8 Three Dimensional Shapes:
Issues of IP and Competition Policy㸫 Comparative Comments on the Japanese System ofTrademark Protection (*)
Invited Researcher: Apostolos CHRONOPOULOS (**)
The recognition of three-dimensional signs as a subject matter eligible for trademark protection gave
rise to a large array of legal problems.
Some of these legal problems may be addressed by adjusting the threshold of protection. Tightening therequirements for protection would serve the purpose of ensuring that the grant of an exclusive right in a
product shape would yield substantial pre-competitive benefits by allowing consumers to ascertain a product’scommercial source on the basis of its design. Lowering the threshold of protection would make sense as it
potentially provides traders with protection for business strategies based on three-dimensional trademarks.
Consumers may also be better off with the latter option if such an expansion of trademark rights generates
benefits that are associated with more dynamic forms of competition with differentiated products.
However, trademark laws rely primarily on the doctrine of functionality to address the concerns
regarding the anticompetitive potential of trademark protection.
With regard to the functionality doctrine, the ultimate objective is to identify the cases where trademark
protection for product shapes has to be denied categorically because it runs contrary to the policy
considerations underpinning the grant of utility/design patents or because it adversely affects competition.

Ϩ Introduction
Product shapes have been rightfully
included in the circle of signs that can beprotected as trademarks, since consumers may
well rely upon them in order to identify thecommercial source of goods. From theperspective of traders, the adoption of aparticular product configuration is often driven
by the consideration of effectively designating
the commercial origin of their goods. The
choice of trade dress constitutes also one of
the most important means of differentiating the
product to make it appealing to consumers.
On the other hand, the protection of
product shapes as trademarks may lead to
product monopolies, extend the temporally
limited term of patents or other exclusive IP
rights, and interfere with the ability ofcompetitors to imitate product shapes thathave already entered the public domain.
Trademark law has to balance the various
interests of traders, their competitors and theconsuming public that collide incidentally todisputes
relatedtothree-dimensional
trademarks. In fact, it is necessary to balance
the social benefits with the social costs of tradedress protection.
The administration of the distinctivenessrequirement entails such a balance of interests.
Protection is normally granted when there is a
palpable social benefit in terms of market
transparency, accruing from either the inherent
or the acquired distinctiveness of a given
product shape. There are instances, however,where trade dress protection would not besocially desirable, even if the productconfiguration at issue may indeed serve as anindication of commercial source. That would be
the case when the assertion of trade dressrights impedes the ability of competitors tocompete, to practice inventions disclosed in
expired utility patents and incorporate preexisting technical solutions in their products.
The doctrine of functionality would thenintervene to bar trade dress protection.
My research aims at categorizing therelevant criteria for the application of trademark(*) This is a summary of the report published under the Industrial Property Research Promotion Project FY2014
entrusted by the Japan Patent Office.
(**) Research Assistant and Teaching Associate, Centre for Commercial Law Studies – Queen Mary University of
London, at our institute over a period of approximately 2 months from July 14, 2014 through September 20,
2014, as an Invited Researcher for the Fiscal Year 2014.
IIP Bulletin 2015 Vol.24● 52 ●

norms on the basis of their objectives,
explaining their rationales in a clear manner andindicating the exact way in which they are to be
applied. In terms of the functionality doctrine,
the ultimate aim is to identify the cases wheretrademark protection for product shapes has tobe denied, because it runs contrary to the policy
considerations
underlying
the grantofutility/design patents, or because it adversely
affects competition.

