Opinion ID: 709490
Heading Depth: 2
Heading Rank: 2

Heading: Knitwaves' Lanham Act Claim

Text: 40 Lollytogs advances two reasons why we should reverse the court's finding that Lollytogs violated the Lanham Act. It contends, first, that the trade dress of Knitwaves' sweaters is not protectible, and, second, that the district court erred in finding a likelihood of confusion between Knitwaves' and Lollytogs' sweaters. As discussed below, we agree that the sweaters' trade dress is not protectible, and so we vacate that part of the court's order finding a Lanham Act violation, without addressing the issue of likelihood of confusion. 41 While trade dress at one time referred only to the manner in which a product was 'dressed up' to go to market with a label, package, display card, and similar packaging elements, the concept has taken on a more expansive meaning and includes the design and appearance of the product as well as that of the container and all elements making up the total visual image by which the product is presented to customers. Jeffrey Milstein, Inc. v. Greger, Lawlor, Roth, Inc., 58 F.3d 27, 31 (2d Cir.1995). Trade dress, thus, is  'essentially [a product's] total image and overall appearance.'  Id. (quoting Two Pesos, Inc., v. Taco Cabana, Inc., 505 U.S. 763, 764 n. 1, 112 S.Ct. 2753, 2755 n. 1, 120 L.Ed.2d 615 (1992)). See also Restatement (Third) of Unfair Competition Sec. 16 & cmt. a (1995). 42 In contending that Knitwaves' sweaters are not protectible under the Lanham Act, Lollytogs relies primarily on what has been dubbed the functionality (or, more precisely in this case, the aesthetic functionality) defense. See Qualitex Co. v. Jacobson Prods. Co., --- U.S. ----, ----, 115 S.Ct. 1300, 1306, 131 L.Ed.2d 248 (1995); Villeroy & Boch Keramische Werke K.G. v. THC Systems, Inc., 999 F.2d 619, 620-21 (2d Cir.1993); Coach Leatherware Co. v. AnnTaylor, Inc., 933 F.2d 162, 171 (2d Cir.1991); Wallace Int'l Silversmiths, Inc. v. Godinger Silver Art Co., 916 F.2d 76, 79-81 (2d Cir.1990), cert. denied, 499 U.S. 976, 111 S.Ct. 1622, 113 L.Ed.2d 720 (1991); Stormy Clime Ltd. v. ProGroup, Inc., 809 F.2d 971, 974-79 (2d Cir.1987); LeSportsac, Inc. v. K Mart Corp., 754 F.2d 71, 78 (2d Cir.1985); Restatement (Third), supra, Sec. 17 cmt. c. We have explained this doctrine and its relation to the other elements of a claim brought under section 43(a) of the Lanham Act as follows: 43 An action for trade dress infringement under Sec. 43(a) of the Lanham Act may be maintained if the plaintiff is able to show either that its trade dress is inherently distinctive, or, if the trade dress is not inherently distinctive, that it has acquired secondary meaning--that is, the trade dress identifies the source of the product--and that there is a likelihood of confusion between the original trade dress and the trade dress of the allegedly infringing product. Despite this type of showing, a defendant may avoid liability under Sec. 43(a) of the Lanham Act if he or she is able to demonstrate that the allegedly similar trade dress feature is functional. 44 Villeroy, 999 F.2d at 620 (citations and internal quotations omitted). 45 The functionality doctrine, the Supreme Court has recently explained, 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. Qualitex, --- U.S. at ----, 115 S.Ct. at 1304. Protection of functional product features is the province of patent law, not trademark law. Id. 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,' that is, if exclusive use of the feature would put competitors at a significant non-reputation-related disadvantage. Id. (quoting Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 850 n. 10, 102 S.Ct. 2182, 2187 n. 10, 72 L.Ed.2d 606 (1982)). 46 In Wallace, relying in part on the Draft Restatement (Third) of Unfair Competition, we held that the functionality doctrine may apply even to features of a product that are purely ornamental: where an ornamental feature is claimed as a trademark and trademark protection would significantly hinder competition by limiting the range of adequate alternative designs, the aesthetic functionality doctrine denies such protection. 916 F.2d at 81; see also Restatement (Third), supra, Sec. 17 cmt. c (A design is functional because of its aesthetic value only if it confers a significant benefit that cannot practically be duplicated by the use of alternative designs). 47 Lollytogs contends that the designs on Knitwaves' sweaters are functional in that their primary purpose is aesthetic--to enhance the sweaters' ornamental appeal--rather than to identify the sweaters as Knitwaves products. See LeSportsac, 754 F.2d at 78 (design of sport bag is non-functional, and therefore protectible, trade dress if its principal function is to identify the bag's maker rather than to make the bag aesthetically pleasing). By precluding Lollytogs from making sweaters with the basic fall motifs of squirrels and leaves, Lollytogs contends, Knitwaves would significantly restrict the number of designs available for apparel manufacturers wishing to compete in the back-to-school clothing market, and would thus foreclose Lollytogs from competing effectively in that market. 