Wilhelm Pudenz, GmbH v. Littlefuse, Inc., 98-8097

• Decision Date: 07 June 1999
• Docket Number: No. 98-8097,98-8097
• Parties: WILHELM PUDENZ, GmbH, Plaintiff-Counterclaimant Defendant-Appellee, v. LITTLEFUSE, INC., Defendant-Counterclaimant Plaintiff-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1204

177 F.3d 1204

WILHELM PUDENZ, GmbH, Plaintiff-Counterclaimant Defendant-Appellee, v. LITTLEFUSE, INC., Defendant-Counterclaimant Plaintiff-Appellant.

No. 98-8097.

United States Court of Appeals, Eleventh Circuit.

June 7, 1999.

Daniel N. Christus, Robert E. Wagner, Jeffrey R. Gargano, Wallenstein & Wagner, Ltd., Chicago, IL, for Littlefuse, Inc.

Geoffrey H. Cederholm, Atlanta, GA, Roger M. Golden, Fenwick & West, LLP, Washington, DC, for Wilhelm Pudenz, GmbH.

Appeal from the United States District Court for the Northern District of Georgia.

Before COX, Circuit Judge, FAY, Senior Circuit Judge, and NANGLE ^*, Senior District Judge.

FAY, Senior Circuit Judge:

Defendant-Appellant Littlefuse, Inc. ("Littlefuse") appeals the district court's order granting declaratory relief to Plaintiff-Appellee Wilhelm Pudenz GmbH ("Pudenz"), invalidating two of Littlefuse's federally registered trademarks, and denying Littlefuse's counterclaims against Pudenz based on those marks for unfair competition and unlawful importation of goods. On appeal, this case raises the following issue: whether a federally registered trademark that has achieved incontestable status may nonetheless be declared invalid based on the functionality doctrine. We hold that registered trademarks that have become incontestable under 15 U.S.C. § 1065 may still be declared invalid if they are found to protect the functional features of a product, and therefore AFFIRM.

I. BACKGROUND

Littlefuse and Pudenz are both companies that manufacture and market, among other electronic devices, plug-in blade fuses for automobiles. Littlefuse and its licensees sell nearly 100% of the automotive blade fuses sold in the United States. Pudenz, a German company, has a significant share of the European market for automotive blade fuses and has started to enter the American market. Both companies market their fuses primarily to automobile and automobile parts manufacturers, but also sell fuses to aftermarket purchasers such as car owners.

As part of its product line, Littlefuse produces and markets an automotive fuse called the ATO blade fuse. At issue in this case are two of Littlefuse's registered trademarks associated with the marketing of this fuse. The first is the subject of U.S. Trademark Registration Number 1,513,357 (the " '357 registration"), which covers the two-dimensional outline of the ATO fuse. The second is the subject of U.S. Trademark Registration Number 1,553,579 (the " '579 registration"), which covers the three-dimensional configuration of the ATO fuse housing. As the registrations show and Littlefuse's counterclaims make clear, both registrations seek to protect the configuration of the ATO fuse as trade dress. Both registrations have also achieved "incontestable" status pursuant to 15 U.S.C. § 1065. ¹

In 1995, Littlefuse sent Pudenz a cease and desist letter, alleging that the configuration of Pudenz's FKS and FK2 automotive blade fuses (the "FK fuses") infringed the registered trade dress of the Littlefuse ATO fuses as set forth in their trademark registrations. The letter demanded that Pudenz refrain from importing the FK fuses into the United States. In response, Pudenz initiated this lawsuit by filing a Complaint for a declaratory judgement that the FK fuses did not infringe any of Littlefuse's trademark rights. In its Answer, Littlefuse filed counterclaims against Pudenz and Pudenz's United States distributor, Wickmann USA, Inc. ("Wickmann"), for infringement of the ATO fuse trade dress as set forth in the '357 and '579 registrations, for federal unfair competition, and for unlawful importation under 15 U.S.C. § 1124 and 19 U.S.C. § 1526.

Littlefuse moved for summary judgment on its counterclaims. The district court denied the motion, holding (1) that functionality may be raised as a defense in actions based on incontestable trademark registrations; (2) that Pudenz established a genuine factual dispute as to the functionality of the ATO trade dress; and alternatively (3) that there was a genuine factual dispute as to the likelihood of confusion created by the configuration of the FK fuses. The case then proceeded to trial before the district court. On January 7, 1998, the court issued a Judgement and Order granting declaratory relief to Pudenz and denying Littlefuse's claims. After finding that both the individual features of the ATO fuse housing and the overall configuration of those features in the housing itself were functional, the court held and declared that this functionality rendered the '357 and '579 registrations invalid and unenforceable. In the alternative, the court held that even if the registrations were valid, the FK fuses did not infringe the trade dress of the ATO fuses. ² Littlefuse filed timely notice of appeal, and we have jurisdiction pursuant to 28 U.S.C. § 1291.

