Bretford Mfg Inc v. Smith System Mfg Co ( 2005 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 03-3932
BRETFORD MANUFACTURING, INC.,
Plaintiff-Appellant,
v.
SMITH SYSTEM MANUFACTURING
CORPORATION,
Defendant-Appellee.
____________
Appeal from the United States District Court for
the Northern District of Illinois, Eastern Division.
No. 98 C 0287—John F. Grady, Judge.
____________
ARGUED DECEMBER 3, 2004—DECIDED AUGUST 8, 2005
____________
Before FLAUM, Chief Judge, and EASTERBROOK and
WILLIAMS, Circuit Judges.
EASTERBROOK, Circuit Judge. Bretford makes a line of
computer tables that it sells under the name Connections™.
Since 1990 many of these tables have featured one rather
than two legs on each end. The leg supports a sleeve at-
tached to a V-shaped brace, making it easy to change the
table’s height while keeping the work surface stable. Al-
though the sleeve and brace together look like a Y, Bretford
calls it the V-Design table, and we employ the same usage.
2 No. 03-3932
This illustration, from Bretford’s web site, shows the idea:
Between 1990 and 1997 Bretford was the only seller of
computer tables with a V-shaped height-adjustment system.
It sold about 200,000 V-Design tables during that period.
Smith System, one of Bretford’s competitors, decided to copy
the sleeve and brace for its own line of computer tables.
Smith System made its initial sales of the knockoff product
to the Dallas school system in 1997, and this trademark
litigation quickly followed.
Invoking §43(a) of the Lanham Act, 15 U.S.C. §1125(a),
Bretford contends that the V-shaped design is its product’s
trade dress, which Smith System has infringed. It also
contends that Smith System engaged in “reverse passing off”
No. 03-3932 3
when it incorporated some Bretford hardware into a sample
table that it showed purchasing officials in Dallas. The
parties waived their right to a jury trial, and the district
court held evidentiary hearings and issued opinions over a
number of years. Although at one point the judge found
Smith System liable and awarded damages in Bretford’s
favor, he reversed course in light of Wal-Mart Stores, Inc. v.
Samara Brothers, Inc., 529 U.S. 205 (2000), and Dastar
Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23(2003). See 286 F. Supp. 2d 969 (N.D. Ill. 2003) (final
decision in Smith System’s favor). The appeal presents two
principal questions: whether Smith System is entitled to
copy Bretford’s design, and, if yes, whether it was nonethe-
less wrongful for Smith System to use Bretford components
in a sample table shown to the Dallas buyers.
Section 43(a) provides:
(1) Any person who, on or in connection with any
goods or services, or any container for goods, uses in
commerce any word, term, name, symbol, or device,
or any combination thereof, or any false designation
of origin, false or misleading description of fact, or
false or misleading representation of fact, which—
(A) is likely to cause confusion, or to cause
mistake, or to deceive as to the affiliation,
connection, or association of such person
with another person, or as to the origin,
sponsorship, or approval of his or her goods,
services, or commercial activities by an-
other person, or
(B) in commercial advertising or promotion,
misrepresents the nature, characteristics,
qualities, or geographic origin of his or her
or another person’s goods, services, or
commercial activities,
4 No. 03-3932
shall be liable in a civil action by any person who
believes that he or she is or is likely to be damaged
by such act.
...
(3) In a civil action for trade dress infringement
under this Act for trade dress not registered on the
principal register, the person who asserts trade
dress protection has the burden of proving that the
matter sought to be protected is not functional.
The Supreme Court held in Wal-Mart that the phrase
“word, term, name, symbol, or device, or any combination
thereof” includes distinctive aspects of a product’s appear-
ance, commonly known as trade dress. The Court added,
however, that a product’s physical design can not be deemed
inherently distinctive, so that to prevail under §43(a) the
producer must demonstrate “secondary meaning”—in other
words, that consumers understand the design elements to
signify the goods’ origin and not just its attributes. Other-
wise, the Court thought, it would be too easy to use the
expense and risk of litigation to dissuade rivals from using
their right to reverse-engineer and copy products, which
they may do down to the last detail unless a feature of the
product is protected by patent, copyright, or trademark law.
