Congratulations to Mark McKenna, whose amicus brief made the
key arguments endorsed by the court here.
A jury awarded over $1.2 million on Groeneveld’s trade dress claims, but
the majority found that Lubecore’s Rule 50 motion should’ve been granted. Starting from the premise that trademark law “is
designed to promote brand recognition, not to insulate product manufacturers
from lawful competition,” the court allowed a competitor to copy the shape of a
grease pump because (1) the plaintiff didn’t show nonfunctionality, and (2) no
reasonable consumer of these expensive and niche products could be confused
based on the shape.
The court framed the issue as a battle between an
established business and an upstart. The
parties make grease pumps for automated lubrication systems (ALS) used in
commercial trucks. An ALS delivers controlled
amount of lubricant to different parts of a machine while the machine is in
operation; its primary component is a grease pump.
Groeneveld has been making the grease pump at issue since
the 1980s. Lubecore was founded in 2007
by Jan Eisses, who had previous business/employment relations with Groeneveld. It made a very similar-looking pump:
The jury found that Groeneveld proved by a preponderance of
the evidence that its trade dress (“the external shape and appearance of the
pump, including logo and color”) was nonfunctional and had secondary meaning, and
that there was likely confusion as to the source of the pumps. It also found the infringement willful.
The majority held that the overall shape was
nonfunctional. Groeneveld didn’t argue
that individual parts were protectable. The
pump was a black cast aluminum base containing the pump mechanism topped by a
clear reservoir. The pump mechanism was
connected by wires and hoses to the rest of the ALS. Both pump and reservoir clearly served
essential functions. The trial testimony
from Groeneveld witnesses made “clear that not only the basic manufacture of the
grease pump’s components, but also their size and shape, are closely linked to
the grease- pumping function.” The shape
of the base minimized the amount of material needed in construction
(functional). The volume of the reservoir was dictated by the amount of grease
needed during each servicing interval (functional). The clear reservoir allowed users to easily
see how much grease was left (functional).
Because the surface area (determined by the need to fit on the base) and
volume were functionally determined, so was the height. All the elements were there for a practical
reason, with nothing ornamental.
“Because Groeneveld presented no evidence showing that the
individual components of its grease pump or their overall configuration are
nonfunctional, it failed to carry its burden of creating a triable issue of
fact with respect to nonfunctionality.”
Combining individual functional components in a nonarbitrary manner is
functional.
The court rejected Groeneveld’s argument that this
particular design wasn’t necessary for effective competition in the ALS
business, as shown by the fact that no other competitors made a similar-looking
pump. But that’s exactly the argument
that the Supreme Court rejected in TrafFix Devices, Inc. v. Marketing Displays,
Inc., 532 U.S. 23 (2001). Competitive
necessity is an appropriate inquiry in aesthetic functionality cases, but not
in utilitarian functionality cases where a design is “essential to the use or
purpose of a device” or affects its cost or quality. When the design is functional under those
standards, there is no need for further consideration of competitive necessity.
“In other words, the question is whether the overall shape of Groeneveld’s
grease pump was substantially influenced by functional imperatives or
preferences. We accordingly reject Groeneveld’s invitation to drift back into
the error of inquiring about possible alternative designs.”
Groeneveld’s VP of design and production van der Hulst, who
was involved in the pump design, testifed that Groeneveld did not “have to make
its pump look this way on the inside because of the way it works on the
outside.” But that was insufficient to create a triable issue of fact under
TrafFix Devices because it improperly focused on the possibility of alternative
designs. It was also conclusory: van der
Hulst didn’t explain “why the chosen design was nonfunctional, and certainly
did not speak with any particularity about the functional considerations that,
as outlined above, apparently dictated the pump’s design.” The bare fact of putting a manager on the
stand to claim nonfunctionality doesn’t create a triable issue of fact.
Groeneveld also relied on van der Hulst’s testimony that the
“commercial people” affected design, but the majority thought that was unclear
and unhelpful. If they were executives
in charge of evaluating commercial viability, their involvement said nothing
about functionality. And even if it meant marketing/design employees, “[e]very
viable mass-market product is presumably designed with marketing considerations
in mind, and this unremarkable fact says nothing about whether the product
design is nonfunctional.” Van der Hulst
also testified that other grease pumps on the market looked “terrible” and that
Groeneveld’s founder had a good design sensibility; Groeneveld hadn’t switched
to alternative designs, even though they might be cheaper, because the current
pump is “a very nice pump” and “[e]verybody knows this pump.” This too didn’t address nonfunctionality:
something might look cleanly designed and
be made of functional parts. To the
extent it was about alternative designs, it wasn’t relevant. This was insufficient, especially in light of
testimony from Groeneveld’s own witnesses to show that “the pump’s volume,
shape, and materials are all essentially influenced by the dictates of
function.”