II. STANDARD OF REVIEW

The applicability of the functionality doctrine to a trademark that is the subject of an incontestable registration is a question of law. As such, we review the district court's determination de novo. See McBride v. Sharpe, 25 F.3d 962, 968 (11th Cir.1994).

III. DISCUSSION

A. The Functionality Doctrine

The functionality doctrine is a judicially created rule that predates the Lanham Act. Under this rule, no trademark rights may be claimed in a product's functional shapes or features. 1 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, § 7:63 (4th ed.1997); See Epic Metals Corp. v. Souliere, 99 F.3d 1034, 1038 (11th Cir.1996)("A products features are protectible as trade dress if they are primarily non-functional."). This proscription serves two purposes. First, by ensuring that competitors remain free to copy useful product features, it prevents the trademark law from undermining its own pro-competitive objectives. Qualitex Co. v. Jacobson Products Co., Inc., 514 U.S. 159, 164, 115 S.Ct. 1300, 1304, 131 L.Ed.2d 248 (1995). Second, the functionality doctrine prevents the trademark law from conflicting with the patent law by eliminating trademark monopolies of potentially unlimited duration on a product's utilitarian features. Id., at 165, 115 S.Ct. 1300.

This second rationale is particularly important. The federal government's power to grant patents flows from the Patent Clause of the Constitution. This clause grants Congress the power "to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive right to their respective writings and discoveries." U.S. Const. art. I, § 8, cl. 8. The Supreme Court has noted that this clause contains both a grant of power to the government, as well as a limitation upon that power. Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 146, 109 S.Ct. 971, 975, 103 L.Ed.2d 118 (1989). Notably, the Patent Clause explicitly requires that the inventor's exclusive right, embodied in a granted patent, must be of a limited duration. Thus, the Constitution strikes a balance between the encouragement of innovation and the establishment of a public domain of freely available inventions to foster competition. Id.

The Supreme Court has explained the importance of this balance and the constitutional underpinnings of the public domain:

The federal patent system thus embodies a carefully crafted bargain for encouraging the creation and disclosure of new, useful, and nonobvious advances in technology and design in return for the exclusive right to practice the invention for a period of years. "[The inventor] may keep his invention secret and reap its fruits indefinitely. In consideration of its disclosure and the consequent benefit to the community, the patent is granted. An exclusive enjoyment is guaranteed him for seventeen years, but upon expiration of that period, the knowledge of the invention inures to the people, who are thus enabled without restriction to practice it and profit by its use." ... The novelty and nonobviousness requirements of patentability embody a congressional understanding, implicit in the Patent Clause itself, that free exploitation of ideas will be the rule, to which the protection of a federal patent is the exception. Moreover, the ultimate goal of the patent system is to bring new designs and technologies into the public domain through disclosure.

Id., at 150-51, 109 S.Ct. 971 (citation omitted). The job of working out this balance is given to patent law, and not trademark law. Qualitex Co., 514 U.S. at 164, 115 S.Ct. at 1304. Consequently, when the operation of the Lanham Act would upset the balance struck by the Patent Act, the Lanham Act must yield. The functionality doctrine serves this purpose by eliminating the possibility of a perpetual exclusive right to the utilitarian features of a product under trademark law, which would be impossible (as well as unconstitutional) under the Patent Act.

Although the functionality doctrine is well established in the federal courts, it was never explicitly mentioned in the Lanham Act until recently. Instead, the courts have applied the rule as a matter of public policy. See McCarthy, supra, § 7:63. On October 30, 1998, Congress enacted the Trademark Law Treaty Implementation Act, Pub.L. No. 105-330, 112 Stat. 3064 (codified in scattered sections of 15 U.S.C. § 1051 et. seq.). The primary purpose of this legislation was to harmonize some aspects of the Lanham Act with foreign trademark laws, in order to carry out the provisions of international trademark treaties. Id., § 102. Congress also included in the Act a section, Title Two, entitled "Technical Corrections." This Title consists of § 201, which makes twelve various corrections to the Lanham Act. Among these changes are several that explicitly add the functionality doctrine to the relevant provisions of the Lanham Act. These changes became effective on the date of enactment, and so do not directly apply to the case at bar. We will examine them infra, however, when we discuss the operation of...