Ezaki Gliko Kabushiki Kaisha v. Lotte International America Co ( 2020 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________
No. 19-3010
_______________
EZAKI GLICO KABUSHIKI KAISHA,
a Japanese Corporation d/b/a Ezaki Glico;
EZAKI GLICO USA CORP.,
a California Corporation,
Appellants
v.
LOTTE INTERNATIONAL AMERICA CORP.;
LOTTE CONFECTIONARY CO. LTD.
_______________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 2:15-cv-05477)
District Judge: Honorable Madeline C. Arleo
_______________
Argued: July 9, 2020
Before: McKEE, BIBAS, and FUENTES, Circuit Judges
(Filed: October 8, 2020)
_______________
Anna K. Shaw
Jessica L. Ellsworth [ARGUED]
Benjamin A. Field
Hogan Lovells US
555 Thirteenth Street, N.W.
Columbia Square
Washington, DC 20004
Steven M. Levitan
Hogan Lovells US
4085 Campbell Avenue
Menlo Park, CA 94025
Aaron S. Oakley
Hogan Lovells US
1601 Wewatta Street
Denver, CO 80202
Katherine B. Wellington
Hogan Lovells US
125 High Street
Boston, MA 02110
Roy H. Wepner
Lerner David Littenberg Krumholz & Mentlik
20 Commerce Drive
Cranford, NJ 07016
Counsel for Appellant
2
John J. Dabney [ARGUED]
Mary D. Hallerman
Snell & Wilmer
1101 Pennsylvania Avenue, N.W.
Washington, DC 20004
Counsel for Appellees
_______________
OPINION OF THE COURT
_______________
BIBAS, Circuit Judge.
This is a tale of more than just desserts. Decades ago, Ezaki
Glico invented Pocky, a chocolate-covered cookie stick. Pocky
was very popular. And its success drew imitators, including
Lotte’s Pepero. Ezaki Glico now sues Lotte for trade-dress in-
fringement.
The District Court granted Lotte summary judgment, find-
ing that because Pocky’s design is functional, Ezaki Glico has
no trade-dress protection. We agree. Trade dress is limited to
features that identify a product’s source. It does not safeguard
features that are functional—that is, useful. Patent law protects
useful inventions, but trademark law does not. We will thus
affirm.
3
I. BACKGROUND
A. A cookie is born: Ezaki Glico’s Pocky
Ezaki Glico is a Japanese confectionery company. For more
than half a century, it has made and sold Pocky: a product line
of thin, stick-shaped cookies (what the British call biscuits).
These cookies are partly coated with chocolate or a flavored
cream; some have crushed almonds too. The end of each is left
partly uncoated to serve as a handle. Ezaki Glico makes Pocky
in both a standard and an “Ultra Slim” size. Appellant’s Br. 9.
In 1978, Ezaki Glico started selling Pocky in the United
States through its wholly owned subsidiary here. Since then, it
has tried to fend off competitors by registering U.S. trademarks
and patents. It has two Pocky product configurations registered
as trade dresses.
Ezaki Glico also has a patent for a “Stick Shaped Snack and
Method for Producing the Same.” App. 1013–16. The first thir-
teen claims in the patent describe methods for making a stick-
shaped snack. The final claim covers “[a] stick-shaped snack
made by the method of claim 1.” App. 1016. The width of that
stick-shaped snack matches that of Pocky Ultra Slim.
B. A new cookie comes to town: Lotte’s Pepero
Imitation is the sincerest form of flattery, and others have
noted Pocky’s appeal. Starting in 1983, another confectionery
company called Lotte started making Pepero. These snacks are
also stick-shaped cookies (biscuits) partly coated in chocolate
or a flavored cream, and some have crushed almonds too. It
4
looks remarkably like Pocky. Here are the two products side
by side:
See App. 980–83, 1018–19, 1021–24. Lotte and its U.S. sub-
sidiary have been selling Pepero in the United States for more
than three decades.
C. Ezaki Glico’s trade-dress suit
From 1993 to 1995, Ezaki Glico sent letters to Lotte, noti-
fying Lotte of its registered trade dress and asking it to cease
and desist selling Pepero in the United States. Lotte assured
Ezaki Glico that it would stop until they resolved their dispute.
But Lotte resumed selling Pepero. For the next two decades,
Ezaki Glico took no further action.
