On March 22, 2000, in a unanimous decision, the United States Supreme Court handed a victory to Wal-Mart Stores, Inc. and provided much needed clarity for those involved in disputes over a particular type of trade dress - the design of a product itself. In the case of Wal-Mart Stores, Inc. v. Samara Bros.,Inc., the Court held that a party claiming a trade dress right under Section 43(a) of the Lanham Act for an unregistered product design must always present evidence that the design is distinctive by showing that it has acquired secondary meaning as an indication of source to consumers. The Court rejected the tests for inherent distinctiveness put forward by the trade dress owner in the case, the Clinton Administration, and several IP associations, implying that these tests are ineffective and unworkable in product design cases, and deciding that product design can never be inherently distinctive, rather, distinctiveness must always be acquired.
Highlights of the Decision
The Court’s decision, and its implications, can be summarized as follows:In order to satisfy the threshold question of whether a particular product design qualifies for trade dress protection in cases where the design is not a registered trademark, the Court stated that a claimant must always present evidence that the design has acquired secondary meaning. This resolves a split in the US Circuit Courts of Appeals.
The Court revisited an earlier key trade dress case, Two Pesos Inc. v. Taco Cabana Inc.That case involved restaurant decor, and held that trade dress in general can satisfy the threshold question of distinctiveness by showing that it is either inherently distinctive or that it has acquired secondary meaning. The Court’s opinion in Wal-Mart stated that the trade dress at issue in Two Pesos should be viewed as akin to packaging rather than product design (a point much debated by legal scholars and courts until now). The Court clearly stated that the current decision, which is limited to product design cases, should not be viewed as a reversal of Two Pesos. But there is no question that this decision narrows the scope of Two Pesos.
The Court clarified that, in its decision in Qualitex Co. v. Jacobson Products Co., it likewise intended that color per se be protected as a trademark only upon a showing of secondary meaning. This point was assumed by most courts and commentators but was not universally accepted. Thus, the Court now recognizes two specialized categories of trade dress where a showing of secondary meaning is always required.
By raising the level of proof required to qualify for protection of product design trade dress, Wal-Mart will make it more difficult and expensive to prevent infringement of this type of intellectual property. This form of trade dress can now only be protected if it is proved that buyers associate the design with a single source. This association, or “secondary meaning,” will need to be shown by presenting evidence in the form of direct consumer testimony, consumer surveys, and/or documentation of circumstances such as the length of time the design has been used exclusively by the manufacturer, the type of advertising, advertising expenditures, the number of sales and customers, and any proof of intentional copying. Proving secondary meaning can be difficult and costly, and is usually impossible for new market entrants.
Presumably, the US Patent and Trademark Office will modify its current practice, which allows registration of both color and product design trade dress as trademarks upon a showing of inherent distinctiveness (registration upon proof of secondary meaning will of course still be allowed). Also, because registered product design trade dress is presumed to have secondary meaning, initially shifting the burden of proving otherwise to the alleged infringer and potentially providing conclusive proof of secondary meaning after five years and an appropriate filing under Section 15 of the Lanham Act, the Wal-Mart decision should result in increased federal trademark filings for this type of trade dress.
The doctrine of aesthetic functionality is apparently alive and well. In fact, the Court indicated a prejudice against claims that product designs should be protected as trademarks since, almost invariably, even the most unusual of product designs...is intended not to identify the source, but to render the product itself more useful or more appealing. Consumers are aware of this, claimed the Court, and therefore are not predisposed to equate these features with product source. This endorsement of the concept of aesthetic functionality continues a trend begun by the Court in the Qualitex decision.
As an apparent justification for requiring a higher level of proof of distinctiveness in product design cases as compared to other trade dress cases, the Court expressed the concern that the mere threat of a lawsuit (the game, as termed by the Court) claiming rights in allegedly inherently distinctive trade dress deters legitimate competition, when in reality protection for such trade dress is, in the Court’s view, rare. This seems a rather novel justification for such a significant increase in the burden on these trade dress owners in litigation.
The Court expressed a preference for protecting designs of this type via design patent or copyright, and we will likely see an increase in US design patent filings for trade dress as a result of this decision. But design patent protection is not as broad as Lanham Act trade dress protection, carrying a 14-year limit and stricter infringement standards, and copyright protection may sometimes by unavailable due to the requirement that, in order to be copyrightable, the design must be separable from the useful article to which it is applied.
Finally, the Court signaled a clear preference for caution in conferring Lanham Act trade dress rights. In cases where it is unclear whether a particular trade dress should be classified as a product design (requiring secondary meaning) or product packaging (which may be inherently distinctive), courts should Aerr on the side of caution and classify the trade dress as product design, requiring the stricter standard.
Background
The Court in Wal-Mart reversed a decision by the Second Circuit upholding a jury verdict finding copyright and trade dress infringement stemming from copying by Wal-Mart’s supplier of several designs in Samara Brothers’ line of children’s clothing. Although Wal-Mart asked the Court to address several issues, the Supreme Court granted certiorari on, and decided, only one question of its own drafting: “What must be shown to establish that a product’s design is inherently distinctive for purposes of Lanham Act trade dress protection”?