ϩ Social Costs and Social Benefitsof Trade Dress Protection
Trade
dress
protection
generates
significant social benefits by facilitating market
transparency. In some contexts, the shape of
the product is the most effective type oftrademark because it economizes very
effectively on consumer search costs. When
shopping in a supermarket, for instance, tradedress allows the consumer to very quickly findthe product he wishes to buy without it being
necessary to get closer to the shelves anddecipher a small logo. Furthermore, the shapeof the product is a very effective marketing
tool, as it constantly provides the consumers
with a reminder about its seller while using the
product. 1 The shape of a designer chair, forexample, can be a constant reminder of thebrand manufacturer when consumers areconfronted with the said product in social
events.
Productshapesaretherefore
particularly effective in maintaining brandawareness in the marketplace. It is very often
the case that the product configuration is an
attribute of the product that triggers its sale.
By protecting trade dress and imposing
restrictions on imitation, trademark law provides
a certain degree of protection to methods ofproduct differentiation. 2 Since consumers have apreference for product variety, trade dress
protection enhances consumer welfare byincreasing the purchasing choices of consumers.
Thereby, competition for matching consumer
preferencefordifferentiatedgoods
isintensified.
Despite their pre-competitive virtues,
three-dimensional trademarks may result insignificant social costs, since trade dress
protection may: a) restrict the imitation of
items that have already entered the publicdomain; b) lead to product monopolies if
asserted in respect to shapes that areassociated with the generic function of a

product (e.g. the shape of a football or the basic
shape of an aeroplane); c) create unlimited
utility/design patent rights.

Ϫ Optimal Degree of DistinctivenessforGranting
Protection
toProduct Shapes as Trademarks
The
thresholdforsatisfying
thedistinctiveness requirement reflects just such abalance between the social benefits and social
costs of trade dress protection. 3 In the light ofthe social costs of trade dress protection, theUS Supreme Court ruled that product shapes
may only be protectable as trade dress if they
have already acquired secondary meaning. 4 In asimilar vein, the CJEU held that only a shapethat significantly deviates from the norm of agiven industry may qualify as inherently
distinctive within the meaning of Article
3(1)(b) of the Trade Marks Directive. 5
Other judicial opinions such as the one
rendered by the US Supreme Court in the Two
Pesos case 6 have been willing to grant
protection on the basis of a lower threshold totake into account the plaintiff ’s legitimate
business interests such as a business’ need to
be protected from imitative competition in theinitial stage of its commercial activity. Somelower courts in the US have occasionallyendorsed the trader’s effort to differentiate his
product by accepting that the trade dress at
issue qualifies as inherently distinctive
because it differs, to some extent, from otherproduct shapes in the marketplace, despite
actually comprising common elements. 7
Lowering the threshold for distinctivenesscould make sense for promoting dynamic
competition with differentiated products. 8 This
theory could probably explain the outcome in
the highly debated and controversial GUYLIAN
case of the Japanese IP High Court. 9

ϫ The Doctrine of Functionality
1

Introduction
The doctrine of functionality serves the
purpose of barring trademark protection
whenever the social costs of protection exceed
the social benefits to market transparency
accruing from a product shape that is either
inherently
distinctiveorhas
acquiredsecondary meaning.

● 53 ●IIP Bulletin 2015 Vol.24

2Competitive Need as a Legal Test for
Determining Functionality
According to this legal test, a productconfiguration may well be protected as atrademark, as long as competitors do not need
it for competing in the relevant market.10 In its
most sophisticated version, this rule should
prevent the trademark proprietor frominterfering with the ability of marketing highly
substitutable products. 11 For the purpose ofadministrating the effect on competition test it
has been recommended to revert to thesubmarket concept of antitrust law.12 Accordingly,
not all products included within a broader
relevant market are equally substitutable. Rather,
competition becomes intensified within market
segments comprising those products that arehighly substitutable with one another. 13 Whendefining submarkets, the following practicalconsiderations should be taken into account:the industry or public recognition of thesubmarket as a separate economic entity, theproduct’s peculiar characteristics and uses,
unique production facilities, distinct customers,
distinct prices, sensitivity to prices changes,
and specialized vendors. 14 A few US decisions
have identified competitive need in a manner
which is highly reminiscent of the submarket
analysis. 15 These criteria shed some light on
the difficult legal task of applying thecompetitive need test and may also serve as
guiding principles for applying Article
4(1)(xviii) JTL.
3

Concerns Regarding Trade Dress
Protection Pertaining to Patent Policy
The main drawback of the “effect oncompetition” test is that it does not address
the concerns about trade dress protection
annihilating patent policy. US courts havedeveloped particular rules for the purpose ofeffectively demarcating the regulatory realmsof patent and trade dress law. Accordingly, theTenth Circuit held in the Vornado case that a
product configuration is de jure functional if itamounts to “a significant inventive aspect of
the invention so that without it the invention
could not fairly be said to be the same
invention.” 16 The court basically sought toexclude the possibility of trade dress
protection interfering with the public’s ability
to practice inventions disclosed in expired
utility patents. Furthermore, the functionality
doctrine excludes from trade dress protection
signs that are purely technical, namely signs

