The Effect of Utility Patents on Trade Dress Protection Claims

The functionality doctrine in trademark law denies trade dress protection to product features that contribute to the utility of the product. “[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.” Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 165 (1999) (quotation omitted). Under the Supreme Court's decision in TrafFix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23 (2001), product features claimed in a utility patent are presumptively functional. And one who seeks to establish trade dress protection for that feature “must carry the heavy burden of showing that the feature is not functional, for instance by showing that it is merely an ornamental, incidental, or arbitrary aspect of the device.” Id. at 29-30.

The Seventh Circuit's recent decision in Specialized Seating v. Greenwich Industries, L.P., No. 07-1435, 2010 WL 3155922 (7th Cir. Aug. 11, 2010), highlights several important considerations that are often overlooked by counsel representing clients who claim trade dress rights in product designs. Paramount among those considerations is the effect that claims in a utility patent can have on the availability of trade dress protection.

Background

Defendant Greenwich Industries, which does business under the name “Clarin,” has been manufacturing and selling “x-frame” folding chairs since 1925. The dispute that led to the instant litigation began in 1993, when Clarin's general manager, Harvey Hergott, left Clarin with his son, also a Clarin employee, to form a competing folding chair company. Clarin filed suit against Harvey Hergott in Illinois state court alleging, inter alia, breach of fiduciary duty, conversion, tortious interference, fraud, and appropriation of corporate opportunity. As part of a settlement agreement, Hergott, along with his son, agreed not to compete with Clarin in the x-frame chair market for a five-year period. Hergott and his son subsequently joined plaintiff Specialized Seating, and in 2002, after the five-year non-compete agreement expired, they began selling x-frame folding chairs.

Meanwhile, in 1999, Clarin applied to register its x-frame folding chair design as a trademark with the U.S. Patent and Trademark Office (“PTO”). The PTO initially refused Clarin's application on the grounds that the mark appeared to be functional, and it requested that Clarin submit information about whether the proposed trade dress was the subject of either a design or utility patent. In response, Clarin disclosed an expired utility patent it owned covering certain features of the x-frame chair, but it failed to inform the PTO of three additional expired utility patents it owned covering other features of the x-frame chair. In January 2004, the PTO issued a trademark registration for the x-frame chair.

Clarin immediately recorded its trademark registration with the U.S. Customs and Border Protection, and it requested that U.S. Customs seize Specialized's chairs at the border as counterfeit. After U.S. Customs seized several shipments of Specialized's folding chairs, Specialized filed suit in the U.S. District Court for the Northern District of Illinois seeking a declaratory judgment that its x-frame chair design did not violate Clarin's rights. See Specialized Seating v. Greenwich Indus., L.P., 472 F. Supp. 2d 999 (N.D. Ill. 2007). Clarin counterclaimed for an injunction.

District Court Decision

Specialized asserted two alternative bases for invalidation of Clarin's trademark registration: 1) that the mark was functional; and 2) that Clarin fraudulently obtained its registration by failing to disclose to the PTO three of its four utility patents covering features of the x-frame folding chair. Following a bench trial, the district court ruled in Specialized's favor on both bases.

As for functionality, the district court found that, with one exception, all of the features of Clarin's x-frame trade dress were denoted as utilitarian in the four expired utility patents. Relying on TrafFix, the court held that these claimed features were presumptively functional, and it found that Clarin had not carried the “heavy burden” of showing that they were not functional. According to the court, the only feature of Clarin's trade dress not covered by the expired utility patents was the chair's “b-back” design, which had replaced the “a-back” design depicted in the patents. As for this feature, the court determined that it merely constituted a functional improvement over the previous “a-back” design.

Having concluded that the overall design of the Clarin's x-frame chair was functional, and that each feature was functional, the court then considered whether Clarin had defrauded the PTO by failing to disclose three of the four expired utility patents. The court noted that, under Seventh Circuit law, Specialized had to show by clear and convincing evidence that Clarin made a deliberate attempt to mislead the PTO into registering its mark by presenting false and misleading information to the PTO. Upon concluding that the three undisclosed utility patents were material to the validity of Clarin's trademark registration, the court found that Clarin's conduct “constituted a knowing, deliberate and deceitful attempt to gain registration,” and it held that Clarin committed fraud on the PTO. Id. at 1018.

