 The court noted that patent claims may, however, have evidentiary value in a functionality analysis, which is the proper limitation on protection of utilitarian product configurations.164

2. An Issue Resolved: Prior Patents Not a Per Se Bar. The Supreme Court granted certiorari in TrafFix to resolve the circuit split over whether an expired utility patent operates as a bar to the patentee’s claiming trade dress protection in the product’s design.165 The TrafFix Court answered no, squarely rejecting the Vornado rule.166 The Court found that the bar to trade dress

156. Id. at 288. 157. Id. (quotation marks omitted). 158. 175 F.3d 1356, 1362–64 (Fed. Cir. 1999). 159. Id. at 1357. 160. Id. at 1358. 161. Id. at 1364 (quotation marks omitted). 162. Id. The Federal Circuit indicated that the “Tenth Circuit stands alone in holding to the contrary.” Id. 163. Id. at 1362. 164. Id. at 1361–62. 165. TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 28–29 (2001). 166. Id. at 29–30. (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

2003] TRAFFIX DEVICES V. MARKETING DISPLAYS 561 protection is functionality.167 “A utility patent is strong evidence that the features therein claimed are functional.”168 Consequently, the Court determined that the functionality bar is the thing that gives a prior patent claim evidentiary value.169 To be sure, this ruling will make it quite difficult to assert trade dress protection in a product configuration that is claimed in a utility patent.170 Congress has already provided that a person asserting protection in a non-registered trade dress has the burden of showing that it is not functional.171 This presumption of functionality, combined with the evidentiary weight of an expired utility patent claiming the features in question, creates a very heavy burden indeed.172 However, the TrafFix Court did allow that the burden could be met.173 Non-functionality could still be proven where the product configuration does not “serve a purpose within the terms of the utility patent”; for example, when the feature is “arbitrary, incidental, or ornamental.”174 Professor J. Thomas McCarthy concludes from the last paragraph of the TrafFix opinion that the Court did not resolve whether “even non-functional features in a utility patent can never be the subject of trade dress.”175 That paragraph states: TrafFix and some of its amici argue that the Patent Clause . . . , of its own force, prohibits the holder of an expired utility patent from claiming trade dress protection. We need not resolve this question. If, despite the rule that functional features may not be the subject of trade dress protection, a case arises in which trade dress becomes the

167. Id. at 32. 168. Id. at 29. 169. See id. at 32 (explaining that functionality is the issue that must be addressed and that an expired patent is strong evidence of functionality). 170. Joanne Hepburn, Caution: Roadblocks Ahead: Patent Revealing Traffic Sign Stand’s Functionality Prevents Trade Dress Protection, 7 B.U. J. SCI. & TECH. L. 413, 420 (2001) (asserting that the TrafFix decision will “foreclose most claims for trade dress protection where an expired utility patent exists because the burden of proving non- functionality is a heavy one”); Glenn Mitchell, Obtaining Protection Despite TrafFix, INTELL. PROP. STRATEGIST, Apr. 2001, at 4 (opining that “the Court’s holding creates an almost insurmountable burden for a plaintiff with a claimed trade dress feature that is an essential part of a patent”). 171. 15 U.S.C. § 1125(a)(3) (2000). 172. TrafFix, 532 U.S. at 30 (explaining that one who seeks trade dress protection for features claimed in an expired patent “must carry [a] heavy burden”). 173. Id. 174. Id. at 34 (hypothesizing that a manufacturer might prove that certain features described in a patent claim, such as arbitrary curves in the legs or an ornamental pattern painted on the springs (of a roadside traffic sign), did not “serve a purpose within the terms of the utility patent”). 175. 1 MCCARTHY, supra note 23, § 7:89.2, at 7-258 to 7-259. (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

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practical equivalent of an expired utility patent, that will be time enough to consider the matter.176 This language merely shows that the Supreme Court recognizes the possibility that the Patent Clause could prohibit protection of trade dress in some hypothetical case where there is an overlap between asserted trade dress and non-functional configurations disclosed in a utility patent claim. The TrafFix Court clearly held that an expired utility patent does not per se foreclose trade dress protection for product features claimed therein.177 If the Court had truly “left the issue open” as to whether non-functional features in a utility patent could never (and not only in some particular fact scenario) be protectible trade dress, there would be no point in even addressing functionality wherever a utility patent included such product configurations.178 Further, the Court offered that a trade dress would be protectible if its proponent proved that it did not “serve a purpose within the terms of the utility patent.”179 The TrafFix Court did not leave the issue open—an expired utility patent is not a per se bar to trade dress protection. The Court did not end its discussion there. It went on to address the proper test for functionality—whether the asserted trade dress is patented or not.180

