Functionality Crumbles under Pocky

A Recipe for Confusion

Product design trade dress is particularly challenging, since it “almost invariably serves purposes other than source identification.”⁴ Almost 40 years ago, the Federal Circuit Court of Appeals attempted to articulate a clear-cut test for functionality by drawing a line between product designs that are de facto functional and those that are de jure functional.⁵ It explained that while de facto designs have a function, de jure designs are in their particular configuration because the product works better that way. Only de jure designs are legally functional and, thus, excluded from trademark protection.

In Inwood Laboratories, Inc. v. Ives Laboratories, Inc., the U.S. Supreme Court weighed in on the issue, explaining 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.”⁶ This formula came to be known as the “traditional functionality” test.⁷ The Court revisited, refined, and perhaps inadvertently complicated this test in Qualitex Co. v. Jacobson Products Co.: “‘[i]n general terms, a product feature is functional,’ and cannot serve as a trademark, ‘if it is essential to the use or purpose of the article or it affects the cost or quality of the article,’ that is, if exclusive use of the feature would put competitors at a significant non-reputation-related disadvantage.”⁸ By tacking a test for aesthetic functionality onto the traditional engineering-driven Inwood test, courts were primed to conflate the applicable standards.

Most recently, the Supreme Court in TrafFix Devices, Inc. v. Marketing Displays, Inc., took the opportunity to emphasize the “engineering-driven” traditional Inwood functionality test: “a feature 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.”⁹ Under this test, the Court found that a dual-spring design used to hold traffic signs upright was functional: “The point is that the springs are necessary to the operation of the device.”¹⁰

Despite this Supreme Court guidance, lower courts have applied various formulations to determine if a claimed trademark is functional. This confusion is not the typical circuit split, where each circuit adheres to a clear-cut standard that varies from some of its sister courts. The functionality doctrine is often applied inconsistently within circuits.¹¹

The Third Circuit is a prime example. Prior to the Supreme Court’s articulation of the traditional functionality test in Inwood, the Third Circuit reasoned that “[p]roof of functionality generally requires a showing that the element of the product serves no purpose other than [source] identification.”¹² Post-Inwood, it has sometimes adhered to the traditional test, finding that trade dress is functional when “it is essential to the use or purpose of the article.”¹³ And in other cases, it has not.¹⁴

The Third Circuit’s confusion over functionality may be most apparent in Ideal Toy Corp. v. Plawner Toy Manufacturing Corp., where it quoted the traditional functionality test from Inwood but then followed it with the logically inconsistent proposition that “[t]his formulation is congruent with our recent statement that a feature of goods is considered non-functional if ‘the element of the product serves no purpose other than identification.’”¹⁵ Yet asking whether a trade dress serves no other function other than source identification is diametrically opposite to asking whether the function that a trade dress serves is essential to the use or purpose of the product. It is against this muddled background that Ezaki Glico’s Pocky cookie case came to the Third Circuit.

A Familiar Sweet Treat

Familiar to many, Ezaki Glico Co., Ltd. (Glico), established in Japan in 1922, launched its original chocolate-covered biscuit stick as a new edition to its line of fine foods. The popular cookie first arrived on the world stage in 1966. The name for the new snack, “Pocky,” was inspired by the onomatopoeic word pokkin, which was associated with the snapping sound made when breaking the chocolate-covered sticks in half.¹⁶

When Glico crafted the cookies, it understood that coating the entire cookie stick in chocolate would create sticky chocolate fingers—and also that the method of manufacture required each stick to be hand-dipped in the chocolate. The logical result was, therefore, keeping one portion of the cookie left bare. That design became Pocky’s signature and continued even as manufacturing methods changed through the years.

The cookie, still popular today, was an instant hit in Japan. Indeed, it even has its own day named after it—November 11 is National Pocky Day in Japan.¹⁷ It is no surprise that after its skyrocketing local success, Glico increased its product offerings, added additional flavors, and expanded globally.

In 1978, Glico began selling Pocky in the United States through its wholly owned U.S. subsidiary. Not long afterward, competitors came along and marketed similar stick-shaped cookies partially coated in chocolate. In an attempt to protect its intellectual property rights, Glico sought several federal registrations. Specifically, on February 28, 1989, Glico received its first trademark registration, which protected Pocky’s product design—“an elongated rod comprising biscuit or the like, partially covered with chocolate” for use with chocolate-covered candy sticks.¹⁸ After more than a decade, in 2002, Pocky received its second trade dress registration, describing its mark as “biscuit sticks, covered with chocolate or cream and almonds” for use with “biscuit stick[s] partially covered with chocolate or cream in which are mixed crushed pieces of almond.”¹⁹ In 2014, the U.S. Patent and Trademark Office issued Patent No. 8,778,428 to Glico, protecting its method for producing the stick-shaped snack from a string-like dough and the resulting cookie.

