Merisant Co. v. McNeil Nutritionals, LLC, 2007 WL 707359 (E.D. Pa.) Merisant makes artificial sweeteners, including Equal, NutraSweet and Canderel (the international version of Equal). Equal is made with aspartame, dextrose and maltodextrin. McNeil makes the artificial sweetener Splenda, made with sucralose, maltodextrin and dextrose. Sucralose begins with sugar, then replaces three of eight hydroxyl groupings on the sucrose molecule with three chlorine atoms. Splenda doesn’t contain unaltered sucrose.
Makers of artificial sweeteners have attempted to avoid using certain language, such as the term "artificial," that may convey negative taste or health safety concerns. Instead, the industry uses the term "no-calorie sweetener"; some manufacturers position their products as “like” sugar, by using images and words to evoke sugar in their ads.
McNeil has spent $235 million from 2000-2006 to develop Splenda’s brand identity capitalizing on Splenda’s sugar origins. Thus the catchphrases “Made from sugar, tastes like sugar” on product packaging and “Made from sugar so it tastes like sugar” on individual serving packets, a slogan repeated in all TV and print ads. Perhaps because of this positioning, Splenda is now the top-selling no-calorie sweetener in the US.
Merisant was aware of the taglines since Splenda’s September 2000 launch, but it didn’t conduct any research about whether the slogan was misleading. Instead, it raised informal concerns with McNeil through correspondence arguing that the tagline was inherently false and misleading because it implies a more natural origin and because there’s no causal relationship between the original sugar molecule and the resulting sugar-like taste of sucralose. McNeil rejected Merisant’s concerns, responding that Splenda had never been promoted as “natural.”
In fall 2004, Merisant concluded that Splenda’s marketing was likely to cause consumer confusion and sent a letter to the Better Business Bureau’s National Advertising Division. Rather than responding directly, McNeil filed a complaint in Puerto Rico seeking a declaratory judgment that its advertising was legitimate. Through procedural maneuvers, that led the parties to this court. Merisant alleged false advertising under the Lanham Act and Pennsylvania state law. Specifically, Merisant claims that (1) “made from sugar” is literally and impliedly false; (2) “made from sugar so it tastes like sugar” is literally false and misleading; (3) the implied claim that Splenda is natural is misleading; and (4) the implied claim that Splenda contains sugar is misleading.
The court refused to grant summary judgment in favor of McNeil based on laches. The Lanham Act has no limitations period, so courts borrow from coordinate state statutes, here Pennsylvania’s consumer protection law, which has a limitations period of six years. Because Merisant sued within the limitations period, McNeil bore the burden of showing inexcusable delay and prejudice. There were reasons one could find both. Four years is a significant amount of time in this context, especially for a large company launching a new product; a four-year delay could be severely prejudicial. Yet Merisant also had evidence in its favor. It might not have been obvious that consumers were deceived at first; McNeil’s advertising eventually dropped the initial qualifier “but it’s not sugar”; Merisant was not the direct target of comparative advertising and had less reason to act than if it had been targeted. Moreover, of the $235 million McNeil spent promoting Splenda, $110 million was spent after Merisant began its suit. Merisant wasn’t bound to rush to court in the early stages of a product promotion, when it wasn’t clear what McNeil’s ultimate ad strategy was and when it might not have been clear that consumers were deceived.
Moreover, consumer protection concerns could tilt in Merisant’s favor. Though there’s no argument that Splenda is unhealthy or unsafe, it’s important to consumers to know whether the foods they buy contain sugar or are “natural.” And deliberate attempts to deceive consumers could also disqualify McNeil from a laches defense. There was some evidence from which a jury could conclude that McNeil intended to deceive, including an independent consultant’s description of McNeil’s “carefully considered decision[]” to “position[] Splenda as ‘not artificial.’” McNeil also stopped testing whether consumers received the message that Splenda was not artificial “for legal reasons,” which could lead to a negative inference.
Given all these uncertainties, it was for a jury to decide whether Merisant’s delay was inexcusable and McNeil was prejudiced.
McNeil argued that “made from sugar, tastes like sugar” is literally true, unambiguous, and not capable of being misleading. It made the usual claims that Merisant’s survey questions were leading, which the court refused to accept at this stage, and also invoked the pernicious rationale of Mead Johnson Co. v. Abbott Laboratories, 201 F.3d 883 (7th Cir. 2000), that surveys shouldn’t be used to define words, here “from” in “made from sugar.” Mead, among other things, invites confusion over whether there’s some sort of intent standard in Lanham Act false advertising cases, distinguishing “factual propositions that are susceptible to misunderstanding” from statements “designed to mislead.”
