INTRODUCTION :: Trademark law’s functionality doctrine is a mess, and the responsibility for this mess rests squarely with the United States Supreme Court. In TrafFix Devices, Inc. v. Marketing Displays, Inc., the Supreme Court intervened to resolve a minor split on a secondary functionality issue, and proceeded to recast the entire law of functionality. In so doing, the Court summarily rejected the general functionality standard used by every circuit court of appeals prior to the TrafFix decision. The TrafFix Court simply declared the existing law “incorrect,” and replaced it with an unwieldy, unjustified, and unworkable set of rules.
The mess created by the TrafFix Court is troublesome. The functionality doctrine is perhaps the most important limitation on trademark protection for product configurations and packaging. A functional product feature cannot be protected as a trademark. This statement of black letter law illustrates both the importance and the crux of the difficulty posed by the functionality doctrine. It is important because how we define functionality will directly affect the range of symbols that may be protected as trademarks. It is difficult because persons with different views on the propriety of trademark protection for attributes such as product configuration or product color are likely to push for different functionality standards. In the TrafFix decision, the Court rejected a competition-based definition of functionality, but failed to provide a clear alternative definition.
Within one year of the TrafFix decision, the lower federal courts divided on the crucial question of what general functionality standard should be used. 7 The Court of Appeals for the Federal Circuit concluded that TrafFix did not change the general functionality standard. This reading is particularly significant because the United States Patent and Trademark Office (PTO) is bound by the decisions of the Federal Circuit on such issues. The PTO, therefore, is still using a competition-based functionality standard when evaluating applications to register trademarks. Other courts, however, have read TrafFix as radically changing the law. These courts now equate functionality with utility, a standard very different from the competition-based standard in use prior to TrafFix.
To appreciate the significance of this split, consider the shape of a plastic spray bottle like the one used with Fantastik cleaner or Spray ‘N Wash laundry stain treatment. This bottle design was the subject of a trademark application filed in 1977. In 1982, the Court of Claims and Patent Appeals (CCPA) held that the bottle design was non-functional, and therefore could be registered as a trademark if the applicant could show the bottle design was distinctive. The design was unquestionably useful, but there was evidence that other bottle designs worked as well as the one used by the applicant. Because the CCPA held that functionality must be defined in terms of competitive need, the design was found to be non-functional.
If, however, functionality is equated with utility (i.e., the approach taken by some courts after TrafFix), the applicant’s bottle design would be functional, and therefore, ineligible for trademark protection. Because of the current division in the courts, it is likely that some product features will be registered as trademarks, based on the competitive need standard used by the PTO, but will be deemed functional, and thus unprotected, by some courts. In fact, at least three federally registered trademarks have been found functional in post-TrafFix decisions, including one decision involving a well-known design logo used on athletic shoes. In all three cases, the registered trademarks probably would have been upheld if the courts had used a competitive need functionality standard.
In this Article, I examine the development (i.e., the rise) and collapse (i.e., the fall) of the functionality doctrine. I describe an important common-law struggle, an effort that produced a coherent, workable limitation on trademark protection for nontraditional product identifiers. The doctrine produced by this struggle denied trademark protection to product features necessary for free and vigorous competition. Such features were deemed functional under this competitive need standard. While the “functional” label may have been a bit misleading, the competitive need standard was well-established in the federal courts when TrafFix was decided.
The functionality story I tell differs from the stories told by most commentators. Where others have found division and confusion in the courts, I find consistencies and trends toward a coherent doctrine. Where others have focused primarily on modern cases, I present a careful review of unfair competition cases from the early twentieth century and discover important lessons from the early cases. The functionality story I tell makes clear that this was not a doctrine in need of repair. It was, to the contrary, a remarkable common-law success. By the end of the twentieth century, the functionality doctrine was working better than it ever had.
Unfortunately, the functionality story does not have a happy ending. The doctrine collapsed in TrafFix. The Supreme Court turned its back on the doctrine’s rich history, recast its own prior functionality decisions, and adopted new rules that no one seems to understand. The current division in the lower federal courts over the proper general functionality standard is not the only problem caused by the TrafFix decision. The TrafFix Court held that product features with aesthetic value require different treatment than features with utilitarian value. The competitive need standard described above still applies to aesthetic features, but a different standard applies to utilitarian features. Though courts are divided on exactly what the utilitarian standard is, it is clear that more designs will be deemed functional, and thus denied trademark protection, under this standard than under the competitive need standard. The distinction between aesthetics and utility, therefore, is now extremely important. In close cases-and there probably will be many-vigorous disputes are likely to arise on the question of whether the aesthetic functionality standard or the utilitarian functionality standard should be used. The resolution of this issue will effectively resolve the functionality question in many cases. Prior to TrafFix, most courts used the competitive need standard regardless of the aesthetic or utilitarian nature of the product features at issue. This troublesome distinction is likely to lead to a great deal of confusion and inconsistency in the lower federal courts.