Throughout this time, one particular competitor caught the attention of Glico—Korea-based Lotte. Lotte’s Pepero products imitated the design of the Pocky snack, so much so that between 1993 and 1995, Glico sent Lotte numerous cease and desist letters. Lotte, as a result, agreed to halt its sales of the imitation cookie until the dispute was resolved. This did not happen, and Lotte ultimately resumed sales. In 2015, Glico initiated suit for trade dress infringement and unfair competition under the Lanham Act and state law in New Jersey.

The Cookie Case

Functional features are those that make a product work better in a particular shape or that make a product cheaper or easier to make.²⁰ Historically, courts opining on the functionality of product features generally begin with the fundamental framework derived from the Supreme Court’s formula set out in Inwood and Qualitex. This framework first considers the traditional test, which focuses on the “essential” nature of the trademark’s features.²¹

Under the traditional test, a product’s design or packaging is functional, and cannot serve as a trademark, if it is “essential to the use or purpose of the article or if it affects the cost or quality of the article.”²² For instance, the pink color of building insulation is not essential to the use or purpose of the product and therefore is nonfunctional.²³

In the U.S. District Court for the District of New Jersey, Glico initially argued that the fundamental use and purpose of a snack is to be consumed. While Pocky’s pleasant taste, texture, and easy-to-eat design are important, Glico contended that the product’s design is not essential to achieve these results. Glico proposed that there was at least a dispute over whether Pocky’s design was essential to the use or purpose of the product, which would be sufficient to overcome summary judgment.

Unimpressed by Glico’s arguments, the district court explained that in order to prove functionality under the traditional test, a product design must be essential to the use or purpose of the product. Citing Third Circuit standards, the court found that product designs driven at least in part by functional considerations meet this standard and, therefore, are functional. The court considered Glico’s prior advertising, which touted its useful features, and reasoned that the purpose of the partially uncoated Pocky cookie design is to provide a convenient, no-mess handle, that could be easily packaged and shared—indicating functionality.

The district court also examined Glico’s patent for the method of producing the stick-shaped snack and found it to be strong evidence that the features claimed therein were actually functional trade dress. Despite Glico’s arguments that cheaper manufacturing methods and other product configurations existed, the court was unmoved.

Reasoning in the alternative, the court explained that even if it could not determine whether Pocky’s design features were essential to the use or purpose of the product under the traditional functionality test, Pocky was still functional under the second part of the test for aesthetic functionality. Particularly, the court found that granting trademark protection to the partially uncoated Pocky stick would put competitors at a significant non-reputation-related disadvantage, thereby unfairly restricting competition. According to the court, Glico would hold a monopoly over features “essential to a successful thin, partially dipped biscuit cookie.”²⁴ Thus, a finding of functionality was imminent.

The district court ultimately concluded that no genuine issue of material fact existed as to the functionality of Pocky’s product configuration. It explained that allowing Glico to maintain its trademark in the functional Pocky configuration “would overextend trade dress law” and “deny competitors the ability to compete.”²⁵ Therefore, the court dismissed Glico’s trademark infringement claims, granted Lotte’s motion for summary judgment, and ordered cancellation of Pocky’s trademark registrations.²⁶ Glico filed a motion to stay cancellation of its federal trademark registrations pending appeal. The court granted this motion and later continued it after the Third Circuit heard the case—pending appeal to the Supreme Court.

A Tale of More Than Just Desserts . . .

On appeal, the Third Circuit affirmed the lower court’s decision, rejecting Glico’s arguments that its trade dress was nonfunctional. Though agreeing with the district court’s conclusion, the Third Circuit applied a different test for functionality. The panel disregarded the “essential” part of the traditional functionality test altogether and found that, “[u]nder both the statute and the case law, a feature’s particular design is functional if it is useful.”²⁷

In fact, rather than looking to Black’s Law Dictionary for clarity in defining “functional feature,” the Third Circuit turned to Webster’s Third New International Dictionary and the Oxford English Dictionary for nonlegal definitions of “functional.” The court found that the plain meaning of “functional” is simply “useful”—something “designed or developed chiefly from the point of view of use.”²⁸ Departing from Qualitex, TrafFix, and Wal-Mart,²⁹ the Glico court concluded that “essential” is not a necessary part of the functionality test.

