Jay Franco & Sons Inc. v. Franek, 09-2155.

• Decision Date: 11 August 2010
• Docket Number: No. 09-2155.,09-2155.
• Citation: 615 F.3d 855
• Parties: JAY FRANCO & SONS, INC., Plaintiff-Appellee, v. Clemens FRANEK, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

615 F.3d 855

JAY FRANCO & SONS, INC., Plaintiff-Appellee,

v.Clemens FRANEK, Defendant-Appellant.

No. 09-2155.

United States Court of Appeals,Seventh Circuit.

Argued May 24, 2010.

Decided Aug. 11, 2010.

Ezra Sutton (argued), Attorney, Woodbridge, NJ, for Plaintiff-Appellee.

Mark D. Roth (argued), Attorney, Orum & Roth, Chicago, IL, for Defendant-Appellant.

Before EASTERBROOK, Chief judge, and POSNER and EVANS, Circuit Judges.

EASTERBROOK, Chief Judge.

The same year Huey Lewis and the News informed America that it's “Hip To Be Square”, Clemens Franek sought to trademark the circular beach towel. His company, CLM Design, Inc., pitched the towel as a fashion statement-“the most radical beach fashion item since the bikini,” declared one advertisement. “Bound to be round! Don't be square!” proclaimed another. CLM also targeted lazy sunbathers: “The round shape eliminates the need to constantly get up and move your towel as the sun moves across the sky. Instead merely reposition yourself.”

The product enjoyed some initial success. Buoyed by an investment and promotional help from the actor Woody Harrelson (then a bartender on the TV show Cheers ), CLM had sold more than 30,000 round beach towels in 32 states by the end of 1987. To secure its status as the premier circular-towel maker, the company in 1986 applied for a trademark on the towel's round design. The Patent and Trademark Office registered the “configuration of a round beach towel” as trademark No. 1,502,261 in 1988. But this was not enough to save CLM: Six years later it dissolved. The mark was assigned to Franek, who continues to sell circular towels.

In 2006 Franek discovered that Jay Franco & Sons, a distributor of bath, bedding, and beach accessories, was selling round beach towels. After settlement negotiations failed, Franek sued two of Jay Franco's customers, Target and Walmart, for unauthorized use of his registered trademark in violation of § 32 of the Lanham Act, 15 U.S.C. § 1114. Jay Franco had agreed to indemnify and defend its customers in such suits, so it sued Franek to invalidate his mark. (The pending suits against Target and Walmart made the claim ripe, just as insurers can bring declaratory-judgment suits to resolve disputes about a policy's scope once an insured has been sued and asserts that the policy applies.) The district judge consolidated the two cases, granted summary judgment in Jay Franco's favor, and dismissed the remaining claims and counterclaims. 2009 U.S. Dist. Lexis 20361 (N.D.Ill. Mar. 13, 2009). Franek appeals from that judgment; Target and Walmart are not part of the appeal.

One way to void a trademark is to challenge its distinctiveness. A valid trademark identifies the source of the good it marks. Designs do not inherently communicate that information, so to be valid a product-design mark must have acquired a “secondary meaning”-a link in the minds of consumers between the marked item and its source. See Wal-Mart Stores, Inc. v. Samara Brothers, Inc., 529 U.S. 205, 120 S.Ct. 1339, 146 L.Ed.2d 182 (2000); Bretford Manufacturing, Inc. v. Smith System Manufacturing Corp., 419 F.3d 576, 578-80 (7th Cir.2005). Cf. Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 112 S.Ct. 2753, 120 L.Ed.2d 615 (1992). But this type of invalidation is unavailable to Jay Franco. Franek (and before him CLM) has continuously used the round-towel mark since its 1988 registration. That makes the mark “incontestable,” 15 U.S.C. § 1065, a status that eliminates the need for a mark's owner in an infringement suit to show that his mark is distinctive. See 15 U.S.C. § 1115(b); Park ‘N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 105 S.Ct. 658, 83 L.Ed.2d 582 (1985).

Unfortunately for Franek, incontestable marks are not invincible. The Lanham Act lists a number of affirmative defenses an alleged infringer can parry with; one is a showing that the mark is “functional.” See § 1115(b)(8); Specialized Seating, Inc. v. Greenwich Industries, L.P., 616 F.3d 722, 724, 2010 WL 3155922, *1 (7th Cir.2010) (discussing functionality and other ways to defeat incontestable marks). As our companion opinion in Specialized Seating explains, patent law alone protects useful designs from mimicry; the functionality doctrine polices the division of responsibilities between patent and trademark law by invalidating marks on useful designs. This was the route Jay Franco pursued. The district judge agreed, finding Franek's mark “functional” under the definition the Supreme Court gave that concept in TrafFix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23, 32-35, 121 S.Ct. 1255, 149 L.Ed.2d 164 (2001). The judge got it right.