5
In 2015, Ezaki Glico sued Lotte in federal court for selling
Pepero. Under federal law, Ezaki Glico alleged trademark in-
fringement and unfair competition, in violation of the Lanham
(Trademark) Act §§ 32 and 43(a), 15 U.S.C. §§ 1114,
1125(a)(1)(A). Under New Jersey law, it alleged trademark in-
fringement and unfair competition, in violation of both the
common law and the New Jersey Fair Trade Act, N.J.S.A.
§ 56:4-1 and 2.
After discovery, the District Court granted summary judg-
ment for Lotte, holding that because Pocky’s product configu-
ration is functional, it is not protected as trade dress. Kaisha v.
Lotte Int’l Am. Corp., No. 15-5477, 2019 WL 8405592, at *3
(D.N.J. July 31, 2019).
Ezaki Glico now appeals. The District Court had jurisdic-
tion under 15 U.S.C. §§ 1119 and 1121(a) and 28 U.S.C.
§§ 1331, 1338, and 1367. We have jurisdiction under 28 U.S.C.
§ 1291.
We review the District Court’s grant of summary judgment
de novo. Cranbury Brick Yard, LLC v. United States, 943 F.3d
701, 708 (3d Cir. 2019). We will affirm if no material fact is
genuinely disputed and if, viewing the facts most favorably to
Ezaki Glico, Lotte merits judgment as a matter of law. Fed. R.
Civ. P. 56(a). Both of Ezaki Glico’s Lanham Act claims de-
pend on the validity of its trade dress. New Jersey’s unfair-
competition and trademark laws are not significantly different
from federal law, so our analysis of Ezaki Glico’s Lanham Act
claims applies equally to dispose of its state-law claims. See
Am. Greetings Corp. v. Dan-Dee Imports, Inc., 807 F.2d 1136,
1141 (3d Cir. 1986); 3 J. Thomas McCarthy, McCarthy on
6
Trademarks and Unfair Competition § 22:1.50 (5th ed. 2020).
Following the parties’ lead, we focus on federal trademark law.
II. TRADE-DRESS LAW DOES NOT PROTECT PRODUCT
DESIGNS OR FEATURES THAT ARE USEFUL
Under the statute, the key issue is whether Pocky’s trade
dress is functional. Lotte says that it is; Ezaki Glico says no.
Ezaki Glico equates “functional” with “essential.” Appellants’
Br. 18, 25 (emphases omitted). But that test is too narrow. It
misreads the Lanham Act’s text and its relationship with the
Patent Act. Under both the statute and the case law, a feature
is functional if it is useful. And there are several ways to show
functionality.
A. Patent law protects useful designs, while trademark
law excludes them from its protection
Copying is usually legal. It is part of market competition.
As a rule, unless a patent, copyright, or the like protects an
item, competitors are free to copy it. TrafFix Devices, Inc. v.
Mktg. Displays, Inc., 532 U.S. 23, 29 (2001).
The Constitution does authorize Congress to grant exclu-
sive patents and copyrights “[t]o promote the Progress of Sci-
ence and useful Arts,” but only “for limited Times.” U.S.
Const. art. I, § 8, cl. 8. Patents promote “Science and useful
Arts” by protecting inventions that are “new and useful.” 35
U.S.C. § 101. Patents include utility patents as well as design
patents for “any new, original and ornamental design.” Id.§ 171(a). In keeping with the Constitution’s time limit, utility
patents last for twenty years, and design patents last for only
fifteen years. Id. §§ 154(a)(2), 173. If there is no patent, or once
7
a patent expires, competitors are free to copy “publicly known
design and utilitarian ideas.” Bonito Boats, Inc. v. Thunder
Craft Boats, Inc., 489 U.S. 141, 152 (1989); accord Qualitex
Co. v. Jacobson Prod. Co., Inc., 514 U.S. 159, 164 (1995). This
way, sellers can compete and build on one another’s innova-
tions. That competition improves quality and lowers consum-
ers’ costs.
By contrast, trademark law protects not inventions or de-
signs per se, but branding. A trademark is a “word, name, sym-
bol, or device . . . used by a person[ ] . . . to identify and distin-
guish his or her goods . . . from those manufactured or sold by
others and to indicate the source of the goods.” 15 U.S.C.
