August Storck K.G. v. Nabisco, Inc.

• Decision Date: 23 May 1995
• Docket Number: No. 95-1721,95-1721
• Parties: AUGUST STORCK K.G. and Storck USA, L.P., Plaintiffs-Appellees, v. NABISCO, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 616

59 F.3d 616

AUGUST STORCK K.G. and Storck USA, L.P., Plaintiffs-Appellees, v. NABISCO, INC., Defendant-Appellant.

No. 95-1721.

United States Court of Appeals, Seventh Circuit.

Argued May 11, 1995.

Decided May 23, 1995. ^*

Order Denying Rehearing June 9, 1995.

Kevin Charles Trock, Joseph F. Schmidt (argued), Judith L. Grubner, Martin L. Stern, Laff, Whitesel, Conte & Saret, Chicago, IL, for plaintiffs-appellees.

Peter V. Baugher, Steven A. Weiss, Donna M. Maus, Kenneth E. Kraus, Schopf & Weiss, Chicago, IL, James B. Swire (argued), Douglas C. Fairhurst, Helene M. Freeman, Townley & Updike, New York City, for defendant-appellant.

Before BAUER, WOOD, Jr., and EASTERBROOK, Circuit Judges.

EASTERBROOK, Circuit Judge.

"It happened a long time ago in the little village of Werther. There, the candymaker, Gustav Nebel, created his very finest candy, taking real butter, fresh cream, white and brown sugars, a pinch of salt, and lots of time. And because these butter candies tasted especially delicious, he called the candy 'Werther's Original', in honor of his little village of Werther." So reads the pitch on a bag of Werther's TM Original candies. Nabisco surely developed its competing candy a different way--in a chemist's lab, followed by testing in focus groups. Nabisco concluded that Nebel used too much sugar for modern tastes and worries; it substituted isomalt, hydrogenated glucose syrup, and acesulfame potassium. Its packaging of Life Savers TM Delites ^TM screams: "25% LOWER IN CALORIES THAN WERTHER'S TM ORIGINAL* CANDY". August Storck K.G., which makes and sells Werther's TM Original, learned about Life Savers TM Delites ^TM from prototype trade samples; the candy is not scheduled for introduction until this coming August. Storck did not appreciate the comparison and filed this suit under the Lanham Act, 15 U.S.C. Secs. 1114, 1125(a), arguing that Nabisco was about to infringe its trademark and trade dress. The district court issued a preliminary injunction, forbidding Nabisco to use the packaging it has devised. 1995 U.S. Dist. (N.D.Ill.). Nabisco tells us that if it must come up with new packaging the new candy cannot be introduced until 1996.

The prototype packaging for Life Savers TM Delites ^TM that Storck attached to the complaint used the words "Werther's Original" without either the TM symbol or the asterisk that Nabisco will include in the product offered for sale. The asterisk refers to a disclaimer: "WERTHER'S TM ORIGINAL is a registered trademark of and is made by August Storck KG. Storck does not make or license Life Savers Delites ^TM." Nabisco assures us that it does not (and never did) plan to market a product without the TM symbol or disclaimer, and that it told Storck so. Before the district judge issued the injunction, Nabisco gave him a copy of the consumer packaging. The judge remarked that if he had seen Nabisco's revised packaging earlier "the Court's ruling might have been different"--and then issued the injunction anyway. Yet Nabisco did not yield to the pressure of litigation, demonstrating in the process that an injunction is essential to prevent it from returning to its preferred practices; Nabisco's corporate policy calls for the use of an TM symbol and disclaimer when mentioning rivals' products. That an injunction could have been appropriate to prevent the use of Storck's registered trademark without the symbol and disclaimer does not mean that it is appropriate once the judge learns that all prospect of an improper use has vanished. Quite the contrary, the injunction hampers a form of competition highly beneficial to consumers.

