Marketing method and display are functional, nondistinctive trade dress

AMID, Inc. v. Medic Alert Found. U.S. Inc., No. H-16-1137
(S.D. Tex. Mar. 16, 2017)
American Medical ID (AMID) sued MedicAlert Foundation United
States for trade dress and copyright infringement. The parties compete in the
market for medical-identification jewelry. One of their marketing techniques is
sending unsolicited mass-mailed countertop displays with tear-off pads attached
to doctors’ offices. “Both companies include a letter to each doctor’s office
explaining what to do with the enclosed display and the importance of patients
wearing medical-identification jewelry.” 
I’m just going to pretend that the court said that AMID “registered its
copyright” in its letter.  There, that
feels better.  AMID also claimed that
unsolicited mailing of countertop easel displays was a protected marketing
method and that its countertop display was protected as trade dress that
MedicAlert infringed
It all started when a former AMID marketing manager, Justin
Noland, resigned from AMID and went to work at MedicAlert. MedicAlert hadn’t
mailed unsolicited countertop displays to doctors’ offices for the previous six
years, but resumed the mailings after Noland began working there.  
In July 2015, AMID complained to MedicAlert that Noland had
violated his noncompete agreement with and confidentiality obligations to AMID,
and that MedicAlert had made a “virtual carbon copy” of AMID’s display.  In August, MedicAlert responded that it
wouldn’t fire Noland because the noncompete clause had already expired, and noted
that MedicAlert would “remain mindful of all the operating boundaries
concerning marketing materials between our two companies . . . .” MedicAlert didn’t
agree to recall, stop using, or change the MedicAlert marketing displays or
other marketing materials.  AMID
responded in early September, mostly proposing a marketing partnership.  AMID sued in April 2016, making nearly 11
months between when AMID allegedly first saw the MedicAlert displays on the
MedicAlert website and when it sued.  The
court denied a preliminary injunction, despite finding a likelihood of success
on the merits of the copyright claim.
The display method/display itself were not registered.  AMID claimed they were inherently
distinctive.  Abercrombie doesn’t work well for non-word marks.  We know more about what can’t be inherently
distinctive—color, product design—than what can.  Erring on the side of caution, as instructed
by Wal-Mart, the court here found the
claimed trade dress to be on the “product design” side, rather than product
packaging, thereby requiring secondary meaning.
AMID proposed a number of different versions of its claimed
trade dress.  After the PI hearing, AMID
alleged rights in a “Marketing Plan and Scheme” that included:
a.         unsolicited
mass-mailing to doctor and other professional offices of display;
b.         an
easel display with integral order forms;
c.         real
jewelry facsimiles in the upper portion of the display;
d.         an
introductory letter;
e.         a
see-through cardboard cover over the jewelry with one medal visible; and
f.          a
clear mailing wrapper.
It also alleged rights in the “[p]ackaging as received by
the professional office of the mailed [d]isplay,” and the “display as used in
the professional offices,” specifically:
a.         an
easel display having three panels on the front portion of the display;
b.         a
top panel, followed by a larger central panel with real jewelry facsimiles
followed by an order form on the lower portion of the display; and
c.         an
order form pad below the central panel taking up approximately 2/3 of the
display face with photographs of jewelry on the face of the order form.

