Pocket Plus, LLC v. Pike Brands, LLC ( 2022 )

United States Court of Appeals
For the Eighth Circuit
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No. 21-3414
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Pocket Plus, LLC
Plaintiff - Appellant
v.
Pike Brands, LLC, formerly known as Runner’s High, LLC, doing business as
Running Buddy
Defendant - Appellee
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No. 22-1304
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Pocket Plus, LLC
Plaintiff - Appellant
v.
Pike Brands, LLC, formerly known as Runner’s High, LLC, doing business as
Running Buddy
Defendant - Appellee
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No. 22-1396
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Pocket Plus, LLC
Plaintiff - Appellee
v.
Pike Brands, LLC, formerly known as Runner’s High, LLC, doing business as
Running Buddy
Defendant - Appellant
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Appeal from United States District Court
for the Northern District of Iowa - Cedar Rapids
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Submitted: September 20, 2022
Filed: November 15, 2022
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Before GRUENDER, MELLOY, and ERICKSON, Circuit Judges.
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GRUENDER, Circuit Judge.
Pocket Plus, LLC, sued Pike Brands, LLC (“Running Buddy”) for trade-dress
infringement of Pocket Plus’s portable pouch. The district court 1 granted summary
judgment to Running Buddy and awarded it a portion of its requested attorney fees.
Pocket Plus appeals the summary judgment, and both parties appeal the attorney-
fees award. We affirm.
I.
Pocket Plus sells a portable pouch under the trademarked name POCKET
PLUS. The pouch is used for carrying small objects and comes in several sizes, all
rectangular in shape and all having a vertical profile (i.e., the pouch is taller than it
is wide). Attached to its rear is a narrow magnetic flap that allows the pouch to be
1
The Honorable C.J. Williams, United States District Judge for the Northern
District of Iowa.
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worn on a waistband, around a belt, or hung on handlebars. See Figure 1. Near the
pouch’s top edge is a small rectangular tag that includes Pocket Plus’s logo. The tag
serves partly as a pull tab to help open the pouch, which can be secured by a Velcro
closure.
Figure 1.
Pocket Plus’s owner created the POCKET PLUS because she wanted the
ability to carry her belongings even when her clothes did not have pockets. She
brought her product to market in 2009 with trade-show appearances, advertising, and
promotional materials emphasizing the pouch’s ability to hold beverage bottles,
cellphones, and other small items. In her deposition, she testified that the pouch’s
vertical design is beneficial for carrying items like tools or beverage bottles. She
also testified that the pouch is worn over the waistband “[f]or easy comfort without
having a belt” and that “nobody would want to put a lot of bulk inside of their pants.”
Pocket Plus is not alone in the portable-pouch market. Since 2012, Running
Buddy has marketed and sold its own pouches under the trademark BUDDY
POUCH and related names. Like the POCKET PLUS, Running Buddy’s pouches
have magnetic flaps that can be used to attach the pouch to a waistband. The pouches
also come with an illustrative “header card” showing how to use the pouch. Since
2015, Running Buddy has offered a vertical version, the BUDDY POUCH MINI
“PLUS,” which is the model at issue here. See Figure 2. Like Pocket Plus’s owner,
Running Buddy’s managing partner stated that a vertical orientation is useful for
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carrying beverage bottles without spilling and that “[a] horizontal orientation would
defeat these purposes.”
Figure 2.
In 2021, after a series of cease-and-desist letters, Pocket Plus sued Running
Buddy for trade-dress infringement under Iowa common law and § 43(a) of the
Trademark Act of 1946 (Lanham Act), 60 Stat. 441, as amended, 15 U.S.C.
§ 1125(a). Running Buddy moved for summary judgment, arguing that the trade
dress failed to satisfy two elements of an infringement claim—nonfunctionality and
distinctiveness. See Gateway, Inc. v. Companion Prod., Inc., 384 F.3d 503, 507 (8th
Cir. 2004). A month later, and within only a few weeks of deposing Pocket Plus’s
owner, Running Buddy threatened to file for Rule 11 sanctions against Pocket Plus
for its weak case. See Fed. R. Civ. P. 11. The threat came in a letter to Pocket Plus’s
counsel with an attached draft motion that sought attorney fees either as a sanction
under Rule 11 or as a remedy under the Lanham Act. Running Buddy then moved
for leave to file supplemental briefing for summary judgment, asserting that
testimony from Pocket Plus’s owner “makes abundantly clear that Plaintiff knew the
product design was functional and lacked secondary meaning before the Complaint
was even filed.” Ultimately, Running Buddy did not pursue Rule 11 sanctions.