We reproduce at the end of this opinion Storck's packaging and Nabisco's proposed packaging. (Nabisco plans to introduce four different Life Savers TM Delites ^TM collections; we show only the two that refer to Storck's product.) It is hard to see how anyone could think that the Life Savers TM Delites ^TM package contains Werther's TM Original candies or has anything to do with Storck's product. Life Savers TM, one of the most famous brand names in American life, is emblazoned on the package of Life Savers TM Delites ^TM; the candy-gulping public will quickly grasp that the point of the diagonal stripe containing the Werther's TM Original name is to distinguish the two candies--to say that one is different from, and better than, the other. Trademarks designate the origin and quality of products. Qualitex Co. v. Jacobson Products Co., --- U.S. ----, 115 S.Ct. 1300, 131 L.Ed.2d 248 (1995); Green River Bottling Co. v. Green River Corp., 997 F.2d 359 (7th Cir.1993); William M. Landes & Richard A. Posner, Trademark Law: An Economic Perspective, 30 J.L. & Econ. 265 (1987). A use of a rival's mark that does not engender confusion about origin or quality is therefore permissible. Prestonettes Inc. v. Coty, 264 U.S. 359, 44 S.Ct. 350, 68 L.Ed. 731 (1924); Saxlehner v. Wagner, 216 U.S. 375, 30 S.Ct. 298, 54 L.Ed. 525 (1910); Calvin Klein Cosmetics Corp. v. Lenox Laboratories, Inc., 815 F.2d 500 (8th Cir.1987); G.D. Searle & Co. v. Hudson Pharmaceutical Corp., 715 F.2d 837 (3d Cir.1983). The use is not just permissible in the sense that one firm is entitled to do everything within legal bounds to undermine a rival; it is beneficial to consumers. They learn at a glance what kind of product is for sale and how it differs from a known benchmark. Storck does not say that Nabisco's claim is false. That Life Savers TM Delites ^TM are 25% lower in calories than Werther's TM Original candies is something consumers may want to know before deciding which candy to buy.

Both the FTC and the FDA encourage product comparisons. The FTC believes that consumers gain from comparative advertising, and to make the comparison vivid the Commission "encourages the naming of, or reference to competitors". 16 C.F.R. Sec. 14.15(b). A "comparison" to a mystery rival is just puffery; it is not falsifiable and therefore is not informative. Because comparisons must be concrete to be useful, the FDA's regulations implementing the Nutrition Labeling and Education Act of 1990, 21 U.S.C. Sec. 301 note, prefer that the object of a nutritional comparison be the market leader (a "comparison" to a product consumers do not recognize is as useless as a comparison to an anonymous rival) or an average of the three leading brands. 21 C.F.R. Sec. 101.13(j)(1)(ii)(A). Werther's TM Original is the top selling butter cream hard candy, so Nabisco's claim follows the FDA's guideline.

Under the circumstances, the district judge's statement that the use of the Werther's TM Original mark on the Life Savers TM Delites ^TM package creates a "possibility" of confusion cannot support an injunction. Many consumers are ignorant or inattentive, so some are bound to misunderstand no matter how careful a producer is. See Gammon v. GC Services Limited Partnership, 27 F.3d 1254, 1258-60 (7th Cir.1994) (concurring opinion). If such a possibility created a trademark problem, then all comparative references would be forbidden, and consumers as a whole would be worse off.

Likelihood of confusion in a trademark case is a factual issue, and appellate review is deferential. Scandia Down Corp. v. Euroquilt, Inc., 772 F.2d 1423, 1428 (7th Cir.1985). But the district court did not hold an evidentiary hearing. Nabisco and Storck informed us at oral argument that to this day no one has conducted the surveys customary in trademark cases, showing the packaging or product to consumers and asking: "Who makes this?" or "Are these two products made by the same firm?" Perhaps the packages are confusing after all; we make little of the disclaimer, which few consumers will read. International Kennel Club v. Mighty Star, Inc., 846 F.2d 1079, 1093 (7th Cir.1988). But all the district court found--all that it could find on this record--is that Nabisco's packaging uses Storck's mark and that confusion is possible. That is not enough to postpone the introduction of a new product. When deciding whether to grant or withhold equitable relief a court must give high regard to the interest of the general public, which is a great beneficiary from competition. Although the benefits of competition do not justify the introduction of products that engender substantial...