The question posed by the Court might elicit only yawns from the general public, but manufacturers are vitally interested in the answer. The importance of this case beyond the actual parties was signaled by the Justice Department’s participation in oral argument, and the submission of amicus briefs by American Intellectual Property Law Association (AIPLA), the International Trademark Association (INTA), and a number of trade associations representing mass retailers.
In contrast to patent or copyright laws, trademark and unfair competition laws create exclusive rights in a product design of potentially unlimited duration, i.e., that can persist so long as the design is used in commerce. The Lanham Act’s protection against copying product designs has important implications, therefore, for market competition, and will affect the cost of goods and incentives for the production of quality goods. A standard that sets the eligibility for protection of product designs too high could withhold the financial benefits of the goodwill established by the owner of the trade dress and prevent consumers from readily distinguishing among competing producers. Conversely, too low a standard could frustrate the legitimate interests of competitors in bringing their goods and services to the public.
Split in the Circuits
The Wal-Mart case provided the Court with the opportunity to resolve a split among the Circuits. The different tests for inherently distinctive product designs adopted by the Circuits partly reflected basic disagreement on whether the same analysis could be applied to product design trade dress and word marks or packaging. Some held that the standard for inherently distinctive product designs should be stricter, because an exclusive right in a product design or feature poses a greater risk to competition. None of the Circuits, however, had adopted the position taken by Appellant Wal-Mart in the case, which ultimately carried the day with the Supreme Court: that product designs can never be considered inherently distinctive.
The Second Circuit asked simply whether the product design “[is] likely to be understood as an indicator of a product’s source. It declined to articulate a more specific test or standard, holding that the “standard for determining the inherent distinctiveness of a product’s design is more rigorous than that for determining the inherent distinctiveness of the product’s packaging.” As a threshold matter, the elements of the claimed trade dress must be articulated with enough specificity to determine whether they are, as a whole, functional. The Second Circuit also placed weight on the creators’ intent that the design function as a source indicator (i.e., rather than for aesthetic or other purposes), and whether protection was sought for an entire line of products (as in the Wal-Mart case), where the effect on competition is potentially greater.
The Third Circuit also applied a stricter standard to product design trade dress than to packaging or word marks. Under its test, an inherently distinctive product design must have been (1) unusual and memorable; (2) conceptually separable from the product; and (3) likely to serve primarily as a designator of origin of the product. The Third Circuit had stated that, without proof of secondary meaning, Lanham Act protection for product design features should be available only under very limited circumstances.
In contrast, the Fourth, Fifth and Eighth Circuits had applied the same analysis for determining distinctiveness to product designs as they do to word marks and packaging designs. These Circuits used the classic Abercrombie categories of distinctiveness to assess the degree to which a design was dictated by the nature of the product. According to this analysis, “generic” trade dress was incapable of functioning primarily as a source indicator, “descriptive” trade dress could function as a source indicator only if it had acquired secondary meaning, and trade dress that was “suggestive”, “arbitrary” or “fanciful” was considered distinctive and qualified for protection under Section 43(a) without a showing of secondary meaning. The Abercrombie categories, however, may not always make sense in the context of product shapes or designs. It can be difficult to explain to a judge or jury what might be “generic”, “descriptive”, or “suggestive” about a particular design. Nevertheless, while these categories may not always apply, many would agree that the underlying principle B i.e., that potential marks are distributed along a spectrum or continuum of distinctiveness and the measure of protection afforded a mark depends on where it falls along that spectrum B could apply equally to packaging and product designs as to word marks.
The Seabrook Test
Another approach to inherently distinctive product designs, expressly adopted by the First Circuit and the Trademark Trial and Appeal Board, was based on a test originally applied in a packaging trade dress case. This Seabrook test asks: (1) whether the design is a “common” basic shape or design; (2) whether the design is unique or unusual in a particular field; (3) whether it is a mere refinement of a commonly-adopted and well-known form of ornamentation for a particular class of goods, viewed by the public as a dress or ornamentation for the goods; or (4) whether it is capable of creating a commercial impression distinct from the accompanying words.” In addition to the First Circuit, the Second Circuit had found the Seabrook factors to be consistent with its test, and the Fourth Circuit relied on the Seabrook factors to clarify the distinctions required in its own analysis. In light of the Wal-Mart decision, these courts will obviously no longer apply the Seabrook test to product design cases, but they may well continue to use it in product packaging trade dress cases.
In separate amicus briefs, the American Intellectual Property Law Association, the International Trademark Association and the Department of Justice had each urged the Supreme Court to adopt a version of the Seabrook test. However, as noted above, the Court rejected the Seabrook test, complaining that it would rarely provide the basis for summary disposition of an anticompetitive strike suit. The Court did not comment as to whether Seabrook might still be considered an appropriate test of inherent distinctiveness for packaging design trade dress cases.
