By Mark Engstrom, J.D.
A federal district court erroneously concluded that the visual layout of a urine-test report designed by Millennium Laboratories was functional, as a matter of law, and thus was ineligible for trade dress protection under the Lanham Act, the U.S. Court of Appeals in San Francisco has ruled (Millennium Laboratories, Inc., v. Ameritox, Ltd., April 4, 2016, Gould, R.). Because the format of the report raised factual questions about the aesthetic functionality of Millennium’s asserted trade dress, the decision of the district court was reversed and the case was remanded for further proceedings.
Products and services. Plaintiff Millennium Laboratories and defendant Ameritox Ltd. provided urine-testing services to healthcare providers. The test results, which were summarized in medical reports that the companies had recently re-designed, allowed healthcare providers to determine whether patients were taking their pain medications as prescribed, and to assess whether the patients were taking any non-prescribed drugs.
Procedural posture. Millennium sued Ameritox for trade dress infringement under the Lanham Act and for unfair competition under Section 17200 of California’s Business and Professions Code. According to Millennium, Ameritox had copied the design of its urine-test report.
Ameritox sought summary judgment on the ground that Millennium’s trade dress was functional. The district court agreed with Ameritox and dismissed the trade dress claim. It also dismissed the unfair competition claim. Millennium appealed.
Assessing aesthetic functionality. In an issue of first impression for the Ninth Circuit, the court addressed aesthetic functionality in the context of “publication formats.” To assess the functionality of Millennium’s claimed trade dress—the visual layout of its urine-test report—the circuit court applied the two-step functionality test from Au-Tomotive Gold, Inc. v. Volkswagen of America, Inc., 457 F.3d 1062 (9th Cir. 2006).
Under the first step of the Au-Tomotive Gold analysis, courts had to determine whether the claimed trade dress was functional because a “significant non-trademark function” was essential to the use or purpose of the article, or because the asserted features of the trade dress affected the cost or quality of the article. If the claimed trade dress was found to be functional under the first step, the inquiry was over. The trade dress was not protectable.
However, if the claimed trade dress was not functional under step one, the analysis proceeded to step two, in which courts had to determine whether the claimed trade dress was aesthetically functional because protecting its features would impose a “significant non-reputation-related competitive disadvantage.”
Step one: functionality. Millennium described its trade dress as a “graphical format” that included a “side-by-side presentation of a bell curve on the left, and a historical plot graph on the right.” The format used “a combination of bold and dashed lines on the bell curve graph and a combination of numbers and letters on the plot graph on the right,” but it used “little verbiage to accent the graphical features of the combination of charts,” and it “placed the combination of graphical features within a solid border.” Millennium did not argue that its trade dress protected the graphed results generally; rather, it argued that the asserted trade dress protected the “specific layout” of the reported results.
In assessing the functionality of the claimed trade dress under step one of the Au-Tomotive Gold test, the court considered four “functionality” factors: (1) whether the asserted design yielded a utilitarian advantage; (2) whether alternative designs were available; (3) whether advertising touted the utilitarian advantages of the asserted design; and (4) whether the design resulted from a comparatively simple or inexpensive method of manufacture. Because no single factor was dispositive, the factors had to be weighed collectively to determine whether a jury could conclude that the specific visual layout of Millennium’s urine-test report was non-functional.
Regarding the first factor, the court concluded that genuine issues of material fact were present with respect to the utilitarian advantage of Millennium’s trade dress. In the court’s view, a jury could reasonably conclude that the alleged trade dress—the side-by-side placement of graphs and other features, such as minimal text—was merely aesthetic, not functional, even though the placement of those graphs on the same page served the function of facilitating an easy and facile review of the results. Accordingly, the first factor disfavored summary judgment.
As to the second factor, the court found that a jury could conclude that many alternative designs were available. The graphs could be arranged in a different order, for example, or one graph could be placed above or below the other. Further, a different type of chart could be used. In the court’s view, the second factor also disfavored summary judgment.
Regarding the third factor, the court decided that a reasonable jury could find that Millennium’s advertisements focused on the benefits of the graphed results rather than the benefits of the specific layout. For that reason, the third factor disfavored summary judgment.
Finally, the court concluded that the fourth factor was “at most” neutral. Millennium’s Director of Clinical Strategy noted in her declaration that the addition of a graphical format to Millennium’s test reports did not result in any cost savings. Instead, Millenium’s costs had increased.
Viewing the four factors together, the court ruled that the district court had erred in granting summary judgment to Ameritox. According to the court, the key point of the functionality analysis was that, even if a comparison of the test results was functional, the results could be presented in many different ways, and the precise format of Millennium’s report was not necessarily functional. Ultimately, the court found that a reasonable jury could conclude that Millennium’s trade dress was not functional under the first step of the Au-Tomotive Gold test.
Step two: aesthetic functionality. The design of Millennium’s test results was created, at least in part, to distinguish the company’s R.A.D.A.R.® Report from the reports of competitors. It was not created merely to attract consumers. Because Millennium proffered evidence to show that the graphical format of its report served a source-identifying function, at least in part, the court concluded that Millennium had presented sufficient evidence to allow a jury to assess the question of aesthetic functionality.
The case is No. 13-56577.
Attorneys: Randall E. Kay, Craig E. Stewart, and Matthew J. Silveira (Jones Day) for Millennium Laboratories, Inc. Eric D. Miller, Matthew F. Carmody, and Michael R. Osterhoff (Perkins Coie LLP) for Ameritox, Ltd.
Companies: Millennium Laboratories, Inc.; Ameritox, Ltd.
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