"Incontestable" Trade Dress Not Immune From Challenge Based on Functionality

Trade dress that has achieved "incontestable" status under the Lanham Act is not immune from challenge based on functionality, even if it achieved such status prior to enactment of the functionality exception to incontestability. Eco Mfg. LLC v. Honeywell Int’l Inc., No. 03-2704, 2003 U.S. App. LEXIS 26430 (7th Cir. Dec. 31, 2003).

Honeywell’s round thermostat formerly was protected by a utility patent and a design patent. After expiration of those patents, Honeywell obtained a federal trademark registration for the trade dress embodied in its thermostat design, which became "incontestable" in 1996 under 15 U.S.C. § 1065.

Eco sought a declaratory judgment that its product did not infringe Honeywell’s trade dress in its round thermostat. Honeywell counterclaimed, seeking preliminary injunctive relief. The district court denied the preliminary injunction, concluding that Honeywell could not demonstrate a likelihood of success on the merits because its round thermostat is functional, thereby precluding trade dress protection.

Honeywell appealed, arguing that the functionality of its thermostat is inconsequential in light of the "incontestable" status of its trade dress. Although 15 U.S.C. § 1064(3) provides that even an "incontestable" mark may be challenged at any time if a mark is or becomes functional, Honeywell argued that this exception did not apply because § 1064(3) was not codified until 1998, and to apply a 1998 law to a trade dress that became incontestable in 1996 would be an impermissible retroactive application of law.

The Seventh Circuit disagreed, holding that while retroactive application of a law alters the legal consequences of completed acts, when an intervening statute authorizes prospective relief, application of the new law in that manner is not retroactive. Since Honeywell was not seeking damages or any remedy on account of conduct that predated enactment of Section 1064(3), but rather seeking prospective injunctive relief, application of the new provision was not retroactive. Thus, the district court did not abuse its discretion in denying Honeywell preliminary injunctive relief based on the alleged functionality of its trade dress.