IIP Bulletin 2015 Vol.24

that simply incorporate technical solutions. 17
As the law now stands in the US, there is a
general rule of functionality which is based oncompetitive need and two per se rules directed
at regulating the relationship between patents
and three-dimensional trademarks.
4

The Theory of Aesthetic Functionality
The core tenet supporting the theory ofaesthetic functionality is that the trademark
proprietor should only be entitled to secureadvantages that are associated with his
reputation as a manufacturer, seller or service
provider by virtue of his exclusive right in asign. As a result, trade dress should not beprotected because its aesthetic appeal may besuch that it renders the trademarked gooddesirable to consumers. The doctrine gained afoothold in US trademark law as soon as it wasrecognized by the Ninth Circuit in the Paglierocase. 18 In subsequent disputes the courts that
adopted this theory sought to analyse in theindividual
case
beforethem,
whether
consumers would buy a product because of its
appealing design or because of the design’s
alleged quality guarantee. 19 The doctrine ofaesthetic functionality met with harsh criticism,
all the more so as it was effectively reducing
the incentive of traders to adopt aestheticallyappealing trade dress. Nevertheless, thedoctrine of aesthetic functionality continues tobe of legal relevance in the context of tradedress protection. Instead of excluding
aesthetically appealing trade dress from tradedress protection altogether, the doctrine has
been modified to exclude product shapes whose
aesthetic appeal is so high that is likely to
exercise a decisive influence on the consumers’purchasing decisions. This approach has been
adopted by the European General Court in the
Bang & Olufsen case. 20 While this legal test is
far from clear and remains difficult to apply, it
reflects an attempt to find a per se rule forregulating the relationship between trade dressand design rights. 21

Ϭ Comments on the Japanese
System for Trademark Protectionof Product Shapes
1

The Requirement of Inherent Distinctiveness
Under this section I will deal with thedistinctiveness requirement as set out in
Article 3(1)(iii) JTL. I will highlight the three
types of criteria invoked by competent● 54 ●

authorities and courts in Japan in order tointerpret that provision and eventually decideon the protectability of a given product shape
as a trademark. According to the first criterion,
the distinctiveness analysis seeks to determine
whether consumers are likely to perceive therespective product shape as a trademark. This
is not likely to occur if a product configuration
does not significantly deviate from the shapethat consumers expect the relevant goods tohave in the first place.
The second criterion aims at preventing
situations in which traders obtain a monopoly
on technical or aesthetically appealing features
simply by registering these as trademarks.
Registration should be denied, even when agiven product configuration comprises uniqueelements that would in all likelihood be relied
upon by consumers to indicate the trademarked
goods’ commercial origin – provided thesefeatures were meant to somehow contribute to
the technical function or the aesthetic appeal of
the relevant goods. The rationale underlying
this interpretation of Article 3(1)(iii) JTL is
twofold: first, it is based on the premise that
trademarks should not impermissibly extend
the temporal scope of patents and design
rights; second, it pays deference to theprinciple of free competition by taking into
account the value judgements contained in
Article 4(1)(xviii) JTL. The administration of
the distinctiveness requirement under thesecond criterion bears some resemblance tothe functionality inquiry in that it balances thesocial benefit to market transparency resulting
from the product configuration’s inherent
distinctiveness with the possible social
monopoly costs that trademark protection
would entail.
Both criteria are mentioned in the JPO
guidelines. Then there is a third criterion uponwhich the IP High Court relied in the
GUYLIAN case. The court resorted to the“monopolization adaptability theory” 22 which,generally speaking, places the emphasis of the
distinctiveness analysis on the need to keep asign available to third parties. 23 Without theneed to keep the sign free from exclusivity
rights, the decision on its registrability would
rather be in favour of the applicant. In my view,
this flexible approach allows for a properbalance of the diverse interests involved in
trademark disputes. Not only does it allow for
the consideration of trader interests when
implementing business strategies for the

purpose of product differentiation, but it also
takes into account the consumer welfare gains
promulgated by a dynamic competition withdifferentiated products.
2

