IP Law And Competition For Retail Space

June 29, 2006
Manufacturers must assert intellectual property protection to defend or secure choice retail space.

Manufacturers that make and sell mass-market retail products are locked in a continual battle to either keep their hard-won shelf space or secure a retail market for new products. Increasingly, they are turning to intellectual property law as a way of fending off competitors. The traditional utility patents are important, but current weapons of choice also include design patent and trade dress protections. Copyright protection is sometimes used.

Design patents have several advantages for goods sold in mass retail markets and should form a central part of a legal strategy. They protect ornamental appearances, are comparatively low cost, and have a short enough processing time to be useful while the product is still relatively young.

Trade dress is no-cost IP protection. For that reason, manufacturers who didn't bother to apply for patents use it, and it is increasingly asserted against competitive products that have a similar appearance. It has some limitations, however. It protects only non-functional product features and only when the product design has already acquired a so-called "secondary meaning," i.e., recognition in the minds of the public that the design primarily identifies the source of the product. If a competitor enters the market quickly, trade dress claims (as to product appearance) may be defeated based on insufficient secondary meaning. In many cases, design patents offer better protection for non-functional features.

Another defense to a trade dress claim is that the product design is not really a source identifier but instead that the design just renders the product more aesthetically pleasing. For example, a cocktail shaker in the shape of a penguin is deemed functional and not protectable under trade dress law. It could be protected, however, with a design patent.

Utility patents protect functionality. This is the strongest form of protection and it generally transcends issues of appearance. However, it takes a few years to obtain one, and by then, some of the product life may be exhausted. This form of protection is highly appropriate for products with long lives, where aesthetics are less important than functionality, or where the invention might be improved in the future by others. Owning a basic, controlling utility patent is a formidable advantage in protecting a product or for cross-licensing in the future, should it be necessary to have something valuable with which to barter.

Copyright is well suited to protecting audiovisual works, software, and the like but generally cannot be used to protect other retail products except in special cases, such as lamps which can be regarded as sculptural works. The main problem with copyrights is that they do not protect utilitarian features unless there are artistic features that can be "conceptualized as existing independently of their utilitarian function." Like trade dress law, copyright law is not meant to be a replacement for patent law.

Asserting And Defending IP Rights

No matter the type of IP protection a manufacturer uses for a product, it is of no use in defending or securing choice retail space if it's not asserted.

When a competing product hits the shelves that is at all similar to its own, the first step for the manufacturer should be to demand that retailers suspend further sales of the disputed product. The burden this places on retailers is significant. Should they continue to sell a disputed product after receiving notification, they could eventually be found to have engaged in willful infringement and be liable for damages should the original manufacturer win its case in court. To defend against such claims, the retailer will want to show compliance with an affirmative duty of due care. That generally means getting an opinion of counsel or terminating sales. This decision has to be made before any adjudication. Usually the retailer turns to the supplier for indemnification, a letter from counsel, and defense against the accusation.

For the manufacturer of the new product, quick action is necessary. If there is concern over a design patent or trade dress claim, a fast redesign of the product's appearance may be feasible, though this often requires new molds -- and, of course, additional expense. Meanwhile, further shipments of the product from abroad might be redirected to another market where the asserted IP right does not exist.

A settlement might also be worked out with the IP owner. This can involve a cash payment, sourcing, favorable manufacturing rights, marketing assistance or transfer of the product line.

Edward D. Manzo is a senior partner with Cook Alex (Chicago), an intellectual property law firm. He can be reached at [email protected] or 312-236-8500.

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