B. Courts of Appeals Split Over Functionality Test

1. Pre-TrafFix Status of the Law. As one scholar has commented, “[i]t seems that there are as many definitions of what is ‘functional’ as there are courts.”181 The circuits have differed on order of decision, the role of competitive need and available alternative designs, the validity of aesthetic functionality, and in general, how to determine whether a product feature is essential to the use and purpose, or affects the cost or quality of an article.182

176. TrafFix, 532 U.S. at 35 (citations omitted). 177. Id. at 34–35. 178. But cf. 1 MCCARTHY, supra note 23, § 7:89.2, at 7-259 (positing the TrafFix Court merely implicitly resolved the conflict between the Tenth Circuit and the Federal Circuit). 179. TrafFix, 532 U.S. at 34. 180. Id. at 34–35. 181. 1 MCCARTHY, supra note 23, § 7:69, at 7-158. 182. The scope of this Note does not provide an examination of every circuit’s functionality test. This Note instead examines a selection of circuits that illustrate the main differences in functionality interpretation. For a survey of each circuit’s treatment of functionality, see 1 MCCARTHY, supra note 23, § 7:69, at 7-158 to 7-167, and Dabney, supra note 110, at 370–72. (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

2003] TRAFFIX DEVICES V. MARKETING DISPLAYS 563

As discussed above, the Tenth Circuit defines functionality solely in terms of competitive need.183 A product configuration is functional if competitors need to use it to make an equally competitive product.184 If competitors do not need to use the product configuration to compete, it is not functional.185 A competitor’s need to use a particular design is determined by the availability of equally satisfactory alternative designs.186 The problem with the Tenth Circuit’s standard is that it ignores the question of actual utility, or inherent usefulness, in a product configuration.187 If the Vornado Court had given any weight to the function of the fan grill in improving airflow, it probably would have found functionality and would not have needed to create the “significant inventive aspect” classification.188 In Stormy Clime, Ltd. v. ProGroup, Inc.,189 the Second Circuit Court of Appeals considered the functionality doctrine in great detail.190 Stormy Clime, Ltd. produced a lightweight rain jacket that incorporated shingled air vents, a high sheen fabric, and a hood.191 Its competitor, ProGroup, Inc., incorporated these features in its own rain jacket that contained other distinguishing features.192 When Stormy Clime brought suit, ProGroup, Inc. asserted a functionality defense, claiming that the vents, fabric, and hood were all unprotectible.193 The Second Circuit began its analysis by pointing out that functionality should not be addressed in a trade dress claim unless the plaintiff first proves that the trade dress has acquired secondary meaning and that the competitor’s product is confusingly similar to his own.194 The court of appeals then quoted the Inwood functionality standard and expanded on its meaning:

183. Vornado Air Circulation Sys., Inc. v. Duracraft Corp., 58 F.3d 1498, 1507 (10th Cir. 1995). 184. Id. 185. Id. 186. Id. 187. See id. (“The availability of equally satisfactory alternatives for a particular feature, and not its inherent usefulness, is often the fulcrum on which Lanham Act functionality analysis turns.”). 188. See 1 MCCARTHY, supra note 23, § 7:69, at 7-165 (commenting that the Tenth Circuit’s “truncated view” of functionality led to the peculiar conclusion that a configuration that was claimed in a patent and advertised as functionally superior was legally non-functional). 189. 809 F.2d 971 (2d Cir. 1987). 190. Id. at 974–78. 191. Id. at 973. 192. Id. The use of shingled air vents was the subject of two expired utility patents. Id. at 972. 193. Id. at 973. 194. Id. at 974 (instructing that functionality is the second stage of a trade dress (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

