Courts still not hot on Honeywell thermostat shape registration

In Eco Manufacturing LLC v Honeywell International Inc, the US Court of Appeals for the Seventh Circuit has upheld a district court decision to refuse the defendant's application for a preliminary injunction to prevent the plaintiff's manufacture of a circular-shaped thermostat.

Honeywell, a US company involved in various aspects of the technology industry, has long manufactured and sold a circular-shaped thermostat. This device had been the subject of an expired utility patent as well as an expired design patent. Honeywell unsuccessfully applied to register the shape of the thermostat as a trademark in 1975. However, its application for registration in 1990 was allowed.

Eco Manufacturing, a competitor of Honeywell, also started to produce circular-shaped thermostats. When threatened by Honeywell with a suit for trademark and/or trade dress infringement, Eco filed a declaratory judgment action seeking a non-infringement finding. Honeywell counterclaimed and filed a motion for a preliminary injunction. The district court denied the preliminary injunction, holding that it was likely that the shape of Honeywell's thermostat was functional. It further reasoned that damages would be sufficiently easy to calculate if Eco's conduct was found to infringe. In coming to this decision, the district court leaned heavily on TrafFix Devices Inc v Marketing Displays Inc.

On appeal, the Seventh Circuit affirmed. It held that the district court was on "solid ground" in observing that the features claimed in a utility patent are functional and that such features should be deemed functional, in the district court's words, "until proved otherwise by the party seeking trade dress protection". The appellate court found that given the heavy burden on Honeywell, it would be "hard to say" that the lower court abused its discretion in finding that Honeywell had not discharged that heavy burden.

However, the Seventh Circuit took pains to note that Honeywell did not face an insurmountable task. Indeed, the court seemed intrigued by Honeywell's claim that the round shape, perhaps once dictated by the fact that the device was comprised of electro-mechanical links that required this particular shape was, at present, merely ornamental or incidental because the shape was no longer dictated by the technical aspects. It stated: "Thus, what was once functional may half a century later be ornamental. Passage of time diminishes a utility patent's significance".

Apart from holding the promise of an interesting development in the law of functionality, the opinion is also noteworthy for its discussion of Honeywell's argument that it should not be bound by the 1998 amendment to Section 1064(3) of the Lanham Act. That section provides that a registration is subject to cancellation if the mark becomes functional. Honeywell argued that its registration became incontestable in 1996, two years before the amendment which, according to Honeywell, changed the law. Honeywell contended that this would amount to impermissible retroactivity. The Seventh Circuit held that it did not need to decide whether the 1998 amendment changed the law because there was no issue of retroactivity. It noted that "[a] law is retroactive when it alters the legal consequences of completed acts". The Seventh Circuit held that Honeywell was not seeking damages or other remedies on account of conduct by Eco that pre-dated the 1998 amendment. Rather, Honeywell was seeking "prospective relief in the form of an injunction". Thus, the court held that applying the 1998 amendment to Eco's 2003 conduct was entirely prospective pursuant to Landgraf v USI Film Products.

For background information on this case, see Honeywell's circular shape mark given the cold shoulder.

Russell H Falconer, Baker Botts LLP, New York