AMID package

AMID display at Publix

display comparison

MedicAlert package

As the court noted, one cannot “coherently define exactly
what the trade dress consists of and determine whether that trade dress is
valid and if what the accused is doing is an infringement” until after the claimant
submits the “discrete elements” making up the its claimed trade dress. AMID’s
final version included for the first time “the proportion of space taken up by
the order form pad, photographs of jewelry, and the number, position, and size
of the panels.”  The court commented that
it wasn’t clear at what point changing the definition of the claimed trade
dress would require an amended complaint. 
Without precise boundaries, determining infringement—and determining
what a competitor could and couldn’t do without entering a courtroom—is very difficult.  The court referred to Wal-Mart’s instructions “to be cautious about applying vague,
litigation-friendly tests for inherent distinctiveness,” and noted that AMID
has changed its marketing materials over the years, helping to create a “moving
AMID’s witness claimed that all the variations shared a
“family look,” but her testimony about what meant “was elastic and expansive.” She
claimed that 80 percent of the displays distributed since 2012 had this “family
look.” The court wasn’t clear which the other 20% were.  AMID used “displays with clearly different
shapes, sizes, text size and font, color, artwork, layout, and materials,” and
some didn’t contain any of the elements AMID identified as defining its trade
dress. Thus, AMID failed to define its trade dress with sufficient clarity or
Plus, erring on the side of caution as instructed, the court
classified this ambiguous trade dress as product design, requiring secondary
meaning for protection.  AMID argued that
its trade dress was “akin” to product packaging, but AMID’s products are
bracelets or dog tags and the purported trade dress didn’t “package” the actual
jewelry AMID sells.  It was in the middle
of the packaging and design spectrum.
AMID also failed to show secondary meaning.  Four of the claimed seven trade-dress
elements were packaging designed to be removed by a doctor’s staff before
putting it out for potential buyers (or doctors) to see.  AMID argued that these elements were seen by the
“gatekeepers”—the staff in the medical office who make the decision to place
the display on a counter visible to the “end users,” the patients.  The court commented that “[i]t stretches
current law to analyze [gatekeeper staff] as the relevant consumer in the
secondary-meaning inquiry.” Doctors might also be gatekeepers in deciding
whether to place the display in their waiting room or whether to recommend
medical-identification jewelry.  Ultimately, gatekeeper recognition couldn’t
determine secondary meaning, because gatekeepers weren’t consumers of medical-information jewelry. “The parties have not
cited cases in which a court found protectable trade dress, when, as here, most
of the purported trade-dress elements are never seen by members of the buying
Plus, the secondary meaning evidence was lacking as to
consumers, especially given the many variations in displays AMID had used over
the years.  MedicAlert put on a consumer
survey finding negative secondary meaning—that is, 35.3% of the test group and
39.8% of the control group associated the two displays they saw with one
company.  In the test group, 3.2%
identified MedicAlert as the source of the display they saw, while 5.4% of the
control group did.  Similar results
obtained for a test of whether “Medical IDs Save Lives!” had attained secondary
meaning.  AMID’s criticisms of the survey
were unavailing, especially given that the survey properly targeted people
who’d bought/were likely to buy medical identification jewelry.
Another survey found that 23.3% of the doctor-respondents
currently displayed advertising or promotional literature from both AMID and
MedicAlert; 58.5% didn’t currently display either; and the remainder were
roughly split.  There was no evidence
from this survey that either party’s marketing materials were replacing the
Annoyingly, the court quoted the line that “evidence of
intentional copying shows the strong secondary meaning of [a product] because
‘there is no logical reason for the precise copying save an attempt to realize
upon a secondary meaning that is in existence,’” right before it started in on
functionality (which it found here).  But
still, there was circumstantial evidence of intent to copy given Nolan’s
employment and the resumption of mass mailings. 
(The court did say that intent to copy was more relevant to infringement
than to protectability in the first instance.)
Finally, the trade dress was functional and AMID didn’t meet
its burden to show nonfunctionality. 
Under the first TrafFix test,
a feature is functional when it “is essential to the use or purpose of the
article or if it affects the cost or quality of an article,” and it’s essential
“if it serves any significant function other than to distinguish a firm’s goods
or identify their source.” If the feature is functional under this definition,
there is no need to consider competitive alternatives.
Evidence of functionality included that displays using an
easel design and attached pad with tear-off sheets are covered by utility
patents and are commonly used. Attaching sample products to countertop displays
was also commonplace, and attached samples had to be placed so as not to make
the display fall over. The combination of functional features wasn’t configured
in a nonarbitrary manner.
And finally: there was no showing of irreparable harm, given
AMID’s delay in seeking relief even after calling the display “an extreme
knockoff” and expressing “great concerns about the use of those [displays] in
the marketplace.”  AMID’s 2015
correspondence didn’t demand that MedicAlert stop distributing the displays or
remove the display from its website.
The copyright infringement claim fared better.  The transmittal letter that introduces a
healthcare professional to AMID’s marketing materials is “the first thing a
healthcare professional sees on opening the display package.”  The court found “obvious” similarities,
including virtually identical text at the bottom as well as overall look and
other content.

AMID letter

MedicAlert letter

“While MedicAlert had a long history of using displays in
its marketing campaigns up to 2009, MedicAlert has presented no evidence that
it used a letter until the mailings sent after Noland arrived.”  However, there was still no irreparable harm,
given AMID’s delay and MedicAlert’s cessation of its use of the similar letter.

The court declined to dismiss a common-law
unfair-competition claim based on misappropriation of “valuable business
methods, marketing plans, confidential know-how and proprietary information,” not
rising to the level of trade secrets.

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