From there, the court was ready to apply its new recipe to Pocky. The court highlighted several ways to prove functionality:

1. Evidence can directly show that a feature or design makes a product work better;
2. Strong evidence of functionality exists when a product’s marketer touts a feature’s usefulness;
3. A utility patent is strong evidence that the features therein claimed are functional; and
4. If only a few ways to design a product exist, the design is functional (however, the existence of other workable designs is not sufficient to constitute a nonfunctional design).³⁰

To illustrate Pocky’s functionality, the court noted that Glico previously promoted Pocky’s utilitarian advantages in its advertising and marketing. It also explained the usefulness of Pocky’s design: “the stick shape makes it ‘easy to hold, so it c[an] be shared with others to enjoy as a snack.’ It also lets people eat the cookie without having to open their mouths wide. And the thin, compact shape lets Ezaki Glico pack many sticks in each box, enough to share with friends.”³¹ Further, the existence of alternative designs was not determinative of the functionality of the Pocky cookie.

An important point of clarification made on appeal was that a patent for a method of manufacturing Pocky cookies was not strong evidence that the features of the product produced by the patented method are functional. Since the “central advance” of the utility patent was not the features claimed as trade dress, the utility patent did not indicate whether the trade dress was functional.³² Although factored in by the district court, the Third Circuit found consideration of Glico’s utility patent for Pocky unnecessary and immaterial.

Ultimately, the court found Pocky’s features were “not arbitrary or ornamental flourishes that serve only to identify Glico as its source.”³³ It stated that every aspect of the Pocky design is useful. Under the court’s new interpretation of functional, now equated with “useful,” the lower court’s decision was affirmed.

Functionality Crumbles

In response to the decision of the Third Circuit Court of Appeals, Glico filed a petition for rehearing en banc. Several amicus briefs were filed in support. They urged the court to rehear the case, explaining that the precedential opinion oversimplified the functionality doctrine, reducing it to a simple question of “usefulness” rather than recognizing the primary question in trademark law of whether or not a product or design would hinder effective competition.³⁴

Among the arguments presented, it became clear that a court would be hard-pressed to find trade dress not useful in at least some way. For example, Lamborghini’s scissor doors open upwardly to avoid scraping the curb due to how low the car is to the ground.³⁵ Herman Miller’s Eames office chair’s armrests provide a place to rest one’s arms.³⁶ The Bodum French press coffee maker’s C-shaped handle provides a method to hold the container, pour liquid from it, and arguably provide a more secure grip.³⁷ And the Maker’s Mark whiskey bottle’s design has the useful dripping wax seal, which seals the bottle.³⁸ Yet courts considered each of these examples to be nonfunctional.

But even after having been provided a host of examples of “useful” products that enjoyed trademark protection that could be stripped away given the court’s new usefulness standard, Glico’s request for a rehearing en banc was denied. The Third Circuit, instead, issued a revised opinion in an attempt to provide clarity on the functionality doctrine, while affirming summary judgment for Lotte.

The court’s revised opinion served as another opportunity for the court to double down on its previous formulation that “[p]roof of nonfunctionality generally requires a showing that the element of the product serves no purpose other than identification.”³⁹ The panel noted that although the green-gold ironing board pads in Qualitex needed some color to avoid noticeable stains, there was no reason to use green-gold. Further, coffeepot handles and armrests are generally useful; however, the Bodum French press and Herman Miller armrest designs “offered no edge in usefulness.”⁴⁰ The court found it to be more telling, not whether a product or feature is useful, but whether the particular shape and form chosen for that feature was useful.

Adding insult to injury, the revised opinion explained that although Lotte bore the burden of proving functionality because the Pocky trade dress was registered, it met this challenge.⁴¹ Ultimately, the court concluded that Pocky’s design is useful and therefore cannot enjoy trade dress protection. Under the new Third Circuit standard, “functional” only means “useful,” not “essential to the use.”

