Confectionary co. Ezaki looses appeal against competitor Lotte in a case involving trade dress infringement
Date Published: Jun 21, 2021
Ezaki Glico is a Japanese confectionery company. It works on developing chocolate covered cookie sticks named ‘Pocky’. Another confectionary company, Lotte started making Pepero which were also stick-shaped cookies (biscuits) partly coated in chocolate. The appearance of both Pocky and Pepero was similar. Having similar appearance, Ezaki Glico sued Lotte for trade-dress infringement in the United States District Court for the District of New Jersey (“District Court”) (Ezaki Glico Kabushiki Kaisha and Ezaki Glico USA Corporation V. Lotte International America Corp., Civil Action No. 15-5477 (MCA) (LDW) (D.N.J. Feb. 13, 2019)). The District Court granted summary judgment in favor of Lotte stating that design of Pocky is functional and therefore, Ezaki does not have any trade-dress protection over Pocky. Aggrieved by this, Ezaki appealed to the United States Court Of Appeals for the Third Circuit (“Third Circuit”) (Ezaki Glico Kabushiki Kaisha and Ezaki Glico USA Corporation V. Lotte International America Corp., 977 F.3d 261 (3d Cir. 2020)). The Third Circuit affirmed with the decision of District Court stating that the trade dress identifies the source of the product but does not protect those designs which are functional. Affirming with the District Court, the Third Circuit granted motion of summary judgment favoring Lotte.
The invention of Pocky by Ezaki was done decades ago whereby it gained substantial market and popularity. Ezaki has been selling Pocky for more than half a century. The cookie is coated with chocolate and also with crushed almonds with both ends partly uncoated to serve as a handle. Pocky was made in both standard as well as “Ultra Slim” sizes. Selling Pocky since 1978 through its wholly owned subsidiary, Ezaki has registered its trademark and patents in the United States. Also it has registered Pocky product configurations as trade dresses and a Utility Patent for a “Stick Shaped Snack and Method for Producing the Same.” In the Utility Patent, the final claim covers “[a] stick shaped snack made by the method of claim 1.”
In 1983, Lotte started making Pepero with similar stick-shaped cookies (biscuits) partly coated in chocolate or a flavored cream, and some have crushed almonds too, adding to the similarity in appearance.
Noticing the similarity, Ezaki sent letters from 1993-1995, asking Lotte to cease and desist selling Pepero in the United States, notifying its registered trade dress. Receiving the letter, Lotte assured to stop selling it until the dispute is resolved, but then resumed and continued selling. For the next two decades, Ezaki didn’t take any action and then filed a suit in the District Court in 2015 against Lotte. At the District Court, Ezaki Glico alleged trademark infringement and unfair competition, in violation of the Lanham (Trademark) Act §§32 and 43(a), 15 U.S.C. §§1114, 1125(a)(1)(A). Referring to the New Jersey law, it alleged trademark infringement and unfair competition, in violation of both the common law and the New Jersey Fair Trade Act.
Delving into the allegation, District Court granted summary judgment for Lotte. Citing the reason of configuration of the product being functional, it noted that the Pocky is not protected under the trade dress. It appealed to the Third Circuit. The Third Circuit specified that their analysis will be limited to the Lanham’s Act due to significant similarity of the New Jersey’s unfair competition and trademark laws with that of the Federal Law.
While delving into the case, the Third Circuit discussed the law at length and its applicability in this case. The trade dress law does not protect product designs that are useful. The functionality basis forms the core part in this case, where Ezaki connotes the functionality with “essential”, which the Third Circuit noted it to be a very narrow test. Referring to the Lanham Act and Patent Act, the Court clarified that under both the statute and the case law, a feature’s particular design is functional if it is useful. Copying is usually legal unless there is a patent or copyright or other right that protects the item. Utility patents promote “Science and useful Arts” by protecting inventions that are “new and useful.” Design patents protect “any new, original and ornamental design.” In keeping with the Constitution’s time limit, utility patents last for twenty years, and design patents last for only fifteen years. After which the competitors are free to copy. The trademark law does not protect the design and but it protects the branding. A trademark is a “word, name, symbol, or device ... used by a person [] ... to identify and distinguish his or her goods ... from those manufactured or sold by others and to indicate the source of the goods.” With regards to the trade dress, the trademark law can protect the overall look of the product, including its size shape and color as trade dress.
The Third Circuit noted that the trade dress is also limited to protecting of owner’s goodwill and preventing any confusion among consumer and must not over extend to the product features. The Third Circuit makes it very clear that “Trade dress protection ... is not intended to create patent-like right in innovative aspects of product design,” extending might override restrictions on what is patentable. The Patent and Trademark Office cannot register any mark that “comprises any matter that, as a whole, is functional.” Even if registered, it is will be defense to infringement unless; the holder proves that the mark is not functional. Therefore, based upon the observation, the Third Circuit notes that the despite confusion of consumer about the product’s source, competitors may copy unpatented functional designs.
The Third Circuit noted four factors for proving functionality. First, evidence can directly show that a feature or design makes a product work better. Second, it is “strong evidence” of functionality that a product’s marketer touts a feature’s usefulness. Third, utility patent is strong evidence that the features therein claimed are functional. Fourth, here are only a few ways to design a product, the design is functional. Citing non-exhaustive list, the court agreed that there might be more considerations.
Observing all the factors, it noted that Pocky’s design was functional. Every feature of Pocky’s registration relates to the “practical functions of holding, eating, sharing, or packing the snack.” Evidence showed that Ezaki Glico promotes Pocky’s “convenient design.” Even if there are alternative design, the “evidence can still show that a product design is functional.” Observing all such factors, the Third Circuit affirmed the District Court decision noting that “Ezaki cannot use trade dress protection to keep competitors from copying it.” There is no dispute that Pocky design is useful, hence the trade dress is not protectable.