I identify three possible solutions to the problems caused by TrafFix. All three require a complete rejection of the TrafFix analysis. The first, and perhaps most obvious, solution is to return to the competitive need functionality standard. This solution would essentially take the law back to its pre-TrafFix state, though it would be helpful to do a bit more. The circuit courts were divided on the question of how to deal with trade dress claims that include elements of a previously patented invention. A number of commentators have argued for a broad right to copy unpatented articles and especially previously patented articles. The concern raised by these commentators is that overbroad trademark protection for such articles might undermine the balance struck by the patent system. These arguments were rejected by almost all courts, but one, the Tenth Circuit Court of Appeals, adopted a special rule for trade dress cases involving previously patented articles. This isolated decision should be expressly rejected, along with TrafFix, and the competitive need standard applied as the sole limitation on the scope of trademark protection for unpatented, distinctive, product features. Finally, this first solution also should make clear that no distinction is needed between aesthetic and utilitarian features.
The second solution requires the elimination of functionality as an element of trade dress claims and adopts, in its place, a limited functionality defense. This proposal may be more controversial than the first, partly because the treatment of functionality as an element of a claim for trade dress infringement is so well-established in the modern practice. Old habits sometimes die hard. But in this case, there are good reasons to reject the established practice.
The modern functionality rule is a front-end, filtering rule. Trade dress claims are evaluated by examining the claimant’s overall product design. If that design is deemed functional, the trade dress claim fails. If the design is non-functional, the claim proceeds with no further analysis of the functionality issue. This approach is flawed. The functionality inquiry should look at the defendant’s product, or more specifically, at the parts of the defendant’s product copied from the plaintiff’s product. No party should be enjoined from the use of functional product features. On the other hand, where the plaintiff can prove its design is distinctive and the defendant’s design is likely to confuse consumers, a court should not walk away from the controversy, even if the plaintiff’s overall design is deemed functional. To do so-and this is precisely what modern courts have done upon finding a plaintiff’s design functional-is to ignore the consumer interest in preventing confusion. Where confusion is likely, some steps should be taken to reduce or eliminate the confusion risk. The burden of such steps should be allocated in an equitable manner between the plaintiff and the defendant.
My second proposal, eliminating functionality as an element of a trade dress claim, may seem radical, but it is not. Nor is it new. This proposal is based on the functionality analysis conducted by courts during the early development of the doctrine. In the earliest functionality cases, courts focused on the elements a defendant copied and refused to enjoin copying where such elements were found to be functional. The courts, however, still imposed on such defendants a duty to take reasonable steps to distinguish their products from those of the plaintiffs. This lesson from the early cases was somehow lost when the courts began to treat functionality as an affirmative element rather than a limited defense. I believe much would be gained by returning to the old rule.
My third proposal is a combination of the first two. It may be the most attractive solution, though I believe the second proposal is a sufficient solution. By combining the first two proposals, a front-end functionality rule would remain in place to filter out bogus claims and applications to register wholly-functional designs as trademarks. The limited functionality defense would continue to play an important role in resolving litigated trade dress disputes and would provide the flexibility needed to best balance the competing interests at stake. Because this solution offers the benefits of the second proposal, while keeping important parts of the modern functionality approach, it may be more acceptable to the range of parties interested in reforming the functionality doctrine.
My analysis and arguments are presented in three parts. First, I examine the rise of the functionality doctrine. This examination, presented in Part I below, is the longest of the three parts. It covers the development of the doctrine over a period of almost 100 years and includes a discussion of aesthetic functionality and the debate over special rules limiting trademark protection for features of previously patented inventions. In Part II, I describe the fall of the doctrine. TrafFix is the cause of the fall and the primary focus of this part of my analysis. I also examine the consequences of TrafFix in the lower courts, finding both division and confusion. Finally, in Part III, I present arguments supporting my three proposed solutions to the TrafFix problems.
November 2014, Vol. 66, No. 6
Lily Kahng, The Taxation of Intellectual Capital