Millennium and Ameritox Graphic Test Reports Raise Intellectual Property Dispute

Along with the shift in reimbursement models from volume to value and the rise of more collaborative, coordinated care, laboratories have been seeking ways to provide more value for clinicians and patients in their test result reporting. Thus laboratories are developing reports with more user-friendly, visual formats. One of those formats has raised an intellectual property dispute between two laboratories.

Millennium Laboratories sued Ameritox Ltd. claiming trade dress infringement— i.e., that Ameritox was using a "confusingly similar" urine test report that copied Millennium's format. The Lanham Act allows for damages if a competitor uses "any word, term, name, symbol or device, or any combination thereof…" "likely to cause confusion" regarding the origin or source of the product. It includes protection for trade dress, which courts have defined as the "total image of a product" including its graphics. Millennium also sued for unfair competition under California state law.

The lab reports at issue used graphics to depict current and historical diagnostic data. Millennium's R.A.D.A.R.® Report included a graphical format it described as "'side-by-side presentation of a bell curve on the left, and a historical plot graph on the right.'" It also included "'a combination of bold and dashed lines on the bell curve graph and a combination of numbers and letters on the plot graph on the right.'" There was minimal wording beside the graphics and charts and the graphic features were surrounded by a solid border. Millennium claims protection not for the idea of using graphs but rather for the layout of its report. In 2012, Ameritox revised its single graph report and the proposed versions for its new format were similar to Millennium's form.

There is an exception to the law's protection of trade dress: design elements that have a functional purpose aren't eligible for trade dress protection. "Although Congress does not want consumers to be confused about a product's source, it also does not want to restrict the availability and use of functional features that enhance the utility of the product," the Ninth Circuit Court of Appeals explained.

But what is functional? That is at the heart of the dispute. A trial court ruled in favor of Ameritox, granting it summary judgment after finding that, based on the facts and the law, the layouts of the two labs' reports had a functional purpose and thus weren't protected from trade dress infringement. But earlier this month, a federal appeals court, the Ninth Circuit Court of Appeals, reversed that ruling saying that prior courts have determined graphical layouts can merit trade dress protection. The appeals court applied a two-step test in reaching its decision: whether the aspect to be protected was functional—that is, it is "essential to the use or purpose"—or affects cost or quality (if yes, there is no protection). However, if it isn't functional the second step is to determine if protecting the feature would put others at a "non-reputation-related competitive disadvantage." The court said a four-factor test was used to determine if a feature was functional: 1) whether it provides a utilitarian advantage, 2) existence of alterative designs, 3) if the utilitarian advantage of the feature is promoted in advertising and 4) manufacturing the feature is simple or inexpensive. Under this test, the Ninth Circuit determined a jury could decide that placing graphs on the same page is aesthetic and not functional, there were other alternative layouts, and that advertisements focused on the benefit of reporting with graphs rather than the specific layout. Thus the court ruled that the first three factors could be applied to determine that a jury should have the opportunity to review the case and granting summary judgment to Ameritox was inappropriate. As to the fourth factor, the court said adding graphs to the report increased rather than decreased costs.

"The key point is that even if a comparison of results is functional, this could be presented in many ways, and the precise format used by company asserting trade dress is not necessarily functional." The court then turned to step two to consider whether the layout gave competitive advantage to Millennium. The layout was intended to distinguish Millennium's report from those of its competitors and thus was source-identifying, which also meant a jury should be able to determine if it is functional or not. Finally, the court of appeals explained that Millennium's unfair competition claim depended on the trade dress infringement claim so it also ruled that should go to a jury.

The Ninth Circuit's ruling gives hope to labs seeking to distinguish themselves from competitors by the layout and visual aids in their test reports.

Takeaway: Labs looking to provide visual reports with graphics should be careful when designing their layout to distinguish them from and avoid confusion with other competitors' reports, at the same time investigating the ability to assert intellectual property protection for the layout design of their reports.