See, e.g., TrafFix Devices, Inc. v. Marketing Displays, Inc.,
532 U.S. 23, 29 (2001); Bonito Boats, Inc. v. Thunder Craft
Boats, Inc., 489 U.S. 141 (1989); Sears, Roebuck & Co. v.
Stiffel Co., 376 U.S. 225 (1964). Trademark law is designed
to reduce the costs customers incur in learning who makes
the product, and this also helps sellers obtain rewards from
producing goods of consistent quality, for consumers will
find it easier to find and buy goods with which they have
been satisfied in the past. So when trade dress implies the
product’s origin it is protected as a trademark (unless it
also is functional); but when consumers value the feature
for its own sake rather than as a badge of origin, it may be
copied freely.
No. 03-3932 5
The district court found that V-shaped legs do not signal
Bretford as a source. The record supports this conclusion;
indeed, Bretford has no evidence that the leg design
prompts “Bretford” in buyers’ minds. There are no surveys
and no evidence of actual confusion. Both Bretford and
Smith System sell through distributors and field represen-
tatives to sophisticated buyers who know exactly where
their goods are coming from.
Many buyers ask for tables with V-shaped legs, and
Bretford insists that this shows that they want its
Connections™ furniture; quite the contrary, this form of
specification does more to imply that the leg design is
functional than to show that anyone cares who makes the
table. In the end, all Bretford has to go on is the fact that it
was the only maker of such tables for eight years and spent
more than $4 million to promote sales. If that were enough
to permit judgment in its favor, new entry would be cur-
tailed unduly by the risk and expense of trademark litiga-
tion, for every introducer of a new design could make the
same sort of claim. “Consumers should not be deprived of
the benefits of competition with regard to the utilitarian
and esthetic purposes that product design ordinarily serves
by a rule of law that facilitates plausible threats of suit
against new entrants based on alleged inherent distinctive-
ness.” Wal-Mart, 529 U.S. at 213.
Originators such as Bretford may receive protection via
design patents, and strictly aesthetic features of products
may be copyrighted. “The availability of these and other
protections greatly reduces any harm to the producer that
might ensue” from limiting trademark protection to fea-
tures that have acquired secondary meaning. Wal-Mart, 529
U.S. at 214. Bretford did not obtain patent or copyright
protection, so it cannot block Smith System’s copy-cat
tables. Even if the record had evidence of secondary mean-
ing, Bretford likely would lose because the leg design
appears to be functional, but we need not explore that issue.
6 No. 03-3932
When Smith System decided to copy Bretford’s table, it
subcontracted the leg assemblies to a specialized metal
fabricator, whose initial efforts were unsatisfactory. This
left Smith System in a bind when the Dallas school system
asked to see a table. Smith System cobbled a sample to-
gether by attaching the leg assembly from a Bretford table
(which Smith System had repainted) to a top that Smith
System had manufactured itself. (Who supplied other
components, such as the cable guides and grommets, is
disputed but irrelevant.) Dallas was satisfied and placed an
order. All of the tables delivered to Dallas included legs
manufactured by Smith System’s subcontractor. Nonethe-
less, Bretford contends, by using its leg assemblies on even
the one sample, Smith System engaged in reverse passing
off and must pay damages.
Passing off or palming off occurs when a firm puts some-
one else’s trademark on its own (usually inferior) goods;
reverse passing off or misappropriation is selling someone
else’s goods under your own mark. See Roho, Inc. v. Mar-
quis, 902 F.2d 356, 359 (5th Cir. 1990). It is not clear what’s
wrong with reselling someone else’s goods, if you first buy
them at retail. If every automobile sold by DeLorean
includes the chassis and engine of a Peugeot, with
DeLorean supplying only the body shell, Peugeot has
received its asking price for each car sold and does not
suffer any harm. Still, the Supreme Court said in Dastar
that “reverse passing off” can violate the Lanham Act if a
misdescription of goods’ origin causes commercial injury.