The Aftermath

In the wake of the Pocky decision, legal news sources quickly reported on the precedential “useful” standard.⁴² The renowned amici, including the International Trademark Association (INTA) and Mondelez Global LLC, that supported Glico when appealing for a rehearing en banc made forceful arguments against the “useful” test.⁴³ INTA argued fervently: “This eviscerates the Supreme Court’s test and would potentially preclude trade dress protection for virtually all product design features since almost any feature is useful in at least some way.”⁴⁴

Indeed, equating “functional” with “useful” would seem to deny trademark protection in the Third Circuit to many currently registered marks. For example, consider the shape of a Coca-Cola bottle. Its hourglass shape makes it easy to grasp, by virtue of its narrowness in the center, while the wide bottom ensures it sits securely on flat surfaces, and its bulbous top ensures it does not easily slip out of one’s hand. Despite the usefulness of this product design, it is widely recognized as a valid trade dress.⁴⁵ This result comports with setting the bar for functional trade dress as precluding protection when the claimed product design is essential to the use or purpose of the product. Since the exact design of the Coca-Cola bottle is not essential to making a beverage container that stands upright, is easy to grasp, and will not easily slip from one’s hand, Coca-Cola does not possess an indefinite monopoly on usable beverage containers. Rather, its particular style, though useful, serves primarily to identify its source, and thus is protected by trade dress.

Consider another example referenced above—one that the Glico court itself tried to reconcile its “useful” standard with—Qualitex’s green-gold ironing pad. The Third Circuit wrote, “The question is not whether the product or feature is useful, but whether ‘the particular shape and form’ chosen for that feature is.”⁴⁶ Since other colors are available that would hide stains as well as green-gold, the Glico court concluded that the green-gold press pad design is not useful. While the green-gold color undoubtedly has a use, it simply is not essential to that use. Certainly, a baby pink press pad would not hide stains as well as green-gold, nor would powder blue, mint green, or canary yellow. Yet the Supreme Court held that Qualitex was entitled to trademark protection for its green-gold press pad product design. Why? Because green-gold is not essential to the use of the press pad. Though useful, the green-gold design is not legally functional—the sole legal function of Qualitex’s trade dress is source identification.⁴⁷

The “useful” standard does not only signal cause for concern to trade dress holders who find themselves attempting to enforce their rights within the Third Circuit. Brand owners seeking to obtain recognition for their trade dress within the circuit now have the odds stacked against them. The circuit, perhaps unwittingly, has depleted trade dress rights by taking an excessively cautious approach to functionality.

Courts and brand owners alike would benefit from clarity on utilitarian functionality. If de facto usefulness is all that is needed to preclude trademark protection, that ought to be clear before trade dress owners invest in litigating a trade dress infringement claim. Alternatively, if the Supreme Court’s “essential to the use or purpose” test for utilitarian functionality is proper, it ought to be universally applied.

On June 24, 2021, Ezaki Glico filed a petition for a writ of certiorari with the Supreme Court presenting two questions:

1. Whether trade dress is “functional” if it is “essential to the use or purpose of the article” or “affects the cost or quality of the article,” as this Court and nine circuit courts have held, or if it is merely “useful” and “nothing more,” as the Third Circuit held below.

2. Whether the presence of alternative designs serving the same use or purpose creates a question of fact with respect to functionality, where the product’s design does not affect cost or quality and is not claimed in a utility patent.⁴⁸

The high-stakes pairing of these issues just might grab the attention of the Court, providing a vehicle for much-needed clarity on the functionality doctrine.

Endnotes

1. E.g., Textron, Inc. v. U.S. Int’l Trade Comm’n, 753 F.2d 1019, 1024–25 (Fed. Cir. 1985) (contrasting de facto functionality with de jure functionality).

2. Ezaki Glico Kabushiki Kaisha v. Lotte Int’l Am. Corp., 986 F.3d 250 (3d Cir. 2021).

3. See 15 U.S.C. §§ 1052(e)(5), 1115(b)(8), 1125(a)(3).

4. Wal-Mart Stores, Inc. v. Samar Bros., 529 U.S. 205, 213 (2000).

5. Textron, 753 F.2d at 1024–25.

6. 456 U.S. 844, 850 n.10 (1982).

7. Dippin’ Dots, Inc. v. Frosty Bites Distrib., LLC, 369 F.3d 1197, 1203 (11th Cir. 2004).

8. 514 U.S. 159, 165 (1995) (emphasis added).

9. 532 U.S. 23, 33 (2001) (emphasis added).

10. Id. at 30 (emphasis added).

11. Compare Eco Mfg. LLC v. Honeywell Int’l Inc., 357 F.3d 649, 654–55 (7th Cir. 2003) (“TrafFix rejected an equation of functionality with necessity; it is enough that the design be useful.” (emphasis added)), with Bodum USA, Inc. v. A Top New Casting Inc., 927 F.3d 486, 491 (7th Cir. 2019) (“[T]he [Lanham] Act . . . does not protect features that are necessary for the use of a product, so as to prevent one competitor from maintaining a ‘perpetual and exclusive right to a useful product feature.’” (emphasis added)).

