Millennium Laboratories, Inc. v. Ameritox, Ltd. ( 2016 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MILLENNIUM LABORATORIES, INC., a No. 13-56577
California corporation,
Plaintiff-Appellant, D.C. No.
3:12-cv-01063-
v. MMA-JMA
AMERITOX, LTD., a Texas limited
partnership, OPINION
Defendant-Appellee.
Appeal from the United States District Court
for the Southern District of California
Michael M. Anello, District Judge, Presiding
Argued November 5, 2015
Submitted April 4, 2016
Pasadena, California
Filed April 4, 2016
Before: Susan P. Graber and Ronald M. Gould, Circuit
Judges, and Wiley Y. Daniel,* Senior District Judge.
Opinion by Judge Gould
*
The Honorable Wiley Y. Daniel, Senior District Judge for the U.S.
District Court for Colorado, sitting by designation.
2 MILLENNIUM LABS. V. AMERITOX
SUMMARY**
Lanham Act
The panel reversed the district court’s grant of summary
judgment in favor of the defendant on claims of trade dress
infringement under the Lanham Act and unfair competition
under California Business and Professions Code section
17200.
The panel held that there were triable issues as to whether
the plaintiff’s claimed trade dress¯the visual layout of a
urine test report¯was functional, and thus disqualified for
protection under the Lanham Act. The panel remanded the
case for further proceedings.
COUNSEL
Randall E. Kay (argued), Jones Day, San Diego, California;
Craig E. Stewart and Matthew J. Silveira, Jones Day, San
Francisco, California, for Plaintiff-Appellant.
Eric D. Miller (argued), Perkins Coie LLP, Seattle,
Washington; Matthew F. Carmody and Michael R. Osterhoff,
Perkins Coie LLP, Chicago, Illinois, for Defendant-Appellee.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
MILLENNIUM LABS. V. AMERITOX 3
OPINION
GOULD, Circuit Judge:
Millennium Laboratories, Inc., appeals the district court’s
grant of summary judgment to Ameritox, LTD, on
Millennium’s claims of trade dress infringement under the
Lanham Act and unfair competition under California
Business and Professions Code section 17200. Millennium
contends that: (1) the district court applied the incorrect
standard for assessing the functionality of Millennium’s trade
dress; and (2) the district court erred by granting summary
judgment to Ameritox on Millennium’s claims. At the heart
of this appeal, we consider whether a product’s visual layout
is functional, defeating a claim for trade dress infringement.
The Ninth Circuit has not previously addressed the
functionality of any publication formats. But several other
circuits have done so. Tools USA & Equip. Co. v. Champ
Frame Straightening Equip., Inc., 87 F.3d 654, 657–59 (4th
Cir. 1996) (concluding that the catalogue page format was not
functional); Comput. Care v. Serv. Sys. Enters., Inc., 982 F.2d
1063, 1071 (7th Cir. 1992) (holding that the computer-
generated report format was not functional); Hartford House,
Ltd. v. Hallmark Cards, Inc., 846 F.2d 1268, 1272–75 (10th
Cir. 1988) (concluding that a greeting card format was not
functional). We have jurisdiction under 28 U.S.C. § 1291.
I
Millennium and Ameritox compete in the medication
monitoring industry, and sell urine-testing services to
healthcare providers who treat chronic pain patients with
powerful pain medications. The testing services provided by
these companies help the healthcare providers to evaluate
4 MILLENNIUM LABS. V. AMERITOX
whether patients are taking the pain medications as prescribed
and to assess whether the patients are taking any non-
prescribed drugs. Millennium gives these test results using
its R.A.D.A.R.® Report. Ameritox gives its test results using
its own RX Guardian™ Report.
A few years before this lawsuit was filed, both companies
were revising the way they presented the urine-test results.
In May 2011, Ameritox launched a new service known as
“RXGuardian CD,” which included a single graph.
Millennium also intensified its efforts in late 2010, and,
recognizing that consumers could easily read comparative
and historical results in graphical format, turned to its
marketing team to “assist[ ] in the formatting on the report.”
On June 2, 2011, Millennium released a sample R.A.D.A.R.®
Report with its new design. Within the year, Ameritox began
to reevaluate its report and the use of a single graph.
Ameritox considered several designs, all of which used a
design similar to Millennium’s new report, and introduced its
new format in March 2012.