The Secondary Meaning Requirement
The report proceeds next to briefly
examine the administration of the secondary
meaning requirement established by Article
3(2) JTL. The main point here is that the caselaw has developed in a way that makes theoutcome of the respective inquiry largely
dependent on the applicant’s promotional
efforts. 24 Importantly, surveys on consumer
perception are not decisive for establishingsecondary meaning. By doing so, the Japanesetrademark system gives effect to the generalprinciple that trademark scope increases
proportionally to the degree of reputation
enjoyed by the party using the trademark. In
other words, trademark law rewards alongstanding
andsuccessfulcommercial
performance in the marketplace. However, it
must be borne in mind that trade dress
protection is crucial for smaller businesses as
well.
3

Article 4(1)(xviii) JTL – The Japanese
Doctrine of Functionality
The problem with Article 4(1)(xviii) JTL,
i.e. the Japanese functionality provision, is thatit can only be applied when the market would
actually be foreclosed as a consequence oftrademarkprotection
foraproduct
configuration. As a result, it does not appear
that the competent authorities can rely uponthis provision to prevent traders fromrestricting the ability of their competitors tomarket highly substitutable products. In thesame vein, the Japanese doctrine offunctionality does not contain rules for the
purpose of regulating the relationship between
patents and three-dimensional signs that haveacquired secondary meaning. 25
In any event, the wording of the provisionthat requires the shape to be “essential to thefunction” of the relevant products is such thatit allows a teleological approach to encompass
the aforementioned competitive need theories
and the per se rules pertaining to patent policy.
To determine competitive need, one could use
a narrow market definition for the purpose ofascertaining whether a given shape isnecessary for obtaining a particular utility. In
addition, a purely technical shape may be● 55 ●IIP Bulletin 2015 Vol.24

excluded from trademark protection as being
essential to the function of the relevant goodsin the sense that it constitutes the feature thatmakes the product actually work. The“essentiality” of the shape could also refer to it
being necessary for practicing an invention
disclosed in an expired utility patent.
Such a teleological interpretation could
result in a greater degree of harmonization
between the Japanese trademark law and its US
and EU counterparts.
According to the revised version of Article
4(1)(xviii) JTL the functionality doctrine would
bar trademark protection for product shapes
consisting solely of characteristics of goods. At
this point one could only speculate on theinterpretation of this provision by thecompetent authorities. Apparently, the provision
is meant to set a limit to the protection of the
new types of non-conventional marks 26 that therevised JTL will recognise as eligible fortrademark protection. It is possible that thecompetent authorities resort to the criteria
relevant to the application of Art 3(1)(iii) JTL
thereby excluding from trademark protection
all shapes that serve somehow the technical or
aesthetic purpose of the relevant goods. Suchan application of Article 4(1)(xviii) JTL would
unjustifiably curtail the protection of productshapes as trademarks. In any event, thewording of the new provision allows for ateleological interpretation like the one
suggested above accommodating the concerns
regarding the ability of competitors to market
highlysubstitutableproducts
andtheconsiderations pertaining to patent policy.

ϭ Conclusion
In the GUYLIAN case, the IP High Court
delivered an opinion which sought to reconcile
the interests of traders in adopting the tradedress of their choice and the interests ofcompetitors in the availability of productshapes for their own products. If applied
carefully, the criteria introduced in the
GUYLIAN case of the IP High Court willdefinitely improve the legal framework for theprotection of three-dimensional trademarks.
On the other hand, the functionality
doctrine is in need of some refinement so as toencompass situations where trade dress
protection would interfere with the ability ofcompetitors to market highly substitutableproducts. Functionality should also prevent

IIP Bulletin 2015 Vol.24

traders from interfering with the ability ofcompetitors to practice inventions that are
already disclosed in utility patents or fromavailing themselves of pre-existing technicalsolutions. Beyond the necessary refinements
to the interpretation of Article 4(1)(xviii) JTL,
it is also vital that the courts engage in a very
careful analysis of the product shape. Only by
doing so, will it be possible to precisely
ascertain the actual utility that the design
confers upon the products and thereby have aclear idea of the scope of the monopoly that theapplicant is seeking to create.