§ 1127. Trademark law can protect a product’s “trade dress[,]
[which] is the overall look of a product or business.” Fair Wind
Sailing, Inc. v. Dempster, 764 F.3d 303, 308 (3d Cir. 2014).
That includes not only a product’s packaging but also its de-
sign, such as its size, shape, and color. Id.; Wal-Mart Stores,
Inc. v. Samara Bros., 529 U.S. 205, 209 (2000).
We are careful to keep trademark law in its lane. Trade
dress, like trademark law generally, is limited to protecting the
owner’s goodwill and preventing consumers from being con-
fused about the source of a product. Shire US Inc. v. Barr
Labs., Inc., 329 F.3d 348, 353 (3d Cir. 2003). We must not
overextend it to protect all of a product’s features, because
“product design almost invariably serves purposes other than
source identification.” TrafFix, 532 U.S. at 29 (quoting Wal-
Mart, 529 U.S. at 213). “Trade dress protection . . . is not in-
tended to create patent-like rights in innovative aspects of
product design.” Shire, 329 F.3d at 353. If it did, it could
8
override restrictions on what is patentable and for how long.
Qualitex, 514 U.S. at 164–65.
The functionality doctrine keeps trademarks from usurping
the place of patents. The Patent and Trademark Office cannot
register any mark that “comprises any matter that, as a whole,
is functional.” 15 U.S.C. § 1052(e)(5). Even after a mark is reg-
istered, it is a defense to infringement “[t]hat the mark is func-
tional.” Id. § 1115(b)(8); see also id. § 1125(a)(3) (providing
that the holder of an unregistered mark must prove that the
mark “is not functional”). Thus, even if copying would confuse
consumers about a product’s source, competitors may copy un-
patented functional designs.
B. Functional features need not be essential,
just useful
The core dispute here is how to define “functional.” Ezaki
Glico reads it narrowly, equating it with “essential.” Appel-
lant’s Br. 18, 25. But that is not what the word means.
Since the Lanham Act does not define functionality, we
start with its ordinary meaning. A feature is functional if it is
“designed or developed chiefly from the point of view of use:
UTILITARIAN.” Functional (def. 2a), Webster’s Third New In-
ternational Dictionary (1966). So something is functional as
long as it is “practical, utilitarian”—in a word, useful. Func-
tional (def. 2d), Oxford English Dictionary (2d ed. 1989). The
word requires nothing more.
Reading functionality as usefulness explains how the Lan-
ham Act fits with the Patent Act. Patents, not trademarks, pro-
tect inventions or designs that are “new and useful.” 35 U.S.C.
9
§ 101. If the Lanham Act protected designs that were useful but
not essential, as Ezaki Glico claims, it would invade the Patent
Act’s domain. Because the Lanham Act excludes useful de-
signs, the two statutes rule different realms.
Precedent also supports defining functional as useful. In
Qualitex, the Supreme Court described the functionality doc-
trine as protecting competition by keeping a producer from mo-
nopolizing “a useful product feature.” 514 U.S. at 164. In
TrafFix, the Court described functionality as depending on
whether “the feature in question is shown as a useful part of the
invention.” 532 U.S. at 34. It contrasted functional features
with “arbitrary, incidental, or ornamental aspects” that “do not
serve a purpose within the terms of [a] utility patent.” Id. And
in Wal-Mart, the Court contrasted designs that only “identify
the source” with those that “render the product itself more use-
ful or more appealing.” 529 U.S. at 213. “[M]ore useful or
more appealing” is a far cry from essential.
Ezaki Glico resists this reading by focusing on one phrase
from Qualitex. The heart of its claim is the first sentence of its
argument: “A product’s configuration is functional for pur-
poses of trade dress protection only ‘if it is essential to the use
or purpose of the article or if it affects the cost or quality of the
article.’ ” Appellants’ Br. 22 (quoting Qualitex, 514 U.S. at
165, and adding the emphasis). But the word “only” is nowhere
on the cited page. Though Ezaki Glico’s forceful brief repeats
“essential” more than four dozen times and structures its case
around that touchstone, the authority does not support its drum-
beat.
