U.S. Industrial Design/Trade Dress Litigation May Be Avoidable

U.S. INDUSTRIAL DESIGN/TRADE DRESS LITIGATION MAY BE AVOIDABLE

by Brian D. Anderson, Esq.

By registration as trademarks of "Industrial Design" features [trade dress in the U.S.], the uncertainty of outcome fueling such American litigation can be reduced, with like effect on both the frequency, intensity and cost of litigation writes Brian Anderson, a partner in our Trademark and Copyright Practice Group.

With increasing international trade and focus on the various forms of intellectual and industrial property protection for such endeavors, there is mounting interest in the protection of product features not effectively or traditionally covered by patent or copyright. Such industrial property is addressed differently and inconsistently throughout the world as: Industrial Design, trade dress, "get up", product configuration marks, the law of "passing off", the law of unfair competition. Although efforts are underway in the European Community toward harmonization of the various laws of the member countries in the Industrial Design area, few believe this or broader international agreement on the scope and substance of a sui generis Industrial Design law to be imminent.

U.S. Design/Trade Dress Litigation is Increasing, But Why?
Despite persistent efforts in the 1980's the United States has never adopted a law of Industrial Design, first codified in 1806 in France and widely imitated throughout the world thereafter. Instead, U.S. protection for product features not effectively covered by patents or copyrights has increasingly been sought within the law of Trademarks and Unfair Competition. It is presently not uncommon in the U.S. for a broad array of product features as well as features of service industries to be looked upon and protected as trademarks, and imitators challenged in the courts with trade dress infringement and Unfair Competition claims. Recent widely reported cases have: upheld protection for the color pink for building insulation (Owens Corning); affirmed as a trademark the color green/gold for ironing press pad covers (Qualitex); found infringing the overall interior trade dress of a chain of Mexican style restaurants (Two Pesos).

Not only is the volume of Unfair Competition litigation over such issues increasing but the most recent Economic Survey of the American Intellectual Property Law Association ("AIPLA") would seem to confirm the widespread view that the intensity [and cost] of such litigation is also on the rise. Litigation of unfair competition/trademark infringement cases is increasingly expensive. Median cost for a single issue Federal Trademark infringement litigation is $250,000; with costs likely to be significantly higher in New York, Chicago and Los Angeles. AIPLA 1995 Economic Survey. The nature and cost of such litigation is both foreign and abhorrent to many overseas businesses entering the U.S. market, while to domestic industry the costs of litigation are all too familiar if no less unwelcome.

Why should this be when the overwhelming majority of such cases are governed by the long established federal trademark law(s)? In the opinion of the author, the factual and legal ambiguities of such cases give rise to an uncertainty of outcome for both sides, tending to fuel the litigation.

As is widely known, the laws of the United States are grounded in the common law tradition whereby economic and social policy reflected by the law is somewhat more fluid or less predictable than the law of countries with a civil or statutory code tradition. In the U.S. the law in the area of both unfair competition and trademarks is thus a hybrid of statutory principles and equitable rulings by the judiciary. In few other countries does the judiciary play such a prominent role in determining the important economic and social policy of what is or is not, "Unfair Competition". Statutory changes in this area of the law are generally few and far between and, when compared to the accretion of the common/case law by the courts, might be said to constitute general pronouncement(s) of principle believed by Congress to be both acceptable within the mainstream of domestic economic and social thought and non-disruptive internationally. That the important "details" of what constitutes fair and unfair competition are left for decision on a case by case basis by the courts necessarily involves uncertainty of outcome for both domestic and international business introducing new products and services in the United States market.

Thus, although litigation in the U.S. over newly introduced product/service design, packaging or trade dress features is increasingly common, the unique factual situations presented by each case clouds the applicability of both established trademark principles and issues of public policy (or the perceived equities presented). This situation in turn adds to the uncertainty of outcome -- both to the parties and the courts, often causing hard fought, protracted litigation. But there are steps that can be taken to minimize both the likelihood of litigation arising and which tend to increase the certainty of outcome and thereby encourage earlier settlement.