On April 30, 2012, Millennium sued Ameritox for trade
dress infringement under the Lanham Act and for unfair
competition under California Business and Professions Code
section 17200, alleging that Ameritox had copied its report
design. Ameritox moved to dismiss the complaint, arguing
that Millennium’s claimed trade dress was functional and
therefore did not qualify for protection. The district court
dismissed the motion, ruling that “[c]onstruing Millennium’s
complaint liberally, it has alleged facts showing that
competitors would not need the features of its report in order
to compete without disadvantage.”
MILLENNIUM LABS. V. AMERITOX 5
Before discovery was complete, Ameritox moved for
summary judgment on the Lanham Act claim, again arguing
that Millennium’s trade dress was functional. The district
court granted the motion, and also concluded that
Millennium’s claim for unfair competition failed.
Millennium appealed.
II
The Lanham Act creates a cause of action for a party
injured when another entity uses “any word, term, name,
symbol, or device, or any combination thereof . . . which is
likely to cause confusion . . . as to the origin, sponsorship, or
approval of his or her goods.” 15 U.S.C. § 1125(a)(1)(A).
This statute provides protection for a trade dress, TrafFix
Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 29 (2001);
15 U.S.C. § 1125(a)(3) (1994 ed., Supp. V), which is the
“total image of a product,” including features such as size,
shape, color, texture, and graphics, Disc Golf Ass’n v.
Champion Discs, Inc., 158 F.3d 1002, 1005 n.3 (9th Cir.
1998).
Like most intellectual property protections, trade dress
protection exists to facilitate competition.
It is well established that trade dress can
be protected under federal law. The design or
packing of a product may acquire a
distinctiveness which serves to identify the
product with its manufacturer or source; and
a design or package which acquires this
secondary meaning, assuming other requisites
are met, is a trade dress which may not be
used in a manner likely to cause confusion as
6 MILLENNIUM LABS. V. AMERITOX
to the origin, sponsorship, or approval of the
goods. In these respects protection for trade
dress exists to promote competition.
TrafFix, 532 U.S. at 28. But trade dress protection cannot be
asserted for any functional features of a product.1 15 U.S.C.
§ 1125(a)(3) (1994 ed., Supp. V) (“In a civil action for trade
dress infringement under this chapter 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.”); 15 U.S.C.
§ 1125(a)(3) (1994 ed., Supp. V); TrafFix, 532 U.S. at 29
(“This burden of proof gives force to the well-established rule
that trade dress protection may not be claimed for product
features that are functional.”); see also Clicks Billiards, Inc.
v. SixShooters, Inc., 251 F.3d 1252, 1258 (9th Cir. 2001);
Disc Golf, 158 F.3d at 1006; Fuddruckers, Inc. v. Doc’s B.R.
Others, Inc., 826 F.2d 837, 842–43 (9th Cir. 1987).
1
“To sustain a claim for trade dress infringement, [the plaintiff] must
prove: (1) that its claimed dress is nonfunctional; (2) that its claimed dress
serves a source-identifying role either because it is inherently distinctive
or has acquired secondary meaning; and (3) that the defendant’s product
or service creates a likelihood of consumer confusion.” Clicks Billiards,
Inc. v. SixShooters, Inc., 251 F.3d 1252, 1258 (9th Cir. 2001) (citing Disc
Golf, 158 F.3d at 1005 and Fuddruckers, Inc. v. Doc’s B.R. Others, Inc.,
826 F.2d 837, 841 (9th Cir. 1987)). The district court granted summary
judgment solely on the ground that Millennium’s claimed trade dress is
functional, without assessing the other two required elements. Because
functionality is the sole issue before us, we assess only that element. We
make clear, however, that our ruling does not preclude summary judgment
or partial summary judgment for Ameritox or for Millennium on either of
the other two elements if the district court concludes that such is
appropriate.
MILLENNIUM LABS. V. AMERITOX 7
This limitation reflects a balance of considerations
affecting the competitive process and consumer benefit.
Although Congress does not want consumers to be confused
about a product’s source, it also does not want to restrict the
availability and use of functional features that enhance the
utility of the product. TrafFix, 532 U.S. at 28–29. This free
competition allows manufacturers not only to compete with
sometimes necessary features, but also to build off the
features’ utility, creating better products. As the Supreme
Court has explained, “[t]rade dress protection must subsist
with the recognition that in many instances there is no
prohibition against copying goods and products. In general,
unless an intellectual property right such as a patent or
copyright protects an item, it will be subject to copying.” Id.
at 29. And copying can lead to “salutary effects in many
instances.” Id.
