Worm poop and the Lanham Act

TerraCycle sells fertilizer made from “worm poop.” Perhaps, then, it is well positioned to make promotional lemonade out of litigation lemons. It’s being sued by Scotts, the market leader in fertilizer, for trade dress infringement/dilution of the Scotts green-and-yellow trade dress and for false advertising. Coverage from Seattle TM Lawyer; TerraCycle's suedbyscotts website; example of columnist on TerraCycle’s side.

A Scotts spokeswoman emphasized the false advertising elements of the case: “‘We don't want to lose sight of the product claims,’ she said. ‘TerraCycle made broad claims that its products are more effective than synthetic chemical fertilizers. And they say industry research confirms this.’ … In its lawsuit, Scotts attacked TerraCycle's use of words and phrases such as ‘most efficient,’ ‘affordable’ and ‘more effective than synthetic chemical fertilizers.’”

From what I can see, the trade dress claims are weak, and may detract from the false advertising claims, which at least deserve consideration on their merits. At a minimum, TerraCycle’s PR seems to have successfully focused public attention on the weakness of the trade dress claims. Yet TerraCycle made establishment claims, and the law is that such claims must be substantiated by sufficiently reliable tests. Scotts could prevail by showing that the tests don’t prove what TerraCycle says they do, or that the better evidence is against TerraCycle’s claims. (Letter that TerraCycle relies on for substantiation here.)

The NYT article on TerraCycle in today’s magazine raises a different trademark issue: TerraCycle packages its products in recycled 20-ounce soda bottles. According to the article, this creates variation in the products’ appearance, since TerraCycle uses multiple bottle types. (TerraCycle’s acceptable bottle policy here. The text refers to “any 20oz Pepsi, Mountain Dew, Dr. Pepper bottle,” though the images of acceptable bottles clearly include distinctively shaped Coke bottles: On this page, mousing over the bottles reveals their origins as Pepsi bottles – except for the Coke bottle, whose logo has been blurred out. One wonders whether there is any history of contact between the Coca-Cola Co. and TerraCycle. And TerraCycle's packaging for its bottle collection program uses a clearly identifiable Pepsi logo -- a possible false endorsement problem?)

In any event, the NYT reports that “[inconsistent packaging] has become part of the brand’s look, and the company is trying to trademark the packaging style.” This raises fascinating questions. [ETA: see comment below for clarification. General-interest reporting often confuses types of IP protection. Still, I think the hypothetical trademark claim is of interest, and even without an affirmative claim of rights there are potential infringement and dilution issues.]

Could repackaging be infringing on the Coke or Pepsi trade dress? The silhouette of the plastic Coke bottle is quite recognizable, though not as iconic as the glass Coke bottle, and Pepsi probably has a fair amount of secondary meaning in its bottles as well. Nonetheless, especially given that a selling point is that the product comes in recycled bottles, it seems unlikely that consumers will be confused about the connection between soda and worm poop. Dilution? Perhaps a harder case for TerraCycle, though in context “worm poop” may be burnishing, not tarnishing – see this NYT article about Diet Coke with Vitamins for a suggestion that Coca-Cola might welcome association with an actual product of nature.

Would it be any defense that recycling bottles is a functional use of those bottles? That is, given that the point of the product is to minimize environmental impact, the quality of the product would be affected (and possibly also the cost of collecting the bottles would be increased) by a prohibition on the reuse of bottles that comprise a large percentage of the available empties. I have been increasingly interested in the idea of contextual functionality – cases in which some uses of a trade dress are functional but others aren’t. Examples include the iPod trade dress, lauded for its ease of use but also sometimes copied only for its source-identifying features, as well as the “ding” sound that Southwest has turned into a brand in its ad campaigns, which is actually the same sound heard on every Boeing plane, whether operated by Southwest or American. I am confident that Southwest can’t use its “ding” registration to force American to retrofit all its Boeing planes, or even to make Boeing change the sound it uses on new planes – but I’m equally confident that American can’t start using “ding” in its ads without a darn good reason. As branding permeates every aspect of production, contextual functionality situations may increase in number.

Setting aside any possible infringement of soda makers’ rights, TerraCycle could perhaps seek trademark protection not for any particular bottle shape, but for the idea of a product line of variable shapes. It seems unlikely that a product line could get trade dress protection in this way. We usually think of trade dress as a consistent presentation, but in the interests of ontological neutrality I will assume that variation can also be a distinctive signal. Still, the very reason behind the variation – eco-friendliness – presents the same functionality concerns that provide TerraCycle with its defense against the big bottlers.

Final note: If TerraCycle does not claim a trademark in its bottle shapes, or even in their variability, it may have a plausible defense to dilution that it isn't using the bottles as a mark for its goods.