AmBrit, Inc. v. Kraft, Inc.

• Decision Date: 04 May 1987
• Docket Number: No. 85-3609.,85-3609.
• Citation: 812 F.2d 1531
• Parties: AMBRIT, INC., f/k/a the Isaly Company, Inc., Plaintiff-Appellee, Cross-Appellant, v. KRAFT, INC., Defendant-Appellant, Cross-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

812 F.2d 1531

AMBRIT, INC., f/k/a the Isaly Company, Inc., Plaintiff-Appellee, Cross-Appellant, v. KRAFT, INC., Defendant-Appellant, Cross-Appellee.

No. 85-3609.

United States Court of Appeals, Eleventh Circuit.

December 10, 1986.^*

Certiorari Denied May 4, 1987.

Barry D. Rein, Robert M. Kunstadt, Michael C. Stuart, Pennie & Edmonds, New York City, Thomas H. Christopher, Kilpatrick & Cody, Atlanta, Ga., Jerry L. Newman, Rodney W. Morgan, Shear, Newman & Hahn, Tampa, Fla., for plaintiff-appellee, cross-appellant.

Jerome Gilson, Gary M. Ropski, Susan Somers Neal, William Brinks Olds Hofer Gilson & Lione Ltd., Chicago, Ill., Frank C. Jones, Charles M. Shaffer, Jr., King & Spalding, Atlanta, Ga., Donald W. Carlin, Seth A. Eisner, Dolores K. Hanna, Kraft, Inc., Glenview, Ill., for defendant-appellant, cross-appellee.

Before CLARK, Circuit Judge, HENDERSON,^* and WISDOM,^** Senior Circuit Judges.

Certiorari Denied May 4, 1987. See 107 S.Ct. 1983.

WISDOM, Senior Circuit Judge:

This appeal presents a variety of questions involving trade dress and trademark rights. The parties are competitors in the ice cream novelty market. The principal question in this controversy is whether the trade dress of Kraft's Polar B'ar infringes the trade dress of Isaly's Klondike bar. The district court answered "Yes" to this question. 619 F.Supp. 983. We affirm, holding that the district court's findings were not clearly erroneous and that the court's conclusions of law were correct.

FACTS

The plaintiff in this action, the Isaly Company, Inc., ("Isaly"),¹ is a Delaware corporation with its principal place of business in Clearwater, Florida. The defendant, Kraft, Inc. ("Kraft"), is a Delaware corporation with its principal place of business in Glenview, Illinois. The parties are competitors in the stickless, five ounce, square, chocolate-covered ice cream bar market. Isaly sells its bar under the trademark "Klondike", and Kraft sells its bar under the trademark "Polar B'ar". The crux of the controversy concerns the packaging of those two products.

Isaly began in the last century as a family-owned dairy business operating in Eastern Ohio and Western Pennsylvania. In 1928 Isaly started making and selling five ounce, chocolate-covered, stickless ice cream bars under the name "Klondike". Isaly now sells three versions of the Klondike bar: plain, crispy, and chocolate/chocolate. The plain Klondike bar has been wrapped in pebbled foil featuring the colors silver, blue, and white since the 1940's. Since at least 1956 the wrapper has featured a 3 × 3 inch panel of silver, white, and blue, the words "Isaly's" and "Klondike", and the figure of a polar bear.

In 1978 Isaly revised the wrapper of the Klondike bar maintaining, however, the impression the original wrapper conveyed. The colors, images, and words on the wrapper remained the same, but "Klondike" was emphasized, "Isaly's" was reduced in size, and the stance of the polar bear was altered. Since 1978, the wrapper has remained the same. The plain Klondike bar is wrapped in pebbled foil presenting a 3 × 3 inch silver panel featuring a white polar bear on all fours before a sunburst design. Both the polar bear and the sunburst are outlined and highlighted with royal blue. Below the bear is the word "Klondike", written in large white letters outlined in royal blue. "Isaly's" appears in small blue letters to the right of the bear. The crispy and chocolate/chocolate wrappers are identical except that those wrappers use the colors yellow and brown respectively in place of the white color used on the plain wrapper.

Isaly began selling the Klondike in a six-pack arrangement in 1963, and between 1963 and 1978 some six-packs were offered in trays overwrapped in clear plastic. Since 1978, all six-packs have been sold in transparently overwrapped trays with a double layer of three bars, presenting the Klondike wrapper three times. The trays are silver and feature a large numeral "6" on the side. The end panels of the Klondike trays display a copy of the appropriate wrapper design depending on the version of the bar contained in the tray.

Until 1978, Isaly sold the Klondike bar in a tri-state area composed of Western Pennsylvania, Eastern Ohio, and Northern West Virginia. Isaly advertised in newspapers and in point-of-sales materials in stores, both of which featured the polar bear emblem found on the bar's wrapper. Isaly also advertised on television in a commercial featuring a polar bear and prospector in a supermarket.