10
On the contrary, the Supreme Court recognizes several
ways to show that a product is functional. One way is indeed
to show that a feature “is essential to the use or purpose of the
article.” Qualitex, 514 U.S. at 165 (quoting Inwood Labs., Inc.
v. Ives Labs., Inc., 456 U.S. 844, 850 n.10 (1995)). Another is
if “it affects the cost or quality of the article.” Id. At least in
some cases, a feature is functional and unprotected if the “ex-
clusive use of [the feature] would put competitors at a signifi-
cant non-reputation-related disadvantage.” TrafFix, 532 U.S.
at 32 (quoting Qualitex, 514 U.S. at 165). All of these are dif-
ferent ways of showing usefulness. (Though this last inquiry is
especially apt for proving aesthetic functionality, the Court has
not specifically limited it to that context. See TrafFix, 532 U.S.
at 33.) On the other hand, a feature is “not functional” if, for
instance, “it is merely an ornamental, incidental, or arbitrary
aspect of the device.” Id. at 30.
A product’s design, including its shape, is often useful and
thus functional. When Nabisco sued Kellogg for making its
shredded wheat pillow-shaped, just like Nabisco’s, the Su-
preme Court rejected the unfair-competition claim. The pillow
shape is functional because using another shape would increase
shredded wheat’s cost and lower its quality. Kellogg Co. v.
Nat’l Biscuit Co., 305 U.S. 111, 122 (1938). For the same rea-
son, the Court rejected a challenge to copying the exact shape
of a pole lamp. Sears, Roebuck & Co. v. Stiffel Co., 376 U.S.
225, 231–32 (1964). And if an inventor created a new light-
bulb shape that improved illumination, he could not trademark
that shape. Qualitex, 514 U.S. at 165. That would be true even
if consumers associated the bulb shape with its inventor, be-
cause trademarking it would “frustrat[e] competitors’
11
legitimate efforts to produce an equivalent illumination-en-
hancing bulb.” Id. So long as the design improves cost, quality,
or the like, it cannot be protected as trade dress. The shape need
only be useful, not essential.
Finally, the leading trademarks treatise concurs that “func-
tional” means useful. “To boil it down to a phrase: something
is ‘functional’ if it works better in this shape.” 1 McCarthy
§ 7:63. That includes features that make a product cheaper or
easier to make or use. Id.
C. Evidence of functionality
There are several ways to prove functionality. First, evi-
dence can directly show that a feature or design makes a prod-
uct work better. See Am. Greetings Corp. v. Dan-Dee Imports,
Inc., 807 F.2d 1136, 1142 (3d Cir. 1986) (treating as functional
“tummy graphics” on teddy bears because they signal each
bear’s personality). Second, it is “strong evidence” of function-
ality that a product’s marketer touts a feature’s usefulness. Id.at 1142–43. Third, “[a] utility patent is strong evidence that the
features therein claimed are functional.” TrafFix, 532 U.S. at
29. Fourth, if there are only a few ways to design a product, the
design is functional. Keene Corp. v. Paraflex Indus., Inc., 653
F.2d 822, 827 (3d Cir. 1981). But the converse is not true: the
existence of other workable designs is not enough to make a
design non-functional. Id.Our list is not exhaustive; there may be other considera-
tions. The Federal Circuit and other sister circuits also use sim-
ilar inquiries. See, e.g., Georgia-Pac. Consumer Prods. LP v.
Kimberly-Clark Corp., 647 F.3d 723, 727–28 (7th Cir. 2011);
12
Disc Golf Ass’n, Inc. v. Champion Discs, Inc., 158 F.3d 1002,
1006 (9th Cir. 1998); In re Morton-Norwich Prods., Inc., 671
F.2d 1332, 1340–41 (C.C.P.A. 1982) (predecessor to the Fed-
eral Circuit).
With these definitions and inquiries in mind, we can now
apply them to this case.
III. POCKY’S TRADE DRESS IS FUNCTIONAL
To decide whether a trade dress is functional, we look at the
usefulness of the exact feature or set of features claimed by the
trade dress. See Am. Greetings, 807 F.2d at 1141. Ezaki Glico
has two registered Pocky trade dresses. The first claims “an
elongated rod comprising biscuit or the like, partially covered
with chocolate.” App 10, 1448. The second claims the same,
along with almonds on top of the chocolate or cream. In a pic-
ture, Ezaki Glico’s trade dresses include all cookies like these:
13
App. 292. The trade dresses are presumptively valid because
they are registered and incontestable. See 15 U.S.C. § 1115. So
Lotte bears the burden of proving that they are functional. Id.§§ 1115(a), (b)(8).