Our opinion in Peaceable Planet, Inc. v. Ty, Inc., 362 F.3d
986 (7th Cir. 2004), shows how this could occur.
Dastar added that the injury must be a trademark
loss—which is to say, it must come from a misrepresenta-
tion of the goods’ origin. Dastar thus had the right (so far as
the Lanham Act is concerned) to incorporate into its videos
footage taken and edited by others, provided that it manu-
factured the finished product and did not mislead anyone
No. 03-3932 7
about who should be held responsible for shortcomings. No
one makes a product from scratch, with trees and iron ore
entering one end of the plant and a finished consumer
product emerging at the other. Ford’s cars include Fram oil
filters, Goodyear tires, Owens-Corning glass, Bose radios,
Pennzoil lubricants, and many other constituents; buyers
can see some of the other producers’ marks (those on the
radio and tires for example) but not others, such as the oil
and transmission fluid. Smith System builds tables using
wood from one supplier, grommets (including Teflon from
du Pont) from another, and vinyl molding and paint and
bolts from any of a hundred more sources—the list is
extensive even for a simple product such as a table. If
Smith System does not tell du Pont how the Teflon is used,
and does not inform its consumers which firm supplied the
wood, has it violated the Lanham Act? Surely not; the
statute does not condemn the way in which all products are
made.
Legs are a larger fraction of a table’s total value than
grommets and screws, but nothing in the statute estab-
lishes one rule for “major” components and another for less
costly inputs. The right question, Dastar holds, is whether
the consumer knows who has produced the finished product.
In the Dastar case that was Dastar itself, even though most
of the product’s economic value came from elsewhere; just
so when Smith System includes components manufactured
by others but stands behind the finished product. The
portion of §43(a) that addresses reverse passing off is the
one that condemns false designations of origin. “Origin”
means, Dastar holds, “the producer of the tangible product
sold in the marketplace”. 539 U.S. at 31. As far as Dallas
was concerned, the table’s “origin” was Smith System, no
matter who made any component or subassembly.
Much of Bretford’s argument takes the form that it is just
“unfair” for Smith System to proceed as it did, making a
sale before its subcontractor could turn out acceptable leg
8 No. 03-3932
assemblies. Businesses often think competition unfair, but
federal law encourages wholesale copying, the better to
drive down prices. Consumers rather than producers are
the objects of the law’s solicitude. If Smith System misled
Dallas into thinking that it could supply high-quality
tables, when its subcontractor could not match Bretford’s
welds and other attributes of Bretford’s V-shaped leg
assemblies, then the victim would be the Dallas school sys-
tem. (As far as we are aware, however, Dallas is happy with
the quality of the tables it received; it has not complained
about a bait and switch.) As the Court observed in Dastar,
creators of certain artistic works are entitled (along the
lines of the European approach to moral rights) to control
how their work is presented or altered by others. See 539
U.S. at 34-35, citing 17 U.S.C. §106A. See also Lee v. A.R.T.
Co., 125 F.3d 580 (7th Cir. 1997). Bretford’s table is not a
“work of visual art” under §106A (and the definition in 17
U.S.C. §101). Once Bretford sold its goods, it had no control
over how customers used their components: the Lanham Act
does not include any version of the “derivative work” right
in copyright law. See 17 U.S.C. §106(2).
A brief word about state law brings this opinion to a close.
Although Bretford contends that Smith System committed
the tort of unfair competition under both Illinois and Texas
law, its brief does not cite any statute or decision of either
state’s judiciary. A reference to one federal district court’s
understanding of Texas law, in a treatment less than a page
long, does not preserve a contention. What do the Texas
courts themselves say on this subject? It is not our job to do
the legal research that Bretford has omitted. Claims under
state law have been forfeited.
AFFIRMED
No. 03-3932 9
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—8-8-05