12. SK&F, Co. v. Premo Pharm. Labs., Inc., 625 F.2d 1055, 1063 (3d Cir. 1980).

13. See, e.g., Shire U.S. Inc. v. Barr Labs., Inc., 329 F.3d 348, 353–54 (3d Cir. 2003).

14. See, e.g., Ezaki Glico Kabushiki Kaisha v. Lotte Int’l Am. Corp., 986 F.3d 250, 253 (3d Cir. 2021) (equating “functional” with “useful”).

15. 685 F.2d 78, 81 (3d Cir. 1982) (quoting SK&F, 625 F.2d at 1063).

16. Caroline Coral, Tracing the History of Pocky Sticks, Tasting Table (May 3, 2021), https://www.tastingtable.com/dine/national/pocky-sticks-history.

17. Jen Santelices, The Story of Pocky: An Iconic Japanese Snack Loved Around the World, TokyoTreat (Jan. 13, 2021), https://tokyotreat.com/news/the-story-of-pocky-an-iconic-japanese-snack.

18. Registration No. 1,527,208.

19. Registration No. 2,615,119.

20. See 1 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 7:63 (5th ed. 2019).

21. Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 859 n.10 (1982); Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159 (1995).

22. Qualitex, 514 U.S. at 165.

23. In re Owens-Corning Fiberglas Corp., 774 F.2d 1116, 1128 (Fed. Cir. 1985).

24. Ezaki Glico Kabushiki Kaisha v. Lotte Int’l Am. Corp., No. 15-5477, 2019 U.S. Dist. LEXIS 230340, at *21 (D.N.J. July 31, 2019).

25. Id. at *22.

26. Id.

27. Ezaki Glico Kabushiki Kaisha v. Lotte Int’l Am. Corp., 977 F.3d 261, 265 (3d Cir. 2020), vacated, 985 F.3d 1069 (3d Cir. 2021); Ezaki Glico Kabushiki Kaisha v. Lotte Int’l Am. Corp., 986 F.3d 250, 255 (3d Cir. 2021).

28. Glico, 986 F.3d at 256.

29. Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159 (1995); TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 25 (2001); Wal-Mart Stores, Inc. v. Samar Bros., 529 U.S. 205 (2000).

30. Glico, 986 F.3d at 258.

31. Id. at 259 (alteration in original) (citation omitted).

32. Id. at 260.

33. Id. at 259.

34. Brief for Mondelez Global LLC as Amicus Curiae in Support of Appellants’ Petition for Rehearing En Banc, Glico, 986 F.3d 250 (No. 19-3010), 2020 WL 7055772.

35. Id.

36. Id.

37. Bodum USA, Inc. v. A Top New Casting Inc., 927 F.3d 486, 492–94 (7th Cir. 2019).

38. Brief for International Trademark Ass’n (INTA) as Amicus Curiae in Support of Neither Party, Glico, 986 F.3d 250 (No. 19-3010), 2020 WL 7055770 [hereinafter INTA Brief]; Maker’s Mark Distillery, Inc. v. Diageo N. Am., Inc., 703 F. Supp. 2d 671 (W.D. Ky. 2010), aff’d, 679 F.3d 410 (6th Cir. 2012).

39. Glico, 986 F.3d at 257.

40. Id. at 258.

41. Id. at 259–60.

42. E.g., Third Circuit Finds Stick-Shaped Cookie Trade Dress Invalid, IPWatchdog (Oct. 15, 2020), https://www.ipwatchdog.com/2020/10/15/third-circuit-finds-stick-shaped-cookie-trade-dress-invalid/id=126438.

43. INTA Brief, supra note 38; Brief for Mondelez Global, supra note 34.

44. INTA Brief, supra note 38, at *5; see also Wal-Mart Stores, Inc. v. Samar Bros., 529 U.S. 205, 213 (2000).

45. See, e.g., 1 McCarthy, supra note 20, § 7:70 (“Some distinctive beverage containers may achieve protectable trade dress status, such as the COCA-COLA bottle . . . .”).

46. Glico, 986 F.3d at 257.

47. Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 166 (1995).

48. Petition for Writ of Certiorari at i, Ezaki Glico Kabushiki Kaisha v. Lotte Int’l Am. Corp., No. 20-1817 (June 24, 2021).