The amended Mead opinion at 209 F.3d 1032 (7th Cir. 2000) backtracks from this standard, but doesn’t quite do the job. Notably, the district court here didn’t cite the amended opinion in Mead, but only quoted the “designed to mislead” language that was amended out. The court went on to hold that “[t]he decision whether to follow Mead Johnson may turn on whether ‘made from sugar’ is merely ‘misunderstood’ or whether it was deliberately designed to be misunderstood and, hence, to mislead.” Given that Mead Johnson isn’t binding in any event, the court could look to the superseded language, but it should acknowledge that’s what it’s doing – and should explicitly address why it’s abandoning the usual Lanham Act rule that intentionally misleading conduct is not required.
McNeil’s position was that a consumer couldn’t interpret “made from sugar” and “tastes like sugar” as “is sugar.” Analogously, a survey couldn’t be used to prove that “Made in America” is misleading because it’s perceived by consumers as meaning “made by well-compensated union workers.” But, the court reasoned, there could be a legitimate dispute over whether Splenda was “made in America” if the sugar cane used was grown in Louisiana but then shipped to Mexico for conversion into Splenda, then returned to the US for packaging. Though McNeil had strong arguments about what “made from sugar” couldn’t mean, it was less convincing about what it could mean to consumers, specifically whether they could be misled about the naturalness of the “making.” If either (1) McNeil acted intentionally, or (2) consumers were confused about more than the meaning of “from,” then the court would decline to follow Mead.
McNeil also raised an affirmative defense of unclean hands, alleging that Merisant had engaged in similar marketing techniques to emphasize its products’ “natural” components. The key examples: For Equal, Merisant highlights the fact that aspartame is made “by joining two amino acids naturally found in wholesome foods like milk, meats and grains,” which are “foods we eat every day.” For NutraSweet, Merisant claims that “unlike saccharine, NutraSweet is the sweetener your body treats naturally.” For Same with Sugar (available in Puerto Rico), Merisant uses packaging that states “made with sugar” and uses images of sugar cane fields even though, McNeil argues, sugar serves only as a bulking agent.
The unclean hands defense requires clear, convincing evidence of egregious misconduct that injured the defendant and that has a close nexus to the subject of the plaintiff’s action. McNeil was hampered by its insistence that its advertising, as well as Merisant’s, was just legitimate product positioning, which made it hard to argue that Merisant’s conduct was “egregious.” As the court pointed out, unclean hands “is not a mere ‘they did it too’ defense, but instead serves as a shield against a plaintiff's claims when the plaintiff has engaged in ‘egregious misconduct.’” Moreover, McNeil’s key examples of Merisant’s advertising claims were in fact true. For example, Same with Sugar is composed of 97.5% real sugar, and thus “made with sugar” is not misleading.
The court excluded evidence of Merisant’s outside-US conduct, based on McNeil’s resistance to discovery on McNeil’s outside-US conduct; if it’s irrelevant to one side of the case, it’s irrelevant to the other. But it did comment that Merisant’s Mexican “Canderel Nature” was likely to be understood as meaning “natural” even though “nature” isn’t a Spanish word. The Spanish word for “nature” is “naturaleza,” and for “natural” is “natural.” Even without evidence, the court expected that the average Spanish-speaking consumer would associate “nature” with the Spanish equivalent. By Merisant’s logic, it could sell an artificial sweetener in Mexico called “Sugar” or one in the US called “Azúcar” (sugar) without being misleading. This, the court felt, overlooked the “shrinking” world in which a nation’s consumers often use more than one language. (Trademark deals with this problem through the doctrine of foreign equivalents, which is usually used to prevent registration of terms that are generic in foreign languages, but would also apply to terms that are deceptive in foreign languages.)
In any event, the court found that the nexus between Merisant’s conduct and its claims were too attenuated to apply unclean hands. The entire artificial sweetener industry wants to avoid the perception that its products aren’t natural, but Merisant’s claims were specifically that McNeil’s ads are misleading because they lead consumers to believe that Splenda contains sugar or is more natural than competing products. “There is a difference between highlighting the ‘natural’ aspects of a product and actually attempting to imply (falsely) that a product is, in fact, natural or made from an ingredient found in nature.” Thus, it granted summary judgment against McNeil’s unclean hands defense, though McNeil might be able to present the relevant evidence for other purposes, such as damages.
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