Author:Handler, Michael

CONTENTS I Introduction: Managing Functional Trade Marks II How Functionality, Distinctiveness and Trade Mark Use Became Entwined A How Did Australia End Up without an Explicit Functionality Bar To Registration? B How Functionality Was Read into the Tests for Trade Mark Use And Distinctiveness 1 Functionality and Trade Mark Use Entwined 2 Functionality and Distinctiveness Entwined 3 Problems with Relying on Trade Mark Use and Distinctiveness to Screen out Functional Marks 4 The Alternative Approach: Allowing Factual Distinctiveness To Override the Need to Keep Functional Signs Free III Do Distinctiveness and Trade Mark Use Provide Adequate Functionality Safeguards? Looking to Registration and Infringement Outcomes A Weeding Out Functional Marks at the Registration Stage B Interpreting the Infringement Test to Enable the Use of Functional Signs IV The Skewing Effect: How Focusing on Functionality Has Distorted the Tests for Distinctiveness and Trade Mark Use A Distorting Distinctiveness B Distorting Trade Mark Use V Recalibrating Distinctiveness and Trade Mark Use, and Rethinking The Shape of a Functionality Exclusion A Recalibrating Distinctiveness and Trade Mark Use to Deal with Non Traditional Marks More Effectively B Rethinking the Functionality Exclusion 1 The Competing European Union and United States Models 2 The Under-Inclusiveness of the European Union Model 3 The Challenge of 'Aesthetic Functionality' 4 Which Way Forward for Australia? VI Conclusion I INTRODUCTION: MANAGING FUNCTIONAL TRADE MARKS

One of the most significant features of the trade mark provisions of the Agreement on Trade-Related Aspects of Intellectual Property ('TRIPS Agreement') is the stipulation in art 15(1) that '[a]ny sign ... capable of distinguishing the goods or services of one undertaking from those of other undertakings ... shall be capable of constituting a trademark ... [and] shall be eligible for registration'. (1) For many World Trade Organization ('WTO') Members, this involved recognising that non-traditional subject matter such as aspects of product packaging, the shape of goods themselves or colours used on goods or in conjunction with their marketing could constitute and be registered as trade marks. (2) At the same time, most WTO Members quickly appreciated that protecting or permitting the registration of non-traditional marks posed significant problems.

One difficulty was working out how longstanding tests for determining trade mark distinctiveness, which had been developed in the context of word and device marks, would map on to such new subject matter. A key concern here was to ensure that the tests would apply so that protection was not granted too readily over product features that would rarely be recognised as indicating trade origin so that the ability of other traders to use similar features in manufacturing and promoting their goods would not be unduly hampered. (3) An even more telling problem with permitting the registration of packaging features or elements of goods themselves, such as their configuration or colour, was recognised to be that some of these signs serve 'functional' purposes. Allowing the monopolisation of such signs was thought to raise the spectre of brand owners securing de facto monopolies over the functions such signs perform, causing significant competition concerns. (4)

There are a number of ways in which a non-traditional sign might be said to be functional. Most obviously, the sign might have a technical purpose. Examples include the shape of a toothbrush containing S-shaped bends in its handle to make it more flexible; a moulded ergonomic chair with the back and legs positioned to promote good posture; or a bright colour used on a rescue device to enhance its visibility in emergency situations. (5) A sign might also be functional if it conveys non-source identifying meaning or information about the goods, such as their ingredients or intended purpose, as with the use of red to indicate that caution is needed in the handling of the product, or a light and dark brown colour combination used on beverage packaging to connote a mocha flavour. (6) More controversially, it might even be said that where a nontechnical design feature of a product adds such aesthetic value that consumers might want to purchase the product because of that value (that is, they are prepared to pay some premium over the cost of the product attributable to its trade origin), the feature is serving an 'aesthetic function. The common concern in all of these cases is that it is entirely conceivable that the sign might have been used exclusively by a trader--whether by virtue of the fact the trader owns or owned patent or design rights covering the sign, or simply by virtue of being the first mover in a market where competitors did not choose to adopt the sign--such that it has become a factually distinctive trade mark. Granting potentially perpetual trade mark rights in such cases would clearly impose costs on present and future competitors who might otherwise wish to produce goods with those functional features or similar variants. These anti-competitive effects are thought to be particularly troubling if they have the effect of trampling over the in-built safeguards in the more obvious legal means of protecting functional product features--namely, patent or design laws--which provide for limited terms of monopoly protection, recognising the economic importance of allowing such features to fall into the public domain. (7)