Seventh Circuit Decision

The Seventh Circuit began its analysis by noting that although Clarin's registration was “incontestable,” the word “incontestable” was misleading, because an incontestable mark may still be contested, and defeated, on several grounds. Specialized asserted two of the grounds available to contest an incontestable mark, namely, functionality and fraud.

Next, the court concluded that because “functionality” is not an issue of law, but a fact-specific conclusion about whether aspects of a product design are essential to the use or purposes of the product or affect the cost or quality of the product, the district judge's findings must stand unless clearly erroneous. Clarin attempted to evade this standard of review by arguing that the district court's findings were influenced by legal errors, but the Seventh Circuit held it was not legal error for the district judge to start from the proposition that claims in an expired utility patent presumptively are functional. The court then held that the district court did not commit clear error in finding that Clarin's expired utility patents disclosed every aspect of the asserted trademark design except the b-back, which the district court properly found constituted a functional improvement over the previous a-back design. According to the court, the x-frame design “looks the way it does in order to be a better chair, not in order to be a better way of identifying who made it (the function of a trademark).” 2010 WL 3155922, at *3.

The Seventh Circuit agreed with the district court that the availability of alternative designs, on its own, was insufficient to overcome a functionality claim. According to the court, Clarin's x-frame chair design was functional not because it represented the only way to do things, but because it represented one of many solutions to a problem. The court noted that although the list of alternative designs presented by Clarin was very long, what that said was that all the designs were functional, in that they represented different compromises along the axes of weight, strength, material, ease of setup, and ability to connect the chairs together. “A novel or distinctive selection of attributes on these many dimensions can be protected for a time by a utility patent or a design patent, but it cannot be protected forever as one producer's trade dress.” Id. at *4.

Although finding Clarin's x-frame design functional, the Seventh Circuit reiterated that a product whose overall appearance is distinctive can be protected as trade dress, even if most of the product's constituent elements are functional. But what makes a product's appearance “distinctive,” according to the court, are non-functional aspects of the product design. The court opined that had Clarin incorporated non-functional attributes into its chair design ' e.g., a cutout in the backrest or a distinctive pattern ' it could have claimed those attributes as trade dress.

Having held that the district court did not commit clear error in finding the x-frame design functional, the Seventh Circuit determined that it was unnecessary to address the district court's finding that Clarin had committed fraud on the PTO. The court noted that a finding of fraud would merely cancel the mark's registration; it would not affect the mark's validity. Thus, because Clarin could still proceed on common law grounds, a finding of fraud would not end the case, whereas a finding of functionality would. Clarin argued that the court should consider the fraud issue nonetheless, because it might affect future litigation against a different competitor. But the court stated that issue preclusion applies only to issues necessarily resolved in the first case. And because it was not necessary to address fraud on the PTO, the district court judge's opinion on the subject would not have preclusive effect.

Conclusion

There are several valuable lessons to be learned from the Seventh Circuit's decision in Specialized Seating. The first and most obvious lesson is that when applying for trade dress protection, counsel should disclose all relevant information in response to a request from the PTO, even when that involves disclosing potentially harmful expired utility patents. Second, if a product feature is claimed as functional in a utility patent, it will be extremely difficult to later show that the same feature is non-functional for purposes of trade dress protection. As such, counsel representing clients who wish to claim trade dress rights in product designs are well-advised to develop a comprehensive protection strategy even before filing utility patent applications covering those designs. This requires, among other things, identifying the non-functional features of the product design that may survive the expiration of the utility patents and promoting those features as source identifiers.

James W. Faris is an associate in the Atlanta office of Kilpatrick Stockton LLP, where he focuses his practice on trademark, copyright, and unfair competition litigation. Faris can be reached at [email protected].