The majority noted the public policy behind functionality: “to
channel the legal protection of useful designs from the realm of trademark to
that of patent. Such channeling ensures that the high public costs of monopoly
are not imposed without an assurance that the design satisfies the rigorous requirements
of patentability, including novelty and nonobviousness, and is protected for
only a limited period of time.” This isn’t
trademark’s job.
The court nonetheless also addressed likely confusion. The factors in the multifactor test “are
helpful guides rather than rigid requirements,” with likely confusion the
ultimate question. The factors “are
therefore not always weighed consistently in this court’s caselaw, and a
particular factor might receive a greater or lesser weight depending on the
circumstances.” Sometimes cases can be
resolved with reference to only one or a few factors.
Here, the presence of house marks was essentially
dispositive. The parties’ logos and trademarks
appeared on the pumps, as well as on sales and marketing literature, and were “unmistakeably
different.” “In light of such a stark visual difference in
branding, no reasonable consumer would think that the two grease pumps belong
to the same company.” This was
reinforced by the fact that, at about $2500 apiece, ALS systems were “expensive
industrial products that are not likely to be purchased without substantial
care and research.” “[P]otential
purchasers of grease pumps are knowledgeable and sophisticated people. Such
purchasers are therefore not likely to ignore the stark difference in labeling
and mistakenly purchase a Lubecore ALS when they intend to purchase a
Groeneveld ALS.”
Groeneveld argued that “(1) labels are not the predominant
brand identifiers in the industry; (2) corporate mergers and acquisitions are
frequent, so competitor affiliations are constantly changing; (3) many pumps
bear multiple company names; (4) a pump’s label does not identify who made it
or where it was manufactured; (5) Lubecore is a newcomer and has no independent
brand recognition; and (6) witnesses who saw the Lubecores were still confused,
notwithstanding the Lubecore label.”
Nope. Mergers and
acquisitions (2) and Lubecore’s newcomer status (5) had no bearing on the
distinguishability of the pumps via the labels.
The claim that labels weren’t the predominant brand identifiers was “irrelevant”
and not supported by record evidence. “The
most that the cited testimony shows is that certain witnesses were able to
distinguish Groeneveld’s pumps from pumps other than Lubecore’s without even
looking at the labels, which says nothing about whether a consumer would be
able to distinguish a Groeneveld pump from a Lubecore pump with the labels.” And points (3) and (4) didn’t apply to the
labels at issue in the present case.
Only (6), actual confusion, was relevant—and wrong (see below). Groeneveld at most “identified possible
reasons why—hypothetically—differential branding might not be sufficient to
distinguish the sources of competing products,” but it didn’t show those
reasons applied.
The “starkly different branding” plus the “high degree of
care presumably exercised by the pumps’ sophisticated consumers” compelled the
conclusion that there could be no likely confusion as a matter of law. The majority nonetheless ran through the rest
of the factors.
Of note is its analysis of intent, the key point in
Groeneveld’s analysis. Yes, the similar
appearance was circumstantial evidence of intent to copy, but “Groeneveld is
mistaken about the legal significance of such copying.” Its argument that intentional copying showed
a bad intent and created a presumption of confusion “indicates a fundamental misapprehension
of the purposes of trademark law.”
Trademark doesn’t bar copying as such—that’s for trademark
and patent. If a manufacturer wants
protection against copying, it should get one of those. No harm is done to trademark’s incentive
structure (which “incentivizes manufacturers to create robust brand recognition
by consistently offering good products and good services”) by the copying of a
product design that doesn’t confuse consumers as to source. “As long as a
consumer can easily identify the source based on the trademark, the consumer
will still be able to allocate his or her capital freely and efficiently, and
manufacturers will retain the incentive to improve their offerings and solidify
their brands.” Thus, copying in the
absence of confusion isn’t just legal; it’s often a positive good.
Given these baseline principles, the intent that is relevant
is not the intent to copy but the intent to confuse. Otherwise, a legal and beneficial act “would
be transformed into evidence—or worse, as Groeneveld suggests, a ‘presumption’—of
unlawfulness.” This would “subvert the
fundamental purposes of trademark law.”