48 We find persuasive Lollytogs' contention that the primary purpose of Knitwaves' designs is aesthetic, but we do not agree that protecting the designs would restrict Lollytogs' ability to compete. Since functionality is a defense to a suit for trade dress infringement, the burden therefore falls on the defendant to prove functionality. Id. at 76. Lollytogs has adduced no evidence whatsoever that the number of designs available for fall motif sweaters is limited, and that consequently extension of trade dress protection to Knitwaves' two sweater designs would restrict Lollytogs' ability to produce alternative competitive designs. See Villeroy, 999 F.2d at 621 (defendant manufacturer of chinaware could not demonstrate that chinaware designs were in such short supply that it could not compete in the market for hotel china without copying plaintiff's design); cf. Wallace, 916 F.2d at 80 (plaintiff's baroque silverware design was functional, and thus not protectible, because effective competition in the silverware market required use of essentially the same scrolls and flowers). 49 Lollytogs argues too broadly. According trademark protection to Knitwaves' designs would not preclude Lollytogs from using fall colors or motifs, squirrels or leaves. It would preclude only the use of designs so similar as to create a likelihood of confusion. 50 Lollytogs thus cannot meet the market foreclosure requirement of functionality. The arguments it raises under the rubric of functionality, however, support a related (and more successful) argument: since the primary purpose of Knitwaves' sweater designs is aesthetic rather than source-identifying, Knitwaves' sweater designs do not meet the first requirement of an action under Sec. 43(a) of the Lanham Act--that they be used as a mark to identify or distinguish the source. 51 As noted above, to prevail in an action for trade dress infringement under Sec. 43(a) of the Lanham Act, a plaintiff must prove (1) that its dress is distinctive of the source and (2) that a likelihood of confusion exists between its product and defendant's product. Jeffrey Milstein, 58 F.3d at 31. To establish that a trade dress is distinctive of a particular source, a plaintiff must demonstrate either that it is inherently distinctive or that it has become distinctive through acquiring secondary meaning to the consuming public. Villeroy, 999 F.2d at 620. 52 Prior to the Supreme Court's decision in Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 112 S.Ct. 2753, 120 L.Ed.2d 615 (1992), this circuit had held that trade dress, unlike trademarks, could never be inherently distinctive, and thus we required plaintiffs seeking Sec. 43(a) protection of trade dress to establish distinctiveness by proving that the trade dress had acquired secondary meaning. See, e.g., Wallace, 916 F.2d at 79; Stormy Clime, 809 F.2d at 974. In Two Pesos, however, the Supreme Court rejected this circuit's approach, finding no textual basis in Sec. 43(a) for treating inherently distinctive verbal or symbolic trademarks differently from inherently distinctive trade dress. 505 U.S. at 774, 112 S.Ct. at 2760. Plaintiffs in trade dress infringement cases, just as in trademark cases, should be given a chance, the Court reasoned, to demonstrate that their trade dress is capable of identifying products or services as coming from a specific source. Id. To deny such plaintiffs this opportunity until secondary meaning has been established would impose particular burdens on the start-up of small companies, by allowing competitors to appropriate the plaintiff's dress in other markets and to deter the plaintiff from expanding into and competing in these areas. Id. at 775, 112 S.Ct. at 2761. 53 The Two Pesos decision left this circuit with the task of determining what it means for trade dress to be inherently distinctive. In Paddington Corp. v. Attiki Importers & Distribs., Inc., 996 F.2d 577 (2d Cir.1993), we addressed this issue and concluded that the test set out by Judge Friendly in Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir.1976), for evaluating the inherent distinctiveness of trademarks was also applicable in the trade dress context. 996 F.2d at 583-84; followed in Jeffrey Milstein, 58 F.3d at 31-32. Under the Abercrombie test, marks are classified as either (1) generic, (2) descriptive, (3) suggestive, or (4) arbitrary or fanciful. Paddington, 996 F.2d at 583. While generic marks can never serve to distinguish a source, and descriptive marks require a demonstration of secondary meaning in order to become distinctive, suggestive and arbitrary or fanciful marks are considered to be inherently distinctive. Id. Applying this reasoning, we examined the trade dress of a liquor bottle and found the bottle's label arbitrary in that [t]he tone and layout of the colors, the style and size of the lettering, and, most important, the overall appearance of the bottle's labeling.... were selected from an almost limitless supply of patterns, colors and designs. Id. at 584. Finding the bottle's trade dress arbitrary, we concluded that it was per se distinctive. Id. 54 We do not find the analysis of Paddington appropriate in the case before us, in which the trade dress at issue consists of a product's features--the artwork on a sweater--rather than, as in Paddington, a product's packaging. Not only does the classification of marks into generic, descriptive, suggestive, or arbitrary or fanciful make little sense when applied to product features, but it would have the unwelcome, and likely unintended, result of treating a class of product features as inherently distinctive, and thus eligible for trade dress protection, even though they were never intended to serve a source-identifying function. The Third Circuit has made this point persuasively in a recent case: 55 The difficulty is that ... a product configuration differs fundamentally from a product's trademark, insofar as it is not a symbol according to which one can relate the signifier (the trademark, or perhaps the packaging) to the signified (the product). Being constitutive of the product itself and thus having no such dialectical relationship to the product, the product's configuration cannot be said to be suggestive or descriptive of the product, or arbitrary or fanciful in relation to it. The very basis for the trademark taxonomy--the descriptive relationship between the mark and the product, along with the degree to which the mark describes the product--is unsuited for application to the product itself. 