The functionality doctrine in trademark law denies trade dress protection to product features that contribute to the utility of the product. “[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.” Qualitex Co. v. Jacobson Prods. Co. , 514 U.S. 159, 165 (1999) (quotation omitted). Under the Supreme Court's decision in TrafFix Devices, Inc. v. Marketing Displays, Inc. , 532 U.S. 23 (2001), product features claimed in a utility patent are presumptively functional. And one who seeks to establish trade dress protection for that feature “must carry the heavy burden of showing that the feature is not functional, for instance by showing that it is merely an ornamental, incidental, or arbitrary aspect of the device.” Id. at 29-30.

The Seventh Circuit's recent decision in Specialized Seating v. Greenwich Industries, L.P., No. 07-1435, 2010 WL 3155922 (7th Cir. Aug. 11, 2010), highlights several important considerations that are often overlooked by counsel representing clients who claim trade dress rights in product designs. Paramount among those considerations is the effect that claims in a utility patent can have on the availability of trade dress protection.

Background

Defendant Greenwich Industries, which does business under the name “Clarin,” has been manufacturing and selling “x-frame” folding chairs since 1925. The dispute that led to the instant litigation began in 1993, when Clarin's general manager, Harvey Hergott, left Clarin with his son, also a Clarin employee, to form a competing folding chair company. Clarin filed suit against Harvey Hergott in Illinois state court alleging, inter alia, breach of fiduciary duty, conversion, tortious interference, fraud, and appropriation of corporate opportunity. As part of a settlement agreement, Hergott, along with his son, agreed not to compete with Clarin in the x-frame chair market for a five-year period. Hergott and his son subsequently joined plaintiff Specialized Seating, and in 2002, after the five-year non-compete agreement expired, they began selling x-frame folding chairs.

Meanwhile, in 1999, Clarin applied to register its x-frame folding chair design as a trademark with the U.S. Patent and Trademark Office (“PTO”). The PTO initially refused Clarin's application on the grounds that the mark appeared to be functional, and it requested that Clarin submit information about whether the proposed trade dress was the subject of either a design or utility patent. In response, Clarin disclosed an expired utility patent it owned covering certain features of the x-frame chair, but it failed to inform the PTO of three additional expired utility patents it owned covering other features of the x-frame chair. In January 2004, the PTO issued a trademark registration for the x-frame chair.

Clarin immediately recorded its trademark registration with the U.S. Customs and Border Protection, and it requested that U.S. Customs seize Specialized's chairs at the border as counterfeit. After U.S. Customs seized several shipments of Specialized's folding chairs, Specialized filed suit in the U.S. District Court for the Northern District of Illinois seeking a declaratory judgment that its x-frame chair design did not violate Clarin's rights. See Specialized Seating v. Greenwich Indus., L.P. , 472 F. Supp. 2d 999 (N.D. Ill. 2007). Clarin counterclaimed for an injunction.

District Court Decision

Specialized asserted two alternative bases for invalidation of Clarin's trademark registration: 1) that the mark was functional; and 2) that Clarin fraudulently obtained its registration by failing to disclose to the PTO three of its four utility patents covering features of the x-frame folding chair. Following a bench trial, the district court ruled in Specialized's favor on both bases.

As for functionality, the district court found that, with one exception, all of the features of Clarin's x-frame trade dress were denoted as utilitarian in the four expired utility patents. Relying on TrafFix, the court held that these claimed features were presumptively functional, and it found that Clarin had not carried the “heavy burden” of showing that they were not functional. According to the court, the only feature of Clarin's trade dress not covered by the expired utility patents was the chair's “b-back” design, which had replaced the “a-back” design depicted in the patents. As for this feature, the court determined that it merely constituted a functional improvement over the previous “a-back” design.

Having concluded that the overall design of the Clarin's x-frame chair was functional, and that each feature was functional, the court then considered whether Clarin had defrauded the PTO by failing to disclose three of the four expired utility patents. The court noted that, under Seventh Circuit law, Specialized had to show by clear and convincing evidence that Clarin made a deliberate attempt to mislead the PTO into registering its mark by presenting false and misleading information to the PTO. Upon concluding that the three undisclosed utility patents were material to the validity of Clarin's trademark registration, the court found that Clarin's conduct “constituted a knowing, deliberate and deceitful attempt to gain registration,” and it held that Clarin committed fraud on the PTO. Id. at 1018.

