Eco Manufacturing LLC v. Honeywell Intern., Inc.

• Decision Date: 20 June 2003
• Docket Number: No. 1:03-cv-0170-DFH.,1:03-cv-0170-DFH.
• Citation: 295 F.Supp.2d 854
• Parties: ECO MANUFACTURING LLC, Plaintiff, v. HONEYWELL INTERNATIONAL, INC., Defendant.
• Court: U.S. District Court — Southern District of Indiana

295 F.Supp.2d 854

ECO MANUFACTURING LLC, Plaintiff, v. HONEYWELL INTERNATIONAL, INC., Defendant.

No. 1:03-cv-0170-DFH.

United States District Court, S.D. Indiana, Indianapolis Division.

June 20, 2003.

COPYRIGHT MATERIAL OMITTED

Lisa M. Barr, Alexandra N. DeNeve, Sofia Foltushansky, Paul R. Garcia, John T. Hickey, Jr, Kirkland & Ellis, Chicago, IL, Lee B. McTurnan, Gregory A. Neibarger, McTurnan & Turner, Indianapolis, IN, for Defendant.

Michael D. Beck, David M. Lockman, Paul J. Maginot, Harold C. Moore, Maginot Moore & Bowman, Indianapolis, IN, Plaintiff.

ENTRY ON DEFENDANT'S MOTION FOR PRELIMINARY INJUNCTION

HAMILTON, District Judge.

I. Introduction

Defendant Honeywell International, Inc. has moved for a preliminary injunction barring plaintiff Eco Manufacturing LLC from manufacturing and selling a round thermostat. Honeywell contends that Eco's round thermostat violates Honeywell's trademark rights. The court heard evidence and argument on May 19 through 21, 2003, and now states its findings of fact and conclusions of law pursuant to Rules 52 and 65 of the Federal Rules of Civil Procedure. All findings of fact and conclusions of law are based on the limited record established in the preliminary injunction proceeding and are subject to reconsideration on a more complete record.

Honeywell seeks to protect its product configuration — the round shape of a thermostat — as a trademark. Trademarks can include "any word, name, symbol, or device, or any combination thereof." 15 U.S.C. § 1127. The protection of trademark law can reach "trade dress" and product configurations that serve to identify the source of a product. E.g., Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 774, 112 S.Ct. 2753, 120 L.Ed.2d 615 (1992) (decorations and other features to evoke Mexican theme of restaurant could be protected as trade dress). The Supreme Court has cautioned, however, against "misuse or overextension of trade dress," noting that "product design almost invariably serves purposes other than source identification." TrafFix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23, 29, 121 S.Ct. 1255, 149 L.Ed.2d 164 (2001), quoting Wal-Mart Stores, Inc. v. Samara Brothers, Inc., 529 U.S. 205, 213, 120 S.Ct. 1339, 146 L.Ed.2d 182 (2000) (also stating 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").

Honeywell's motion requires the court to address the trademark doctrine of functionality and the relationship between trademark law and patent law. Trademark law protects for an unlimited time a company's non-functional trademarks designating the source of a product. Patent law gives an inventor exclusive use for a limited time of novel, useful, and non-obvious inventions. After the patent expires, though, the American public has a right to practice the invention. Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. ___, ___, 123 S.Ct. 2041, 2048, 156 L.Ed.2d 18 (2003), citing Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 230, 84 S.Ct. 784, 11 L.Ed.2d 661 (1964), and Kellogg Co. v. National Biscuit Co., 305 U.S. 111, 121-22, 59 S.Ct. 109, 83 L.Ed. 73 (1938).

Especially in product configuration cases, the doctrine of "functionality" plays a critical role in maintaining the boundary between these two fields of law. The boundary is important because it should prevent a business from first obtaining legitimate but temporary patent protection for a useful invention, and then obtaining a trademark on the configuration to extend its rights improperly so as to obtain exclusive and perpetual rights to a useful product design. See TrafFix Devices, 532 U.S. at 29, 121 S.Ct. 1255; Valu Engineering, Inc. v. Rexnord Corp., 278 F.3d 1268, 1273 (Fed.Cir.2002) (affirming rejection of trademark application based on functionality doctrine), quoting Qualitex Co. v. Jacobson Products Co., 514 U.S. 159, 165, 115 S.Ct. 1300, 131 L.Ed.2d 248 (1995); see also Dastar Corp., 539 U.S. at ___, 123 S.Ct. at 2048-50 (holding that trademark law could not be used to trump copyright law to give perpetual protection to use of materials in public domain, and explaining decision in terms of the "bargain" that both copyright and patent holders make with the public to allow public use after exclusive rights expire).