Ezaki Glico argues that none of these features is essential
to make the snack easy to eat. But that is the wrong test. Lotte
has shown that Pocky’s design is useful and thus functional.
A. Pocky’s design makes it work better as a snack
Every feature of Pocky’s registration relates to the practical
functions of holding, eating, sharing, or packing the snack.
Consider each stick’s uncoated handle. Ezaki Glico’s internal
documents show that it wanted to make a snack that people
could eat without getting chocolate on their hands. Pocky was
born when Ezaki Glico found that it could coat just part of a
cookie stick, leaving people an uncoated place to hold it. So it
designed Pocky’s handle to be useful.
The same is true of Pocky’s stick shape. As Ezaki Glico
recognizes, the stick shape makes it “easy to hold, so it c[an]
be shared with others to enjoy as a snack.” App. 595. It also
lets people eat the cookie without having to open their mouths
wide. And the thin, compact shape lets Ezaki Glico pack many
sticks in each box, enough to share with friends.
Viewed as a whole, Pocky’s trade dress is functional. The
claimed features are not arbitrary or ornamental flourishes that
serve only to identify Ezaki Glico as the source. The design
makes Pocky more useful as a snack, and its advantages make
Pocky more appealing to consumers. As Ezaki Glico’s own
documents acknowledge, “Pocky provides a functional value
14
[Enjoy chocolate lightly].” App. 636 (bracketed material in
original).
B. Ezaki Glico promotes Pocky’s utilitarian
advantages
There is plenty of evidence that Ezaki Glico promotes
Pocky’s “convenient design.” App. 646. Its ads tout all the use-
ful features described above. It advertises “the no mess handle
of the Pocky stick,” which “mak[es] it easier for multi-tasking
without getting chocolate on your hands.” App. 648, 651. It
also describes Pocky as “[p]ortable,” since “one compact,
easy-to-carry package holds plentiful amounts of Pocky.” App.
648. “With plenty of sticks in each package, Pocky lends itself
to sharing anytime, anywhere, and with anyone.” App. 655.
These promotions confirm that Pocky’s design is functional.
C. There are alternative designs, but that does not
make Pocky’s design non-functional
Lotte could have shaped its Pepero differently. Ezaki Glico
offers nine examples of partly-chocolate-coated snacks that do
not look like Pocky. That is hardly dispositive. As we noted in
Keene, even when there are alternatives, the evidence can still
show that a product design is functional. 653 F.3d at 827. That
is true here. Every aspect of Pocky is useful. The nine other
designs do not make it less so.
15
D. Ezaki Glico’s utility patent for a manufacturing
method is irrelevant
Finally, Lotte argues that Ezaki Glico’s utility patent for a
“Stick Shaped Snack and Method for Producing the Same”
proves functionality. It does not.
As TrafFix explained, “[a] utility patent is strong evidence
that the features therein claimed are functional.” 532 U.S. at
29. This is because patented items must be “useful.” 35 U.S.C.
§ 101. If a patentee relied on a product’s feature to show that
the product was patentable, that reliance is good evidence that
the feature is useful. As TrafFix put it, the question is whether
the “central advance” of the utility patent is also “the essential
feature of the trade dress” that the owners want to protect. 532
U.S. at 30. So Ezaki Glico’s utility patent would be strong ev-
idence of functionality if the features it claimed overlapped
with its trade dress. But they do not.
The trade dress that Ezaki Glico defends is a stick-shaped
snack that is partly coated with chocolate or cream. Yet those
features are not the “central advance” of its utility patent. In-
stead, the patent’s innovation is a better method for making the
snack’s stick shape. The method is useful for making the shape
whether or not the shape itself is useful for anything. Thus, the
patent’s mention of the shape says nothing about whether the
shape is functional.
The District Court erroneously considered the utility patent.
But that error was immaterial. Even setting that aside, many
other factors show that Pocky’s trade dress is functional and so
invalid. Thus, the District Court properly granted summary
16
judgment for Lotte. We need not reach other possible grounds
for affirmance.
* * * * *
Though Ezaki Glico created Pocky, it cannot use trade
dress to keep competitors from copying it. Trade dress protects
features that serve only to identify their source. It does not
cover functional (that is, useful) features. That is the domain of
patents, not trademarks. There is no real dispute that Pocky’s
design is useful, so the trade dress is invalid. We will thus af-
firm. That’s the way the cookie crumbles.
17