Broad, Flexible U.S. Trademark Laws Encourage Registration of Rights
For various reasons, securing trademark registration in the United States for such product/service design, packaging or trade dress features should receive early consideration by management and, in many cases, appropriate filings undertaken. Not least among the benefits of registration are the priority rights and statutory presumptions of validity afforded such rights upon issuance. Apart from the purely procedural benefit of such presumptions, ownership of a United States Trademark Registration on the Principal Register by either party would weigh favorably in the analysis of likelihood of success on the merits, not only by the courts but by the parties themselves.

The subject matter registrable in the United States is very broadly defined by statute. Little, if any, subject matter is statutorily precluded, although administratively the Patent & Trademark Office has historically taken a narrower view. Nonetheless, scents, sounds and other 'sensory marks', color, architectural features, product and container configurations and many other types of subject matter have long been registrable as trademarks or service marks. The broad scope of our trademark law remains surprising to many overseas intellectual property practitioners accustomed both to the availability of Industrial Design protection and a considerably narrower statutory and cultural view of what constitutes a trademark. International efforts toward the harmonization of world trademark law is gradually leading toward a more common understanding on such issues as, for example, with the increasing recognition of three dimensional marks. In time, these and like efforts with the limited term protection Industrial Design law will no doubt reinvigorate efforts in the United States to pass meaningful sui generis Industrial Design legislation. The future possibility of such short term Industrial Design protection passing is, however, all the more reason for securing federal trademark registration protection which is renewable indefinitely so long as use continues.

Recent Case Law Confirms That Property Rights Protectable
in the Courts Should be Registrable
The ability to secure registration for non-traditional trademark subject matter has been eased by a recent administrative decision of the United States Trademark Trial & Appeal Board in the case of In re Hudson News Company. That case presented for registration the following description of the interior trade dress of a chain of newsstands:

The mark is a distinctive trade dress composed of a cool bluish, clean and salubrious newsstand shopping environment. The blue motif is created and enhanced by blue neon lighting associated with the store name and publication(s) displays, blue carpeting, blue accents, and blue employee uniforms. The blue motif is further enhanced by extensive use of clear, acrylic plastic shelving and coverings for displays which both reflect and allow for the passage of the reflected bluish light throughout.

Early commentary on the issue decided favorably by the Board confirms the significance of the case: "This is an extraordinary decision which, if followed by the Examining Operation, will quickly open up the federal register to a wide range of subject matter not previously accepted under the trademark definitional provisions of the Lanham [Trademark] Act." Allen's Trademark Digest, Volume X, No. 3, 1996. The case is presently on appeal to the Court of Appeals for the Federal Circuit from an adverse ruling on a second issue of law.

The Hudson News case presents for registration rights analytically similar to those unregistered trade dress rights sustained on appeal by the United States Supreme Court in the well known Two Pesos Mexican restaurant case. The registrability of industrial property rights, however abstract, which are cognizable under the common law and in the courts is consistent with the broad policy favoring public registration. Registration enables access to such claims of right for purposes of clearance searching prior to adoption and use of marks by third parties. There are in addition, numerous procedural safeguards against the abuse of the registration process, such as the right of parties to Oppose registration or to Petition to Cancel registrations on various grounds. Thus, it would seem that rights sustainable in court should be registrable, whether owned by the plaintiff or the defendant. The case for this principle is perhaps more readily understandable where the rights of the plaintiff/senior user are involved. However, the registration of lawful rights is available for all thus, a defendant/junior user with its own protectable [but non-patentable and uncopyrightable] enhancements may also benefit and reduce the likelihood of litigation by taking such action itself.

Summary
The registration of trademark rights in the United States for a broad range of trade dress or Industrial Design subject matter is generally advisable, increasingly viable and, relative both to the cost of litigation and the benefits afforded in this large marketplace, very inexpensive. The potential benefits of early filing of such trademark applications cannot be overstated. Early filing for trademark registration serves to curtail the legal rights of competitors in their subsequent introduction of knock-off products or imitative service activity at such time trademark rights vest and a federal registration issues. Additionally, a federal registration on the Principal Register is useful both psychologically with an adversary and substantively in court. In the United States, the often used maxim applicable to the registration of trademarks, 'file early and often' is now generally applicable to a broad range of subject matter although individual situations should be discussed with United States trademark counsel.

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Mr. Anderson is representing Hudson News Company in the case discussed above.

Reprinted with permission. First published in United States Litigation Yearbook 1997.