Fordham IP: TM and functionality

SESSION 12: TRADEMARK LAW

12A. Functionality and Trademark Law in the U.S. & EU, including a discussion of Louboutin 

Moderator: Prof. Susan Scafidi, Fordham University School of Law, New York

People copied Louboutin’s red soles; Prada ad showed soles that looked red but turned out to be dark orange (gee, I thought shade confusion wasn’t a problem any more).  Also showed up in car ads and the “Louboutin manicure” (black on top, red on the bottom).  Louboutin got a registration for a lacquered red sole on footwear.  Why red?  Identifies his shoes—red is engaging, flirtatious, memorable, the color of passion—it attracts men.  So he says both it has no function and that it has reasons.  Scafidi suggests he was speaking off the cuff, so to speak.

People copied everything but the red sole.  Until YSL came along.  (I should note, for those who didn’t follow the details, that YSL submitted evidence that it made all-red shoes for earlier collections before Louboutin made red-soled shoes.)  In fashion, the court ruled, color serves aesthetic functions, thus potentially invalidating the registration.  Appeal pending.

Harley I. Lewin, McCarter & English, LLP, New York, Registering, enforcing and defending against non-traditional trademarks in the United States

Just released commerce report on IP-intensive industries: support 40 million jobs, and contribute 34.8% of US GDP.  (Skeptical take.)  TM: fashion industry brands, employment 6x as high as patent-intensive industries.  Strong public reason to protect fashion TMs.

Louboutin has acquired distinctiveness.  Louboutin makes a red shoe with a red outsole too. 

Court didn’t afford the rebuttable presumption of distinctiveness; had post-sale confusion survey of over 90%; over 50% of those identified the red sole as the reason they thought the shoe was a Louboutin.  YSL’s own survey showed 5% confusion.  We also had fashion expert testimony saying women don’t match the outsole of the shoe with their clothing; red outsole contrasts rather than blends with a number of garments.

Defenses: color depletion.  Fundamentally and clearly shot down by Qualitex: not a problem unless there’s a market impact. Court morphed the argument from a lacquered red outsole to “the color red.”  (Because Louboutin argued its rights extended to the color red YSL was using …)

Shade confusion: district court thought it was hard to distinguish different reds.  Qualitex specifically rejected that too.  Judges make this decision every day with words and symbols; can do it with colors.  Industry standard is easy: stay far enough away not to be confusing.  (Yes, super easy!)  Judge found shade confusion without evidence.

Fair use: descriptively, fairly and in good faith. We expect this argument if this case goes forward. Even if they didn’t intend to use it as a TM, we think they are because they recognize the red sole as a TM in their own documents—not put on by accident.  

Functionality: sexy or attractive—that’s not functional.  Nobody every adopted a TM because it was ugly; TMs are inherently attractive.  If you shoot a TM down because it’s attractive, you destroy the TM system.  You need something else, not just being pretty.  Aesthetic functionality: the issue is whether you can compete without using the color.  Jimmy Choo etc. can compete with Louboutin without the sole.

Prof. Rebecca Tushnet, Georgetown Law

Cribbing largely from the amicus brief I helped write: There are instances when consumers have preferences that cannot be reduced to scientific quantification of performance (“utility”), but are real marketplace constraints nonetheless.  The harm to competitors from monopolization of those features justifies barring their appropriation, especially given the many nonfunctional words, logos, and other features that remain available for use as marks.  In these instances, and where the product feature in question does not meet design patent’s novelty requirement, the aesthetic functionality doctrine serves to maintain robust competition, and to prevent mark owners from using trademark as a kind of back door to perpetual patent-like protection for attractive but non-novel product features.  Aesthetic functionality doctrine thus plays a vital role in ensuring that trademark law does not invade the jurisdiction of patent.

Mark McKenna: “If … consumers expect their farm equipment to be green or their strawberry-flavored ice cream to be pink, then those colors serve non-source-related functions, and they do so even if consumers also associate the colors with John Deere and Dippin’ Dots, respectively.”

In other words, “all markets contain an element of fashion.”  Ashley Mears, Pricing Beauty: The Making of a Fashion Model 253 (2011).  Demand regularly comes not from something inherent in the progress of human history, but from changes in the appearance and style of products that fit – for reasons that are mostly ineffable but nonetheless very powerful – with the aesthetic sensibility of the moment. Skateboards are valued not just because of the speed they enable a human to attain under her own power (many devices do better), but because they serve particular cultural needs.  So too with shoes. Fashion consumers choose high heels not because they improve ease of movement (indeed, they impair it), but because in many consumers’ judgments high heels look better with certain outfits, or they fit with a certain image that the consumer has, or wishes to have, of herself. For these reasons, product features that are non-novel but attractive can structure markets every bit as powerfully as those that are conventionally understood as “utilitarian.”

A product feature should be held functional, and therefore outside the ambit of trademark, if it offers a significant non-reputation-related advantage to a competitor.  In other words, if the relevant consumers want a product feature because it is especially attractive, then that feature is not a proper subject of monopolization by a single producer – unless it meets the demanding novelty requirement of design patent. 

