Intellectual Property

Score One for Private Labelers: The Third Circuit Finds that Store Brand Products in Yellow Packaging Do Not Infringe SPLENDA Trade Dress Where Store Marks are Prominent

In McNeil Nutritionals LLC v. Heartland Sweeteners LLC, 511 F.3d 350 (3d Cir. 2007) the Third Circuit Court of Appeals decided that "arguably, under our holding, store  brands can 'get away' with a little more similarity than other defendants' products when they display prominently a well-known label on their packages."  Id. at 368.  Since 1994, when the Federal Circuit issued a similar ruling in Conopco, Inc. v. May Department Stores Co., 46 F.3d 1556 (Fed. Cir. 1994), private labelers have had broader latitude than other competitors as to the amount of allowed similarity between their products and those of name brands. 

The difference may arise from two sources.  First, grocery, drug and convenience stores, common users of private labels, are major customers for many name brands.  Name brands have a strong incentive not to sue such entities. 

Second, the consumer protection motive seems to differ in private label trademark infringement cases from other trademark cases.  One of the guiding principles of trademark protection is that the public must be protected from confusion, necessitating that brands and packaging not be too similar.  In the case of store brand products, consumers may be advised by the similarity of packaging that the product is the same or similar, but costs less. 

Plaintiff McNeil had a difficulty not presented by most trademark cases.  McNeil sought in large part to protect the yellow color of its Splenda packaging.  McNeil argued that consumers were accustomed to distinguishing between artificial sweeteners:  pink for Sweet 'N Low (saccharin); blue for Equal (aspartame), white or brown for sugar, and yellow for Splenda.  McNeil stated that the makers of Equal and Sweet 'N Low had waited too long to challenge imitators of their colors, and hence could not do so, but that McNeil had protected its color from the beginning.  This, McNeil said, increased the likelihood of confusion with store brands.

The court saw things differently: because customers recognize that competitors use pink and blue for saccharin and aspartame respectively, they will similarly recognize that yellow does not necessarily mean Splenda, but means sucralose.  Under such an argument, McNeil's entry into a market where others have permitted their colors to designate types, not brands, of sweetener doomed Splenda's yellow from the start. 

The advent of initial interest confusion, not present in the case law when Conopco was decided, could have swayed the case in McNeil's favor.  Initial interest confusion occurs when a consumer is initially drawn to a product because of its similarity to another, even though the consumer ultimately realizes the difference before buying the product.  See Hilliard, Welch, Marvel, 3 Trademarks and Unfair Competition Deskbook § 7.02[4], and cases cited therein. 

The Court, while recognizing the initial interest confusion doctrine, evaluated the case under the standard likelihood of confusion factors without consideration of initial interest confusion.  McNeil, 511 F.3d at 358, citing Interpace Corp. v. Lapp, Inc., 721 F.2d 460 (3rd Cir. 1983).  The Court found that one of the defendants' packages, that did not feature a major store brand prominently, did infringe, while others that did feature major store brands, would not cause confusion.  Not even the private labelers' obvious intent to come as close as possible to the name brand trade dress, usually a major factor supporting likelihood of confusion, could sway the case in McNeil's favor.

The case gives comfort to private labelers and major retailers, but should not be read too broadly.  Most cases find that inclusion of a brand on an otherwise confusingly similar trade dress will not vitiate likelihood of confusion.  The Court was thus careful to limit its holding:  "The danger of the District Court's result is that producers of store-brand products will be held to a lower standard of infringing behavior, that is, they effectively would acquire per se immunity as long as the store brand's name or logo appears somewhere on the allegedly infringing package, even when the name or logo is tiny.  The Lanham Act does not support such a per se rule."  Id. at 367-368.  The Court elucidated later in its opinion:  "[B]ut [store brands] cannot copy national brands to such a degree of similarity, then merely affix a tiny differentiating label, as to become entirely immune to infringement actions."  Id. at 368-369.  Although a survey is not mentioned in the opinion, a strong survey probably could also support a finding of likelihood of confusion, even if a major store brand appeared on the allegedly infringing packaging.

The McNeil case described the Courts' apparent understanding that consumers are accustomed to comparing and differentiating store brands and name brands.  The case does not alter the law for the rest of us.  It is still unwise to develop a label intended to appear similar to that of a competitor.