As explained below, the court denies Honeywell's motion for a preliminary injunction because Honeywell is unlikely to succeed on the merits of its claims. The court bases its decision primarily upon the reasoning and holding in TrafFix Devices, which taught that a utility patent is "strong evidence that the features therein claimed are functional," and therefore cannot be protected by a trademark. 532 U.S. at 29, 121 S.Ct. 1255. Honeywell's round thermostat configuration was the subject of a utility patent that was issued in 1946 and expired in 1963.

TrafFix Devices left open a narrow exception to allow for the possibility that trademark law could protect "arbitrary, incidental, or ornamental aspects of features of a product found in the patent claims." Id. at 34, 121 S.Ct. 1255. That exception does not apply here. The record here shows that Honeywell obtained its expired utility patent by persuading the Patent Office that the circular, convex shape of its thermostat was indeed novel and useful when the patent was issued in 1946. The record as a whole further shows that giving Honeywell exclusive rights to the circular, convex shape puts Honeywell's competitors at "a significant, non-reputation-related disadvantage." See id. at 33, 121 S.Ct. 1255.

When Honeywell's utility patent expired, the public received the benefit of the patent bargain — the right to practice the claimed invention, "including the right to make it in precisely the shape it carried when patented." Dastar Corp., 539 U.S. at ____, 123 S.Ct. at 2048, quoting Sears, Roebuck, 376 U.S. at 230, 84 S.Ct. 784. Thus, the public has the right to use the circular, convex shape of the Honeywell thermostat. Plaintiff Eco is entitled to do so, using its own trademark and without suggesting that its product is made by or associated with Honeywell. Eco's evidence shows that the circular, convex shape is functional and that the Trademark Trial and Appeal Board ("TTAB") erred in 1988 when it issued Honeywell a registered trademark on that shape. The TTAB made its decision in an ex parte proceeding with an incomplete record, and it applied a standard of functionality that was much more favorable to Honeywell than the correct legal standard later adopted by the Supreme Court in TrafFix Devices.

II. The Parties and Their Products

Defendant Honeywell is the largest seller of thermostats in the United States. In the 1940s, when the company was known as the Minneapolis-Honeywell Regulator Company, Honeywell engineers invented a new design for an electro-mechanical thermostat. The design has a circular base with a round, convex cover and a round dial in the center of the cover. Over the past 50 years, Honeywell has sold more than 85 million round thermostats. Honeywell estimates that it has spent about $70 million over the years to advertise and promote "The Round," the current version of which is known in the industry as the T87 model. For at least the past 15 years, Honeywell has been the only company selling round thermostats in the United States. As discussed in more detail below, the evidence shows that Honeywell's round design is widely recognized in the industry. Many HVAC (heating, ventilation and air-conditioning) contractors and others in the industry even say that, in this business, "round means Honeywell."

Plaintiff Eco Manufacturing LLC is a new company that is developing a new thermostat. Eco intends to sell thermostats that do not use mercury to determine room temperature. Eco has developed a design for a thermostat that looks similar to the round thermostats manufactured and sold by defendant Honeywell, Inc. The Eco design is circular when viewed from head-on. In profile, however, it is not perfectly round, as Honeywell's design is, but it has a conical shape that appears similar to Honeywell's design. Eco plans to market the new product as "Eco Stat."

Eco introduced its planned product to the industry at a trade show in January 2003. After Honeywell learned of Eco's plan, it threatened to sue Eco for trademark infringement and related wrongs. Eco then filed this action for a declaratory judgment stating that its product would not infringe any of Honeywell's trademarks. Honeywell responded with a motion for preliminary injunction to block Eco from selling its new round thermostats. The parties conducted expedited discovery and then presented evidence.

In its motion for preliminary injunction, Honeywell claims that Eco's product will infringe Honeywell's registered U.S. Trademark 1,622,108 (here, "the `108 trademark"), which has become "incontestable." See 15 U.S.C. § 1114(1)(a). Honeywell also claims that Eco's product will infringe its registered trademark No. 1,439,016 for the words "The Round," as well as its common law trademark rights under 15 U.S.C. § 1125(a)(1)(A) and its rights under the Anti-Dilution Act, 15 U.S.C. § 1125(c).

III. Legal Protection of Honeywell's Round Design

Because the critical issue here is functionality, based on the guidance in TrafFix Devices about the role of utility patents, the court must review in detail the history of Honeywell's intellectual property protection for its round thermostat design. That history begins with a utility patent, followed by a design patent, and finally the '108 registered trademark issued after protracted proceedings before the Patent and Trademark Office ("PTO").

A. The Utility Patent

TrafFix Devices shows that a utility patent's claims, specifications, and prosecution history can all provide highly relevant evidence in...