Many in the intellectual property bar and, more importantly, intellectual property owners, are no doubt disappointed with the Supreme Court’s ruling in the Wal-Mart case. Indeed, some may question whether the Court presented a compelling argument in support of its stricter treatment of product design trade dress. However there is a silver lining in this cloud: the clarification of the standard for protecting trade dress under the Lanham Act, both in the form of confirmation of the standard in product packaging trade dress cases, and establishment of a bright line rule for establishing the distinctiveness required to protect product design trade dress - secondary meaning. It remains to be seen whether there will be a movement to reverse the effects of this decision through legislation.
The Justices Speak
Observations from the January 19 Oral Argument in
Wal-Mart Stores, Inc. v. Samara Bros., Inc.
There were a host of interesting questions and comments from the Justices during oral argument in the Wal-Mart case on January 19, 2000. In fact, every Justice except the traditionally silent Justice Thomas had something to say to one or more of the three lawyers who argued the case.
The most active Justices were O’Connor, Scalia, Breyer, Ginsburg, and Kennedy. O’Connor began with a comment that has no doubt been voiced by many an IP lawyer in the precise context of attempting to evaluate trade dress protection in the US: Echoing Justice Stewart’s famous line, she stated that inherent distinctiveness, like pornography, seems susceptible to a standard of AI know it when I see it.
In response to the (ultimately successful) urging of Wal-Mart’s attorney, William D. Coston, that the Court establish a rule that always requires a showing of secondary meaning in product configuration trade dress cases, several Justices inquired whether that would be consistent with the Two Pesos decision. Mr. Coston responded that it would be a clarification of Two Pesos, in the same way that the Qualitex decision held that secondary meaning must be shown to obtain trademark protection for color per se. Justice Breyer, the author of the unanimous decision in Qualitex, nodded his head at this comment, and later observed that it may indeed be appropriate to view color and product configuration similarly.
On the other hand, Justice Breyer presented to Mr. Coston the example of a hair brush shaped like a grape, and wondered why such a unique product shape should not be considered inherently distinctive. However, later on, during the presentation by Samara Bros. attorney Stuart M. Riback, Justice Breyer, along with Justices Scalia, Kennedy, Souter and Stevens, wondered why the Court could not require that product shapes be held to a stricter standard of proof of distinctiveness than packaging. Why not modify Two Pesos, as suggested by Wal-Mart, since it can so hard to determine whether a product is truly inherently distinctive? One problem with that approach, identified by Riback and, earlier, by Justice O’Connor (and hinted at by Justice Ginsburg), would be the difficulty in categorizing some products as either packaging or product configuration. In fact, noted Riback, it had never been clear where Two Pesos (dealing with restaurant decor) would fall in this dichotomy. (Ultimately, the Court stated in its decision that it would prefer the uncertainty over categorizing certain products to the uncertainty of how to test for inherent distinctiveness, and the Court also put a new gloss on the 1992 Two Pesos decision, holding that it should be viewed as a packaging case.)
Several times during the argument, Justice Scalia seemed troubled by the fact that federal law provides trade dress/trademark protection to items that could conceivably be protected by design patent and (implicitly) copyright. Justice Souter also raised this issue. In response, Mr. Riback pointed out that even though there might be overlapping subject matter that could be protected under both the Patent Act and the Lanham Act, the rights conferred by each were quite different. Also, speaking to the dress designs that were at issue in the Wal-Mart case, Justice Scalia observed that it seemed to him that these designs were merely aesthetically pleasing and, thus, functional, rather than being elements of trade dress that serve primarily to operate as indicators of source. Justice Souter seemed to agree, as did Justice Breyer. Justice Scalia also pointed out that, in his view, one cannot ignore the functionality analysis when considering whether a trade dress is distinctive (even though non-functionality is a necessary additional criteria for establishing protectable trade dress).
Justice Ginsburg, echoing an early comment by Justice O’Connor, wanted to know whether the test for distinctiveness should be applied by a judge as a screen before sending a case to the jury, or whether it should be part of the jury’s instructions. Lawrence G. Wallace, who argued the case for the Solicitor General’s Office, replied that it should be a screen for judges.
None of the Justices expressed admiration for the so-called Seabrook test. Justices Ginsburg and Scalia complained that the test is so vague that it would not end up being particularly helpful.
It is an extremely risky business to try to predict the outcome of a Supreme Court case based upon the comments of some of the Justices during oral argument. Much of the Justices’ questions and comments are for the purpose of baiting counsel and forcing them to present coherent, rational arguments in support of their positions, and often do not reveal the true predilections of the inquiring Justice. This was quite true in the oral argument in the Qualitex case. There, Justice Breyer spent a good deal of time goading the trademark owner’s counsel, asking, incredulously, whether he, Justice Breyer, could be prohibited from wearing a green-gold neck tie if it was the same color as Qualitex’s press pads. Ultimately, Justice Breyer authored the 9-0 decision upholding color per se as a trademark. Interestingly, the vote in Two Pesos was also 9-0, albeit with two concurring opinions. In the Wal-Mart 9-0 decision, of course, it turned out that many of the justices were in fact telegraphing their views that it would be okay, and even appropriate, to establish a universal requirement for a higher level of proof of distinctiveness - a showing of secondary meaning - in product design trade dress cases.