1

Krueger Intern., Inc. v. Nightingale Inc., 915 F.
Supp. 595 (S.D.N.Y. 1996).
2
Apostolos Chronopoulos, Trade Dress Rights as
Instruments of Monopolistic Competition: Towards a
Rejuvenation of the Misappropriation Doctrine in
Unfair Competition Law and a Property Theory ofTrademarks, 16:1 MARQ. INTELL. PROP. L. REV.
119-179 (2012).
3
See generally, APOSTOLOS CHRONOPOULOS,DAS MARKENRECHT ALS TEIL DERWETTBEWERBSORDNUNG, 2013, 171 et seq.
4
Wal-Mart Stores, Inc. v. Samara Brothers, Inc., 529
U.S. 205 (2000).
5Mag Instrument Inc. v (OHIM), Case C-136/02 P,
7.10.2004, paras. 30-32.
6
Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763(1992).
7
Callaway Golf Co. v. Golf Clean, Inc., 915 F. Supp.
1206, 1212–13 (M.D. Fla. 1995); Kompan A.S. v.
Park Structures, Inc., 890 F. Supp. 1167 (N.D.N.Y.
1995); Banff Ltd. v. Limited, Inc., 869 F. Supp. 1103
(S.D.N.Y. 1994); Chevron Chem. Co. v. Voluntary
Purchasing Grps., Inc., 659 F.2d 695 (5 th Cir. 1981).
8
Chronopoulos, supra note 2.
9
See the reports on the case offered by Junko Izumi,
Three-Dimensional Trademark Registration in Japan,
103 TRADEMARK REP. 895, 899-900 (2013) and
Hiromichi Aoki, Fundamental Structure of a ThreeDimensional
Trademark
Systemand
Its
Interpretation - Comparative Studies in Japan, theU.S. and Europe -, Intellectual Property Law and
Policy Journal, Vol. 26, pp. 1-34, January 2010.
10
In re Morton-Norwich Products, Inc., 671 F.2d 1332
(C.C.P.A. 1982).
11
Chronopoulos, supra note 2 at 169-177.
12
Id.
13
See generally Jonathan B. Baker, Stepping Out in an
Old Brown Shoe: In Qualified Praise of Submarkets,
68 ANTITRUST L. J. 203 (2000–2001).
14
Brown Shoe Co. v. United States, 370 U.S. 294, 325(1962).
15
See for example Federal Trade Comm‘n v. Staples,
Inc., 970 F. Supp. 1066 (D.D.C. 1997).
16
Vornado Air Circulation Systems, Inc. v. Duracraft
Corporation, 58 F.3d 1498, 1510 (10 Cir. 1995).
17
TrafFix Devices, Inc. v. Marketing Displays, Inc.,
532 U.S. 23 (2001).

● 56 ●

18

Pagliero v. Wallace China Co., Limited, 198 F.2d 339(9th Cir. 1952).
19
See generally, Mitchell M. Wong, The Aesthetic
Functionality Doctrine and the Law of Trade-Dress
Protection, 83 CORNELL L. REV. 1116 (1997–1998).
20
Bang & Olufsen A/S v OHIM, Case T-508/08,
6.10.2011.
21
Michael S. Mireles, Jr, Aesthetic Functionality, 21
TEX. INTELL. PROP. L.J. 155 (2013).
22
Soichi Ogawa, Distinctiveness of Three-Dimensional
Trademarks Consisting of the Shape of Goods - Article
3, paragraph (1), item (iii) of the Trademark Act -,Selected Articles in Honor of the 120th Anniversaryof the Founding of Nihon University College of Law,
Vol. 1, pp. 269-301, October, 2009.
23
On the “monopolization adaptability theory” seegenerally SHOEN ONO, OVERVIEW OF JAPANESETRADEMARK LAW, 1999, Chapter 5, 10 and 17.
24
Izumi, supra note 9.
25
Kazufumi Dohi, Registration Requirements for ThreeDimensional Trademarks, L & T, No. 54, 54-62(2012).
26"Colour per se", "sound", "motion", "hologram" and"position" marks.

● 57 ●IIP Bulletin 2015 Vol.24