Intent to copy might be probative of secondary meaning, but “such intent
standing alone has no bearing on the likelihood-of-confusion issue.”
Here, copying had salutary effects, as posited by the
general rule: “the similarity serves the procompetitive purpose of signaling
the existence of a competitive alternative by alerting potential consumers that
the pumps might work the same because they look the same.” Lubecore’s use of similarity “targeted
consumers who are familiar with the Groeneveld pump and offered them a
competitive option.” And “using a
functional product’s look to promote a competitive offering is a procompetitive
practice.” It would be unfair if there
were confusion, but Lubecore “scrupulously avoided such confusion by choosing a
starkly different logo that it prominently displays on its pumps and on all its
sales and marketing literature.” By targeting Groenveld customers, “Lubecore
focuses its competitive activity on those who are most interested in such
competition, thereby decreasing the consumers’ search costs and intensifying
competition where it matters most.”
Maybe Lubecore doesn’t make a better pump, but aggressively courting
consumers and offering them choices is good, from a public policy viewpoint.
One of Groeneveld’s witnesses, Dean Osborn, proved the point
by testifying that he likes the way the Groeneveld pump works but does not
particularly care who manufactures it. He testified that he was satisfied with
both and never confused. With the labels
off, he wouldn’t be able to tell the difference, but to him, “that means I’m
comfortable with the product. If it be whose product it is, I don’t care. I
have a good experience with it.… I’m looking at the mechanism that functions
the grease to go to the spots where the greasing, that’s all I’m -- that’s all
I care about.” The fact that the pumps
looked similar gave him confidence to choose either, since he knew how the
Groeneveld worked.
Groeneveld argued that Lubecore’s pumps were worse, and that
Lubecore offered to extend Groeneveld’s warranty and to replace Groeneveld
pumps and parts with Lubecore products.
But that was no aid to Groeneveld: “If Lubecore’s pumps are in fact
inferior, all the better for Groeneveld: Consumers would soon realize the
difference in quality on the clearly labeled pumps and flock to Groeneveld.”
The court then rejected an anti-copying ideology:
Groeneveld’s protestations against
slavish copying admittedly have a certain emotional appeal and presumably
swayed the jury. After all, people generally dislike copycats. But, as the
foregoing discussion demonstrates, the proper application of trademark law
requires us to focus our analysis not on the intent to copy the product design,
but on the likelihood of consumer confusion. Evidence of Lubecore’s intent to
copy Groeneveld’s product design is therefore of no help to Groeneveld. Such
evidence, if anything, shows the procompetitive benefits of Lubecore’s
practices and cautions against allowing the issue to go to the jury. See
Wal-Mart Stores, Inc. v. Samara Bros., 529 U.S. 205, 214 (2000) (discussing the
desirability of “summary disposition of an anticompetitive strike suit” in the
trade-dress context).
Then the majority ran through the other factors. Groeneveld had evidence that its design was
recognizable in the industry, which was sufficient to support a factual finding
of a strong trade dress—but that was no help without evidence of likely source confusion. Similarity weighed heavily against
Groeneveld, because of the “starkly different” labels and trademarks. And Groeneveld had no evidence of likely
confusion; it offered the testimony of a single customer, who unequivocally
testified that he wasn’t confused.
Testimony that Groeneveld’s own employees and affiliates were shocked
and surprised by the copying wasn’t consumer testimony, and anyway they weren’t
confused.
Overall, the trade dresses (including logos) were dissimilar,
the purchases were sophisticated, there was no evidence of actual confusion,
and the “intent and effect” of Lubecore’s design copying was procompetitive. The factors that weighed in Groeneveld’s
favor were the strength of the trade dress, the relatedness of the products,
and the similarity of the marketing channels.
But those three factors standing alone didn’t raise a triable issue of
fact about likely confusion. No
reasonable jury could find that Groeneveld met its burden.
Adding in initial interest confusion didn’t change anything. IIC might make sense “under the right
circumstances,” and here the court offered a billboard analogy: you’re lured
off the interstate by a sign for McDonald’s, but discover only a Burger
King. “You are not so fond of Burger
King but, having already made the detour and loath to waste even more time, you
reluctantly buy a Whopper and get on with your trip.” Even without purchase point confusion, this
harms “consumer interests, brand-development incentives, and efficient
allocation of capital.”
