Intellectual Property
June 2000 Vol. 39, No. 4
Statements or expressions of opinion or comments appearing herein are those of the editors or contributors, and not necessarily those of the association or section.
Contents
* When is a dress trade dress? Walmart Stores, Inc. v. Samara Brothers
When is a dress trade dress? Walmart Stores, Inc. v. Samara Brothers
By Steven L. Baron, D'Ancona & Pflaum LLC
On March 22, 2000, the United States Supreme Court tackled the thorny question of whether a product's design could be "inherently distinctive" so as to provide protection under trade dress theory. In the case of Walmart Stores, Inc. v. Samara Brothers, Inc. (No. 99-150), the Court held that in an action for infringement of an unregistered trade dress under section 43(a) of the Lanham Act, a product design (in this case, children's clothing) is distinctive, and therefore protectable, only upon the showing of secondary meaning.
Facts
In Walmart, plaintiff, Samara Brothers, Inc. was a designer and manufacturer of children's clothing. Its primary product was a line of spring/summer one-piece seersucker outfits decorated with appliques of hearts, flowers, fruits and the like. Samara sold its clothing under contract to chain stores, including JCPenney.
Defendant Walmart Stores, Inc. contracted with Judy-Philippine, Inc. to manufacture a line of children's outfits based upon Samara's line. In fact, Walmart sent Judy-Philippine photographs of a number of garments from the Samara line and Judy-Philippine copied the photographs with only minor modifications. Walmart began selling the knock-offs and generated more than $1.15 million in gross profits.
When Samara learned of the knock-offs, it sent a cease and desist letter and sued Walmart, Judy-Philippine, and various retail stores in federal court in the Southern District of New York. Samara alleged claims for copyright infringement, consumer fraud and unfair competition and infringement of unregistered trade dress under section 43(a) of the Lanham Act.
The jury found in favor of Samara on all of its claims. The district court awarded Samara damages, interest, costs and fees totaling $1.6 million together with injunctive relief. Both the district court and the Second Circuit denied Walmart's motion for judgment as a matter of law, in which Walmart argued among other things that there was insufficient evidence to support a conclusion that Samara's clothing designs could be legally protected as distinctive trade dress under section 43(a) of the Lanham Act.
Analysis
The United States Supreme Court reversed the Second Circuit and remanded the case for further proceedings on the question of whether Samara could maintain an action for infringement of its unregistered trade dress under section 43(a) of the Lanham Act in the absence of a showing of secondary meaning.
In reaching its ruling, the Court traced the difference between inherent distinctiveness and acquired distinctiveness under section 43(a) of the Lanham Act. The Court cited its earlier decision in Qualitex Co. v. Jacobson Products Co, 514 U.S. 159 (1995) in which the Court held that color could come to indicate a product's origin, but only upon the showing of secondary meaning. Analogizing to the Qualitex opinion, the Court found that like color, a product design is not inherently distinctive. The Court stated:
In the case of product design, as in the case of color, we think consumer predisposition to equate the feature with the source does not exist. Consumers are aware of the reality that, almost invariably, even the most unusual of product designs such as a cocktail shaker shaped like a penguin is intended not to identify the source, but to render the product itself more useful or more appealing.
The Court went on to articulate its concerns about consumer interests:
Consumers should not be deprived of the benefits of competition with regard to the utilitarian and esthetic purposes that product design ordinarily serves by rule of law that facilitates plausible threats of suit against new entrance based upon alleged inherent distinctness.
The Court later noted that, "[c]ompetition is deterred . . .
not merely by successful suit but by the plausible threat of successful suit. . ."
Samara argued that the Court's decision in Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763 (1992) precluded the conclusion that a product-design trade dress can never be inherently distinctive. The Court disagreed. The Court found that Two Pesos was inapposite because the trade dress at issue in that case, the decor of the restaurant, was not, according to the Court, akin to a product design.
The Court also found uncompelling Samara's argument that courts will find it too difficult to draw lines between product-design and product-packaging trade dress. Specifically, the Court noted that, "[t]he frequency and the difficulty of having to distinguish between product design and product packaging will be much less than the frequency and the difficulty of having to decide when a product design is inherently distinctive."
It may be too soon to tell the full impact of the Court's ruling, but at minimum, the decision clearly makes it more difficult for plaintiffs to pursue trade dress claims solely on product design. The Court did note, however, that as in the Samara case, there are other protections for design claims, including patent and copyright law which offer remedies to plaintiffs in the situation that Samara found itself. For now, plaintiffs who choose to pursue trade dress claims for product design had best be armed with survey evidence or other strong evidence of secondary meaning arising from the product design. The Supreme Court has made it abundantly clear that a product's design can never be inherently distinctive. In short, a dress cannot be trade dress without proof secondary meaning.
All the rage, and a significant concern
Copyright 2000 by David Loundy
Use of Application Service Providers (ASPs) is a hot topic in computer technology circles, but there are significant concerns that often get overlooked. ASPs are service providers that allow you to remotely access computer software, rather than having to purchase it yourself. Essentially, instead of buying a word processor, for example, you log onto someone else's computer and use theirs.