Consider the following example: a car manufacturer
places headlights at the front of the vehicle to light the road
when dark. Such lights might have some distinctive appeal
that could be identified with the first manufacturer to use
them, but having lights in the front of the vehicle to
illuminate a dark road also has a functional benefit. Once the
public understands it can purchase a vehicle that allows safe
driving at night, other manufacturers may not even be able to
compete without some similar lighting system and the
original manufacturer may gain a monopolistic stronghold on
the car market, with effective barriers to entry and
competition. The functionality limitation on trade dress
protection eliminates this problematic result. At the same
time, it is not hard to imagine variants of the car lighting
system that at some point would deserve trade dress
protection. For example, while some lighting system at the
front of the car may be functional, a car manufacturer may be
8 MILLENNIUM LABS. V. AMERITOX
able to claim a protectable trade dress for a particular lighting
pattern such as using ten small light bulbs in a triangular
pattern instead of one big light bulb.
Here, the parties dispute whether the layout of
Millennium’s R.A.D.A.R.® Report is functional. The parties
also dispute the appropriate test to apply to determine
functionality. Interpreting the Lanham Act, the Supreme
Court has held that “a product feature is functional if it is
essential to the use or purpose of the article or if it affects the
cost or quality of the article.” Inwood Labs., Inc. v. Ives
Labs., Inc., 456 U.S. 844, 850 n.10 (1982). Expanding on
this test, the Court explained further that a functional feature
is one the “exclusive use of [which]. . . would put competitors
at a significant non-reputation-related disadvantage.”
Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 165
(1995) (citing Inwood Labs., 456 U.S. at 850 n.10); see also
TrafFix, 532 U.S. at 32–33. The Court later clarified that the
quoted passage in Qualitex was not meant to replace the test
outlined in Inwood Laboratories, but instead was meant to be
a secondary question. See TrafFix, 532 U.S. at 33 (“Where
the design is functional under the Inwood formulation there
is no need to proceed further to consider if there is a
competitive necessity for the feature.”).
In 1998, three years before TrafFix clarified the
relationship between Inwood Laboratories and Qualitex, we
outlined a four-factor functionality test: “(1) whether the
design yields a utilitarian advantage, (2) whether alternative
designs are available, (3) whether advertising touts the
utilitarian advantages of the design, and (4) whether the
particular design results from a comparatively simple or
inexpensive method of manufacture.” Disc Golf, 158 F.3d at
1006. This test has been applied most often in cases
MILLENNIUM LABS. V. AMERITOX 9
involving utilitarian, physical devices. See, e.g., Secalt S.A.
v. Wuxi Shenxi Constr. Mach. Co., 668 F.3d 677, 685–87 (9th
Cir. 2012) (traction hoist); Talking Rain Beverage Co. v. S.
Beach Beverage Co., 349 F.3d 601, 603–05 (9th Cir. 2003)
(bike bottle). Disc Golf and the two cases on which it relied
to create its four-factor test also involved physical devices.
158 F.3d at 1006 (Frisbee® goal); Int’l Jensen, 4 F.3d at 821
(audio speaker); Clamp Mfg. Co. v. Enco Mfg. Co., 870 F.2d
512, 513(9th Cir. 1989) (cantilevered clamp).
Because most of these cases have focused on physical
devices, we have questioned whether the Disc Golf four-
factor test is appropriate in cases involving aesthetic trade
dress claims for designs or layouts. See Au-Tomotive Gold,
Inc. v. Volkswagen of Am., Inc., 457 F.3d 1062, 1072 n.8 (9th
Cir. 2006) (“Our long-standing test for functionality largely
excluded aesthetic considerations . . . .”); Clicks Billiards,
251 F.3d at 1260 (“[The Disc Golf] factors do not translate
easily from application in the context of utilitarian product
features . . . to application in the context of services . . . .”
(citation omitted)). Instead, when assessing these aesthetic
trade dress claims, we have focused our analysis on the
Qualitex language—whether the protection of the design
would put competitors at a disadvantage. Au-Tomotive Gold,
457 F.3d at 1072–73 (“In the case of a claim of aesthetic
functionality, an alternative test inquires whether protection
of the feature as a trademark would impose a significant non-
reputation-related competitive disadvantage.” (citing TrafFix,
532 U.S. at 33)); Clicks Billiards, 251 F.3d at 1261 (“[T]he
ultimate issue on functionality is whether Clicks’ ‘particular
integration of elements leaves a multitude of alternatives to
the’ pool hall ‘industry that would not prove confusingly
similar to’ its trade dress.”).