But that wasn’t the case here. First, Groeneveld didn’t explain how there
could be any initial interest confusion at all, given the different labels and
logos. Nor did Groeneveld explain why
any confusion wouldn’t dissipate without harm. “[A] hypothetical chance that a
consumer might think for an instant that two products come from the same source
is simply not enough.” Groeneveld wasn’t
really upset about initial interest confusion, but rather initial
interest. It’s natural enough to dislike
competition, but not a trademark problem.
The court also
refused to consider Groeneveld’s dilution theory of harm (that Lubecore harmed
its brand image by introducing low-quality knockoffs) for the first time on
appeal.
The majority also rejected false advertising claims based on
Lubecore’s practice of offering to extend Groeneveld’s warranty and to replace
Groeneveld pumps and parts with Lubecore products. Targeting the customers of a competitor by extending a
warranty program or offering the replacement of parts wasn’t unlawful; that’s
competition.
Judge Helene White dissented, arguing that the jury could
reasonably have found differently than the majority did. The appropriate focus should have been the
overall trade dress rather than each component.
(I think the majority approach, carving out the house mark, is much
better—it avoids the problem of the plaintiff claiming that the overall trade
dress including the mark is nonfunctional, then claiming confusing similarity
based only on similarities in functional elements.)
The majority overread TrafFix,
which only held that the possibility of alternative designs can’t render an
otherwise functional trade dress nonfunctional.
(Seems to me that’s exactly what the majority says!) But that doesn’t mean the possibility of alternative
designs is irrelevant, or relevant only in cases of aesthetic functionality.
The dissent read the testimony to say that the form wasn’t
dictated by function. Anyway, a
nonfunctional configuration of functional components could be protectable, as
long as the features were configured in an “arbitrary, fanciful, or distinctive
way.” (Note that this quote, from an
earlier case, can’t fully be squared with Wal-Mart’s
holding that there’s no such thing as inherent distinctiveness in product
design.) There was evidence supporting a
finding that the pump’s overall configuration was designed to look distinctive
in the industry rather than due to functional concerns. The dissent would’ve
found it sufficient fact that the outer appearance wasn’t dictated by internal
functioning (even though that’s exactly the reasoning reversed in TrafFix). Here, “the round and cylindrical shape of the
clear reservoir, the grooves on the top and bottom of the reservoir, the
particular placement of the product label and other features, and the irregular
shape of the base” had no inherently functional purpose, even if individual
components had functional qualities. And
Groeneveld’s witness van der Hulst testified that the pump could be made in
different ways—horizontal or vertical pistons, round or square reservoirs—and work
the same. (The quoted testimony also
says the reservoir could be made in different sizes … because that affects the
time between fillings. I see why the
majority wasn’t impressed.)
Van der
Hulst also explained that the pump was designed to look nice and “completely
different” from other pumps made with lots of different “bolts and screws”—the Groeneveld
pump was “[o]ne piece worked and finished” and thus looked much nicer than the
alternatives. Where “the pump’s design
was based on aesthetic considerations, the shape does not dictate the pump’s
function, other designs would result in the same function, and the design does
not result in superior performance or cost effectiveness,” the dissent would
allow a finding of nonfunctionality.
Likewise, the dissent would’ve upheld the confusion finding. There was testimony that the pump was
recognizable by its shape, and strong evidence of intent to copy. “When a newcomer to the market copies a
competitor’s trade dress, its intent must be to benefit from the goodwill of the
competitor’s customers by getting them to believe that the new product is
either the same, or originates from the same source as the product whose trade
dress was copied.” (Yes, and it’s that
either/or that is the issue: as the majority says, it’s not the case that we
condemn intent to confuse and are simply neutral about intent to communicate
comparability. To the contrary, public
policy supports copying, and thus
communication of copying, product features, at least where confusion can be
avoided. Because one of the two
possibilities is a positive good, it would be foolish to find that intent to
copy was intent to confuse.) The dissent
would’ve used the copying as evidence of secondary meaning (though of course
for the same reasons copying might just be evidence of a good product design
that, if unprotected by patent, is free for all to try.)
The dissent, rather implausibly for these particular
products, evoked the rule that likely confusion has to be judged not side by
side, but singly, “to account for the possibility that sufficiently similar
[trade dresses] may confuse consumers who do not have both [trade dresses]
before them but who may have a general, vague, or even hazy, impression or
recollection of the other party’s [trade dress].” And the pumps look similar
despite the different labels.
