Lawsuits still not so sweet for Splenda

McNeil Nutritionals, LLC v. Heartland Sweeteners LLC, 2007 WL 1520101 (E.D. Pa.)

Hard upon its settlement of Merisant's false advertising case against it (link goes to a tendentious press release by the Sugar Association, which has its own pending lawsuit against McNeil), the makers of Splenda artificial sweetener suffered another legal setback. (Thanks to Eric Goldman for the heads-up.)

McNeil sued for infringement of its Splenda (sucralose) trade dress under the Lanham Act and Pennsylvania state dilution and unfair competition claims, based on Heartland’s packaging for its private-label sucralose.

The court denied a preliminary injunction. Among the relevant findings: because there are a number of different artificial sweeteners on the market, color-coding in packaging differentiates products and quickly identifies the active ingredient in a given product. Sweet’N Low (saccharin) is red and pink, and the recognized industry standard is to sell house brands of saccharin in red and/or pink packaging. Equal (aspartame) is blue, and so are house brands of aspartame. Splenda is yellow.

The court also found that consumers are highly familiar with store-brand products, which are typically found on shelves next to the analogous national brand. Store-brand products often have “compare to” statements and similar packaging to national brands, as well as shelf-talker tags that call attention to the differences between the products. Consumers know this, and can easily see the price differences between the store and national brands. Nearly all grocery store chains sell private-label saccharin and aspartame sweeteners that compare to the national-brand products.

Heartland makes lots of store-brand artificial sweeteners for retailers; this litigation concerned only its sucralose for Giant, Stop & Shop, Tops, Food Lion, and Safeway. The packaging for the first three is identical except for the respective store names/logos. The packaging for the others is similar, using blue lettering (as Splenda does) and pictures of a white cup of coffee and other food (as Splenda does).
Most sugar and sugar substitute packages use pictures of foods and/or drinks.

In balancing the confusion factors, the court noted that similarity is the paramount consideration in product packaging trade dress cases. Though side-by-side comparisons are often disfavored, consumers do encounter the products at issue here side-by-side, so that is how the court evaluated them. The court then found both the store packaging and the individual sweetener packets not similar enough for this factor to weigh in McNeil’s favor, basically because of differences in lettering and layout, plus the addition of house brands, despite similar predominant colors.

The strength of the Splenda trade dress weighed in McNeil’s favor; even though McNeil’s advertising focused on its (litigation-spurring) slogan “Made From Sugar, Tastes Like Sugar” and even though other sugar and sugar-substitutes use a yellow and blue color scheme and images of coffee, fruit, and baked goods. In only six years on the market, Splenda has become the leading artificial sweetener, with 60% of the market, so it had a strong trade dress.

Though the goods are cheap, people buy artificial sweeteners for “health, fitness, and dietary considerations,” so the court found they’d exercise a heightened level of care. This factor didn’t weigh in favor of McNeil.

McNeil had evidence of one instance of actual confusion. A Pasadena consumer mistakenly purchased Safeway’s sucralose in December 2006, though she intended to buy Splenda. She was “just buzzing through the market ....” and didn’t look at prices, just grabbed the box and ran. She’s a self-described “surgical strike” shopper, intending to shop faster than others. She’s aware of store brands, but not aware they’re cheaper than national brands; she’s not a comparison shopper. And no surprise, since “[h]er yearly household income exceeds $300,000.” She wasn’t wearing her reading glasses when she bought Safeway sucralose, and testified that it would have been difficult for her to read the information on the store shelf without them. “Additionally, in preparation for her deposition, Mrs. Grossman purchased a 400 count box of Splenda because she thought her usual 200 count box was not available. However, during a deposition, when looking at a picture she herself took of the shelf on which the 400 count box was located, she noticed for the first time that the 200 count box was on the shelf and available for purchase.” I bet McNeil’s lawyers wish she’d been just a little bit less zealous in preparing for the deposition!

Unsurprisingly given the facts the court chose to emphasize, it found insufficient evidence of a likelihood of confusion by the ordinarily prudent consumer. Still, the short time the defendants’ products have been on the market, and the inexpensiveness of the products, made the actual confusion factor favor neither side.

If Barton Beebe is right, intent is often dispositive, though courts don’t say so. Here, then, it may have been crucial that the court distinguished intent to copy from intent to confuse. Defendants clearly indended to copy, but that’s common in the private label industry, and the court was unwilling to infer an intent to confuse.

I have a deep interest in private label strategies – I was once kicked out of a Walgreen’s for taking pictures of house brands next to national brands – and I found it interesting that the court treated both verbal and nonverbal “tools for making comparisons” as valid strategies. That is, it grouped “similar color, shapes, and sizes” with “compare to” statements. And I agree – if it is legitimate to signal “I have the same qualities as Brand X,” it shouldn’t matter how that signal is communicated. It’s the flip side of the refusal to divide marks into ontological categories (see Qualitex).

The channels of trade and advertising, targets of the parties’ sales efforts, and similarity of the goods favored McNeil.

The Third Circuit separately considers whether consumers might expect the plaintiff to make a product in defendant’s market or expand into that market. McNeil made an argument I’ve seen a few times before; it hasn’t worked yet, but trademark owners will surely keep trying: Because there are numerous partnerships and cross-promotions in modern marketing, consumers may believe that Splenda makes store-brand sucralose products for the grocery stores or that there’s some sort of affiliation or sponsorship. Because McNeil had no evidence of this (and no evidence that this belief would be affected by the trade dress of the store brand product), the court rejected the argument as speculative.

McNeil also argued that initial interest confusion was likely. Because of the “significant distinctions” between the parties’ products, including the house brand, price differences, and shelf labels; consumers’ high awareness of store brand products and of which store they’re shopping in; and the opportunity for side-by-side comparison, the court found no likelihood of initial interest confusion.

The same fate met McNeil’s post-sale confusion theory, because the store brand individual sweetener packets were not similar to individual Splenda packets. The court also pointed out that post-sale confusion could only harm McNeil if, due to a bad experience with defendants’ product, consumers avoided Splenda in the future, and McNeil had no evidence that defendants’ sucralose was inferior. (There’s another theory of harm from post-sale confusion: that people may buy knockoffs to get the cachet of a prestige brand without the prestige price. Perhaps the court wasn’t a fan of that theory, or perhaps it considered that type of harm unlikely when the prestige price here is less than a dollar more per 100 packets of sweetener.)

The state law dilution claim also failed. Pennsylvania’s antidilution law tracks the FTDA almost verbatim. That’s the FTDA, not the TDRA. Thus, because many courts had already held that the FTDA and Pennsylvania standards for determining dilution were identical, the Moseley rule requiring actual dilution still applies. McNeil argued, weakly, that because Congress changed the FTDA, the court should imply a similar rewriting of Pennsylvania law. (If that was McNeil’s position, why didn’t it bring a federal dilution claim? Why didn’t it bring a federal dilution claim anyway?) The court rightly rejected this invitation, since Pennsylvania’s legislature had made no such changes. McNeil had no evidence of actual dilution, so its claim failed.