AJ Canfield Co. v. Vess Beverages, Inc., 85 C 4368.

• Decision Date: 08 July 1985
• Docket Number: No. 85 C 4368.,85 C 4368.
• Citation: 612 F. Supp. 1081
• Court: U.S. District Court — Northern District of Illinois
• Parties: A.J. CANFIELD COMPANY, Plaintiff, v. VESS BEVERAGES, INC., Defendant.

612 F. Supp. 1081

A.J. CANFIELD COMPANY, Plaintiff, v. VESS BEVERAGES, INC., Defendant.

No. 85 C 4368.

United States District Court, N.D. Illinois, E.D.

July 8, 1985.

Richard H. Compere, Pamela J. Johnson, Jeffery A. Handelman, Willian, Brinks, Olds, Hofer, Gilson & Lione Ltd., Chicago, Ill., for plaintiff.

Beverly W. Pattishall, David C. Hilliard, John Bostjancich, Pattishall, McAuliffe & Hofstetter, Chicago, Ill., for defendant.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

SHADUR, District Judge.

A.J. Canfield Company ("Canfield") has sued Vess Beverages, Inc. ("Vess"), claiming "federal unfair competition" (invoking for that purpose Lanham Act ("Act") § 43(a), 15 U.S.C. § 1125(a)) and also asserting several related pendent state law claims. This Court has conducted a June 7, 1985 evidentiary hearing (the "Hearing") on Canfield's motion for preliminary injunctive relief. At the Hearing this Court heard the testimony of Canfield's Senior Vice President Alan Canfield, Vess's President Don Schneeberger ("Schneeberger") and the market researcher who conducted a brief survey for Vess (see Appendix), and it has considered the numerous exhibits and affidavits tendered by both litigants both at and after the Hearing (most recently a July 1 affidavit by Schneeberger, with accompanying Vess exhibits). Vess has also moved for summary judgment under Fed.R.Civ.P. ("Rule") 56. Finally each party has submitted extensive legal memoranda addressing both motions, as well as its proposals for this Court's findings of fact and conclusions of law.

In accordance with Rule 52(a), this Court finds the facts specially as set forth in the following Findings of Fact ("Findings") and states the following Conclusions of Law ("Conclusions"). To the extent if any the Findings as stated reflect legal conclusions, they shall be deemed Conclusions; to the extent if any the Conclusions as stated reflect factual findings, they shall be deemed Findings.

Findings of Fact

1. Canfield is a corporation both incorporated in Illinois and having its principal place of business in Chicago, Illinois. For diversity jurisdictional purposes it is an Illinois citizen.

2. Vess is a corporation both incorporated in Missouri and having its principal place of business in St. Louis, Missouri. For diversity jurisdictional purposes it is a Missouri citizen.

3. Since 1924 Canfield has been, and it continues to be, actively engaged in the business of bottling and selling soft drinks primarily in the midwest. It has registered

its "Canfield's" trademark in the United States Patent and Trademark Office as Reg. Nos. 976,004 and 927,808 (DX 25-27).¹ It currently markets a number of soft drinks under the well-known Canfield's trademark (DX 18).

4. About 1971 Canfield set out to try to develop a diet carbonated soft drink² that would be low in calories but nevertheless have a taste similar to chocolate. By 1972 it had developed such a soft drink, which it proceeded to market under the designation "Chocolate Fudge" and to describe as an "artificially sweetened chocolate soda." Its soft drink was sugar-free and did not contain any cocoa. All the flavor and color contained in the soft drink were artificial (PX 22).

5. In 1972 Canfield kicked off its new product with substantial advertising in radio and television, and with product couponing. Its Chocolate Fudge had moderate market success. Before January 1985 Canfield sold on the average 1.25 million cans of its Chocolate Fudge annually (those sales, like those of Canfield's other soft drinks, were primarily in the midwest).

6. Canfield's original container for its Chocolate Fudge (PX 22) was used until 1980, when the graphics were slightly modified (PX 38). In 1984 Canfield began use of its current container (PX 23).

7. In 1984 Canfield switched all its diet soft drinks to contain 100% NutraSweet.³ Assisted by a cooperative advertising arrangement with Searle, Canfield spent $500,000 in advertising those products. Canfield retained a public relations firm to assist it in that activity, and it had several articles written about Canfield and its products, including its Chocolate Fudge.

8. No company other than Canfield had used the designation "Chocolate Fudge" in association with a carbonated soft drink until after January 1985, although numerous other companies, including Vess, have sold carbonated diet chocolate drinks. Industry publications have consistently referred to that group of drinks as "chocolate-flavored soft drinks" or "chocolate drink" (PX 4, 39). Until January 1985 Canfield was unique in its use of Chocolate Fudge in a trademark manner for a carbonated soft drink with a chocolate flavor.