The district court granted summary judgment for Running Buddy on
functionality and distinctiveness grounds. Running Buddy then moved to recover
attorney fees, arguing that this was an “exceptional case” under the Lanham Act.
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See 15 U.S.C. § 1117(a). The district court found for Running Buddy but awarded
only one-fourth of the requested fees. Both parties appeal the attorney-fees award.
Pocket Plus objects to any award; Running Buddy wants more.
II.
Pocket Plus appeals summary judgment. We review a district court’s grant of
summary judgment de novo. Ehlers v. Univ. of Minn., 34 F.4th 655, 659 (8th Cir.
2022). “Summary judgment is appropriate ‘if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.’” Id. (quoting Fed. R. Civ. P. 56(a)).
Section 43(a) of the Lanham Act creates a federal cause of action for trade-
dress infringement. Gateway, 384 F.3d at 507. Trade dress typically refers to a
product’s design or packaging. See Wal-Mart Stores, Inc. v. Samara Bros., 529 U.S.
205, 209-10 (2000). To prevail on a trade-dress infringement claim, a plaintiff must
show that its trade dress is distinctive and nonfunctional and that the trade dress’s
imitation would result in a likelihood of confusion to consumers regarding its source.
Gateway, 384 F.3d at 507.2 Pocket Plus’s trade dress is unregistered, so it enjoys no
presumption of nonfunctionality. See 15 U.S.C. § 1125(a)(3). Because we find that
there is no genuine dispute that the trade dress is functional, we need not address
Pocket Plus’s arguments that its pouch is distinctive.
A.
As a preliminary matter, the parties dispute which features make up Pocket
Plus’s trade dress. Pocket Plus’s definition evolved throughout the litigation, with
each iteration more detailed and specific than the one before. The district court
evaluated the trade dress as defined in Pocket Plus’s summary-judgment opposition
brief: a portable pocket that (1) is worn externally on a person’s clothing, over the
waistband on the hip; (2) has a vertical profile with a length at least 1.75 inches
2
Running Buddy did not challenge the likelihood-of-confusion element.
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longer than its width; (3) includes a label smaller than one square inch; and (4) is
accompanied by an illustration and photographs that emphasize its vertical profile
and use on one’s hip.
Running Buddy challenges this definition. It argues that two aspects of the
asserted trade dress—how the pocket is worn and its range of sizes—cannot be
considered part of Pocket Plus’s trade dress. Running Buddy is likely correct on
both fronts. How a product is worn or used is not part of the “tangible features of
[that] product.” Cf. Home Builders Ass’n of Greater St. Louis v. L&L Exhibition
Mgmt., Inc., 226 F.3d 944, 948 (8th Cir. 2000) (holding that the locations and times
of trade shows were not trade dress). As for the asserted size ranges, trade-dress
protection arises from actual “use[] in commerce,” not potential use. See 15 U.S.C.
§ 1125(a)(1). The asserted ranges encompass more than what Pocket Plus has used
in commerce. Nonetheless, we need not resolve whether these aspects are generally
cognizable as trade-dress features because Pocket Plus’s trade dress is functional
with or without them.
B.
To be protectable, trade dress must be nonfunctional. Gateway, 384 F.3d at
508. The traditional rule is that a product feature is functional if “it is essential to
the use or purpose of the device or when it affects the cost or quality of the device.”
TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 33 (2001). Conversely,
a feature is nonfunctional “if it is an arbitrary embellishment primarily adopted for
purposes of identification and individuality.” Gateway, 384 F.3d at 508. The
boundary between arbitrary embellishment and functionality is not always clear.