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A design feature of a particular article is “essential” [to its use or purpose] only if the feature is dictated by the functions to be performed; a feature that merely accommodates a useful function is not enough. And a design feature “affecting the cost or quality of an article” is one which permits the article to be manufactured at a lower cost or one which constitutes an improvement in the operation of the goods.195 The court of appeals explained that a functionality analysis should focus on whether the trade dress would “hinder competition or impinge upon the rights of others to compete effectively in the sale of goods.”196 The Second Circuit remanded with instructions for the district court to consider “the degree of functionality of the similar features, the degree of similarity between the non-functional (ornamental) features of the competing products, and the feasibility of alternative arrangements of functional features that would not impair the utility of the product.”197 These instructions suggest that the Second Circuit would endorse protecting functional product features if: (1) the degree of functionality was low, or (2) the functional features could be rearranged to change the overall product appearance. The Fifth Circuit recently addressed the functionality doctrine in the context of golf course design.198 Tour 18 I, Ltd. is a public golf course that copies the designs of holes from famous golf courses.199 When three of the famous courses filed suit for trade dress infringement, Tour 18 asserted a functionality defense.200 The Fifth Circuit Court of Appeals cited Two Pesos201 as providing a comprehensive definition of functionality, thereby adopting a competitive need test quite similar to the test created by Tenth Circuit.202 To determine competitive necessity, the Fifth protection inquiry). This order of decision has been used by other circuits as well. See, e.g., Versa Prods. Co. v. Bifold Co., 50 F.3d 189, 193 (3d Cir. 1995) (“We need not reach the nonfunctionality and distinctiveness questions because the appeal may be disposed of on the likelihood of confusion issue . . . .”). 195. Stormy Clime, 809 F.2d at 975 (quoting LeSportsac, Inc. v. K Mart Corp., 754 F.2d 71, 76 (2d Cir. 1985) (citations omitted)). 196. Id. at 976–77 (quotation marks omitted) (citing Sicilia Di R. Biebow & Co. v. Cox, 732 F.2d 417, 429 (5th Cir. 1984) (quoting In re Morton-Norwich Prods., 671 F.2d 1332, 1342 (C.C.P.A. 1982))). 197. Id. at 977 (citations omitted). 198. Pebble Beach Co. v. Tour 18 I Ltd., 155 F.3d 526, 537–40 (5th Cir. 1998). 199. Id. at 534–35. 200. Id. at 533, 537. 201. Refer to note 131 supra and accompanying text (discussing the rationale of the Two Pesos holding). 202. Pebble Beach, 155 F.3d at 537–38. The Fifth Circuit went on to quote the (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

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Circuit considers whether the product feature(s) are “superior or optimal in terms of engineering, economy of manufacture, accommodation of utilitarian function or performance.”203 The district court held that the golf-hole designs were not functional because they were not superior to alternative designs, which were unlimited in number.204 On appeal, the Fifth Circuit discussed several other functionality issues in addressing Tour 18’s arguments.205 First, it held that a product feature that contributes to the product’s commercial success is not necessarily functional.206 Tour 18 then argued that a feature is functional unless “a specific design can be made another way without affecting use, purpose, cost, quality or commercial desirability.”207 The Fifth Circuit dismissed this definition as being too broad.208 It interpreted the Qualitex Court’s statement—“that is, if exclusive use of the features [or combination of features] would put competitors at a significant non-reputation-related disadvantage”—to require that the asserted trade dress have an effect on the cost or quality of an article that would significantly disadvantage competitors in order to be found legally functional.209 The Fifth Circuit further rejected the doctrine of aesthetic functionality.210 It acknowledged that the Qualitex Court addressed aesthetic functionality, but declared that the doctrine was irrelevant because the “ultimate inquiry in aesthetic functionality is the same as utilitarian functionality: whether the recognition of trademark rights would significantly hinder competition.”211

Inwood-Qualitex functionality standard, but described it as a more general statement of the law than competitive necessity. Id. at 538. 203. Id. (quotation marks omitted). 204. Id. 205. Id. at 538–39. 206. Id. (“To define functionality based upon commercial success would allow the second comer to trade on the first comer’s goodwill . . . . Such a rule does not promote innovation . . . .”). 207. Id. at 539 (quotation marks omitted). This was obviously an attempt to reconcile the Inwood standard that “a product feature is functional if it is essential to the use or purpose of the article or if it affects the cost or quality of the article,” Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 850 n.10 (1982), with Qualitex’s addition, “that is, if exclusive use of the feature would put competitors at a significant non- reputation-related disadvantage,” Qualitex Co. v. Jacobson Products Co., 514 U.S. 159, 165 (1995). 208. Pebble Beach, 155 F.3d at 539. 209. Id. (alteration in original) (quotation marks omitted). 210. Id. at 540 n.6. 211. Id. (quotation marks omitted). Scholars agree that at least pre-TrafFix, most circuits had rejected the doctrine of aesthetic functionality. See, e.g., LEVIN, supra note 1, § 17:3, at 17-6 (“Each circuit has struggled in its own way with aesthetic functionality, and most have rejected it.” (footnotes omitted)); 1 MCCARTHY, supra note 23, § 7:80, at 7- (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

