Design patent regime preempts state law claims for copying unpatented articles

Carson Optical, Inc. v. Prym Consumer USA, Inc., 2013 WL 1209041 (E.D.N.Y.)

Carson sued Prym, a manufacturer of competing optical products, and Jo-Ann Stores, a retailer, for patent infringement, trade dress infringement, unfair competition, and tortious interference with prospective business relations. Carson asserted infringement of four design patents for three different products.  The designs of Carson’s SureGrip and Clip & Flip weren’t protected by design patents, but allegedly had a distinctive overall design that had been a commercial success.  Carson also alleged that defendants copied its written materials, including packaging describing the features and benefits of the Clip & Flip, to which Carson owned the copyright.

Defendants successfully sought to dismiss the non-design-patent related claims.  Start with the unfair competition and tortious interference claims, which were based on defendants’ alleged copying of Carson’s products and marketing materials, displacing Carson as a Jo-Ann supplier; Jo-Ann allegedly pretended to fairly evaluate Carson as a supplier with no intention of continuing its business relationship with Carson.  The court found preemption by federal patent law.  Unfair competition is a broad tort in New York, but not all-encompassing.  For claims like these, there has to be additional tortious conduct separate from the patent law cause of action.  Claims of unfair competition from reproducing products covered by the patents and from “systematically” infringing Carson’s IP were preempted.  Bare allegations that Prym intended to interfere with Carson’s relationship with Jo-Ann by dishonest, unfair, and improper means were conclusory and insufficient.  The contention that patent infringement was a means to the end of unfair competition necessarily required resolution of substantial questions of federal patent law and didn’t plead conduct or bad faith independent of patent infringement.  Allegations that Jo-Ann unfairly competed by “refusing to continue its longtime supplier relationship with Carson” and “pretending to fairly evaluate Carson as a supplier with no intention of continuing its business relationship,” failed because there was no allegation that Jo-Ann had a contractual obligation to do business with Carson, and a retailer like Jo-Ann doesn’t unfairly compete by declining to do business with a wholesaler like Carson.

As for allegations of unfair competition by reproducing the Clip & Flip, that also failed to state a claim, since unpatented products are in the public domain and states are not allowed to interfere with the patent scheme by creating a cause of action for copying unpatented products.

As for common law claims based on alleged trade dress infringement of the Clip & Flip and SureGrip magnifiers, such claims are identical to Lanham Act claims with an additional requirement of bad faith.  As for the Clip & Flip, the complaint didn’t contain any allegations of trade dress infringement in the design.  To the extent that Carson alleged that defendants copied portions of Carson’s marketing materials, they failed to allege any harms separate from the alleged copying, and that claim would be preempted by the Copyright Act.

That left the alleged trade dress of the SureGrip, and the allegations there were conclusory: defendants allegedly sold “knock-offs,” but that was insufficient to allege the necessary bad faith; the court had  more to say when it got to the Lanham Act claims.

Likewise, tortious interference requires some wrongful means, and factual allegations of copying were insufficient to avoid preemption.  Also, plaintiffs didn’t allege that defendants’ conduct was motivated solely by malice or to inflict injury beyond the prospect of economic gain, as required.

The court also rejected Carson’s judicial estoppel argument based on Prym’s attempt to allege state-law false advertising counterclaims premised on false patent marking; judicial estoppel applies to inconsistent factual positions, not inconsistent legal ones.  Plus Prym alleged an additional element of bad faith in false marking (not so sure about this; bad faith is routinely found not to count as an additional element for preemption purposes; on the other hand it’s not clear to me that the false marking statute should be treated the same as the basic patent/copyright infringement provisions for preemption purposes).  Prym alleged that Carson was told twice by the PTO that if it wished to claim a design involving a transparent, translucent or highly polished or reflective surface, it had to use diagonal lines in the patent drawings to depict such surface, but Carson ignored these directives and marked the products with patent numbers that didn’t protect them.

Turning to the trade dress claim, it failed on multiple grounds.  First, a plaintiff must “offer a precise expression of the character and scope of the claimed trade dress,” and articulate the “elements of their product design with specificity to be afforded trade dress protection,” especially given courts’ reluctance to protect product design or product lines.  Competition policy is strongly implicated when product design is claimed as trade dress.  This also means that nonfunctionality must be rigorously enforced.

Here, Carson failed to plead that any of the elements for which it claimed trade dress were nonfunctional, instead conclusorily claiming that “[t]he ornamental design and overall appearance of Carson's SureGrip™ magnifier are not functional.”  This was insufficient under Iqbal.  Carson argued that there was no other way to allege overall nonfunctionality than to state it, and used a photo of the SureGrip to “illustrate[] the non-functional nature of its ornamental design and overall appearance.”  That was insufficient—a trade dress claim can’t be rescued by photos, since courts can’t be expected to distill nonfunctional elements from a set of images.

Separately, Carson failed to define the trade dress it wanted to protect. It failed to articulate “the specific elements which comprise its distinct dress”: “not just which features are distinctive, but also how they are distinctive.”  Merely pleading inherent distinctiveness and attaching a photo of the product in its package (which had numerous text elements making laudatory claims about the product) was insufficient. Images alone couldn’t explain what elements were protected.

In addition, Carson failed to plead facts supporting a plausible inference of secondary meaning. There were no facts relating to advertising expenditures, consumer surveys, sales success, marketing expenditures, or unsolicited media coverage.  It claimed that the overall design and appearance was “inherently distinctive [clearly barred by Wal-Mart] and/or has acquired secondary meaning in the relevant marketplace,” and argued that defendants’ copying, plus successful sales and marketing since 1998, could be used to infer secondary meaning.  But these “general and cursory allegations” were insufficient.

And furthermore, Carson failed to plead facts making likely confusion plausible, instead making naked assertions of likely confusion.