10 MILLENNIUM LABS. V. AMERITOX
But we have clarified that this divergence between
physical and aesthetic products is not necessary. In Au-
Tomotive Gold, we held that after Qualitex and TrafFix, “the
test for functionality proceeds in two steps.” Au-Tomotive
Gold, 457 F.3d at 1072. For the first step, “courts inquire
whether the alleged ‘significant non-trademark function’
satisfies the Inwood Laboratories definition of
functionality—‘essential to the use or purpose of the article
[or] affects [its] cost or quality.’” Id. (alteration in original)
(quoting TrafFix, 532 U.S. at 32–33) (“Step One”). We have
since incorporated this part of Inwood Laboratories into the
Disc Golf four-factor test. Id. at 1072 n.8. If the claimed
trade dress is determined to be functional under Step One,
then “the inquiry is over.” Id. at 1072. If not, the court must
proceed to the second step and address aesthetic functionality
by “inquir[ing] whether protection of the feature as a
trademark would impose a significant non-reputation-related
competitive disadvantage.” Id. (citing TrafFix, 532 U.S. at
33) (“Step Two”).
Millennium argues that Disc Golf is inapplicable and
should be abandoned. First, Millennium argues that the Disc
Golf test was used only in cases involving physical devices,
not in cases involving aesthetic formats. That argument,
however, overlooks that the Disc Golf factors reflect the
Inwood Laboratories definition of functionality—“essential
to the use or purpose of the article or if it affects the cost or
quality of the article.” See Disc Golf, 158 F.3d at 1006
(quoting Qualitex, 514 U.S. at 165). Moreover, Disc Golf did
not suggest that the four factors were applicable only to
physical devices, but held that the four factors were “[t]o
determine whether a product feature is functional.” Id. Here,
Millennium’s R.A.D.A.R.® Report layout is a product
feature.
MILLENNIUM LABS. V. AMERITOX 11
Second, Millennium argues that the Disc Golf factors
should be reconsidered because some of the factors were
omitted from the Supreme Court’s analysis in TrafFix. This
argument is unavailing. The Supreme Court did not discredit
the Disc Golf four-factor test, see TrafFix, 532 U.S. at 32–35,
and we have held already that the test still applies after
TrafFix was decided, Au-Tomotive Gold, 457 F.3d at 1072,
1072 n.8; Talking Rain, 349 F.3d at 603.
III
We review de novo a district court’s decision to grant
summary judgment. Clicks Billiards, 251 F.3d at 1257 (citing
Balint v. Carson City, 180 F.3d 1047, 1050 (9th Cir. 1999)
(en banc)). We must determine, viewing the evidence in the
light most favorable to the nonmoving party and drawing all
reasonable inferences in its favor, whether there are any
genuine issues of material fact in dispute and whether the
district court correctly applied the relevant substantive law.
Id. “[F]unctionality is generally viewed as an intensely
factual issue.” Tie Tech, Inc. v. Kinedyne Corp., 296 F.3d
778, 783 (9th Cir. 2002) (citing Vuitton Et Fils S.A. v. J.
Young Enters., Inc., 644 F.2d 769, 775 (9th Cir. 1981)).
Under the Au-Tomotive Gold two-step test, the district court
erred by granting summary judgment to Ameritox on
Millennium’s trade dress claim.
A. Step One
Under Step One, we first address whether there are
genuine issues of material fact regarding functionality.
Millennium describes its alleged trade dress as follows: a
“graphical format” which includes “side-by-side presentation
of a bell curve on the left, and a historical plot graph on the
12 MILLENNIUM LABS. V. AMERITOX
right”; the format uses “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”; the report uses
“little verbiage to accent the graphical features of the
combination of charts and place[s] the combination of
graphical features within a solid border.” Millennium does
not assert that it should have a trade dress on graphed results
generally, but on the specific layout that it chose. For good
reason: “[I]n evaluating functionality as well as the other
elements of a trade dress claim, it is crucial that we focus not
on the individual elements, but rather on the overall visual
impression that the combination and arrangement of those
elements create.” Clicks Billiards, 251 F.3d at 1259
(emphasis in original). Further, “functional elements that are
separately unprotectable can be protected together as part of
a trade dress.” Fuddruckers, 826 F.2d at 842.