In 1978, Isaly began to investigate the possibility of expanding the market for the Klondike bar. Isaly decided to introduce the bar into supermarkets and convenience stores in various expansion markets. To augment the expansion it achieved on its own, Isaly approached Kraft, an international manufacturer and distributor of food products, concerning a distribution arrangement between the two parties. Although Kraft's dairy group produces its own ice cream products, which are principally distributed under the brand names "Sealtest" and "Breyers", since 1970 that group has also distributed ice cream products made by other companies. The parties agreed that Kraft would distribute the Klondike bar in Florida and that Isaly would be responsible for most of the advertising in that market.

The introduction of the Klondike bar into the Florida market in early 1979 was highly successful and Kraft was well satisfied. Kraft had previously been unsuccessful with its ice cream novelty line and viewed the Klondike bar as a way to change that pattern. In October 1979, Kraft informed Isaly that it was interested in purchasing Isaly or having Isaly package its bars for Kraft under the Sealtest name. Isaly rejected these proposals, suggesting instead that Kraft expand its distribution of the Klondike bar. Kraft stated, however, that it was reluctant to expand distribution without a proprietary interest in the product.

In late 1979, Kraft began to develop its own five ounce chocolate-covered ice cream bar. Kraft attempted to duplicate the exact size and taste of the Klondike bar. Kraft chose the name "Polar B'ar" after finding that name on a list of unused trademarks. A predecessor of Kraft, Southern Dairies, Inc., had sold an ice cream bar under that trademark from 1929 to 1932, and periodically renewed the trademark registration. Through merger, Kraft acquired it.

Kraft employed two firms to design the packaging for the Polar B'ar product, making clear to these firms that the functional features of the Polar B'ar package were to resemble as closely as possible the Klondike bar package. The bars were to be wrapped in foil and sold in six-pack trays overwrapped in transparent plastic. Kraft supplied these design firms with samples of the Klondike packaging to aid them in their efforts.

The designers presented Kraft with a number of different wrapper designs but ultimately chose the one Isaly now challenges. That wrapper presents a 3 × 3 pebbled silver foil panel with a white polar bear standing on all fours contained within a colored triangle in the bottom right corner. "Polar B'ar" is written in large colored block letters diagonally across the center of the bar. "Sealtest" is written in script in a red box in the upper left corner, and the phrase "made with real milk chocolate" appears in a red circle in the bottom left corner of the panel.

In 1980 Kraft sold Polar B'ars in two forms: plain and "crunchy". The colors of the triangle and block letters on the wrappers varied with each version. Plain wrappers used royal blue and "crunchy" wrappers used red. Later, Kraft introduced four new versions of the bar: chocolate, mint, heavenly hash, and peanut butter, using the colors brown, green, light blue, and golden brown respectively.

As planned, Kraft sold Polar B'ars in a six-pack tray overwrapped in clear plastic. The tray employs a silver background and displays a large numeral "6" between the brand name and the product description. The end panels of Kraft's tray feature a large white polar bear and the words "Polar B'ar" in large block letters against a background colored to correspond with the version of the bar contained in the tray. Kraft promoted the bar with television and newspaper advertising. Its television commercial featured the figure of a bear. Then came a bear's roar when the camera shifted to the polar bar wrapper.

Kraft was the exclusive distributor of the Klondike bar in Florida from 1979 to 1982. In February 1982 Kraft notified Isaly in writing of its intention to terminate its distribution of Klondike as of April 1982. In May 1982 Isaly initiated this suit. Isaly asserted that Kraft's packaging: (1) constituted a false designation of origin under § 43(a) of the Lanham Act,² (2) infringed Isaly's federal trademarks covering its label and package designs,³ (3) constituted common law unfair competition, (4) diluted Isaly's trade dress in violation of Florida statutory law,⁴ and (5) constituted unfair competition under Florida law.⁵ Isaly later amended its complaint seeking to have Kraft's Polar B'ar trademark cancelled. Kraft denied all of Isaly's claims and asserted the defense of laches. After a long trial, the district court ruled in favor of Isaly on the trademark and false designation of origin claims.⁶ The court rejected Kraft's laches defense and Isaly's request to cancel Kraft's trademark. The court then entered an injunctive order and scheduled a hearing on the damages issue.⁷ Both parties appealed.

DISCUSSION

I. Trade Dress Infringement

Kraft's first contention on appeal is that the district court erred in finding Kraft guilty of trade dress infringement. Kraft does not contend that the district court applied the wrong test in making this finding, but rather argues that the district court misapplied the proper test.

Section 43(a) of the Lanham Act states in relevant part:

Any person who shall ... use in connection with any goods or services, or any

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