TrafFix says that a design is functional when it is “essential to the use or purpose of the device or when it affects the cost or quality of the device,” 532 U.S. at 33, 121 S.Ct. 1255, a definition cribbed from Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 850 n. 10, 102 S.Ct. 2182, 72 L.Ed.2d 606 (1982). So if a design enables a product to operate, or improves on a substitute design in some way (such as by making the product cheaper, faster, lighter, or stronger), then the design cannot be trademarked; it is functional because consumers would pay to have it rather than be indifferent toward or pay to avoid it. A qualification is that any pleasure a customer derives from the design's identification of the product's source-the joy of buying a marked good over an identical generic version because the consumer prefers the status conferred by the mark-doesn't count. That broad a theory of functionality would penalize companies for developing brands with cachet to distinguish themselves from competitors, which is the very purpose of trademark law. In short, a design that produces a benefit other than source identification is functional.

Figuring out which designs meet this criterion can be tricky. Utility patents serve as excellent cheat sheets because any design claimed in a patent is supposed to be useful. See 35 U.S.C. § 101; Brenner v. Manson, 383 U.S. 519, 528-36, 86 S.Ct. 1033, 16 L.Ed.2d 69 (1966). For this reason, TrafFix held that expired utility patents provide “strong evidence that the features therein claimed are functional.” 532 U.S. at 29, 121 S.Ct. 1255. The parties in this case wrangle over the relevance of a handful of utility patents that claim circular towels. We need discuss only one (No. 4,794,029), which describes a round beach towel laced with drawstrings that can be pulled to turn the towel into a satchel. This patent's first two claims are:

1. A towel-bag construction comprising: a non-rectangular towel;

a casing formed at the perimeter of said towel;

a cord threaded through said casing; and

a section of relatively non-stretchable fabric of a shape geometrically similar to that of said towel attached with its edges equidistant from the edges of said towel.

2. A towel-bag construction as set forth in claim 1 wherein said towel is circular in shape, whereby a user while sunbathing may reposition his or her body towards the changing angle of the sun while the towel remains stationary.

Claim 2 sounds like Franek's advertisements, which we quoted above. The patent's specification also reiterates, in both the summary and the detailed description, that a circular towel is central to the invention because of its benefit to lazy sunbathers.

Franek argues that claim 2 does not trigger the TrafFix presumption of functionality because his towel does not infringe the '029 patent. He notes that claim 2 incorporates claim 1 (in patent parlance, claim 1 is “independent” and claim 2 “dependent,” see 35 U.S.C. § 112) with the added condition that the towel be circular. An item can infringe a dependent claim only if it also violates the independent claim incorporated by the dependent claim. See Monsanto Co. v. Syngenta Seeds, Inc., 503 F.3d 1352, 1359 (Fed.Cir.2007). Franek reasons that because his towel lacks a perimeter casing, drawstring, and non-stretchable section of fabric, it does not infringe claim 1, and thus cannot infringe claim 2. Even if his towel could infringe claim 2, Franek maintains that the claim is invalid because the towel-to-bag patent was sought in 1987, two years after Franek started selling a round beach towel, and thus too late to claim its invention. See 35 U.S.C. § 102(b); Pfaff v. Wells Electronics, Inc., 525 U.S. 55, 119 S.Ct. 304, 142 L.Ed.2d 261 (1998).

Proving patent infringement can be sufficient to show that a trademarked design is useful, as it means that the infringing design is quite similar to a useful invention. See Raytheon Co. v. Roper Corp., 724 F.2d 951, 959 (Fed.Cir.1983). But such proof is unnecessary. Functionality is determined by a feature's usefulness, not its patentability or its infringement of a patent. TrafFix's ruling that an expired patent (which by definition can no longer be infringed) may evince a design's functionality demonstrates that proof of infringement is unnecessary. If an invention is too useless to be patentable, or too dissimilar to a design to shed light on its functions, then the lack of proof of patent infringement is meaningful. Otherwise it is irrelevant. A design may not infringe a patented invention because the invention is obvious or taught by prior art, see 35 U.S.C. §§ 102(a), 103(a), but those and other disqualifers do not mean that the design is not useful. Just so here: Franek's towel may lack some of the components in claim 1 necessary to infringe claim 2, but claim 2's coverage of a circular beach towel for sunbathing is enough to signal that a round-towel design is useful for sunbathers. Each claim in a patent is evaluated individually, see Altoona Publix Theatres, Inc. v. American Tri-Ergon Corp., 294 U.S. 477, 487, 55 S.Ct. 455, 79 L.Ed. 1005 (1935), each must be substantially different, see 37 C.F.R. § 1.75(b); Manual of Patent Examining Procedure § 2173.05(n)(b) (8th ed., July 2010 rev.), and each...