See, e.g., Jay Franco & Sons, Inc. v. Franek, 615 F.3d 855, 860 (7th Cir. 2010)
(noting the “chief difficulty [of] distinguishing between designs that are fashionable
enough to be functional and those that are merely pleasing”). Aesthetic product
features, for instance, may be critical to survival in the marketplace and therefore
functional if their protection would put competitors at a “significant non-reputation-
related disadvantage.” TrafFix, 532 U.S. at 33; see also Gateway, 384 F.3d at 508
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(“[I]f the trade dress is an important ingredient in the commercial success of the
product, it is clearly functional.”). But where a feature is functional under the
traditional rule, “there is no need to proceed further to consider if there is a
competitive necessity for the feature.” TrafFix, 532 U.S. at 33.
Also informing the functionality analysis is whether the trade dress constitutes
product design or product packaging. See Wal-Mart, 529 U.S. at 213. Product
design, unlike product packaging, “almost invariably serves purposes other than
source identification.” Id. These other purposes are often utilitarian and aesthetic.
See id. Such product designs generally are “subject to copying” absent a patent or
copyright. See TrafFix, 532 U.S. at 29. Relatedly, some product designs may be
too generic or basic to deserve protection because they would “impoverish[] other
designers’ palettes.” See Franek, 615 F.3d at 860 (holding that a round beach
towel’s design was functional); see also Landscape Forms, Inc. v. Columbia
Cascade Co., 113 F.3d 373, 380 (2d Cir. 1997) (“[G]ranting trade dress protection
to an ordinary product design would create a monopoly in the goods themselves.”).
Finally, the functionality analysis focuses on “the collection of design
elements, taken as a whole,” rather than on “whether individual elements of the trade
dress could be categorized as [functional].” Insty*Bit, Inc. v. Poly-Tech Indus., Inc.,
95 F.3d 663, 673 (8th Cir. 1996); see also Stuart Hall Co. v. Ampad Corp., 51 F.3d
780, 790 (8th Cir. 1995). We emphasize, however, that this approach remains
consistent with the notion that trademark law does not protect individual features of
a trade dress that are functional. See TrafFix, 532 U.S. at 31-34 (analyzing the
functionality of the trade dress’s “essential feature”). In other words, it is possible
for a trade dress to comprise some functional elements and some arbitrary elements
so that the trade dress as a whole is nonfunctional and eligible for protection, while
competitors remain free to copy the functional elements in their own designs. See
Stuart Hall, 51 F.3d at 790; see also Antioch Co. v. W. Trimming Corp., 347 F.3d
150, 158 (6th Cir. 2003) (“[I]n order to receive trade dress protection for the overall
combination of functional features, those features must be configured in an arbitrary,
fanciful, or distinctive way.”).
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Taken as a whole, there is no genuine dispute of material fact that Pocket
Plus’s trade dress is functional. The pouch’s purpose is to carry objects, including
beverage bottles and cellphones. A pouch’s shape (vertical or horizontal), the ability
to open the pouch (pull-tab size and positioning), and how the pouch is worn (around
the waist or attached to clothing) all combine to affect its suitability for carrying
objects. None of these features are “arbitrary flourish[es].” See TrafFix, 532 U.S.
at 34. Varying any one affects the usefulness of the pocket in critical ways. See
CTB, Inc. v. Hog Slat, Inc., 954 F.3d 647, 665 (4th Cir. 2020) (concluding that a
feeder pan for chickens was functional because it was the combination of “wholly-
functional components”).
Pocket Plus argues that the vertical orientation of its pouches is not functional
because some competitors make horizontal pouches capable of holding bottles.
Similarly, Pocket Plus argues that some competitors make pouches that are worn
inside clothing rather than outside. But the question is not whether it is possible for
alternatives to serve similar purposes. Rather, it is whether that orientation is
“essential to the use or purpose of the device” or “affects the cost or quality of the
device.” See TrafFix, 532 U.S. at 33. If it is, then competitors need not explore
other design possibilities. See id. at 33-34. Pocket Plus’s chosen vertical orientation
and over-the-hip design undoubtedly affect the quality of a portable pouch and are
essential to its purpose.
As for the illustrations and photographs accompanying the packaging, we see
no reason why their inclusion in Pocket Plus’s trade-dress definition changes the
conclusion that its trade dress is functional. Pocket Plus has not pointed to anything
unique, unusual, or nonfunctional about the fact that it uses product depictions to
inform consumers about its product. See Abercrombie & Fitch Stores, Inc. v. Am.