Color claims: in fashion, single color is routinely something consumers seek and manufacturers present as desirable in itself.  Tiffany’s claims, trying to extend its packaging TMs to the products themselves, are typical and typically troubling given what single colors do and mean in fashion:

Calvin Klein Spring/Summer 2011 collection used robin’s egg blue to “weave[] the collection together in a common theme and excite[] audiences about a trendy new color for the season.  Warm, inviting and fashionable, this egg blue is a part of a family of popular pastels that have made their way onto runways, magazines and streets this summer.”

It’s no surprise that classes of products exist where functionality of a particular color is easily established, such as the color red for candy – or, here, for monochromatic red shoes.  And though color may be registered where not functional, that does not mean that a color, especially a primary one, is nonfunctional for all classes of products. 

The relevance of a single color product: Gold Toe socks v. yellow socks.

If Louboutin had never existed, YSL would have the same aesthetic reasons for choosing to use a red sole on a red shoe and the sock manufacturer likewise for yellow socks.

But it doesn’t have to be single color to have an aesthetic function in the product: Nikita’s shoes.

Functionality of defendant’s use even if plaintiff’s use might be nonfunctional: example—TerraCycle; also red rubber boots formed of a single piece of rubber.

Or we can flip it: there might be nonfunctional uses of functional designs, like ipodmybaby.com.

Larger point: “blanket rules”—or, as I would put it, context-dependent rules—exist all over the place in trademark.  Where expressive interests are heightened, as they are in fashion designs, this Circuit has not hesitated to adopt rules that protect creators.  In Rogers v. Grimaldi, the court declined to apply the ordinary multifactor confusion test, which was unlikely to produce reliable results as applied to expressive uses such as titles, and shaped a rule more appropriate for the situation: protecting a title against trademark claims unless it lacked all artistic relevance or was explicitly misleading.  Rogers is not an impermissible “blanket rule,” though it does apply to an entire sector of the market.  Rather, it is a rule fitted to a particular context.

Moreover, the Supreme Court has indicated a preference for rules of decision that minimize costly case-by-case determinations for competitors who might be deterred by the mere threat of suit.  The Court’s concern in Wal-Mart that “[c]onsumers should not be deprived of the benefits of competition with regard to the utilitarian and esthetic purposes that product design ordinarily serves by a rule of law that facilitates plausible threats of suit against new entrants,” is as applicable to aesthetic functionality in the fashion market as it is to the rule that product design cannot be inherently distinctive.

Richard Z. Lehv, Fross Zelnick Lehrman & Zissu, P.C., New York, Painting With Too Broad a Brush

Filed amicus for Tiffany—didn’t like the breadth of the ruling.  Many other issues should have been decided, like delay, before aesthetic functionality.  Also conflated ornamentation and functionality.  Something that looks nice can function as a TM even as it is ornamental.  So stripes on a shirt look nice; stripes on a shoe say Adidas.  A package in a blue box looks nice, but is also a valid TM.  District court recognized the secondary meaning in the soles.  The judge didn’t properly evaluate utilitarian functionality except pointing out that the red sole made the shoe more expensive—but that’s not an indicator of utilitarian functionality.

Aesthetic functionality: this is distinct from ornamentation, and we don’t think that the district court properly analyzed the need for the color.

Prof. Spyros Maniatis, Queen Mary, University of London, London, Competition Considerations in Trademark Cases: Viking, eBay, Louboutin

EU has a similar rule: if it’s functional, it’s functional, even if you can achieve the result a different way. Patent is strong evidence of functionality. Distinctiveness is irrelevant.  Only covers 3D shapes though, so we use similar concepts to deal with other signs.

The court isn’t sure it wants to intervene in regulating new markets (eBay).  So asking whether taking a bottle out of its box and offering it for sale is an infringement can’t be answered in the abstract.  Gas bottle case: get protection for a gas bottle. ECJ was not asked to consider TM validity; was asked: if I refill the bottle at a place unconnected to the person who sold me the bottle, and the refiller uses the label, is that infringement?  ECJ talks about different interests: consumer as owner, TM owner, market interests.  ECJ is not willing to interfere: to allow prevention of refilling would unduly reduce competition in the downstream market—protection of this is not the purpose of TM.  Purchaser, to regain free choice of gas supply, would have to abandon expensive investment in bottle, which is multi-use.

Jersey Shore: apparently willing to a pay a character not to wear Abercrombie & Fitch because he doesn’t fit the image. 

Aesthetic functionality, from European perspective, is dealt with in Bang & Olafson case.  Something that contributes to attractiveness can be functional: shape of speakers.  Even though it was distinctive, nevertheless it was functional.  Perceived as a kind of sculpture: looks good and that’s why people buy it.

Freixenet: tried to protect the color of a drink bottle; but have you ever bought an unmarked green bottle?  ECJ however took a step back and said that the mark had to be examined in the abstract and could be accepted as a TM.