9. On January 13, 1985 the Chicago Tribune and some 80 other newspapers contained a nationally syndicated column (PX 1) written by Bob Greene ("Greene") about Canfield's Chocolate Fudge. Greene's article said he had vaguely remembered reading a story in the Tribune about Canfield's, and he characterized his "discovery" of Canfield's Chocolate Fudge as "a miracle." Greene (a self-confessed chocoholic) compared Canfield's Chocolate Fudge to a hot fudge sundae, and he told how it helped him maintain his diet by satisfying his desire for chocolate. As an immediate result of Greene's article a tremendous demand was created for Canfield's Chocolate Fudge. Initially Canfield was unable to satisfy that demand, especially in areas outside the midwest where its Chocolate Fudge had never been sold.

10. Following Greene's article the enormous skyrocketing demand for Canfield's Chocolate Fudge generated substantial print coverage in newspapers and magazines across the country (PX 2-17), including the New York Times and Time magazine, and numerous television and radio news stories. In turn that widespread media coverage increased the escalating demand, which in turn generated further media coverage. Canfield estimates it has had over two hours of prime time coverage from television broadcasts throughout the United States since Greene's article appeared (PX 24).

11. At the Hearing Canfield sought to ascribe the truly astonishing growth in demand for (and sales of) its Chocolate Fudge in substantial part to its public relations efforts, which had in fact antedated Greene's article and which then seized the opportunity presented by Greene's article to maximize the favorable image presented by that article. Though Canfield and its public relations firm have in fact exercised substantial efforts in that respect (since January 13, 1985 Canfield has spent a considerable amount of money in advertising and promoting its Chocolate Fudge, and it estimates that it and its licensees will spend up to $6 million in the next year in advertising and promoting the product), no such activities could account for the unprecedented success story here: In the four months after appearance of the Greene article, sales of Canfield's Chocolate Fudge aggregated 50 million cans (100-fold times the prior volume described in Finding 5, as previously increased by the advertising efforts described in Finding 7). Instead that success story is a dramatic confirmation of the power of the press, assisted of course by Canfield's own activities.

12. Increased and still-increasing demand for Canfield's Chocolate Fudge, as referred to in Findings 9-11, is undoubtedly the result of the synergistic phenomena described in Finding 10. But what is relevant for current purposes is not the cause but the effect of those phenomena: Spectacular public acceptance of and demand for Canfield's Chocolate Fudge. And given the uniqueness of Canfield's use of Chocolate Fudge as a designation for a carbonated soft drink for years before and up to the time of Greene's article, that acceptance and demand substantially increase the likelihood the Chocolate Fudge designation has acquired a secondary meaning as a trademark designating Canfield's product.

13. Added manifestations of the trademark character of Chocolate Fudge, as used by Canfield, are found in collateral effects inuring to Canfield's benefit following the appearance of Greene's article. Canfield has developed numerous promotional items, such as bags, beach towels, bumper stickers and buttons promoting its Chocolate Fudge trademark (PX 25).

14. By reason of the developments described in the preceding Findings, Canfield has received requests from most of the major bottlers throughout the United States to obtain licenses to manufacture and sell Canfield's Chocolate Fudge. Canfield's has now licensed 12 major bottlers in the United States to produce and sell its Chocolate Fudge. With those licensees, Canfield's product will now be available throughout the entire United States. Canfield has also received numerous phone calls and letters from consumers requesting Canfield's Chocolate Fudge or asking where they can obtain it (PX 30).

15. Vess contends "the phrase `chocolate fudge' names a well known flavor" (Vess Proposed Finding 43). For that proposition it quotes from Webster's New International Dictionary, Second Edition (DX 16):

choc'o-late, n.

1. The solid or pliable mass obtained by grinding roasted cacao beans which have been freed from germ and shell; — sometimes called plain or bitter chocolate to distinguish it from sweet chocolate which contains added sugar, and milk chocolate which contains added sugar and dried milk. Cf. CACAO, COCOA.

2. The beverage made by cooking a portion of the above in water or milk.

3. A small candy with a center as of fondant, nougat, or nut, and a coating of chocolate; — disting. from bonbon.

4. The color of chocolate; a brown, red-yellow in hue, of low saturation and low brilliance. Cf. COLOR.

5. Bot. The purple avens (Geum rivale).

COMBINATIONS and PHRASES are:

chocolate candy chocolate-coated chocolate-colored chocolate-covered chocolate dipper chocolate drop chocolate fudge chocolate grinder chocolate grinding chocolate maker chocolate mill chocolate mixer chocolate...