Even though it might be difficult to agree on a clear set of principles for determining when, exactly, a sign is functional, there is widespread, and justifiable, agreement around the world that trade mark laws should contain limitations to ensure that such signs cannot be monopolised. The vast majority of WTO Members have sought to achieve this policy goal by categorically excluding functional signs from registration. That is, they have established outright bars to the registration of functional trade marks, which apply even if such marks satisfy the separate test for distinctiveness. (8)

A significant number of jurisdictions have considered that functional shape marks raise the most acute problems. Most significantly, the European Union ('EU'), in its 1988 Trade Marks Directive, established grounds of refusal and cancellation of registration for

signs which consist exclusively of:

* the shape which results from the nature of the goods themselves, or

* the shape of goods which is necessary to obtain a technical result, or

* the shape which gives substantial value to the goods ... (9)

These exclusions are said to have been motivated by an explicit desire to ensure that the life spans of patent and design rights are not indefinitely extended through trade mark laws and, at least in the case of the first two exclusions, that competitors have access to product features incorporating technical solutions. (10) Many countries have followed the EU's lead.

For example, Singapore, (11) India, (12) China (13) and Hong Kong (14) transposed the tripartite EU bar into their domestic laws. Sri Lanka (15) and South Africa (16) adopted only the first and second exclusions, although South Africa extended those exclusions to apply to the 'shape, configuration or colour' of goods. (17) Other countries have gone further in adopting bars that are not tied to particular types of sign. The most notable is the US, which has a longer history than most countries of protecting trade dress and product configuration, and of denying protection to functional marks. In 1998, the US amended its federal Trademark Act of 1946 to provide a ground of refusal of registration for a mark that 'comprises any matter that, as a whole, is functional'. (18) Registrations are refused on the basis of what is sometimes termed 'utilitarian functionality' (focusing on technical or utilitarian features of trade dress or product design) and 'aesthetic functionality' (focusing more on features that provide other, non-technical competitive advantages). The EU has recently moved closer to the broader US position: in both its 2015 Trade Marks Directive (19) and the amended EU Trade Mark Regulation, in force from 23 March 2016, (20) the three exclusions contained in the earlier 2008 Trade Marks Directive (21) have been extended to cover signs that consist of 'the shape, or another characteristic' of goods. (22) Notwithstanding the variety of approaches outlined above, what is clear is that a significant number of WTO Members have chosen, in enacting functionality exclusions, to prioritise competition concerns over the private interests of those traders whose signs have acquired distinctiveness and over limiting the consumer confusion that might result from multiple non-traditional signs being used in a market. (23)

So what then are we to make of the handful of countries that have not adopted explicit bars to the registration of functional marks in their domestic laws? Australia is perhaps the most notable example. Notwithstanding its close legal and historical ties to the United Kingdom ('UK'), and its tendency to look to other British Commonwealth nations in matters of intellectual property law reform, (24) Australia did not go down the same path as these countries on the issue of trade mark functionality when it came to reform its law to ensure compliance with the TRIPS Agreement. Australia's Trade Marks Act 1995 (Cth) ('TMA') adopted a broad, open-ended definition of 'sign' that specifically includes an 'aspect of packaging, shape, colour, sound or scent', (25) and a test for distinctiveness that contemplates that any mark can potentially acquire distinctiveness on the basis of use. (26) But it made no explicit provision for functional non-traditional signs. (27) On the face of it, this suggests that Australia sought to mediate the tensions between distinctiveness and functionality differently from most other countries, post-TRIPS...

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