ASPs have some advantages: generally they allow you access to expensive software at lower costs than a purchase would require and they allow you access to powerful machines without needing as much computing power at the desktop (in some ways, this is a return to the days of mainframe computing and the "time share" model). They also provide for central administration and support. Rather than updating every employee's desktop software, the ASP need only upgrade the copy sitting on its server for you. You have no need to have your own staff stay current with upgrades and updates to the software, it all (in theory) happens behind the scenes courtesy of the ASP.
There are a few concerns involved with using an ASP, or in reviewing contracts for use of an ASP, that need to be considered. The first issue is privacy. Strong confidentiality provisions are necessary in any agreement with an ASP. Using an ASP means taking what may be your most valuable data, such as your accounting, payroll, inventory, and customer data, and giving it to the ASP. Who is this ASP and what is it going to do with your data? Provisions are necessary to make sure that this data is kept safe and that relief is readily and quickly obtainable against any breach of confidentiality.
A similar issue is that of computer security. Your data will be stored on someone else's machine. Is it safe? Is the ASP taking adequate precautions? Is the ASP monitoring security hole reporting services and installing appropriate upgrades/patches/workarounds? In theory, just as using an ASP can allow the sharing of costs for expensive hardware and software applications amongst a number of customers, so too can the costs of adequate security be shared amongst a collection of customers. In practice, however, the ASP may not be giving adequate attention to this issue. This is a fairly significant concern because the whole ASP model is inherently a security weakness. Protection of your data is taken out of your hands and given to the unknown staff of some minimally known third party using unknown software, hardware, and network design.
The final issue is access. This takes two forms: usage and data recovery. Some ASP contracts have provisions for scheduled maintenance and disclaimers as to service availability. A good ASP contract should have a provision that provides some definition to the amount of scheduled maintenance and provides that it will be scheduled at a time that will minimize its impact on your or your client's business. You also should consider a provision that provides a service level guarantee. If the ASP is providing a mission-critical function, you want a guarantee of availability, especially since the application's availability is out of your control when it is provided by an ASP (remember, the Internet is not a medium that is ready for prime time--a backhoe in the parking lot that takes out the fiber cable to your office could leave you dead in the water unable to use your outsourced applications).
Data recovery concerns not just the obvious issues of whether the ASP is making proper backups of the data stored on its servers, but also the concern of being able to get at your data if you have a dispute with the ASP. Since your data is being stored by the ASP, either you should have the technical infrastructure in place to make sure that you have a copy of all of your data, or there needs to be adequate provisions ensuring that you can get your data back. It would be a really bad thing to have, say, a dispute with an ASP only to have your payroll or customer database held hostage until you pay the ASP fees that you do not believe are owed.
ASPs serve a convenient function and are likely to grow in popularity. Just as you would exercise care in your own hiring and security decisions, care must be taken to make sure that as many risks as possible are addressed before the company jewels are turned over to an outside service provider.
From the Official Gazette of the United States Patent and Trademark Office, Trademarks, June 20, 2000 at 1235 TMOG 70.
Standard Form Agreement or Order for Protecting Confidentiality of Information and Documents Disclosed During Proceedings Before the Trademark Trial and Appeal Board
Parties involved in inter partes proceedings before the Trademark Trial and Appeal Board often enter into agreements intended to safeguard information and documents viewed as confidential, commercially sensitive or trade secret. Similarly, a party involved in a Board proceeding may move the Board for an order providing that disclosure of such information or documents be conditioned on the receiving party's being obligated to hold the material in confidence and utilize it only for purposes related to the proceeding.
The Board, in response to requests from parties involved in its cases, has promulgated standard provisions for protecting such material. Parties may agree to be bound by these provisions, to facilitate the exchange of information and documents. As an alternative, parties may use the standard form as a template upon which to base a more particularized agreement. In cases where the parties do not agree on provisions for protecting confidential, commercially sensitive or trade secret information, the Board may make orders designed to facilitate discovery or trial activities. The standard provisions may be imposed by the Board in appropriate cases.
The standard form Agreement or Order is published with this notice and made available to parties for their use. The document will also be made available on the Office's Web site [www.USPTO.gov/web/menu/tm]; and it will be included in future revisions of the Trademark Trial and Appeal Board Manual of Procedure [TBMP].
PROVISIONS FOR PROTECTING
CONFIDENTIALITY OF INFORMATION REVEALED DURING BOARD PROCEEDING
Information disclosed by any party or non-party witness during this proceeding may be considered confidential, a trade secret, or commercially sensitive by a party or witness. To preserve the confidentiality of the information so disclosed, either the parties have agreed to be bound by the terms of this order, in its standard form or as modified by agreement, and by any additional provisions to which they may have agreed and attached to this order, or the Board has ordered that the parties be bound by the provisions within. As used in this order, the term "information" covers both oral testimony and documentary material.