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In Aromatique, Inc. v. Gold Seal, Inc.212 the Eighth Circuit Court of Appeals found that a potpourri bag was not protectible trade dress because it was functional.213 Aromatique, Inc. marketed potpourri in clear cellophane bags tied with cord in such a way that customers were able to detect the scent.214 Aromatique asserted trade dress infringement when its competitor began to sell potpourri in an almost identical packaging.215 After determining that the trade dress was not distinctive and had not acquired secondary meaning, the court then addressed functionality as a second ground for denying protection.216 The court held that “trade dress is nonfunctional if it is an arbitrary embellishment primarily adopted for purposes of identification and individuality.”217 “But if the trade dress is an important ingredient in the commercial success of the product, it is clearly functional.”218 The court then evaluated each feature of the potpourri package in turn, finding that each served some function and was therefore not an arbitrary embellishment.219 However, the problem with this analysis is that if arbitrary embellishment is the test for nonfunctionality, it is circular to define arbitrary embellishment as whatever serves no function. Although this is only a sampling of the circuits, it should by now be clear that there is little uniformity in the application of the functionality doctrine among the courts of appeals. The TrafFix decision should bring at least some uniformity to the circuits on this issue.

2. An Issue Resolved: Order of Decision. The TrafFix decision, when viewed as a whole, establishes a specific order of decision for product configuration trade dress cases. First, the deciding court should determine functionality by examining

197 (“But the majority of courts have rejected the theory of aesthetic functionality with varying degrees of zeal.”); see also Mitchell, supra note 170, at 4 (noting that before TrafFix, the aesthetic functionality doctrine had been largely rejected). 212. 28 F.3d 863 (8th Cir. 1994). 213. Id. at 874. 214. Id. at 866. 215. Id. at 867–68. Although the court described the asserted trade dress as packaging only, Aromatique’s trade dress included the overall appearance of the product and packaging because the product (the potpourri) could be seen and smelled through the cellophane. Id. at 866. 216. Id. at 873. 217. Id. (quotation marks omitted) (citing Prufrock Ltd., Inc. v. Lasater, 781 F.2d 129, 133 (8th Cir. 1986)). 218. Id. (quotation marks omitted) (referencing Prufrock, 781 F.2d at 133). 219. Id. at 873–74. For example, the clear cellophane functioned to allow customers to see the potpourri, the double bagging extended the product’s shelf life, and the method of tying allowed customers to smell the product. Id. (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

2003] TRAFFIX DEVICES V. MARKETING DISPLAYS 567 whether a product feature is essential to the use or purpose of a product, or whether such features affect its cost or quality.220 The party asserting trade dress protection has the burden of proving non-functionality,221 and a utility patent is strong evidence that the features claimed therein are functional.222 Second, if functionality is not found, and if there is a question of aesthetic functionality, the court should inquire whether exclusive use of a product feature would create a significant non-reputation related disadvantage,223 as well as consider the availability of alternative designs.224 If functionality is then established, the product feature is not entitled to trade dress protection; only if the product feature is found non-functional should the court continue on to evaluate secondary meaning and likelihood of confusion.225 TrafFix clearly establishes that courts should not address secondary meaning until any functionality issues have been resolved.226 The Second, Third, and Eighth Circuits’ practice of analyzing functionality only after a prima facie case has been established through proof of secondary meaning and likelihood of confusion is no longer acceptable.

3. An Issue Resolved: Aesthetic Functionality and the Competitive Need Test. The TrafFix Court endorsed the doctrine of aesthetic functionality by instructing that a “significant non- reputation-related disadvantage” should only be considered in cases of aesthetic functionality.227 The courts of appeals are no longer justified in rejecting the aesthetic functionality doctrine.

220. TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 32 (2001). While the Court did not explicitly state that the Inwood standard is the first step in a functionality analysis, it did state: (1) that where functionality is found under the Inwood formulation, there is no need to proceed further to consider if there is a competitive necessity for the feature; (2) once functionality is established, secondary meaning need not be considered; and (3) functionality means that competitors need not consider other designs which might serve the same purpose. Id. at 33–34. These statements establish that the Inwood standard is the first step, but the Court did not give any concrete criteria for applying it. 221. Id. at 32. 222. Id. at 29–30 (creating a “heavy burden” for the party seeking protection). 223. Id. at 33 (“It is proper to inquire into a significant non-reputation-related disadvantage in cases of aesthetic functionality . . . . Where the design is functional under the Inwood formulation there is no need to proceed further to consider if there is a competitive necessity for the feature.” (quotation marks omitted)). 224. Id. at 34 (holding that when a product design is functional under the Inwood standard, “[o]ther designs need not be attempted”). 225. Id. at 33 (“Functionality having been established, whether MDI’s dual-spring design has acquired secondary meaning need not be considered.”). 226. Id. at 33–34. 227. Id. at 33 (quotation marks omitted). Professor McCarthy argues otherwise, characterizing Justice Kennedy’s discussion of aesthetic functionality as dicta. 1 MCCARTHY, supra note 23, § 7:80, at 7-198. However, the aesthetic functionality (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