High degree of care wasn’t enough as a matter of law. Adding a house mark isn’t dispositive, and
doesn’t always need to be given significant weight. In the Maker’s
Mark case, the court credited testimony that many consumers didn’t know
about brand affiliations, and that some companies produce multiple types of
distilled spirits. When two products are
related enough, one might associate with the other and still use a house mark.
“Confusingly similar marks may lead a purchaser who is extremely careful and
knowledgeable . . . to assume nonetheless that the seller is affiliated with or
identical to the other party.” Since the
most important factors are similarity of marks and strength of the plaintiff’s
mark, consumer care couldn’t overcome them.
The same reasoning was available to the jury here; the
district court found that the different markings might not be enough “given the
testimony regarding corporate mergers and acquisitions in the industry; the
fact that many pumps bear multiple company names; and, the fact that labels may
not be the brand identifiers relied on in this industry.” The dissent argued that “facts that undermine
presumed consumer care in differentiating between products are relevant to the
overall analysis, and dissimilarities in the trade dresses based on labeling
have less weight in the context of such industry-specific evidence.” There was
testimony that people in the industry didn’t rely on labels to distinguish
pumps (though they didn’t need to until Lubecore entered the market—as the
majority concludes didn’t and couldn’t are potentially very different things). But the evidence that consumers usually used
the design to identify the brand “supports the inference that labels are not
necessarily indicative of the product’s manufacturer as the consumer’s focus in
this industry is on the design.” (As a
matter of policy, given functionality doctrine, perhaps we should discourage
consumers from this focus, since for functional designs it will lead them
astray.)
Also, Lubecore was a new company with minimal brand
recognition, which undercut the effect of the labeling: “even a sophisticated
consumer cannot be expected to recognize brands that have little name
recognition or have been in existence only a short time.” That short time on the market also undermined
the weight the majority gave to the lack of evidence of actual confusion.
As to intent, the dissent agreed that intentional copying
isn’t itself actionable. But then the
dissent said that a presumption of intent to confuse arises from evidence of
copying, unless confusion is unlikely based on other factors. So intent to copy wasn’t irrelevant. Lubecore’s founder testified that he liked
the Groeneveld pumps because they had a good reputation and Lubecore didn’t
want its pumps to look like those of a company with a bad reputation. This was “compelling circumstantial evidence”
that Lubecore intentionally copied to benefit from Groeneveld’s established
reputation. Also, Lubecore’s extended
warranty specifically targeted Groeneveld customers and products, and not other
competitors. This also supported an inference of intent to confuse, “as an
unaffiliated company normally does not (and cannot) extend another company’s
warranty.”
Anyway, intent never favors the defendant, as the majority
seemed to hold. “Intent … is an issue
whose resolution may benefit only the cause of a senior user, not of an alleged
infringer.” The same was true of lack
of evidence of actual confusion, which is rarely present.
Strength of the trade dress and relatedness of the goods,
while discounted by the majority, are factors that bear on whether confusion is
likely. (This is a core problem with the
multifactor test treated as if it were uniformly applicable—fortunately here
just by the dissent. Strength of a trade
dress and relatedness of goods, along with similarity of marketing channels, may
be “significant” in a likely confusion inquiry, but only if other factors are present. Coca-Cola’s trade dress in its bottle
epitomizes trade dress strength. But
that doesn’t mean that Pepsi’s bottle is likely to infringe!)
Because the dissent would’ve upheld the permanent
injunction, it addressed Groeneveld’s appeal arguing that the injunction should’ve
been broadened to include Canada. The dissent disagreed. Extraterritorial application of the Lanham
Act requires a court to consider “(1) whether the defendant’s conduct has a
substantial effect on commerce in the United States; (2) whether the defendant
is a citizen of the United States; and (3) whether there exists a conflict
between defendant’s trademark rights established under foreign law, and
plaintiff’s trademark rights established under domestic law.”
Lubecore is a Canadian corporation, weighing heavily against
extraterritorial application of the Lanham Act, though Lubecore had no claim to
the trade dress in Canada so barring its use wouldn’t interfere with Canadian
sovereignty. Groeneveld’s argument that
Lubecore’s Canadian activities had a substantial effect on US commerce was
speculative—it just claimed a likelihood that Canadian trucks with Lubecore
pumps would cross in and out of the US, affecting sales and reputation in the
US. “Even if (as Groeneveld asserts)
U.S. consumers can access Lubecore’s web sites and order products online, that
does not prove that Lubecore’s Canadian activities have a substantial effect on
domestic commerce.” The possibility of a US impact wasn’t enough.
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