IP Law Daily Craft company’s trade dress claims fail again; case dismissed with prejudice
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Friday, December 6, 2019

Craft company’s trade dress claims fail again; case dismissed with prejudice

By Nicholas Kaster, J.D.

State law claims of intentional interference with prospective economic advantage and unfair competition were preempted by the Copyright Act and also dismissed.

The federal district court in San Diego dismissed claims for trade dress infringement brought by a craft company against certain retailers where the company could not plausibly show that the trade dress was nonfunctional. Crafty Productions, Inc. (CPI) discovered that replicas of its products were being sold by its Chinese manufacturer to one of CPI’s competitors, which in turn supplied the products to retailers including The Michaels Companies, Inc. and Hobby Lobby. CPI sought to protect the entire "design" of each product, but the products as a whole were "nothing more than the assemblage of functional parts." The state law claims were preempted by the Copyright Act (Crafty Productions, Inc. v. The Michaels Companies, Inc., December 5, 2019, Bashant, C.).

Background. Alleging that one of its former sales representatives had arranged with the Chinese company to manufacture "knock-offs" of CPI’s original products, CPI brought an action for trade dress infringement and actions under state law for intentional interference with prospective business advantage and unfair competition. The defendants moved to dismiss the complaint for failure to state a claim.

In an earlier decision, the court dismissed the trade dress infringement claim for failing to clearly articulate the design elements underlying its claim. However, CPI was given leave to amend its complaint in order to re-state the trade dress allegations in detail. The court also dismissed the state law claims on the grounds that they were preempted by the Copyright Act, but again permitted CPI to amend its complaint to show the claims were not preempted.

Trade dress claim. In the prior complaint, CPI had broadly claimed its trade dress to be its "original designs and products." CPI pointed to hundreds of products that contained the alleged protectable design and generically referred to the design covering all products as "the Crafty Trade Dress." The court found this description to be too broad because the products sought to be protected did not share the same "design" and differed greatly. Because CPI had not clearly articulated its trade dress, the court dismissed the claim.

In its amended complaint, CPI admitted that its trade dress (still covering hundreds of products) did not possess a "consistent overall look." Rather the numerous particular trade dress rights alleged included each of the individual, protectible trade dress rights associated with each individual, distinctive Crafty product design. CPI argued that, because it included pictures of its products, this was sufficient to show the protectable products. CPI made clear that it was now seeking trade dress protection for each individual product in all exhibits attached to the complaint.

CPI sought to define the trade dress as the "design" of each product. Doing so is not necessarily improper, the court noted. But when the trade dress sought to be protected "constitutes the product itself," said the court, plaintiffs bear the burden of establishing that the features sought to be protected are not functional, but were selected arbitrarily or for purely aesthetic reasons.

For an overall product configuration to be recognized as a trademark, the court noted, the entire design must be nonfunctional. However, looking at the products that CPI used as examples, the court found that CPI failed to plausibly show that the trade dress was nonfunctional.

As the Ninth Circuit has explained, trade dress must be viewed as a whole, but where the whole is nothing other than the assemblage of functional parts, and where even the arrangement and combination of the parts is designed to result in superior performance, it is semantic trickery to say that there is still some sort of separate "overall appearance" which is non-functional. If it is permissible to draw a distinction between such an object and its "general appearance," then virtually nothing is utilitarian, said the court, and virtually the only product designs which could be copied faithfully are those which are widely used and therefore in the public domain. Here, CPI sought to protect the entire "design" of each product, but the products as a whole are "nothing more than the assemblage of functional parts," the court stated.

The court declined to independently inspect each and every exhibit and scour the pictures for one design that was entirely nonfunctional. CPI cannot simply say "each and every design is nonfunctional" without doing any further work to show this is plausible for each exhibit, said the court.

Accordingly, the court again found that CPI failed to plausibly plead trade dress infringement. As the court had given CPI various opportunities to amend this claim, and they have been unable to do so in a way that plausibly pleads trade dress infringement, the court dismissed the claim with prejudice.

State law claims. CPI again brought two state law claims, intentional interference with prospective economic advantage, and unfair competition. The court previously dismissed these claims without prejudice because, as pled, the claims were preempted by the Copyright Act.

Two conditions must be met for the Copyright Act to preempt a state law. First, the content of the protected right must fall within the subject matter of copyright as described in 17 U.S.C. §§ 102 and 103. Second, the right asserted under state law must be equivalent to the exclusive rights contained in section 106 of the Copyright Act. Thus, the issue was whether the rights under the state law claims were "equivalent to" the rights protected under the Copyright Act.

On the claim for intentional interference with prospective economic advantage, the gist of CPI’s claim was that the defendant companies "went around" CPI and sold its products. This claim does not protect any right "qualitatively different" from the rights protected by the Copyright Act, the court held. The claim was therefore preempted. The court noted in its last order that it would provide CPI "one final opportunity" to amend this claim to the extent it could show the claim is not preempted. CPI failed to do so and the court therefore found that it was unable to plausibly allege this claim in a way that is not preempted. Therefore, the dismissal was with prejudice.

The unfair competition allegation stemmed from the actions constituting the claim for intentional interference with prospective economic advantage. Thus, this allegation was likewise preempted. Again, as noted above, the court gave CPI one final opportunity to amend this claim, and it was unable to allege the claim in a way that is not preempted. The dismissal of this claim was therefore with prejudice.

Accordingly, all causes of action were dismissed with prejudice.

This case is No. 3:15-cv-00719-BAS-JLB.

Attorneys: Stephen M. Lobbin (SML Avvocati P.C.) for Crafty Productions, Inc. Victor C. Johnson (Dykema Cox Smith) for The Michaels Companies, Inc.

Companies: Crafty Productions, Inc.; The Michaels Companies, Inc.

MainStory: TopStory Copyright Trademark CaliforniaNews

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