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The TrafFix Court also flatly rejected the competitive need test as the proper standard for functionality.228 The Court singled out Vornado, holding that the Tenth Circuit’s characterization of functionality as defined in terms of competitive need “was incorrect as a comprehensive definition.”229 The Court explained its observation in Qualitex—“that a functional feature is one the exclusive use of [which] would put competitors at a significant non-reputation-related disadvantage” should not be interpreted to mean that competitive necessity is the proper functionality standard.230 Rather, competitive necessity should only be examined in cases of aesthetic functionality, such as Qualitex.231 The TrafFix Court also held that once functionality is established, competitors have the right to copy trade dress regardless of whether other designs are available.232 This implies that where functionality is not established under the Inwood standard, and thus competitive necessity must be evaluated to determine aesthetic functionality, it is appropriate to consider whether alternative designs are available. Professor McCarthy, however, asserts that the TrafFix Court did not preclude considering the availability of alternative designs in utilitarian functionality analysis.233 He argues that the availability of alternative designs has strong evidentiary value, because the existence of “designs that work equally well strongly suggests that the particular design used by plaintiff is not needed by competitors to effectively compete on the merits.”234 The problem with Professor McCarthy’s reasoning is that the Inwood standard does not ask whether competitors need to copy a design in order to effectively

discussion was still essential because it explained why the Court did not proceed to the Qualitex prong of functionality analysis. Professor McCarthy also strongly objected to Justice Kennedy’s characterization of Qualitex in TrafFix as an aesthetic functionality case. Id. 228. TrafFix, 532 U.S. at 33. 229. Id. at 32–33 (rejecting the Vornado court’s statement that “[f]unctionality, by contrast, has been defined both by our circuit, and more recently by the Supreme Court [in Two Pesos], in terms of competitive need” as a misinterpretation of the Supreme Court’s holdings). 230. Id. (alteration in original) (quotations marks omitted). 231. Id. at 33 (“Where the design is functional under the Inwood formulation there is no need to proceed further to consider if there is a competitive necessity for the feature.”). 232. Id. at 33–34 (“Here, the functionality of the spring design means that competitors need not explore whether other spring juxtapositions might be used.”). 233. 1 MCCARTHY, supra note 23, § 7:75, at 7-180 (“[T]he observations of the Supreme Court in TrafFix do not mean that the availability of alternative designs cannot be a legitimate source of evidence to determine in the first instance if a particular feature is in fact ‘functional.’”). 234. Id. § 7:75, at 7-181. (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

2003] TRAFFIX DEVICES V. MARKETING DISPLAYS 569 compete, but only asks whether a design is essential to the use or purpose, or affects the cost or quality of an article.235 Careful examination of the TrafFix decision reveals that examining alternative designs may be helpful in answering those questions. The Court found it relevant that a single-spring design would affect the use of the device and, although a three-spring design would work, it “would unnecessarily increase the cost of the device.”236 The TrafFix Court stated that this evidence “demonstrate[s] the functionality of the design.”237 This reasoning shows that alternative designs may provide valuable information for an Inwood analysis—determining whether a configuration is essential to the use or purpose or affects the cost or quality of an article. However, whether alternative designs are available for competitors is not relevant because the Inwood standard does not address competitive need.238 The question is then, in addition to comparisons with alternative designs, what has evidentiary value when determining what is essential to the use or purpose, or what affects the cost or quality of an article?

4. Issues Unresolved: How to Determine “Essential to the Use or Purpose” and “Affects the Cost or Quality.” The TrafFix Court provided little guidance to courts faced with determining when a design is essential to the use or purpose, or affects the cost or quality of an article. The Court did provide some guidance in the application of Inwood to its own facts. First, the Court determined that MDI’s dual-spring design was essential to the use or purpose of the sign stand.239 It stated that MDI’s dual-spring design served the purpose of keeping the sign upright in heavy wind conditions, doing so in a “unique and useful” manner.240 According to the Court, it was essential for the sign stand to remain standing in heavy winds in order for the stand to accomplish its purpose of warning motorists about road conditions.241 Because the dual-spring design accomplished that purpose, it was essential to the use or purpose of the sign stand.242