As noted above, the four functionality factors are
“(1) whether the design yields a utilitarian advantage,
(2) whether alternative designs are available, (3) whether
advertising touts the utilitarian advantages of the design, and
(4) whether the particular design results from a comparatively
simple or inexpensive method of manufacture.” Disc Golf,
158 F.3d at 1006. “No one factor is dispositive; all should be
weighed collectively.” Id. We must consider, viewing the
evidence in the light most favorable to Millennium, whether
a jury could conclude that the R.A.D.A.R.® Report’s specific
visual layout is non-functional.
We conclude that, on the first factor, genuine issues of
material fact remain regarding whether Millennium’s claimed
trade dress has any utilitarian advantage. Here, Millennium
used its marketing department and graphic designers to create
a “presentable product,” and to “distinguish” Millennium
MILLENNIUM LABS. V. AMERITOX 13
“from its competitors.” In response to Ameritox’s motion for
summary judgment, Millennium also offered the declaration
of Jennifer Strickland, Millennium’s Director of Clinical
Strategy, who said that the elements of the “graphical format
are aesthetic and non-functional.” A jury could conclude
that, although placing the graphs on the same page serves the
function of allowing easy and facile review of the medical
results, the alleged trade dress—the side-by-side placement
of the graphs and other features, such as minimal text—is
merely aesthetic, not functional. The first factor thus weighs
against summary judgment for Ameritox.
As to the second factor, a jury could conclude that many
alternative designs were available. To give a few examples:
There could be side-by-side graphs arranged in opposite
order. There could be one graph above the other. There
could be pie charts instead of the charts used. One could
fashion many such examples. The second factor, too, weighs
against summary judgment for Ameritox.
Turning to the third factor, there is some question whether
Millennium actually advertised the functionality of its
report’s format. Though Millennium’s website promoted the
R.A.D.A.R.® Report, a reasonable jury could find that the
advertisements focused on the benefits of the “graphed
results” rather than on the benefits of the specific layout. For
that reason, the third factor weighs against summary
judgment for Ameritox.
Finally, we conclude that the fourth factor is at most
neutral. Jennifer Strickland’s declaration noted that “[t]he
addition of the graphical format to Millennium’s
R.A.D.A.R.® Report has not resulted in a costs savings,” but
“has resulted in an increase in costs.”
14 MILLENNIUM LABS. V. AMERITOX
Looking at the four Disc Golf factors together, and
viewing the evidence in the light most favorable to
Millennium, we conclude that the district court erred in
granting summary judgment to Ameritox. The key point is
that even if a comparison of results is functional, this could
be presented in many ways, and the precise format used by
company asserting trade dress is not necessarily functional.
A reasonable jury could conclude that Millennium’s trade
dress is not functional under Step One of the Au-Tomotive
Gold two-step test.
B. Step Two
Because Millennium’s claimed trade dress is not
functional as a matter of law under Step One, we next assess
whether it is functional as a matter of law under Step
Two—“whether protection of the feature as a trademark
would impose a significant non-reputation-related
competitive disadvantage.” Au-Tomotive Gold, 457 F.3d at
1072 (citing TrafFix, 532 U.S. at 33). Even assuming that a
document describing the results of urine analysis could be
considered aesthetically functional, “aesthetic functionality
has been limited to product features that serve an aesthetic
purpose wholly independent of any source identifying
function.” Id. at 1073. Here, Millennium’s chosen design for
its test results was, at least in part, crafted to distinguish the
R.A.D.A.R.® Report from its competitors, and not simply to
attract consumers. Because Millennium has presented
evidence that the graphical format served in part a source-
identifying function, we conclude that Millennium has
presented enough evidence to allow a jury to assess the
question of aesthetic functionality.
MILLENNIUM LABS. V. AMERITOX 15
IV
We also reverse the district court’s decision to grant
summary judgment on Millennium’s California unfair
competition claim. The district court relied on Cleary v.
News Corp., 30 F.3d 1255, 1262–63 (9th Cir. 1994), which
clarified that trade dress infringement claims under the
Lanham Act and unfair competition claims under California
Business and Professions Code section 17200 are inextricably
linked. Because we hold that summary judgment was not
appropriate on Millennium’s trade dress claim, we hold the
same for its unfair competition claim.
V
We reverse the district court’s grant of summary
judgment in favor of Ameritox on Millennium’s claim of
trade dress infringement under the Lanham Act and unfair
competition under California Business and Professions Code
section 17200, and we remand for further proceedings.
Although it is functional to have a system to portray test
results, there is a genuine fact issue whether the precise
manner in which Millennium presented its results was
functional.
REVERSED and REMANDED.