Eagle Outfitters, Inc., 280 F.3d 619, 644-45 (6th Cir. 2002) (noting the unique
features in Abercrombie’s catalog). Instead, Pocket Plus has simply pointed to a
generic marketing idea or concept. Tellingly, its trade-dress definition emphasizes
what the depictions do rather than what they look like. According to Pocket Plus,
the depictions “emphasize[] the vertical profile and use on one’s hip.” That is
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functional. See Fun-Damental Too, Ltd. v. Gemmy Indus. Corp., 111 F.3d 993, 1002
(2d Cir. 1997) (noting the usefulness of “displaying the actual product to the
consumer”); see also Woodsmith Publ’g Co. v. Meredith Corp., 904 F.2d 1244, 1248
(8th Cir. 1990) (holding that a woodworking magazine’s easy-to-follow instructions,
materials lists, and cutting diagrams are functional and not protectable as trade
dress). Further, the record shows that the practice of using product depictions to
inform consumers is quite common. See Woodsmith, 904 F.2d at 1248 (noting
common practices in the magazine industry). Numerous competitors employ
depictions to show how to use a pouch and what it might look like when worn.
Trademark law “does not protect one from a competitor’s imitation of one’s
marketing concept.” Aromatique, Inc. v. Gold Seal, Inc., 28 F.3d 863, 868 (8th Cir.
1994).
In sum, there is no genuine dispute that Pocket Plus’s trade dress is functional
and thus not protected by trademark law. To grant trade-dress protection for Pocket
Plus would be to hand it a monopoly over the “best” portable-pouch design.
Trademark law precludes that. See Qualitex Co. v. Jacobson Products Co., Inc., 514
U.S. 159, 164 (1995) (“The functionality doctrine prevents trademark law, which
seeks to promote competition by protecting a firm’s reputation, from instead
inhibiting legitimate competition by allowing a producer to control a useful product
feature.”).
III.
Both parties dispute the attorney-fees award. We review a district court’s
award of attorney fees under the Lanham Act for abuse of discretion. Safeway
Transit LLC v. Discount Party Bus, Inc., 954 F.3d 1171, 1183 (8th Cir. 2020). An
abuse of discretion occurs “when a relevant factor that should have been given
significant weight is not considered; when an irrelevant or improper factor is
considered and given significant weight; and when all proper factors, and no
improper ones, are considered, but the court, in weighing those factors, commits a
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clear error of judgment.” Fair Isaac Corp. v. Experian Info. Sols., Inc., 650 F.3d
1139, 1152 (8th Cir. 2011).
Pocket Plus argues that the district court abused its discretion in finding that
this was an exceptional case under the Lanham Act warranting an award of attorney
fees. Running Buddy argues that the district court abused its discretion in awarding
only a portion of the requested fees. We find no abuse of discretion in either
decision.
A.
In “exceptional cases,” a district court “may award reasonable attorney fees
to the prevailing party.” 15 U.S.C. § 1117(a). Whether a case is exceptional is for
the district court’s discretion, considering the totality of the circumstances. Octane
Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014) (interpreting
a similar provision in patent statutes); Safeway, 954 F.3d at 1182-83 (applying
Octane Fitness in the trademark context).
“[A]n ‘exceptional’ case is simply one that stands out from others with respect
to the substantive strength of a party’s litigating position (considering both the
governing law and the facts of the case) or the unreasonable manner in which the
case was litigated.” Octane Fitness, 572 U.S. at 554. In other words, the case is
“uncommon, not run-of-the-mill.” Safeway, 954 F.3d at 1182. Relevant factors for
a district court to consider include “frivolousness, motivation, objective
unreasonableness (both in the factual and legal components of the case) and the need
in particular circumstances to advance considerations of compensation and
deterrence.” Id. (quoting Octane Fitness, 572 U.S. at 555). A party’s unreasonable
conduct need not be independently sanctionable for the case to be exceptional. Id.
Finally, courts may also consider the prevailing party’s behavior in declining to
award attorney fees in exceptional cases. Id. at 1183.
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After briefing and a hearing on the attorney-fees motion, the district court
concluded that this was an “exceptional” case due to Pocket Plus’s “unreasonable
behavior” and the weakness of its litigating position in view of the facts of the case.