235. Refer to notes 98–112 supra and accompanying text (discussing the Court’s opinion in Inwood). 236. TrafFix, 532 U.S. at 31–32 (quotation marks omitted) (referring to facts from MDI’s patent applications and prior patent litigation involving the dual-spring design). 237. Id. at 32. 238. Id. at 32–33. 239. Id. at 33. 240. Id. Interestingly, this language seems to mirror the statutory requirements for patentability. To be patentable, a thing must be new and useful. 35 U.S.C. § 101 (2000). The third and final requirement for patentability is non-obviousness. Id. § 103. 241. TrafFix, 532 U.S. at 31. 242. Id. at 33. (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

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Second, the Court held that the dual-spring design affected the cost of the device. In its Inwood analysis, the Court found it relevant that a three-spring design would perform the same function as a two-spring design, but would “unnecessarily increase the cost of the device.”243 This demonstrated to the TrafFix Court that the dual-spring design was functional.244 While this application of the functionality doctrine to the facts in the TrafFix case does provide an example from which lower courts may pattern functionality analysis, it will not be enough to remedy the vagueness of the standard itself.

C. Post-TrafFix: The Confusion Continues The cases decided since the TrafFix ruling show that we can expect little uniformity in functionality analysis. In Metrokane, Inc. v. Wine Enthusiast,245 the U.S. District Court for the Southern District of New York attempted to apply the functionality test as set forth in TrafFix.246 Metrokane, Inc. manufactured the “Rabbit,” a corkscrew that was the subject of an expired utility patent.247 Metrokane asserted trade dress infringement when its competitor, The Wine Enthusiast, manufactured a “Le Rapide” corkscrew that was quite similar in appearance to the Rabbit.248 The court cited the Inwood rule and TrafFix’s holding that an expired utility patent is strong evidence of functionality.249 The court went on to note that the TrafFix Court suggested, in dicta, that a party seeking trade dress could overcome the functionality presumption.250 The court decided that the Rabbit’s physical features were more arbitrary than functional and held that the Rabbit was not legally functional.251

243. Id. at 32 (quotation marks omitted). 244. Id. 245. 160 F. Supp. 2d 633 (S.D.N.Y. 2001). 246. Id. at 637–40. The district court correctly cited TrafFix as dictating that distinctiveness and secondary meaning need not be addressed if the party asserting trade dress protection could not prove non-functionality, and so began by analyzing functionality. Id. at 637. 247. Id. at 635 & n.1. The earlier corkscrew was called the “Screwpull,” and its patent expired in July 1999. Id. at 635 n.1. 248. Id. at 635–36. 249. Id. at 638. 250. Id. (“In a case where a manufacturer seeks to protect arbitrary, incidental, or ornamental aspects of features of a product found in the patent claims . . . a different result might obtain.” (quoting TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 34 (2001))). 251. Id. at 638–39. The court described how the physical characteristics of the corkscrew combined to create the appearance of a rabbit. Id. at 638. (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

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This analysis did not follow the standard set forth in TrafFix. First, the court did not ask whether the corkscrew design was essential to the use or purpose, or affected the cost or quality of the corkscrew, which TrafFix clearly states is the threshold question.252 The rule the court took from TrafFix was that an expired utility patent creates a presumption of functionality that can be overcome only by showing that the design is arbitrary, incidental, or ornamental.253 This is not the TrafFix standard. TrafFix holds that a product design feature claimed in a prior utility patent is strong evidence of functionality, and that the Inwood standard must be applied to determine functionality.254 The court should have applied the Inwood analysis, using the prior patent as evidence. The arbitrary nature of the Rabbit’s design would simply have reduced the evidentiary value of the patent. If the court still found the corkscrew to be nonfunctional under the Inwood standard, it would proceed to the Qualitex prong to determine aesthetic functionality by examining competitive need.255 The result may have been the same, but Metrokane’s analysis has set an example for other courts that is contradictory to TrafFix. In In re All Rite Products, Inc.,256 the Trademark Trial and Appeal Board (TTAB) attempted to apply the functionality test as set forth in TrafFix.257 All Rite Products, Inc. filed for trade dress registration of a carrier fork, which was a component part of a motorcycle-mounted utility carrier (used to carry rifles or other elongated objects).258 The utility carrier was the subject of an expired utility patent.259 The TTAB stated the TrafFix rule

