Ezaki Glico Kabushiki Kaisha v. Lotte Int'l Am. Corp.

986 F.3d 250

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.

No. 19-3010

United States Court of Appeals, Third Circuit.

Argued: July 9, 2020

Filed: January 26, 2021

Amended: March 10, 2021

Jessica L. Ellsworth [ARGUED], Anna K. Shaw, Neal K. Katyal, 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, Suite 2010, Boston, MA 02110, Roy H. Wepner, Lerner David Littenberg Krumholz & Mentlik, 20 Commerce Drive, Cranford, NJ 07016, Counsel for Appellants

John J. Dabney [ARGUED], Mary D. Hallerman, Snell & Wilmer, 2001 K Street, N.W., Suite 425 North, Washington, DC 20006, Counsel for Appellees

David H. Bernstein, Debevoise & Plimpton, 919 Third Avenue, New York, NY 10022, Bruce R. Ewing, Dorsey & Whitney, 51 West 52nd Street, New York, NY 10019, Jonathan E. Moskin, Foley & Lardner, 90 Park Avenue, New York, NY 10016, Claudia E. Ray, Kirkland & Ellis, 601 Lexington Avenue, New York, NY 10022, Counsel for Amicus Curiae in support of Appellants International Trademark Association, on Petition for Rehearing

Theodore H. Davis, Jr., Kilpatrick Townsend, 1100 Peachtree Street, Suite 2800, Atlanta, GA 30309, Sara K. Stadler, Kilpatrick Townsend, 1114 Avenue of the Americas, The Grace Building, 21st Floor, New York, NY 10036, Counsel for Amicus Curiae in support of Appellants National Confectioners Association, on Petition for Rehearing

Adam H. Charnes, Kilpatrick Townsend, 2001 Ross Avenue, Suite 4400, Dallas, TX 75201, Charles H. Hooker, III, Kilpatrick Townsend, 1100 Peachtree Street, Suite 2800, Atlanta, GA 30309, J. David Mayberry, Rita M. Weeks, Kilpatrick Townsend, 1114 Avenue of the Americas, The Grace Building, 21st Floor, New York, NY 10036, Counsel for Amicus Curiae in support of Appellants Mondelez Global LLC, on Petition for Rehearing

Before: McKEE, BIBAS, and FUENTES, Circuit Judges

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 infringement.

The District Court granted Lotte summary judgment, finding that because Pocky's design is functional, Ezaki Glico has no trade-dress protection. We agree. Trade dress is limited to designs that identify a product's source. It does not safeguard designs that are functional—that is, useful. Patent law protects useful inventions, but trademark law does not. We will thus affirm.

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 utility patent for a "Stick Shaped Snack and Method for Producing the Same." App. 1013–16. The first thirteen 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 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. subsidiary 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, notifying 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.

In 2015, Ezaki Glico sued Lotte in federal court for selling Pepero. Under federal law, 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). Under New Jersey law, it alleged trademark infringement 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 judgment for Lotte, holding that because Pocky's product configuration 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 jurisdiction 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 depend 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 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 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's particular design is functional if it is useful. And there are several ways to show functionality.

A. Patent law protects useful designs, while trademark law does not

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, 121 S.Ct. 1255, 149 L.Ed.2d 164 (2001).

The Constitution does authorize Congress to grant exclusive patents and copyrights "[t]o promote the Progress of Science and useful Arts," but only "for limited Times." U.S. Const. art. I, § 8, cl. 8. Utility patents promote "Science and useful Arts" by protecting inventions that are "new and useful." 35 U.S.C. § 101. Design patents protect "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 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, 109 S.Ct. 971, 103 L.Ed.2d 118 (1989) ; accord Qualitex Co. v. Jacobson Prod. Co., Inc. , 514 U.S. 159, 164, 115 S.Ct. 1300, 131 L.Ed.2d 248 (1995). This way, sellers can compete and build on one another's innovations. That competition improves quality and lowers consumers’ costs.

By contrast, trademark law protects not inventions or designs per se, but 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." 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 design, such as its size, shape, and color. Id. ; Wal-Mart Stores, Inc. v. Samara Bros. , 529 U.S. 205, 209, 120 S.Ct. 1339, 146 L.Ed.2d 182 (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 confused 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, 121 S.Ct. 1255 (quoting Wal-Mart , 529 U.S. at 213, 120 S.Ct. 1339 ). "Trade dress protection ... is not intended to create patent-like rights in innovative aspects of product design." Shire , 329 F.3d at 353. If it did, it could...