Parties may use this standard form order as the entirety of their agreement or may use it as a template from which they may fashion a modified agreement. If the Board orders that the parties abide by the terms of this order, they may subsequently agree to modifications or additions, subject to Board approval.
Agreement of the parties is indicated by the signatures of the parties' attorneys and/or the parties themselves at the conclusion of the order. Imposition of the terms by the Board is indicated by signature of a Board attorney or Administrative Trademark Judge at the conclusion of the order. If the parties have signed the order, they may have created a contract.1 The terms are binding from the date the parties or their attorneys sign the order, in standard form or as modified or supplemented, or from the date of imposition by a Board attorney or judge.
TERMS OF ORDER
1) Classes of protected information
The Rules of Practice in Trademark Cases provide that all inter partes proceeding files, as well as the involved registration and application files, are open to public inspection. The terms of this order are not to be used to undermine public access to files. When appropriate, however, a party or witness, on its own or through its attorney, may seek to protect the confidentiality of information by employing one of the following designations.
Confidential-Material to be shielded by the Board from public access. Highly Confidential-Material to be shielded by the Board from public access and subject to agreed restrictions on access even as to the parties and/or their attorneys.
Trade Secret/Commercially Sensitive-Material to be shielded by the Board from public access, restricted from any access by the parties, and available for review by outside counsel for the parties and, subject to the provisions of paragraph four and five, by independent experts or consultants for the parties.
2) Information not to be designated as protected
Information may not be designated as subject to any form of protection if it (a) is, or becomes, public knowledge, as shown by publicly available writings, other than through violation of the terms of this document; (b) is acquired by a non-designating party or non-party witness from a third party lawfully possessing such information and having no obligation to the owner of the information; (c) was lawfully possessed by a non-designating party or non- party witness prior to the opening of discovery in this proceeding, and for which there is written evidence of the lawful possession; (d) is disclosed by a non-designating party or non-party witness legally compelled to disclose the
information; or (e) is disclosed by a non-designating party with the approval of the designating party.
3) Access to protected information
The provisions of this order regarding access to protected information are subject to modification by written agreement of the parties or their attorneys, or by motion filed with and approved by the Board. Judges, attorneys, and other employees of the Board are bound to honor the parties' designations of information as protected but are not
required to sign forms acknowledging the terms and existence of this order. Court reporters, stenographers, video technicians or others who may be employed by the parties or their attorneys to perform services incidental to this proceeding will be bound only to the extent that the parties or their attorneys make it a condition of employment or obtain
agreements from such individuals, in accordance with the provisions of paragraph four.
* Parties are defined as including individuals, officers of corporations, partners of partnerships, and management employees of any type of business organization.
* Attorneys for parties are defined as including in-house counsel and outside counsel, including support staff operating under counsel's direction, such as paralegals or legal assistants, secretaries, and any other employees or independent contractors operating under counsel's instruction.
* Independent experts or consultants include individuals retained by a party for purposes related to prosecution or defense of the proceeding but who are not otherwise employees of either the party or its attorneys. o Non-party witnesses include any individuals to be deposed during discovery or trial, whether willingly or under subpoena issued by a court of competent jurisdiction over the witness.
Parties and their attorneys shall have access to information designated as confidential or highly confidential, subject to any agreed exceptions.
Outside counsel, but not in-house counsel, shall have access to information designated as trade secret/commercially sensitive.
Independent experts or consultants, non-party witnesses, and any other individual not otherwise specifically covered by the terms of this order may be afforded access to confidential or highly confidential information in accordance with the terms that follow in paragraph four. Further, independent experts or consultants may have access to trade secret/commercially sensitive information if such access is agreed to by the parties or ordered by the Board, in accordance with the terms that follow in paragraph four and five.
4) Disclosure to any individual
Prior to disclosure of protected confidential or highly confidential information by any party or its attorney to any individual not already provided access to such information by the terms of this order, the individual shall be informed of the existence of this order and provided with a copy to read. The individual will then be required to certify in writing that the order has been read and understood and that the terms shall be binding on the individual. No individual shall receive any protected information until the party or attorney proposing to disclose the information has received the signed certification from the individual. A form for such certification is attached to this order.The party or attorney receiving the completed form shall retain the original.
5) Disclosure to independent experts or consultants
In addition to meeting the requirements of paragraph four, any party or attorney proposing to share disclosed trade secret/commercially sensitive information with an independent expert or consultant must also notify the party which designated the information as protected. Notification must be personally served or forwarded by certified mail, return receipt requested, and shall provide notice of the name, address, occupation and professional background of the expert or independent consultant.
The party or its attorney receiving the notice shall have ten business days to object to disclosure to the expert or independent consultant. If objection is made, then the parties must negotiate the issue before raising the issue before the Board. If the parties are unable to settle their dispute, then it shall be the obligation of the party or attorney proposing disclosure to bring the matter before the Board with an explanation of the need for disclosure and a report on the efforts the parties have made to settle their dispute. The party objecting to disclosure will be expected to respond with its arguments against disclosure or its objections will be deemed waived.
6) Responses to written discovery