252. TrafFix, 532 U.S. at 33. 253. Metrokane, 160 F. Supp. 2d at 638. The TrafFix Court did interpret the Lanham Act as creating a statutory presumption that product features are functional by placing the burden of proving non-functionality on the party asserting non-functionality. TrafFix, 532 U.S. at 29–30; see also 1 MCCARTHY, supra note 23, § 7:72, at 7-172 (informing that Congress amended the Lanham Act in 1999 to achieve this result); William G. Barber et al., Recent Developments in Trademark Law: Cybersquatters Run for Cover, While Copycats Breathe a Sigh of Relief, 9 TEX. INTELL. PROP. L.J. 231, 238 (2001) (asserting that the TrafFix Court “put the brakes” on the scope of trade dress protection by holding that product designs are presumed to be functional). However, that presumption exists regardless of whether there was prior patent protection. TrafFix, 532 U.S. at 32 (“As we have noted, even if there has been no previous utility patent the party asserting trade dress has the burden to establish the nonfunctionality of alleged trade dress features.” (emphasis added)). 254. Id. at 31–33. 255. See id. at 33. 256. No. 75/260,089, 2001 WL 1182932 (Trademark Tr. & App. Bd. Sept. 26, 2001) (not citable as precedent of the Trademark Trial and Appeal Board). 257. Id. at *2. 258. Id. at *1. 259. Id. (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

572 HOUSTON LAW REVIEW [40:2 that an expired utility patent is strong evidence that the features claimed therein are functional and that, where the expired patent claimed the features in question, one who seeks to establish trade dress protection must carry the heavy burden of showing that the feature is not functional; for instance, by showing that the feature is merely an ornamental, incidental, or arbitrary aspect of the device.260 The TTAB did not refer to the Inwood-TrafFix standard that a product feature is functional if it is essential to the use or purpose of the device, or affects its cost or quality. All Rite’s utility patent stated that the carrier fork operates to restrain the contained object in a locked position in the holding member.261 The TTAB determined that the carrier fork’s functionality was established by its inclusion in the utility carrier patent and was not ornamental, incidental, or arbitrary.262 The utility carrier was thus functional under TrafFix, precluding any further inquiry into available alternatives or their cost.263 The TTAB’s application of the functionality test amounts to a per se bar to trade dress protection of products included in expired utility patents, which was expressly rejected by TrafFix.264 The TTAB decided that the carrier fork was functional simply because it served a purpose, but failed to examine whether All Rite’s carrier fork design was essential to the use or purpose of the utility carrier. Neither the Metrokane court nor the TTAB applied the Inwood analysis required by TrafFix. More recently, in Valu Engineering, Inc. v. Rexnord Corp.,265 the Federal Circuit held that TrafFix did not alter its traditional functionality analysis.266 The Federal Circuit uses the Morton-Norwich factors to determine functionality: (1) the existence of a utility patent disclosing the utilitarian advantages of the design; (2) advertising materials in which the originator of the design touts the design’s utilitarian advantages; (3) the availability to competitors of functionally equivalent designs; and (4) facts indicating that the design results in a comparatively simple or cheap method of manufacturing the product.267

260. Id. at *2. 261. Id. at *3. 262. Id. at *4. 263. Id. at *5. 264. TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 29–30 (2001). 265. 278 F.3d 1268 (Fed. Cir. 2002). 266. Id. at 1276 (“We do not understand the Supreme Court’s decision in TrafFix to have altered the Morton-Norwich analysis.”). 267. Id. at 1274 (citing In re Morton-Norwich Prods., 671 F.2d 1332, 1340–41 (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

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The first, second, and fourth factors were all endorsed by the TrafFix Court as having evidentiary value in a utilitarian functionality analysis.268 However, the third factor—availability to competitors of equivalent designs—was specifically rejected by the TrafFix Court.269 The Federal Circuit concluded that TrafFix merely held that the availability of alternative designs cannot render a particular design protectible under trademark law once that design has been found functional under Inwood.270 The Federal Circuit asserted that this does not preclude considering the availability of alternative designs as “evidence to determine whether a feature is functional in the first place.”271 This assertion does not contradict TrafFix. However, the Federal Circuit then quoted Professor McCarthy’s statement that “[t]he existence of . . . alternative designs that work equally well strongly suggests that the particular design used by plaintiff is not needed by competitors to effectively compete on the merits.”272 This assertion does contradict TrafFix. TrafFix specifically rejected competitive necessity as a part of the Inwood-utilitarian functionality standard.273 The availability to competitors of alternative designs—as opposed to information about the cost or quality of alternative designs—has no place in the Inwood-utilitarian functionality standard. This factor is only relevant to the competitive necessity question, which TrafFix dictates should only take place in aesthetic functionality analysis.274 Many courts will continue to avoid using the Inwood factors because “essential to the use or purpose” is simply too vague a standard to be uniformly applied.275 If the Supreme Court had