56 Duraco Prods., Inc. v. Joy Plastic Enterprises, Ltd., 40 F.3d 1431, 1440-41 (3d Cir.1994) (citations omitted). See also Restatement (Third), supra, Sec. 16 cmt. b: 57 As a practical matter, ... it is less common for consumers to recognize the design of a product or product feature [as opposed to packaging features] as an indication of source. Product designs are more likely to be seen merely as utilitarian or ornamental aspects of the goods. In addition, the competitive interest in copying product designs is more substantial than in the case of packaging, containers, labels, and related subject matter. Product designs are therefore not ordinarily considered inherently distinctive and are thus normally protected only upon proof of secondary meaning. 58 The Supreme Court made a similar point recently when it addressed whether the Lanham Act permits registration of a trademark which consists solely of a color. A color, it noted, is capable of satisfying the more important part of the statutory definition of a trademark, which requires that a person 'us[e]' or 'inten[d] to use' the mark 'to identify and distinguish his or her goods.... from those manufactured or sold by others and to indicate the source of the goods ...'  Qualitex, --- U.S. at ----, 115 S.Ct. at 1303 (quoting 15 U.S.C. Sec. 1127). On the other hand, the Court noted, in an observation equally applicable to product features: 59 [A] product's color is unlike fanciful, arbitrary, or suggestive words or designs, which almost automatically tell a customer that they refer to a brand. The imaginary word Suntost, or the words Suntost Marmalade, on a jar of orange jam immediately would signal a brand or a product source; the jam's orange color does not do so. 60 Id. (citations omitted). Thus, the Court concluded, a product's color is capable of indicating a product's source, and thereby becoming eligible for trademark protection, only when it acquires secondary meaning as, over time, customers come to associate that color with the particular product. Id. 61 As noted above, in Two Pesos the Court concluded that trade dress--unlike color alone, see Qualitex--may be inherently distinctive even without the addition of secondary meaning. We do not think, however, that the Court thereby intended to nullify what it called, in Qualitex, the more important part of the statutory definition of a trademark--the requirement that a person 'us[e]' or 'inten[d] to use' the mark 'to identify and distinguish his or her goods ... from those manufactured or sold by others and to indicate the source of the goods.'  Qualitex, --- U.S. at ----, 115 S.Ct. at 1303 (quoting 15 U.S.C. Sec. 1127); see also Restatement (Third), supra, Sec. 16 cmt. b (The imitation or even complete duplication of another's product or packaging will not create a risk of confusion unless some aspect of the duplicated appearance is identified with a particular source.). While arbitrary, fanciful, or suggestive packaging of a product may be presumed to serve this source-identifying function, and thus may be deemed per se distinctive of the source, see Paddington, 996 F.2d at 583, the same presumption may not be made with regard to product features or designs whose primary purposes are likely to be functional or aesthetic. 62 Accordingly, in determining whether each of Knitwaves' sweater designs can be protected as a trademark, we do not ask whether it is generic, descriptive, suggestive, or arbitrary or fanciful--categorizations which we find inapplicable to product features. Rather, we ask whether it is likely to serve primarily as a designator of origin of the product, Duraco, 40 F.3d at 1449. Cf. Restatement (Third), supra, Sec. 13(a) (whether because of the nature of the [design] and the context in which it is used, prospective purchasers are likely to perceive it as a [design] that ... identifies goods or services produced or sponsored by [Knitwaves]); and see id. Sec. 16; Imagineering, Inc. v. Van Klassens, Inc., 53 F.3d 1260, 1263-64 (Fed.Cir.1995) (Trade dress is inherently distinctive when, by its 'intrinsic nature,' it identifies the particular source of a product.) (quoting Two Pesos, 505 U.S. at 768, 112 S.Ct. at 2757); Tone Bros., Inc. v. Sysco Corp., 28 F.3d 1192, 1206 (Fed.Cir.1994) (the focus of the inquiry is whether or not the trade dress is of such a design that a buyer will immediately rely on it to differentiate the product from those of competing manufacturers), cert. denied, --- U.S. ----, 115 S.Ct. 1356, 131 L.Ed.2d 214 (1995). 6 63 As Knitwaves' objective in the two sweater designs was primarily aesthetic, the designs were not primarily intended as source identification. Those sweater designs therefore fail to qualify for protection of trade dress inherent in product design. Accordingly, the judgment in favor of Knitwaves on the Lanham Act claim is reversed. Judgment should be entered for Lollytogs on this claim. 64 As set out in the following section, the significance of our decision to vacate the court's finding of a Lanham Act violation is limited; the judgment may be affirmed with only slight modification under the Copyright Act alone, with the exception of the court's award of $12,000 in lost profits under the Lanham Act. 65