Louboutin: European version.  Board requested narrowing specification of registration application to high-heeled footwear; sports shoes have colored soles.  Gave significance to press cuttings as evidence of distinctiveness.  Compare to B&O which said iconic appearance was functional.  Also said that protecting sole would help protect against counterfeiting, though he finds this a bit circular.

Scafidi: significance of the scope of Louboutin’s TM and of the scope of YSL’s activity (monochrome shoes).  How should we measure the effect on competition?

Robert L. Raskopf, Quinn Emanuel Urquhart & Sullivan, LLP, New York

Red lacquered sole on footwear.  That’s a pretty unbelievably broad TM registration.  Raises red flags.  Compare Converse Chuck Taylor shoe.  It’s different to enforce against a black upper and red sole than an entirely red shoe, which makes its own statement.  A fair use like concept that maybe ought to come out on the facts of this particular use.  Coupled with Louboutin’s own statement that he used the red to create particular effects.  Whether it’s ornamental or functional, that’s non-TM use. 

Prof. Robert Burrell, TC Beirne School of Law, The University of Queensland

One thing he finds odd about US TM law is that everyone calls it a use based system. And what role do we expect from bright line rules in a use-based system? In a registration based system, you find things like a double identity rule, where you don’t have to show likely confusion to win your infringement case.  We managed to get by with a use-based system with no bright line rules to exclude even utilitarian functionality, and yet the cases play out with plaintiffs who claim goodwill in a design feature almost always losing. They win either by demonstrated intention to mislead or something unusual about the product (e.g., the product doesn’t contain a more traditional brand).  Big problem Louboutin should face is that no one is going to be confused at point of sale, and we’re only talking about post-sale confusion, and that means evidence of bad intent is not likely.  Even if we’re not attracted to functionality, that doesn’t seem to suggest that Louboutin should win.

Lewin: Competition—the case law says you measure this by looking at whether competition has been adversely affected or whether a new entrant could compete.  Robust competition in women’s designer shoes exists.  Red rubber shoes isn’t our TM (even with heels, like the ones I showed?)—that’s a non TM use. We think the TM is narrow: red on an outsole, treated with lacquer, on a designer shoe.  Satisfies all the requirements in TMEP.  Has been discussion about using Pantone numbers, but that’s a red herring, so to speak.  Pantone gives you a colored square, and then you have to go through the same analysis as if you’d started with the shoe/the registered red.

Whether people are confused at the point of sale: there’s a likelihood most are not.  YSL is on the shoe. But there is some law that a sophisticated consumer could think YSL had a deal.  We specifically address post-sale confusion. It’s not what the shoe looks like when you hold it in your hand—it’s the flash of red at the Oscars.  You don’t see whether she’s wearing an all red shoe, only a glimpse. (This is not my experience of Oscars fashion.  Also, this is a terrible case for the post sale confusion harm theory: if all you see is the flash of red, YSL can’t possibly harm Louboutin with a shoe that is expensive and will thus not be worn by the “wrong” sorts of people, even if you think that’s a legitimate form of harm.)

Me: I’d say the issue of ornamentality is about counterfactual causation: does consumer desire stem from the secondary meaning?  Or does it stem from “that’s a good looking shoe” in a way we’d expect even if Louboutin didn’t exist? Related in a way to materiality: what is the consumer looking to purchase?  Something touched upon in the now-abrogated Betty Boop initial panel decision.  Also, the aesthetic functionality debate is strongly related to questions of market definition: what market does defendant get to compete in?  Monocolor shoes are and should be a permissible market.  Marks Lemley & McKenna have recently published a good paper on this.

Lehv: secondary meaning is about source association, not motivation to buy.  (I think that’s my point.)  When I see a robins’ egg blue box, do I know it’s from Tiffany, or do I just say that looks nice.  (The question is which should control in particular circumstances, since functionality trumps secondary meaning even if present, and I offer counterfactual causation as a possible mechanism.)

Gold toe socks: if that’s a perfectly good TM, why not a red sole?

Me: Black shoe with red sole might be.  This is why we might want blanket rules so that people don’t have to spend a million dollars on surveys to compete: you look at the monocolor product and say it’s not functioning as a TM.

Comment from European with experience: unlikely that Louboutin will end up with rights to a red sole for ladies’ footwear, defined as expansively as that.  There will be an opposition/cancellation even if it is allowed.

Lewin: A lot of TMs are appealing and ornamental.  Au-Tomotive Gold: consumers’ reason for purchase may be a factor, but doesn’t negate source indication function.  Ornamentation may be the beginning motivation, but then the thing becomes known and is transformed from something ornamental into a source indicator.  Registration entitles you to presumptions that you’ve made that proof.  They’re not mutually exclusive.

Q: Then it’s dangerous when the registration based on distinctive character prevents others from using red soles in a manner which is ornamental/decorative etc. If you define the mark in a way that captures ornamentation, then you get the problem with competition. 

Lewin: disagrees, because there isn’t a TM in the world that doesn’t create some carveout against competitors’ use.  The issue isn’t whether a subsequent user can use it because it’s popular. There are TMs that drive demand.  You’d destroy the TM system if that stopped protection.