(C.C.P.A. 1982)). 268. TrafFix, 532 U.S. at 29–30, 33, 34–35 (focusing primarily on the existence of patent protection as evidence of functionality, but also recognizing that a feature is functional when it affects the quality or cost of the product). 269. Refer to notes 223–31 supra and accompanying text (discussing the relevance of available alternative designs in functionality analysis). 270. Valu Engineering, 278 F.3d at 1276. 271. Id. 272. Id. (quoting 1 MCCARTHY, supra note 23, § 7.75, at 7-180 to 7-181). 273. TrafFix, 532 U.S. at 32–33. 274. Id. at 33. 275. For an example of courts that have properly employed the Inwood standard under TrafFix, see Eppendorf-Netheler-Hinz GMBH v. Ritter GMBH, 289 F.3d 351, 354– 58 (5th Cir. 2002) (reversing the district court’s finding of non-functionality that was based upon availability of alternative designs), Abercrombie & Fitch Stores, Inc. v. American Eagle Outfitters, Inc., 280 F.3d 619, 640–44 (6th Cir. 2002) (holding that Abercrombie & Fitch’s clothing designs were functional as a matter of law under aesthetic—not traditional—functionality analysis). Both of these courts referred to the Inwood-utilitarian standard as “traditional” functionality and referred to aesthetic (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

574 HOUSTON LAW REVIEW [40:2 provided more guidance for the interpretation of that standard, some uniformity would have been possible.

D. A Proposal: How to Reduce the Confusion

The TrafFix formulation could well suffice to serve the objectives of the functionality doctrine,276 but only if courts are provided with a standard for analyzing the Inwood factors. The Second Circuit has provided a good basis for analysis: A design feature of a particular article is “essential” [to its use or purpose] only if the feature is dictated by the functions to be performed; a feature that merely accommodates a useful function is not enough. And a design feature “affecting the cost or quality of an article” is one which permits the article to be manufactured at a lower cost or one which constitutes an improvement in the operation of the goods.277 This was a well-reasoned attempt by the Second Circuit to interpret the Inwood formulation, at a time when other circuits still considered Inwood to be mere dicta regarding functionality. First, a product feature is essential to its use or purpose if the feature is dictated by the function to be performed.278 This means that absent the product feature, the product will not function properly or in the same manner. This would advise a court applying the facts in TrafFix that the dual-spring design is essential to the sign stand’s use or purpose if, absent the dual- spring mechanism, the sign stand would not withstand strong winds. Because it would not, the dual-spring mechanism would be found functional. Further, a feature that merely accommodates a useful function is not functional. The dual- spring design does not simply make it possible for some other feature to perform the wind-resistance function—it performs that function itself. Second, a design feature affects the cost or quality of an article if it allows the article to be manufactured at a lower cost or improves the operation of the goods.279 This standard does not inquire into the amount of cost savings or the amount of quality functionality as a second form of functionality to be determined by reference to competitive need. Eppendorf, 289 F.3d at 356; Abercrombie, 280 F.3d at 641. 276. Refer to Part III.B supra (discussing the purposes of the functionality doctrine: preventing monopolistic control of invention and fostering design innovation by allowing copying). 277. Stormy Clime, Ltd. v. ProGroup, Inc., 809 F.2d 971, 975 (2d Cir. 1987) (citations omitted) (citing LeSportsac, Inc. v. K Mart Corp., 754 F.2d 71, 76 (2d Cir. 1985)). 278. Id. 279. Id. (7)MCCORMICKG2.DOC 7/2/2003 6:01 PM

2003] TRAFFIX DEVICES V. MARKETING DISPLAYS 575 improvement. It assumes that any effect is sufficient to justify a finding of functionality. Adopting the Second Circuit’s elaboration of the Inwood formulation would be only half of the solution. Courts must still follow the proper order of decision set out in TrafFix. As evidenced by All-Rite Products and Metrokane, the lower courts are already confused about what parts of the analysis need to be performed, and in what order. If the Supreme Court were to adopt the Second Circuit’s clarification of the Inwood formulation and clarify the proper order of decision for functionality analyses, lower courts would have the guidance needed to maintain uniformity in this ever-changing area of law.

V. CONCLUSION The TrafFix Court accomplished several significant things. First, it unequivocally established that an expired utility patent is not a per se bar to trade dress protection. The functionality bar will provide the necessary delineation between patent and trademark law. Second, the TrafFix Court firmly established that the Inwood formulation is the proper analysis to determine utilitarian functionality. Third, it affirmed the validity of aesthetic functionality by providing a standard for determining aesthetic functionality—the competitive need test. Fourth, the Court established that the traditional infringement elements of secondary meaning and likelihood of confusion should not be addressed until a product configuration has been shown to be nonfunctional. It remains to be seen, however, whether the lower courts will be able to interpret TrafFix in a manner that provides uniform application of the functionality doctrine.

Tracey McCormick