It found that Pocket Plus’s cease-and-desist letters sent before the litigation
“unreasonably demanded” action from Running Buddy because the letters did not
specify what the trade dress was and instead provided “unreasonably broad”
definitions. Considering this context, the district court further found that Pocket Plus
acted unreasonably when it changed its trade-dress definition in its opposition to
summary judgment, five months after its amended complaint. This change required
Running Buddy to undertake additional time, argument, and analysis.
As for Pocket Plus’s litigating position, the district court determined that it
was “objectively unreasonable on the facts.” For support, the district court again
noted Pocket Plus’s shifting trade-dress definition as well as Pocket Plus’s factual
assertions that were directly contradicted in the record. Specifically, the district
court found that Pocket Plus’s arguments for exclusivity were directly contradicted
by the several-years’ existence of another competitor’s pouch. Finally, the district
court found that Pocket Plus’s assertion that it was entitled to a presumption of
distinctiveness was clearly contradicted by evidence in the record regarding another
competitor’s sales during Pocket Plus’s early years.
On this record, the district court did not abuse its discretion in finding that this
was an exceptional case. It considered the appropriate law, reviewed the litigation
history, held a hearing, and explained its decision.
B.
After finding that this was an exceptional case, the district court declined to
award Running Buddy’s requested fees for two reasons. First, it reasoned that
Pocket Plus’s definitional change at summary judgment impacted only part of the
litigation, not the whole case. Second, it found that Running Buddy’s conduct in
threatening to move for sanctions was unreasonable. The district court disapproved
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of Running Buddy’s “unfulfilled threat of Rule 11 sanctions,” which it regarded as
“meritless and intended to harass.” After conducting a lodestar analysis and
reducing the requested hourly billing rate and number of hours, the district court
awarded Running Buddy $25,103.75, a quarter of its requested fees.
Running Buddy argues that the district court erred in reducing the fees by
relying on Running Buddy’s letter threatening to file for Rule 11 sanctions and its
subsequent decision not to file. Running Buddy cautions that the district court’s
logic would have a chilling effect on future Rule 11 motions because a party must
provide twenty-one days’ notice before filing for sanctions and yet might decide
during that period not to file. See Fed. R. Civ. P. 11(c)(2); see also Thermolife Int’l
LLC v. GNC Corp., 922 F.3d 1347, 1357 (Fed. Cir. 2019) (“[O]ne consideration that
can and often should be important to an exceptional-case determination is whether
the party seeking fees provide[d] early, focused, and supported notice of its belief
that it was being subjected to exceptional litigation behavior.” (internal quotation
marks omitted and second alteration in original)).
Although we are inclined to agree with Running Buddy that merely not
following through on a notice to file Rule 11 sanctions is an insufficient reason to
conclude that the threat was meritless, we disagree that the district court abused its
discretion in considering that fact along with Running Buddy’s letter and draft
motion to reduce the fee award. “[A]ll Lanham Act remedies are equitable in
nature.” Safeway, 954 F.3d at 1178. The district court was free to consider both
parties’ conduct. Although the district court’s explanation for why it regarded the
threat as meritless and intended to harass could have been more thorough, we find
no abuse of discretion.
Running Buddy also challenges the district court’s determination of a
reasonable billing rate and hours worked. For billing rates, a district court has “great
latitude to determine a reasonable hourly rate because it is intimately familiar with
its local bar.” Childress v. Fox Assocs., LLC, 932 F.3d 1165, 1172 (8th Cir. 2019).
“The burden is on the moving party to provide evidence supporting the rate
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claimed.” Wheeler v. Mo. Highway & Transp. Comm’n, 348 F.3d 744, 754 (8th Cir.
2003). The district court discounted Running Buddy’s national-survey evidence
because it was not sufficiently probative of reasonable rates in Iowa. Instead, it
analyzed a 2008 federal case from the same state and considered defense counsel’s
experience to reduce the hourly rates from $400, $425, and $480 to $350, which it
regarded as “the highest reasonable rate available in the record.” Finally, the district
court also reviewed the 295.10 hours that Running Buddy billed during the relevant
timeframe and reduced the total by less than ten hours for attending a hearing and
for time spent on the Rule 11 threat. Neither reduction was an abuse of discretion.
IV.
For the foregoing reasons, we affirm the district court’s grant of summary
judgment and award of attorney fees to Running Buddy.
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