Seventh Circuit Decision

The Seventh Circuit began its analysis by noting that although Clarin's registration was “incontestable,” the word “incontestable” was misleading, because an incontestable mark may still be contested, and defeated, on several grounds. Specialized asserted two of the grounds available to contest an incontestable mark, namely, functionality and fraud.

Next, the court concluded that because “functionality” is not an issue of law, but a fact-specific conclusion about whether aspects of a product design are essential to the use or purposes of the product or affect the cost or quality of the product, the district judge's findings must stand unless clearly erroneous. Clarin attempted to evade this standard of review by arguing that the district court's findings were influenced by legal errors, but the Seventh Circuit held it was not legal error for the district judge to start from the proposition that claims in an expired utility patent presumptively are functional. The court then held that the district court did not commit clear error in finding that Clarin's expired utility patents disclosed every aspect of the asserted trademark design except the b-back, which the district court properly found constituted a functional improvement over the previous a-back design. According to the court, the x-frame design “looks the way it does in order to be a better chair, not in order to be a better way of identifying who made it (the function of a trademark).” 2010 WL 3155922, at *3.

The Seventh Circuit agreed with the district court that the availability of alternative designs, on its own, was insufficient to overcome a functionality claim. According to the court, Clarin's x-frame chair design was functional not because it represented the only way to do things, but because it represented one of many solutions to a problem. The court noted that although the list of alternative designs presented by Clarin was very long, what that said was that all the designs were functional, in that they represented different compromises along the axes of weight, strength, material, ease of setup, and ability to connect the chairs together. “A novel or distinctive selection of attributes on these many dimensions can be protected for a time by a utility patent or a design patent, but it cannot be protected forever as one producer's trade dress.” Id. at *4.

Although finding Clarin's x-frame design functional, the Seventh Circuit reiterated that a product whose overall appearance is distinctive can be protected as trade dress, even if most of the product's constituent elements are functional. But what makes a product's appearance “distinctive,” according to the court, are non-functional aspects of the product design. The court opined that had Clarin incorporated non-functional attributes into its chair design ' e.g., a cutout in the backrest or a distinctive pattern ' it could have claimed those attributes as trade dress.

Having held that the district court did not commit clear error in finding the x-frame design functional, the Seventh Circuit determined that it was unnecessary to address the district court's finding that Clarin had committed fraud on the PTO. The court noted that a finding of fraud would merely cancel the mark's registration; it would not affect the mark's validity. Thus, because Clarin could still proceed on common law grounds, a finding of fraud would not end the case, whereas a finding of functionality would. Clarin argued that the court should consider the fraud issue nonetheless, because it might affect future litigation against a different competitor. But the court stated that issue preclusion applies only to issues necessarily resolved in the first case. And because it was not necessary to address fraud on the PTO, the district court judge's opinion on the subject would not have preclusive effect.

Conclusion

There are several valuable lessons to be learned from the Seventh Circuit's decision in Specialized Seating. The first and most obvious lesson is that when applying for trade dress protection, counsel should disclose all relevant information in response to a request from the PTO, even when that involves disclosing potentially harmful expired utility patents. Second, if a product feature is claimed as functional in a utility patent, it will be extremely difficult to later show that the same feature is non-functional for purposes of trade dress protection. As such, counsel representing clients who wish to claim trade dress rights in product designs are well-advised to develop a comprehensive protection strategy even before filing utility patent applications covering those designs. This requires, among other things, identifying the non-functional features of the product design that may survive the expiration of the utility patents and promoting those features as source identifiers.

James W. Faris is an associate in the Atlanta office of Kilpatrick Stockton LLP, where he focuses his practice on trademark, copyright, and unfair competition litigation. Faris can be reached at [email protected].